The clipper-ship era began in New York in the late 1840's and ended in London about 1872. Clipper ships were originally built for the profitable New York to China tea trade. American customers were
willing to pay a premium for the freshest tea, so speed of delivery became the prime concern of ship owners. A few years later, the Calcutta to London also became an important Clipper ship run.
By 1854 the vessel Champion of the Seas made a record run of 465 nautical miles in a single day...an average of almost 20 knots. This is a sailing speed record, which stood
until very recently.
The end of the clipper ships era was not caused by competition by steamers as common wisdom would hold. The first steam ships appeared in the 1830's. The end of the clipper ship
era was caused by two events that took place in 1869:
- Workers laid tracks that joined the Central Pacific and Union Pacific Railways, forming the first transcontinental railway in North America. As a result, tea was trans-shipped
via San Francisco avoiding the long and perilous trip around Cape Horn.
- The Suez Canal opened shortening the distance from India to England by 6,000 mi. (9,700 km).
The demise of the clipper ships is an example of a business based on a premise that was very substitutable. Clipper ship owners viewed other ships as their competition, when in fact, technological
innovation created unforeseen competition from new sources that directly reduce demand.