Books Online 18544 Essay Example

last year. With over 16 million items available, primarily books due to intense competition, Amazon.com initially started as a bookstore but noticed a high demand for general retail products prompting its expansion. However, this expansion ultimately resulted in Amazon.com's financial loss last year. Among the three major online booksellers, Amazon.com stands out with its diverse selection. To maintain competitiveness, Amazon.com must remain committed to its original plan of being an online bookstore.

Amazon.com, led by CEO Jeffrey P. Bezos and employing 3000 workers, operates a frequently updated dynamic website. The site offers a wide selection of popular books along with valuable book reviews that strongly influence consumer buying decisions. Amazon.com strives to be the most customer-focused company globally, both online and offline.

To simplify purchasing, they have introduced the innovative one-click ordering option which enables customers to securely store their credit card information and addresses for future orders. In addition, advanced software is used to analyze previous customers' purchase patterns in order to provide personalized recommendations for additional purchases. As a result, repeat customers make up 66% of Amazon.com's sales (Article: Cover Story, 1999. Amazon.com vs. E-bay. Business Week, May 31, 1999. P128-140).

By actively seeking customer opinions and suggestions, Amazon.com effectively manages potential risks associated with book purchases. They also use a star rating system where highly regarded books are given 5 stars while poorly written or uninteresting ones receive only 1 or no stars.

These practices allow prospective customers to access relevant perspectives and information that can significantly impact their decision-making process.

Currently, online shoppers enjoy the perk of not having to pay sales tax on their purchases. This advantage is applicable to all online retailers, including book

sellers. In lieu of sales tax, online shoppers are obligated to cover shipping and handling fees. However, this advantageous situation may soon change as congress is in the process of implementing a sales tax for online consumers. The proposed nationwide Internet tax rate for purchases stands at 6.3%, which aligns with the average sales tax in the United States. According to an article by Mike France (1999) published in Business Week, this modification could result in a reduction of 30% or more in online shopping.

According to Business Week, there are currently 457 online booksellers competing in the online book retail industry, including specialized ones. Amazon.com faces competition from Barnes and Noble.com and Borders.com. However, what sets Amazon.com apart as the "Earth's Biggest Bookstore" is its diverse offerings beyond being an online bookseller. Its website includes comprehensive catalogs for both books and music, as well as additional resources like customer reviews, personal recommendations, and gift suggestions. Customers can easily search for books by author, title, subject or keyword; similarly, they can search for music by artist, CD title or song title on Amazon.com. These unique features distinguish Amazon from other online retailers.

Both Borders Group, Inc. and Barnes and Noble, Inc. have a global presence with physical book and music superstores as well as mall-based bookstores. In contrast, Amazon.com operates exclusively online. However, despite the belief that having a renowned name would be essential, Barnes and Noble's online site has struggled to attract customers. Online shoppers prioritize price over brand recognition and continue to be loyal to Amazon.com. According to Business Week's report (#5), approximately 101 million American adults (52%) are acquainted with Amazon.com.

Paul Larson finds it

entertaining when people try to compare Amazon.com to Borders.com or Barnes and Noble.com. He believes that comparing Amazon to Wal-Mart might be a bit more accurate, but still not fully capturing its uniqueness. According to Larson, Amazon stands out on its own. It offers a wide range of products including books, videos, music, drugs, groceries, and pet supplies. The assortment of items keeps expanding and Larson assures that it will continue growing significantly.

When evaluating financial decisions, most investors prioritize a company's statistics. Upon comparing the statistics of three companies, it is evident that Amazon.com is thriving and effectively managing competition. For the thirteen weeks ending April 25, 1999, Borders Group, Inc. experienced a 13% increase in sales, resulting in a profit of $618.7 million. However, their net losses amounted to $4.1 million, contrasting with an income of $3.8 million (Borders.com General Information #8). These results indicate a rise in sales from both new and existing stores. Unfortunately, these gains were offset by expenses related to Borders.com and higher levels of debt.

