Amazon is obviously one of the most important digital companies of our era. Its market cap recently reached USD $1 trillion, and through its notorious 1-click system, it eliminates any checkout barrier for you to buy even more from their ‘beloved‘ platform.
But before of all of this frenzy came about, Jeff Bezos wasn’t the billionaire we all know. He actually was a nice, smart, charismatic guy, as shows from this excellent TED talk that he gave in 2003:
(The whole TED talk is brilliant by the way, please have a look when you can.)
Why Jeff Bezos started selling books
This short blog post only focuses on one thing: why Jeff Bezos started Amazon by selling books, as opposed to any other product. There are three main reasons for that:
- Books have a low unit price, and high margin
- There are literally millions of different titles (aka: ‘the long tale’)
- You don’t need to feel, touch or smell a book before you buy one
1 – Books have a low unit price, and high margin
Book cost prices are non-fluctuating, low and the margins are great (roughly 40-45%). This makes it a very profitable business to step into (that is: the business for physical books, e-books have a different profit margin).
2 – There are literally millions of different titles
The super wide availability of different book titles is an attribute of the long tail, or sometimes known as the ‘infinite aisle’.
The great thing about offering books, is that you have such a broad (or ‘infinite’) range of products, which leads to a way better chance of converting visitors to buyers. People can search for a very specific keyword (e.g. ‘McCoy Surfboard’ in the example diagram above), and find the exact product they are looking for.
3 – You don’t need to feel, touch or smell a book before you buy one
The last (and quite obvious) reason why Bezos started selling books is because of its form factor. Books are a commodity product. You are interested in the contents of a book, not its cover (hence the saying: don’t judge a book by its cover). Buying a book online is therefore a ‘safe purchase’, as you don’t feel the immediate need to feel, smell or touch a book: you take for granted what its physical shape is, and instead can’t wait to dive in and find out what trouble Harry Potter got himself up to, this time!