How Amazon.com is thriving in a horrendous retail climate.

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Feb. 5 2009 5:11 PM

Shop Till Everyone Else Drops

How Amazon.com is thriving in a horrendous retail climate.

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I don't rely on Amazon just because it's cheap and convenient. For a store that aims to give you a bargain, it also excels at customer service. Here's something that happens often: I'll buy an item on Monday afternoon and be told to expect it to arrive Wednesday. Then, sometime Tuesday, the UPS guy rings my door—amazingly, Amazon has moved the product from its shipping center in Nevada to my apartment in San Francisco in less than a day, for no extra charge. The store even excels when something goes wrong. The Web abounds with stories of Amazon going above and beyond to make sure its customers are happy. Last year Joe Nocera of the New York Times wrote about how Amazon replaced his son's Christmas present for free after someone had filched the package from his building—which, of course, wasn't Amazon's fault.

I've got a story like that, too. Before Thanksgiving last year, I ordered a roasting pan for my parents, who live in Southern California—but I accidentally had the item delivered to my house, hundreds of miles away. What to do? I looked into shipping the roasting pan to my parents, but the cost was prohibitive. Then I thought about ordering them a new pan and returning the one that had come to me—but the sale on the item had expired, meaning that the pan was now $10 more expensive.

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So I did what any frustrated customer would do: I threw myself on the mercy of customer service. I called Amazon's secret call center and explained my problem to a friendly gentleman in a foreign country. (Speaking of which, there is one way Amazon can improve its service—publicize their call center's number!) The Amazon rep fixed everything. Because I was a loyal customer, he said, he would sell me a new pan—shipped to my parents' house—at the now-expired sale price. He also offered to take back the pan that I'd had delivered to me for no charge at all—not even shipping.

Amazon can provide such great service because it's a retail behemoth. There's a feedback loop working here—as it gets more customers, it makes more money and can better afford to placate the small number who feel wronged, which of course helps it win even more customers. This also explains why Amazon is not only beating offline stores but is also stealing market share away from its online rivals. EBay had a terrible holiday quarter—its profits declined by one-third, and, for the first time in its history, its revenues were lower than the comparable period the previous year. The company is also warning that its numbers for the current quarter will fall below expectations.

This seems counterintuitive—as times get tough, you'd expect that people would turn to eBay both to sell their stuff and to buy other people's used items. But while you can occasionally get some amazing deals on eBay, shopping on an auction site requires a lot of work. Shipping costs vary widely depending on the merchant, which means you've always got to be on the lookout to avoid getting ripped off. Shipping times are inconsistent, too—buy something at Amazon and you can be sure you'll get it within the week, but a delinquent merchant on eBay could dither forever. And what if something goes wrong—if your package is stolen from your apartment's common area, or your kitchen sponges aren't as absorbent as you expected, or you accidentally got your product shipped to the wrong address? Some sellers on eBay might go the extra mile, but many won't—and you'll end up stuck.

In the past, all this was worth it—you could be sure that if you put in the work, you'd get a fantastic deal on eBay. But as Amazon has reduced its prices and expanded its selection, fiddling with eBay no longer seems necessary. At Amazon, you click once, and the item's on its way. No wonder people can't stop shopping.

Farhad Manjoo is a technology columnist for the New York Times and the author of True Enough.