Barnes and Noble, Inc. primarily engages in the retail sale of books and magazines, operating 1,009 bookstores across 49 states along with an online platform. In the thirteen-week period ending on May 1, 1999, Barnes and Noble's revenue grew by 9% to reach $718.3 million. Additionally, their net losses decreased by 57%, amounting to $1.4 million before accounting changes were made. These positive outcomes are attributed to the opening of new stores and pre-launch cost reduction measures (source: BarnesandNoble.com - General Information #6).

The number of customer accounts on Amazon.com grew by more than 2.2 million during the quarter ending March 31, 1999, reaching a total

of over 8.4 million. This translates to a growth rate of over 250% compared to the same period in 1998, when there were only 2.3 million customer accounts. Sales also saw substantial growth, increasing from $148 million in 1997 to $610 million in 1998, demonstrating an impressive rise of 313%. (Amazon.com. Investor Guide #4).

Amazon.com is the leading bookseller on multiple platforms, including AOL.com, Yahoo!, Netscape, Exite.com, the Alta Vista Search Service, and the Prodigy Shopping Network. Their platform offers numerous features such as a comprehensive catalog of 2.5 million titles, easy-to-use search and browsing options, email services, personalized shopping service, online credit card payment capability, and direct shipping to customers. As the top online retailer, Amazon.com provides customers with a wide range of products through its efficient search-and-retrieval interface.

Amazon.com, Inc. and Barnes and Noble, Inc. have resolved a lawsuit initiated by Barnes and Noble, with Amazon also filing counterclaims in the same case. No blame was accepted nor damages paid by either party. Both companies have chosen to prioritize competition in the marketplace rather than engaging in legal disputes (Amazon.com. Company Info #2).

Amazon.com, the dominant force in e-commerce for books worldwide, has extended its global presence by launching two international websites: www.amazon.co.uk in the United Kingdom and www.amazon.de in Germany. To enter the European Book Market, Amazon.com successfully purchased the top online bookseller in both the U.K and Germany last year. This strategic decision enables Amazon to offer a wide range of titles from these countries as well as from the United States, ensuring swift delivery to customers across Europe. Additionally, dedicated distribution centers have been established in England and Germany.

Amazon.com has expanded globally by

forming a Global Merchant Agreement with Yahoo!. This collaboration allows Amazon.com to utilize Yahoo.com's international Internet sites, strengthening its position as the leading online bookseller worldwide. In addition to facing competition from U-Bid and similar companies, Amazon.com has partnered with prestigious art auctioneer Sotheby's. By joining forces, this alliance enables individuals from across the world to participate in live auctions showcasing valuable art pieces, including exquisite paintings.

Amazon.com provides a wide variety of products, expanding beyond books to include groceries and fine paintings. With a selection of 16 million items available for purchase, customers from around the world can visit Amazon.com to discover unbeatable prices on books and more.

Amazon.com, Barnes and Noble.com, and Borders.com are the three main online booksellers today. Currently, Amazon is leading the pack while Barnes ; Noble and Borders are trying to catch up. To fully understand the situation, it is important to analyze each company's strategies and evaluate relevant performance measures such as stock price. On June 29, 1999, Amazon's stock price was 116 and 1/16, Barnes ; Noble's was 17 and 13/16, and Border's was 15. This data clearly shows that Amazon is the dominant force. Our goal was to determine why Amazon has been more successful than its competitors by identifying its sources of competitive advantages. Additionally, with recent fluctuations in stock prices potentially impacting investor interest for each company, we must question whether this trend can generate a return on investment.

