1995: AMAZON.COM IS THE FIRST MAIN ONLINE BOOKSTORE

= [Overview]

The online bookstore Amazon.com was launched by Jeff Bezos in July 1995, in Seattle, on the West coast of the U.S., after a market study which led him to conclude that books were the best "products" to sell on the internet. When Amazon.com started, it had 10 employees and a catalog of 3 million books. Unlike traditional bookstores, Amazon doesn't have windows looking out on the street and books skillfully lined up on shelves or piled upon displays. The "virtual" windows are its webpages, with all transactions made through the internet. Books are stored in huge storage facilities before being put into boxes and sent by mail. In November 2000, Amazon had 7,500 employees, a catalog of 28 million items, 23 million clients worldwide and four subsidiaries in United Kingdom (launched in August 1998), Germany (August 1998), France (August 2000) and Japan (November 2000). A fifth subsidiary opened in Canada in June 2002, and a sixth subsidiary, named Joyo, opened in China in September 2004.

= Amazon in the U.S.

# First steps

What exactly was the idea behind Amazon.com? In Spring 1994, Jeff Bezos drew up a list of twenty products that could be sold online, ranging from clothing to gardening tools, and then researched the top five, which were CDs, videos, computer hardware, computer software, and books.

As recalled by Jeff Bezos in Amazon's press kit (in its 1998 version), "I used a whole bunch of criteria to evaluate the potential of each product, but among the main criteria was the size of the relative markets. Books, I found out, were an $82 billion market worldwide. The price point was another major criterion: I wanted a low-priced product. I reasoned that since this was the first purchase many people would make online, it had to be non-threatening in size. A third criterion was the range of choice: there were 3 million items in the book category and only a tenth of that in CDs, for example. This was important because the wider the choice, the more the organizing and selection capabilities of the computer could be put in good use."

People could search the online catalog by author, title, subject, date, or ISBN. The website was offering excerpts from books, book reviews, customer reviews, and author interviews. People could "leaf" through extracts and reviews, order some books online, and pay with their credit card. Books arrived within a week at their doorstep. As an online retailer, Amazon.com could offer lower prices than local bookstores, a larger selection, and a wealth of product information. Customers could subscribe to a mailing list to get reviews of new books by their favorite authors, or new books in their favorite topics, with 44 topics to choose from.

In 1998, there were discounts on 400,000 titles, with 40% on some feature books, 30% on hardcovers, and 20% on paperbacks. Amazon.com was also selling CDs, DVDs, audiobooks and computer games, with 3 million clients in 160 countries, and a catalog with ten times as many titles as the largest supermarkets' bookstores.

As mentioned by Jeff Bezos in Amazon's press kit: "Businesses can do things on the web that simply cannot be done any other way. We are changing the way people buy books and music. Our leadership position comes from our obsessive focus on customers. (…) Customers want selection, ease of use, and the lowest prices. These are the elements we work hard to provide. We continued to improve our customer experience during the quarter [the second quarter 1998] with the opening of our music store, our easier-to-navigate store layout, and our expansion into the local U.K. and German book markets. These initiatives will continue to require aggressive investment and entail significant execution challenges."

# Expansion

People began buying books across borders. What we take for granted now - buy a book in Europe from the U.S. website Amazon.com, or buy a book in the U.S. from the German website Amazon.de - was making big waves at the time. The local online bookstores called it "unfair competition".

There were also issues about custom taxes. A first outline agreement was reached between the U.S. and the European Union in December 1997. This agreement was followed by an international convention. The internet was decided a free trade area, i.e. without any custom taxes for software, films and digital books bought online. Material goods (books, CDs, DVDs) and services were subject to existing regulations, with collection of VAT (value added tax) for example, but with no additional custom taxes.

