What turned out to be the correct model? It looks like the Amazon of today: a very differently geared company than the one of the 90s. As it turns out, when shelf space is infinite, what really matters is lead generation and customer loyalty. Amazon captures this brilliantly through Amazon Prime, which sits on top of a Marketplace — Basics — Fulfillment equilibrium where Amazon either takes a tax as Marketplace broker, or sells its own branded products through Basics. (Or Kindle, or Amazon studios, and others.)
For example, it might seem counterintuitive that Amazon is a major threat to Google’s core search business. But you can see this by following the money through the loop: a significant portion of Google’s revenue comes from search queries for things that can be bought on Amazon, and the buying experience on Amazon (from initial purchasing intent to consumption/unboxing) is significantly better than the buying experience on most non-Amazon e-commerce sites you find via Google searches. After a while, shoppers learn to skip Google and go straight to Amazon.