Amazon is able to offer lower prices because of its large sales volume. Currently, all three companies are implementing cost-cutting strategies. Recently, Amazon announced a 50% discount on New York Times best sellers, and Barnes ; Noble quickly

matched the same discount. These discounts aim to incentivize customers to purchase more valuable items while browsing the site. Reports suggest that both companies will experience financial losses due to these reduced rates. However, this move could ultimately benefit Amazon as they have a stronger market presence and can afford temporary losses in order to attract customers (MSNBC. #10). This situation gives Amazon a competitive advantage as they continue to outperform their competitors even when imitating their strategies.

Amazon's early entry into the industry has given them an advantage, enabling them to acquire experience more quickly and reduce costs. Moreover, when customers think of online booksellers, Amazon is often the first brand that comes to mind, fostering a sense of loyalty. Due to their satisfaction with Amazon, customers are reluctant to try new booksellers. Conversely, Barnes and Noble and Borders benefit from being second movers as they can learn from Amazon's previous errors and capitalize on their advertising endeavors. Through substantial investments in marketing, Amazon has heightened awareness about the advantages of buying books online, benefiting all firms in the industry.

First mover advantages

The procurement of essential resources is a crucial element of our business strategy.

Brand loyalty is the extent to which customers are attached and committed to a specific brand.

? Lower costs

They are established

Barnes and Noble experienced a rapid growth in sales from $14.6 million to $70.2 million in 1998, as stated in their annual report. Additionally, their inventory has significantly increased, now offering over 750,000 titles which is more than double their previous volume. To surpass Amazon, the company is taking various measures such as introducing new additions and enhancements while launching an innovative

advertising campaign. The main goal of these improvements is to provide customers with a wide range of choices and deliver an unmatched online experience. These enhancements consist of:

? One click ordering

Introducing a more powerful search engine that assists customers in easily finding any title.

Free email service that helps customers stay informed.

? A wider range of discounted books are available for purchase.

Shorter download times

Unmatched collection of rare and out of print books

(Barnes and Noble. General Information. Number 6)

Currently, Borders is lagging behind both Amazon and Barnes ; Noble. Borders Group is the owner of the Waldenbooks chain and used to be the leading book retailer in the country. However, some analysts believe that Waldenbooks was unprepared for the emerging trend of online book shopping. In order to regain their dominance in book selling, they were compelled to enter the online book selling market. Since doing so, they have witnessed sales growth and expansion. Similar to Barnes ; Noble, they are implementing strategies to catch up to Amazon and become the top company in the book-selling industry. These strategies include:

? Focusing on expanding into the global market

? Forming partnerships with other companies (for example, Planet Music)

? Reader reviews and recommendations

Decreasing their shipping time

Borders. General Information. #8

According to our research, all three companies possess unique strengths and advantages. Presently, Amazon holds a strong position in the market, giving them a notable edge. Nevertheless, both Barnes ; Noble and Borders are actively developing strategies to set themselves apart from competitors and challenge Amazon's dominance. Although this will be difficult, we maintain an optimistic outlook on its feasibility.

Now we will examine the general goals for the companies

as a group. Currently, all the companies, except Amazon.com, are experiencing growth and profits. Amazon.com, however, has incurred a loss in profits due to their recent diversification and problematic start. They have embarked on expanding into the overall online retail industry. Once they establish a solid customer database, word of mouth and consumers in need of products will help them regain profits. The online retail industry is rapidly growing due to an untapped market. As a group, these three companies need to be prepared to fend off new competitors entering the industry. To achieve this, they must focus on maintaining or increasing their current market shares. Advertising, improvements, and expansion are the means by which they are attempting to accomplish these goals. While all three companies share the general goal of increasing market shares in the fast-growing online retailing industry, they are pursuing slightly different strategies, as previously mentioned. Only time will determine which company has the most effective plan to accomplish their goals.

Although some individuals may assume that Amazon is content with its current position in the market, the company actually desires more success. By further widening the gap between themselves and their closest competitors, it will become even more challenging for rivals to survive in the battle against Amazon. Additionally, new market entrants hoping to compete in terms of size and speed will likely fail. Currently, Amazon's stock price stands at 116 and 1/16, but they aim to regain their all-time high of 221 and +. To achieve this, they intend to remain steadfast in the strategies that initially propelled their success: maintaining a large size, expanding into new markets, and remaining open

to potential opportunities. By doing so, Amazon enhances their prospects of increasing their market share.

