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Note that choice of starter product is important. Amazon started with books - you know exactly what you're getting, they always fit, they're hard to damage, the

Note that choice of starter product is important. Amazon started with books - you know exactly what you're getting, they always fit, they're hard to damage, they have pretty high markups and low shipping costs. People were willing to risk buying books online, back when online e-commerce basically consisted of the USENET misc.forsale groups. Tesla and many other EV companies started with low-volume expensive sports cars, with high margins so they could be basically hand-crafted. (Tesla actually bought the chassis/body/interior from Lotus) If they had started with the Model 3, they'd have gone bankrupt long before they sold any.

koonsolo 4y ago
I think Bezos also mentioned that he started with books because no single physical shop could have all the books, but Amazon could. It is a product with so many variations that Amazon had a clear competitive advantage.
- bsder 4y ago
  Amazon's competitive advantage was not paying any tax. Amazon's selection in technical books was quite poor for quite a while. However, the tax discount drove ALL the small, local technical booksellers out of business. It might have happened anyway since local sellers had to pay retail rent and so Amazon had a structural advantage. However, Amazon also gained a straight 8% advantage for not having to pay tax.
  - indymike 4y ago
    > Amazon's competitive advantage was not paying any tax. I'm assuming you are saying "not paying sales tax". Amazon was operating like every other mail order bookseller that did not operate stores at the time. Retailers have complained for a century about mail order catalogs not collecting local sales tax. This was not new, or novel. > the tax discount drove ALL the small, local technical booksellers out of business Demand aggregation is a real thing. Localized, there's not a lot of demand for any specific niche technical book, and that leads to sub-optimal inventory. Why carry something you'll only turn once a year? You'd be better off putting that floor-plan money into gum, mints or batteries at the cash register. Quick access to product is why I shifted to buying technical documentation online. The local electronics store or bookshop could order books and it would often take 4-6 weeks for the book to arrive. Even early Amazon did 3-4 days. Demand aggregation is how Amazon won.
    - DrScientist 4y ago
      I remember at the time there was a lot of talk about how Amazon didn't have the costs of high street stores etc and was 'just' a web site. That was never true - sure they didn't have high street stores, but they invested big time in warehousing. That's why you could get a book from Amazon in days, whereas a traditional seller it would take weeks if it needed to be ordered. They also invested in the wider distribution network.
galdosdi 4y ago
Another now-classic example of solving this chicken and egg problem, I think: Facebook starting with just Harvard, then ivy league colleges, then colleges, then colleges and high schools, and only finally the general public. At each stage the arena was small enough it was realistic to take the whole segment over, and then that became the seed for the next phase.
SatvikBeri 4y ago
And their second product was CDs/DVDs, which have a lot of the same properties. Then they opened Amazon Marketplace, allowing other stores to sell through their site, and used the data of what was popular there to expand into other products – they were consistently very deliberate about what to sell next.

koonsolo 4y ago

I think Bezos also mentioned that he started with books because no single physical shop could have all the books, but Amazon could. It is a product with so many variations that Amazon had a clear competitive advantage.

bsder 4y ago
Amazon's competitive advantage was not paying any tax. Amazon's selection in technical books was quite poor for quite a while. However, the tax discount drove ALL the small, local technical booksellers out of business. It might have happened anyway since local sellers had to pay retail rent and so Amazon had a structural advantage. However, Amazon also gained a straight 8% advantage for not having to pay tax.
- indymike 4y ago
  > Amazon's competitive advantage was not paying any tax. I'm assuming you are saying "not paying sales tax". Amazon was operating like every other mail order bookseller that did not operate stores at the time. Retailers have complained for a century about mail order catalogs not collecting local sales tax. This was not new, or novel. > the tax discount drove ALL the small, local technical booksellers out of business Demand aggregation is a real thing. Localized, there's not a lot of demand for any specific niche technical book, and that leads to sub-optimal inventory. Why carry something you'll only turn once a year? You'd be better off putting that floor-plan money into gum, mints or batteries at the cash register. Quick access to product is why I shifted to buying technical documentation online. The local electronics store or bookshop could order books and it would often take 4-6 weeks for the book to arrive. Even early Amazon did 3-4 days. Demand aggregation is how Amazon won.
  - DrScientist 4y ago
    I remember at the time there was a lot of talk about how Amazon didn't have the costs of high street stores etc and was 'just' a web site. That was never true - sure they didn't have high street stores, but they invested big time in warehousing. That's why you could get a book from Amazon in days, whereas a traditional seller it would take weeks if it needed to be ordered. They also invested in the wider distribution network.

galdosdi 4y ago

Another now-classic example of solving this chicken and egg problem, I think: Facebook starting with just Harvard, then ivy league colleges, then colleges, then colleges and high schools, and only finally the general public. At each stage the arena was small enough it was realistic to take the whole segment over, and then that became the seed for the next phase.

SatvikBeri 4y ago

And their second product was CDs/DVDs, which have a lot of the same properties. Then they opened Amazon Marketplace, allowing other stores to sell through their site, and used the data of what was popular there to expand into other products – they were consistently very deliberate about what to sell next.