The price wars underscore the importance this season holds for online retailers, especially booksellers. Apparently even a 1 percent difference in the discount on books can make a difference this holiday season.
"It is very important," said Amazon CEO and founder Jeff Bezos. "A large fraction of sales are done in the fourth quarter."
In fact, he said, many online merchants are only profitable in the fourth quarter. "It's a very seasonal business."
Bezos said Amazon hasn't experienced that same kind of "seasonality" because of its rapid growth. "Nobody knows what to expect. Last Christmas may or may not have been a good indicator," he said.
Amazon is using the holidays and the promotions that come with them to leverage what Bezos says is a 55 percent return rate for customers. Both the discounts and the holiday gift center are designed to draw in new customers, who are statistically likely to buy from Amazon again.
"We have a very high return rate for a company that has grown as fast as we have. If we can get someone to try our site, the chances are good they'll come back and use it again," Bezos said.
Amazon's new discounts include 30 percent off selected audio books and 20 percent off selected calendars. Amazon also is offering up to 89 percent off what it calls "special value books," beating BarnesandNoble.com's 88 percent discount.
Both companies are vying for an estimated $156 million in fourth-quarter online sales. Many analysts believe this is an especially important time for electronic retailers because many consumers will be making their presence felt in cyberspace for the first time.
Customers buying online for the first time are experimenting with different brands this season, looking for the company with the best prices, the largest library of titles, and the safest transactions. The companies are in a heated war to one-up each other with added specials such as discounts, recommendation services, and gift wrapping.
One of the companies missing out on the chance to create customer relationships this holiday season is Borders Books, which is scheduled to launch its online store in early 1998.
According to Bezos, this season is of the utmost importance for creating new customer relationships.
"This is a critical category formation time. Getting customers sooner rather than later is very important," he said, adding that Borders' eventual entry into the market would not be all bad for Amazon. Borders may expand the market for all online booksellers, instead of just taking customers from BarnesandNoble.com and Amazon.
"It can be an advantage, when traditional players start to do new things. It helps to legitimize the Internet," Bezos noted.