Despite trailing Amazon, Barnes ; Noble has rapidly achieved success in the online book-selling sector. Their objectives encompass outpacing both Amazon and rival companies in terms of growth, adopting the latest technology, and staying informed about competitors' actions. They recognize that higher earnings per share will attract additional investors and generate more capital for expansion. Their focus will be on their core strengths, which are providing the fastest delivery time among competitors, offering unique options not available from other book-sellers, and enhancing the ease of ordering.

Borders lacks clear goals and aims to reclaim its position as the leading book retailer in the country. However, this objective is challenging to achieve and lacks specificity and realism (Borders. General Information. #8). Given Amazon's strong dominance in the market, Borders should not prioritize such a difficult task. Instead of focusing on innovation, Borders seems more interested in imitating its competitors. Consequently, Borders.com is always lagging behind because it avoids taking risks or being the first to act. Unfortunately, this means they miss out on the benefits of seizing opportunities. Unlike Barnes ; Noble, Borders does not offer the same features as Amazon. Hence, we do not consider Borders' goals a significant threat to Amazon.

The future of the online book-selling industry is uncertain as one company may dominate the market with a successful strategy, but others may imitate their tactics. Despite the uncertainty, Amazon appears to be the safest option for investors and consumers. Interestingly, Amazon.com's stock price has been volatile since December. Our research indicates that Amazon is the most prepared for the future,

closely followed by Barnes ; Noble. Borders may need to reassess its strategy and establish concrete and achievable goals to keep up with the constantly evolving online book-selling industry.

According to Commerce Secretary William Dailey, commerce is expected to expand by approximately $1.4 trillion by 2003, which is equivalent to one sixth of the current Gross Domestic Product (G.D.P). The online bookselling industry is a significant player in the field of commerce and will continue to experience growth, especially with its recent entry into the online retail market. Notably, industry expert Zapman, specializing in e-commerce for CBS Marketplace, predicts a promising future for online booksellers that are well-positioned to capitalize on this growth.

It is speculated that in the future, individuals will use portable computers to read books and publishers will directly sell books through the Internet. These possibilities pose potential challenges for online booksellers. Zapman further comments that books are inexpensive, easily transportable, do not require batteries, and do not need to be downloaded. He also notes that publishers have limited knowledge of direct selling and online retailing. Online retailing is an extremely competitive industry with slim profit margins. Additionally, publishers aim to avoid undermining their physical retailers by offering lower prices in the virtual realm. Instead, they strive to expand their sales channels, rather than reduce them.

Yankelovich, an expert in online retail sales, agrees with Zapman's views in a "Cybercitizen" study that reveals the distribution of online sales. The study indicates that book, tape, and video sales are the second most popular after airline tickets, emphasizing the demand for online bookstores (Figure 1).

The editor-in-chief of Amazon.com expressed that the Internet is unexpectedly reviving the influence

of critics, as online opinion leaders greatly impact consumer shopping habits. This further reinforces the idea that online booksellers will continue to experience rapid and consistent growth.

Not all online booksellers, especially smaller ones, are optimistic about their future. With the novelty of online shopping wearing off for many, these booksellers are realizing the challenges of retaining customers who may now choose to spend their money elsewhere. In order to maintain customer loyalty, many struggling retailers are investing significant resources and effort into providing exceptional customer service. However, it seems that only Amazon, Barnes and Noble, and a few other major companies are making such efforts. This could be attributed to the strong brand recognition enjoyed by these leading players in the online bookseller industry.

