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Chapter 6. Dumb Kids? > How Amazon Flouted the Rules

How Amazon Flouted the Rules

Amazon's importance lay in the fact that its strategy appeared to work despite the absence of the conditions that were thought to be necessary for its success. Hence, Amazon suggested to the financial community that the ordinary rules didn't apply to Internet space.

One of the conditions for the success of the get-big-fast strategy did apply to Amazon. Its strategy did require large up-front investments, and Amazon made them. But the other two conditions didn't apply. There are no network effects of significance; that is, it doesn't matter to a customer where another customer purchases books or any of the myriad of other products Amazon now sells. And book selling has large established players who have defended their established customer relations, even becoming online retailers, and have thereby kept Amazon's profit margins so low that it has never yet been profitable.


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