In 2002 I was working in Amazon’s retail division. We were organized by department - books, CDs, electronics, etc - and a separate dept for products sold by 3rd parties. Then Bezos decided 3rd party should appear next to 1st party on the same product page. Here’s what happened:

Amzn launched 3rd party biz right after I joined summer 1999. Started w auctions, competing directly w eBay. Added fixed price when eBay acquired Half. Despite a ton of cross-promo, nobody visited the 3rd party store. eBay had buyer/seller network effects. Amzn couldn’t compete.

By 2002 most people thought we should shut down 3rd party biz. It wasn’t working, consumed a lot of resources, good people were on it, big distraction. At the same time, core retail biz had decelerated to single digit growth after we raised prices to stop bleeding cash.

Jeff refused to give up on 3rd party. After spending tons of money (including TV ads) and banging his head against it over and over again, a light bulb went off. Going against eBay with a separate 3rd party store was like bringing a knife to a gun fight.

eBay had an insurmountable lead in the market for people browsing and looking for deals. Amzn’s strength was people spear-fishing for products, low prices, dependendable service. The way to attack eBay was to move the battlefield to Amzn’s turf.

“You can be sure of succeeding in your attacks if you only attack places which are undefended. You can ensure the safety of your defense if you only hold positions that cannot be attacked.” -Sun Tzu, The Art of War

But in order to show 1st party & 3rd party products on the same detail page, we needed a canonical product catalog. Jeff created a team to re-architect the catalog around universal identifiers for every product on the planet (including categories Amzn didn’t yet offer).

At the time, each retail division was responsible for its own P&L. For example, I was in charge of computers - source & manage inventory, set prices, run promos, bundles, etc. This is standard merchandising for any retail biz - balancing act between inventory / pricing / margin.

After the universal catalog was complete, Jeff told the retail teams: “You will now be competing with other sellers for the buy button. If they offer a lower price, they get the button. Adjust your inventory, pricing and margin plans accordingly.”

This was an impossible task for the retail merchants to manage. How could we plan our biz in the face of unkowable actions from 3rd parties? Our senior execs with deep retail experience were shocked / perplexed. This was why I had dropped out of b-school, learn on the job!

The project was called “Single Detail Page.” Within a few years, 3rd party sales went from 0.x% of GMV to 40%. 3rd party profits far exceeded 1st party - no inventory risk, no fulfillment cost, pure margin. eBay’s market cap peaked at 4x Amzn’s, today Amzn is worth 40x eBay.

“So in war, the way is to avoid what is strong, and strike at what is weak.”