Even though they trail Amazon, Barnes & Noble have experienced success quickly in the online book-selling industry. Their goals include growing at a faster rate than Amazon and all other competitors. They also want to incorporate all the latest technology and stay aware of what the competitors are doing. They know that higher earnings per share will attract more investors and create more capital for growth. They plan on concentrating on what they do best: providing the quickest delivery time of all competitors, offering options that other book-sellers don t have, and increasing ordering ease.
Borders doesn t have any clear-cut goals. They want to reclaim their throne as the nations top book retailer , but this may be too challenging to start of with (Borders. General Information. #8). This goal isn t time specific or realistic. Amazon is so far ahead of them that they shouldn t focus on such a difficult task. Borders doesn t seem to be trying to innovate as much as they are trying to copy the competition. It seems as though Borders.com will always be a step behind everyone else because they never want to take the risk of moving first. Unfortunately for them, this means they won t get the rewards that come with taking a chance. Unlike Barnes & Noble, Borders doesn t offer things that Amazon does. Therefore, we feel that Border s goals does not pose much of a threat to Amazon.
It is hard to tell what the future holds for the online book-selling industry. One company may emerge with a highly successful strategy and take hold of the market but there is no guarantee that others will not copy these strategies. Although it is hard to tell exactly what will happen with the online bookseller industry; however, the safest bet for investors and consumers is clearly Amazon. Coincidentally, Amazon.com s stock price has fluctuated intensely since December. According to all the information we have researched, Amazon is the best prepared for the future closely followed by Barnes & Noble. Borders may need to rethink its strategy and set specific and realistic goals in order to keep pace with the rapidly changing online book-selling industry.
Commerce Secretary William Dailey estimates commerce will grow about 1.4 trillion dollars by year 2003 or one sixth of the current G.D.P. The online booksellers are very big in commerce and will continue to grow because they have just broken into the online retail business. One analyst Zapman, who is a specialist in e-commerce for CBS Marketplace, says things look pretty bright for on-line booksellers positioned for that kind of growth.
Some people speculate in the future people will read books on portable computers and publishers will sell books directly on the Internet. These seem to be to potential problems for online booksellers. Zapman goes on to say that books are cheap, portable, do not need batteries, and do not to be downloaded. He also says publishers know little about selling direct, much less e-tailing (online retailing). Online retailing is a killer business with razor thin margins. Besides, the last thing publishers want to do is to offend their brick-and-mortar retailers by undercutting them in cyberspace. Publishers seek more sales channels, not fewer.
Yankelovich, who is an expert in on-line retail sales also supports Zapman’s thoughts in a “Cybercitizen” study which shown the distribution of on-line sales. The study shows that book, tape and video sales are second only to airline tickets and clearly shows the demand for on-line booksellers (Figure 1).
The editor-in-chief for Amazon.com also was quoted, saying “Suddenly the Internet is revitalizing the critics role as online opinion leaders sway shopping habits to a degree that almost no one expected” which continues to support the theory that online booksellers will continue to grow at a rapid and steady pace.
Not all are so optimistic for online booksellers especially the smaller ones. Now that the novelty of online shopping is over for many, booksellers are facing the harsh reality of keeping their money and clicking elsewhere. In their efforts to keep customers loyal, many profit-starved retailers continue to spend a lot of money and time on providing a critical element, customer service. It appears that Amazon, Barnes and Noble and a few other large companies are the only ones attempting to due do this. This could possibly be due to brand recognition of these front runners in the online bookseller industry.
According to a Biz Rate.com, industry study during the first quarter of this year, online book shoppers rated customer support among the weak links of e-commerce sites. This follows Jupiter Communications research that found the percentage of customers saying they were “largely satisfied” with their online shopping experience dropped to seventy-four percent in January from eighty-eight percent in July 1998.
Forrester has also conducted a recent study, which stated that ninety-six percent of online book buyers said they were satisfied with their online shopping experience and would return to the online store they picked. Yet seventy-three percent of those same buyers said they might shop elsewhere (MSNBC #10).
In light of these numbers, Cooperstien, analyst for Forrester Research, said online retailers need to work harder to please customers by simplifying the buying process through personalization, better order tracking and one-click buying. This is why it is imperative for Amazon, Barnes and Noble and other companies to reduce their customer care cost. This could possibly be the reason for the recent decline of these companies stocks(MSNBC #10).