On the footsteps of the Internet Bookstore, based in United Kingdom and the largest online bookstore in Europe, Amazon.com launched is Associates Program. As stated in a press release dated June 8, 1998: "The Amazon.com Associates Program allows website owners to easily participate in hassle-free electronic commerce by recommending books on their site and referring visitors to Amazon.com. In return, participants earn referral fees of up to 15 percent of the sales they generate. Amazon.com handles the secure online ordering, customer service, and shipping and sends weekly email sales reports. Enrollment in the program is free, and participants can be up and running the same day. Associates range from large and small businesses to nonprofits, authors, publishers, personal home pages, and more. The popularity of the program is reflected in the range of additions to the Associates Community in the past few months: Adobe, InfoBeat, Kemper Funds, PR Newswire, Travelocity, Virtual Vineyards, and Xoom." There were 60,000 "associates" in June 1998.

Barnes & Noble, a leading U.S. bookseller, entered the world of e-commerce in 1997.

Barnes & Noble had 481 stores nationwide in 1997, in 48 states out of 50, as well as 520 bookstores (B. Dalton stores) in shopping malls, and a catalog of 175,000 titles from 20,000 publishers. Barnes & Noble also published books under its own imprint for exclusive sale through its retail stores - and its nationwide mail-order catalogs.

Barnes & Noble first launched its America OnLine (AOL) website in March 1997 - as the exclusive bookseller for the 12 million AOL customers -, before launching its own website, barnesandnoble.com, in May 1997. The site was offering reviews from authors and publishers, with a catalog of 630,000 titles available for immediate shipping, and significant discounts: 30% off all in-stock hardcovers, 20% off all in-stock paperbacks, 40% off select titles, and up to 90% off bargain books. Its Affiliate Network spread quickly, with 12,000 affiliate websites in May 1998, including CNN Interactive, Lycos and ZDNet.

In May 1998, Barnes & Noble.com launched a revamped website with a better design, and an Express Lane one-click ordering, improved book search capabilities, and expanded product offerings with a new software "superstore". Jeff Killeen, chief operating officer, stated in a press release dated May 27, 1998: "Through our first year in business we have listened intently to what our customers have asked for and believe we have delivered a vastly superior product based on those requests. (…) Innovation based on customer-focus has been the hallmark of our success and we see our new site as proof- positive of our commitment to be the leader in online bookselling and related products. We're also extremely excited to have Intel, a leader in the technology products category, open its SoftwareForPCs.com site at barnesandnoble.com."

Barnes & Noble.com began a fierce price war with Amazon.com for the best book discounts. Amazon.com came to be known as "Amazon.toast". Jeff Bezos, Amazon's CEO, didn't mind the competition. In the magazine Success of July 1998, he explained to journalist Lesley Hazleton: "The gap has increased rather than decreased. We went from $60 million annualized sales revenue in May to $260 million by the end of the year, and from 340,000 customers to 1.5 million, 58 percent of them repeat customers - all that in the context of 'Amazon.toast'. We're doing more than eight times the sales of Barnes & Noble. And we're not a stationary target. We were blessed with a two-year head start, and our goal is to increase that gap."

= Amazon in Europe

The European presence of Amazon began in October 1998, with the creation of two subsidiaries in Germany and in United Kingdom.

In August 2000, Amazon had 1.8 million customers in U.K., 1.2 million customers in Germany, and less than 1 million customers in France. Amazon opened its third subsidiary, Amazon France, with books, music, DVDs and videos - software and video games were added later, in June 2001 - and a 48-hour delivery. At the time, online sales represented only 0.5% of the book market in France, against 5.4% in the United States.

The opening of Amazon France was announced at the last minute, on August 23, 2000, after months of secrecy surrounding the next "American cultural invasion". The French subsidiary opened in Guyancourt, in the suburbs of Paris, with 100 employees - some of them trained in the U.S. headquarters in Seattle - for administration, technical services, and marketing. The distribution service opened in Boigny-sur-Bionne, near Orleans, a town in the south of Paris. The customer service landed in The Hague, Netherlands, because Amazon was expecting to broaden its European network.

Amazon France had four competitors: Fnac.com, Alapage,
Chapitre.com, and BOL.fr.

Fnac.com was the online branch of Fnac, a network of
"traditional" bookstores spread throughout France and other
European countries, and run by the group Pinault-Printemps-
Redoute.

Alapage was an online bookstore founded in 1996 by Patrice Magnard, before being bought by France Telecom in September 1999. Alapage became a subsidiary of Wanadoo, the internet service provider of France Telecom, in July 2000.

