Still, Barnesandnoble.com’s sales report for the first quarter showed that recent efforts to exploit all of the sales channels are making a mark. Revenues grew by 23 percent over the previous year to $109 million. By contrast, Amazon.com’s core books and music business in the United States, which brought in $410 million in the quarter, grew by only 2 percent. Without providing specific numbers, Stephen Riggio credits the better-than-expected results with rising conversion rates. Gross margins, which measure the net sales minus the cost of doing business, rose to 23 percent from 15.8 percent. At the same time, Barnesandnoble.com was able to cut marketing expenses as well as the cost of fulfillment and customer service.

Mark Rowen, an e-commerce analyst at Prudential Securities in New York City, upgraded the company’s stock after the first quarter results came out, saying he estimated that Barnesandnoble.com had gained "significant market share" from "arch rival Amazon." Barnesandnoble.com doesn’t provide statistics on market share. But Prudential Securities says that Barnesandnoble.com captured 28 percent of total combined books, music and video sales of both Amazon.com and Barnesandnoble.com in the first quarter, up from 21 percent in the fourth quarter of 2000.

And while profits most likely won’t come before late 2002, Barnesandnoble.com’s balance sheet looks strong, with $174 million in cash and securities and no debt.

All I Really Need to Know I Learned on the Retail Floor

During its four-year existence, Barnesandnoble.com has experienced all of the ups and downs of the e-commerce roller-coaster ride, from the euphoria of launching a site to the sting of criticism. And it doesn’t look like things are going to smooth out completely anytime soon. The retail business, and bookselling in particular, has always been a narrow-margin, cutthroat industry. To make things worse, recent studies from the National Retail Federation show that online book sales are leveling off after five years of growth.

All this and still that titanic online battle rages. In July, Barnesandnoble.com offered free shipping for orders of two or more items to U.S. destinations, one month after Amazon.com had offered a similar deal.

Expect more skirmishes. Barnesandnoble .com has learned enough to proceed in a still-uncertain environment by keeping costs down and making the most of its brand name. "Growth prospects have come down for everything in e-commerce, and that has compelled us to be more efficient," Stephen Riggio says, noting that the company cut 16 percent of its workforce in February and has cut back on expenses. Ironically, things are looking up for Barnesandnoble.com at a time when many e-commerce sites are struggling to survive.