Many analysts have come to the conclusion that the online bookseller industry will succeed but will become a consolidated oligopoly between four or five companies. Competition will be fierce and the companies will have to change with consumer demand or they will lose their market share quickly. Analyst have tried to predict the future of industries for years; some are right, some are wrong, only the future will let us know how the online bookseller industry will turn out.
Amazon.com has formed several coordinated and strategic alliances that have been beneficial to the growth and expansion of market share in the online booksellers industry. These alliances have allowed the companies involved to share resources and distinctive competencies that enable them to achieve their individual strategic goals. By participating in joint ventures Amazon.com is able to establish new businesses and share the cost and the risk associated with new ventures.
Amazon.com is in coordination with Yahoo! , one of the Internet s largest distributor of information, to feature its online book-selling and other items using direct links and advertising banners. This alliance brings together the web s leading information provider and largest online bookseller to provide users with access to information on the Internet. The companies involved will also benefit by sharing distinctive competencies that will improve the strategic position of both companies. Yahoo! competencies include specialty programming, content distribution and networking of globally branded properties. As being the first online guide to the web, Yahoo also has brand recognition that will help to further expand the visibility of Amazon.com and broaden its customer base. Amazon brings to this business relationship core competencies such a reputation as the leading online bookseller, efficient distribution channels that allow for fast delivery to customers, and brand loyalty. These benefits can be attributed to Amazon.com s first mover advantage. As the innovator in the online book selling industry, Amazon.com has gained brand loyalty and key resources that play an integral part in its domination of this industry. Consumers that purchase items from Amazon.com that are satisfied with the service they receive will most likely buy from them again. This is indicative of how high psychological customer costs are associate with using another online bookseller, though the switching cost associated with changing vendors is low. This brand loyalty that customer exhibit is also a factor affecting rivalry in the five forces model. It reduces Amazon.com s probability of losing customers to competitors such as Barnes and Noble.com and Borders.com. Key resources such as the location of distribution sites have also helped in securing Amazon.com s position as industry leader.
Amazon.com entered into a strategic alliance with Sotheby s Holding. This joint venture will entail the launching of an online auction site at sotheby.amazon.com. It will allow dealers around the world to participate in the auction of collectibles, Hollywood memorabilia, jewelry and art. Sotheby can bring to this alliance distinctive competencies such as its reputation and expertise in art and other valuable objects. This, along with Amazon.com s online technology and access to a broad customer base makes a viable alliance. Both companies will exchange complimentary skill and in the process benefiting from economies of scope.
Another strategic alliance was recently formed with Drugstore.com. This site offers more than 15,000 brand name personal health care products, product information and a licensed pharmacy. The strategic objective of both companies encompasses the same goals of high quality, being customer focused, along with being the industry leader. This is an important element in determining the success of a strategic analysis. There are also some negative aspects to this newly formed alliance. Amazon owns a minority interest in this company, (46% of outstanding shares) which could potentially cause problems for Amazon.com in the future. The minority interest decreases Amazon.com s influence over matters such as restructuring, business philosophies, and management.
The macroenvironment is a tremendous force in shaping the outcome of the strategic alliances Amazon.com entered into. The factors shaping the social environment in both strategic alliances include a decrease in leisure time, increase in an international connection for dealers, and a vast decrease in travel time. Amazon responded by forming joint ventures with Sotheby s holdings and drugstore.com to create an online auction pharmacy. In the technological environment, Amazon has set the standards for the development of online book selling and the distribution channels that are utilized. Through its superior innovation, Amazon.com has dominated the online book selling as well as the online retail industry as a whole. Leaving its competitors to imitate its strategic position, Amazon stands to be the forever leader in this particular industry.
In conclusion, online retailing as a whole is increasing at an increasing rate. As far as the online booksellers, there is really only one suitable solution out there. Amazon.com s benefits and system of conducting business is almost untouchable. With the lowest prices in the industry, the largest selection, and the most brand recognition (52%), why would the average consumer gamble with the competition? All of the online booksellers stand to make impressive profits being that this industry is still growing; therefore, investments into these companies could very well be the investment of a lifetime.
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