Chapitre.com was an independent online bookstore, created in 1997 by Juan Pirlot de Corbion.

BOL.fr was the French subsidiary of BOL.com (BOL: Bertelsmann On Line), launched in August 1999 by Bertelsmann, a German media giant, in partnership with Vivendi, a French multinational company.

Unlike their counterparts in the U.S. and in U.K., where book prices were free, French online bookstores couldn't offer significant bargains. A French law - the Lang law - regulated prices. (Jacques Lang was the ministry of culture who fathered the law to protect independent bookstores.) The 5% discount allowed by law for both traditional and online bookstores was offering little latitude to Amazon.fr, Fnac.com, and the likes, who were nevertheless optimistic about the prospects offered by the French-language international market. A significant number of orders was already coming from abroad, with 10% of orders for Fnac.com as early as 1997.

Interviewed by AFP (Agence France-Presse) on the Lang Law and the meager 5% discount allowed for book prices, Denis Terrien, president of Amazon France (until May 2001), explained in August 2000: "Our experience in Germany, where book prices are also regulated, shows that prices are not the main factor for our customers to purchase books at Amazon. The main factor resides in the additional services we provide. We offer a whole bunch of services, beginning with a large choice in our catalog - we sell all the French cultural products. We have a powerful search engine. As for music, our site offers the only catalog searchable by song title. In addition to the editorial content of our site, which ranges from the one of a traditional bookstore to the one of a magazine, we have a customer service 24h/24 7days/7, something unique in the French market. Finally, an additional specificity of Amazon is our commitment for a fast delivery. We aim to have more than 90% of our products in stock (at our storage facility)."

Amazon's economic model was already admired by many in Europe, but could hardly be considered a model too for staff management, with short-term labor contracts, low wages, and poor working conditions.

Despite the secrecy surrounding the working conditions of the European staff, problems began to filter. In November 2000, the Prewitt Organizing Fund and the French union SUD-PTT Loire Atlantique launched an awareness campaign among the employees of Amazon France, after meeting with a group of 50 employees in the distribution center of Boigny-sur-Bionne. In a statement following the meeting, SUD-PTT denounced "degraded working conditions, flexible schedules, short-term labor contracts in periods of flux, low wages, and minimal social guarantees". Similar action was conducted in Germany and in U.K. Patrick Moran, head of the Prewitt Organizing Fund, founded an employee organization under the name of Alliance of New Economy Workers. In response, Amazon sent internal memos to its employees, stressing the pointlessness of unions within the company.

At the end of January 2001, Amazon, which employed 1,800 people in Europe, announced a 15% reduction of its European staff. It also closed its customer service center in The Hague (Netherlands). Its 240 employees were offered to work in one of the two other European customer service centers, in Slough (United Kingdom) and in Regensberg (Germany).

= Amazon worldwide

The second group of foreign clients - after European customers - was in Japan. In July 2000, during an international symposium on information technology in Tokyo, Jeff Bezos announced his intention to launch Amazon Japan in the near future. He insisted on the high potential of the Japanese market, with expensive real estate affecting the prices of goods and services and, as a result, online shopping being more convenient than traditional shopping. High population density would mean easy and cheap home deliveries.

A Japanese call center opened in August 2000 in Sapporo, a city on the Hokkaido island. Amazon Japan opened three months later, in November 2000, as the fourth subsidiary of Amazon and first non-European subsidiary, with a catalog of 1.1 million titles in Japanese and 600,000 titles in English. To reduce delivery times to 24 to 48 hours instead of six weeks for books published in the U.S., a large distribution center (15,800 m2) was created in Ichikawa, a town in the east of Tokyo.

In November 2000, Amazon had 7,500 employees, a catalog of 28 million items, and 23 million clients worldwide. It opened its digital library with 1,000 ebooks, and the promise of many more titles for soon.

Amazon also began focusing on the French-language market in Canada. It hired staff knowing the language and the market, to be able to offer French-language books, music and films (VHS and DVD) in a Canadian subsidiary. Amazon Canada, the fifth subsidiary of the company, was finally launched in June 2002 with a bilingual (English, French) website.

