For E-Commerce Shoppers, There Is a Santa Claus

Photograph by Carolyn Cochrane/Getty Images, Illustration by

The holiday shopping season officially kicks off this week with the frenzy of profligacy known ominously around much of the world as Black Friday.

There will be two vastly different common experiences among those who indulge in this annual rite. Customers of traditional stores will encounter crowded aisles, long lines, limited parking, and overworked employees as they jostle to grab the hottest holiday gifts. For some, the chaos will be energizing. Others will return home slightly traumatized, credit limits dinged by bulging bags.

Then there’s the experience of shopping online. On the Web, the grind of retail’s biggest day will be invisible—hidden hundreds of miles away, inside the massive warehouses of juggernauts like and Wal-Mart. While the overall growth in retail is likely to remain relatively flat, e-commerce sales over the holidays are expected to jump 16 percent to $55 billion, according to the tracking firm Comscore. It’s no wonder. Clicking the mouse and waiting for the doorbell to ring is much easier than battling feverish, Xbox-obsessed crowds.

It’s not only the lack of fight-or-flight response that separates the experience of online shopping from the bricks-and-mortar variety. In physical stores, many decisions are still based on simple, fallible human intuition. Mere mortals in clothing stores decide what styles and sizes to stock and which combinations to display on that creepy mannequin in the window. A blue-shirted employee at the local Best Buy will guide you to the best phone or flatscreen TV. An orange-aproned worker at Home Depot will point you to the wrench selection. Associates at Walmart in blue shirts or vests will greet customers at the entrance, then ring them up and check them out at the exit.

On the Web, intuition rarely enters into the equation. The shopping process is almost entirely curated by computers. Algorithms decide what products to recommend, how to display them, what price to set. and how an order can be most expeditiously and inexpensively shipped.

At mighty Amazon, the omniscient computer program that practically runs the company’s supply chain is known internally as the Mechanical Sensei. The program tracks all the items and orders coursing through Amazon’s systems. It makes millions of small decisions, such as how much of a particular product Amazon should buy, and—given the geographic dynamic of demand for that product —where in its massive network of fulfillment centers to store it. As I researched my recent book on Amazon, The Everything Store, some employees even asserted that the Mechanical Sensei’s simulations helped to decide where the company should locate its newest fulfillment centers.

For the last two centuries, parents have spun tales of a mythical figure, clad first in bishop’s clothes and then in a red heavy winter coat, who almost magically delivers gifts to the homes of children. The story is a fraud, we reassure ourselves as we grow up. But is it really? Companies such as Amazon now seem to know what we want before we know we want it. They have armies of menial laborers—not elves but temporary workers making $12 an hour—toiling in what some assert are grueling conditions, far away in remote warehouses. The gifts are delivered (seemingly magically) to our homes, not by a reindeer-powered sled but via UPS, FedEx, or the U.S. Postal Service.

So consider this on Black Friday and throughout the holiday shopping season as you dust off the credit card and prepare to indulge. Yes, Virginia, there is a Santa Claus. It’s a blinking, unfeeling computer program. And it never wears a colored shirt.

Before it's here, it's on the Bloomberg Terminal.