On the other hand, the cost structure for those e-commerce firms that use electronic means to distribute tangible goods, such as books, apparel, and toys, appears to mirror more conventional business models. The network costs for these firms reflect the well-understood high fixed cost and low marginal cost model of the electronic world.
However, the economics of fulfillment--that is, providing and servicing the goods--still depend on these businesses' ability to achieve efficiencies and low unit costs for materials, storage, distribution, and after-sales service. The story of the demise of one prominent Internet-only retailer may be instructive in this regard.