Surprisingly, even for the marketing of a main online bookstore, paper was not dead. For two consecutive years, in 1999 and 2000, Amazon sent a print catalog to its customers (10 million in 2000) before the holiday season.

2001 marked a turning point for the company, with the need to address the internet bubble affecting the "new" economy and so many companies. Following a deficit for the fourth quarter 2000, Amazon reduced its workforce by 15% in January 2001. 1,300 employees lost their jobs in the U.S. 270 employees lost their jobs in Europe. Jeff Bezos decided to diversify the products sold online, and to sell not only books, videos, CDs and software, but also health care products, toys, electronics, kitchen utensils, and garden tools. In November 2001, cultural products - books, CDs and videos - represented only 58% of sales, the total of which were US $4 billion, with 29 million customers.

The company was beneficiary for the first time in the third quarter 2003.

In October 2003, Amazon launched a full text search (Search
Inside the Book) after scanning the text of 120,000 titles,
with many more to come. It also launched its own search engine,
A9.com.

A sixth subsidiary - named Joyo - opened in China in September 2004.

The net income of Amazon was US $588 million for 2004 - 45% of which from its six subsidiaries (Canada, China, France, Germany, Japan, U.K.) -, with a total of $6.9 billion for sales.

Amazon became a reference for global online commerce.

In July 2005, for its 10-year anniversary, Amazon had 9,000 employees, and 41 million clients enjoying attractive prices for a whole range of products they could get within 48 hours in one of the seven countries with an Amazon platform.

Amazon also sold more and more ebooks. In April 2005, it bought the French company Mobipocket, specialized in ebooks and readers (software) for PDAs.

In November 2007, Amazon launched its own reading device, named Kindle, with a catalog of 80,000 ebooks on Amazon's website. 538,000 Kindle were sold in 2008. A new version of Kindle, named Kindle 2, was launched in February 2009, with a catalog of 230,000 ebooks.

= What about small bookstores?

Local bookstores have closed one after the other, or have had a hard time keeping up with the competition of Amazon.com and other online bookstores. Amazon and others are also bad news for specialist bookstores, for example the travel bookstore created in 1971 by Catherine Domain in Paris, France.

According to Catherine, Librairie Ulysse (Ulysses Bookstore) is the oldest travel bookstore in the world. Its 20,000 out-of- print or new books, maps and magazines - in a number of languages and about any country - are all packed up in a tiny space, in the heart of Paris, on Ile Saint-Louis, a small island surrounded by the Seine river.

Catherine has been a traveller since she was a child. She travels every summer - usually sailing on the Mediterranean, the Atlantic or the Pacific - while her boyfriend runs the bookstore. She is also a member of the French National Union of Antiquarian and Modern Bookstores (SLAM: Syndicat national de la librairie ancienne et moderne), the Explorers' Club (Club des explorateurs) and the International Club of Long-Distance Travelers (Club international des grands voyageurs).

Catherine visited 140 countries, and some trips were quite challenging. But her most difficult challenge was to set up a website on her own, from scratch, without knowing anything about computers. In December 1999, she wrote in an email interview: "My site is still pretty basic and under construction. Like my bookstore, it is a place to meet people before being a place of business. The internet is a pain in the neck, takes a lot of my time and I earn hardly any money from it, but that doesn't worry me… I am very pessimistic though, because the internet is killing off specialist bookstores."

Some booksellers decided to run most of their business online, for example Pierre Joppen and his wife Joke Vrijenhoek, the owners of Paulus Swaen Old Maps and Prints, a bookstore founded in 1978 in the Netherlands that relocated in 1996 in Florida. The bookstore offers maps, atlases and globes ranging from the 16th to the 18th century. The maps cover all parts of the world, and were produced by renowned cartographers, such as Ortelius, Mercator, Blaeu, Janssonius, Hondius, Visscher, de Wit, etc. The bookstore has also sold travel books and Medieval manuscripts. It has offered an online internet auction since November 1996, first twice a year, in March and November, and then four times a year, in March, May, September and November.