The extent of e-commerce markets

A bricks-and-mortar bookstore serves a geographical area defined by a reasonable traveling time. By contrast, an Internet bookstore serves a much larger market - defined by the reach of telecommunications and the cost of shipping. In March 2000, Stephen King launched Riding the Bullet, which he described as “a ghost story in the grand manner,” in digital format over the Internet. Readers paid $2.50 to download the 16,000-word story (about 33 printed pages). With digital distribution, Internet bookstores would be able to dispense with the logistics of shipping physical product. They would need only the telecommunications network.

In October 2004, the market value of Internet bookstore Amazon.com was almost 7 times greater than that of America’s leading bricks-and-mortar bookstore, Barnes and Noble. The vast disparity reflected the stock market’s assessment of the difference in the long-term profitability of the two companies. An e-commerce business can reach a much larger market than a traditional bricks-and-mortar retailer. Further, by avoiding the costs of inventory and store rental, the e-commerce business may achieve lower costs.

Source: “E-Books King: Stephen the First,” Wired News, March 14, 2000.