According to a study by Biz Rate.com, during the first quarter of this year, online book shoppers identified customer support as a weak aspect of e-commerce sites. This finding aligns with research conducted by Jupiter Communications, which observed a decrease in the percentage of customers who expressed being "largely satisfied" with their online shopping experience. In January, this percentage dropped to seventy-four percent from eighty-eight percent in July 1998.

According to a study conducted by Forrester, ninety-six percent of online book buyers expressed satisfaction with their online shopping experience and indicated that they would revisit the chosen online store. However, seventy-three percent of these buyers mentioned the possibility of shopping elsewhere (MSNBC #10).

Cooperstien, an analyst for Forrester Research, emphasizes that online retailers should make efforts to improve customer satisfaction by making the purchasing process simpler through personalization, improved tracking of orders, and implementing one-click purchasing. The reduction of customer care costs is

crucial for companies like Amazon and Barnes and Noble and may explain the recent decline in their stock prices (MSNBC #10).

Several analysts predict that the online bookseller industry is poised for success, but expect it to evolve into a consolidated oligopoly consisting of four or five dominant companies. Competition in this industry will be intense, and companies will need to adapt to consumer demand in order to maintain their market share. However, only time will tell how the future of the online bookseller industry will unfold, as analysts have had mixed success in their predictions over the years.

Amazon.com has created a number of coordinated and strategic alliances that have proven advantageous for the growth and expansion of its market share in the online booksellers industry. These alliances have facilitated resource sharing and the utilization of unique strengths among the involved companies, helping them to accomplish their respective strategic objectives. Through engagement in joint ventures, Amazon.com is able to launch new enterprises while also distributing the associated costs and risks.

Amazon.com and Yahoo! are collaborating to promote Amazon's online book-selling and other products through direct links and advertising banners. This partnership combines Yahoo!'s role as a major distributor of information on the internet with Amazon's status as the largest online bookseller, providing users with access to internet-based information. Additionally, both companies will benefit from sharing their unique strengths, enhancing their strategic positions. Yahoo! boasts specialty programming, content distribution, and networking capabilities across globally recognized properties. As the first online guide, Yahoo! also enjoys brand recognition that will increase the visibility of Amazon.com and broaden its customer base. On the other hand, Amazon.com brings core competencies to the

table, including a reputation as the leading online bookseller, efficient distribution channels for fast customer delivery, and brand loyalty. These advantages can be attributed to Amazon.com's status as a first mover in the online book selling industry, giving it a head start and allowing it to accrue brand loyalty and crucial resources that have contributed to its industry dominance. Customers who are satisfied with their experience purchasing from Amazon.com are likely to become recurring customers.The text emphasizes that psychological customer costs are high when using a different online bookseller, despite the low cost of switching vendors. This brand loyalty influences rivalry in the five forces model, reducing the likelihood of customers switching to competitors like Barnes and Noble.com and Borders.com. Additionally, Amazon.com's strategic resources, including the location of distribution sites, have contributed to its dominant position in the industry.

Amazon.com and Sotheby's Holding have formed a strategic alliance to launch an online auction site at sotheby.amazon.com. This joint venture will enable global dealers to participate in auctions for collectibles, Hollywood memorabilia, jewelry, and art. Sotheby's offers its distinguished expertise and reputation in the art and valuable objects industry, which complements Amazon.com's online technology and extensive customer base. By exchanging their complementary skills, both companies will benefit from economies of scope.

A strategic alliance was recently established with Drugstore.com, a website offering over 15,000 brand name personal health care products, product information, and a licensed pharmacy. The main objective of both companies is to maintain high quality, prioritize customer satisfaction, and achieve industry leadership. These factors play a crucial role in determining the success of a strategic analysis. However, there are some drawbacks to this alliance. Amazon owns

a minority stake (46% of outstanding shares) in Drugstore.com, which could potentially lead to issues for Amazon.com in the future. This minority interest reduces Amazon.com's control over matters such as restructuring, business philosophies, and management.

The macroenvironment greatly influences the outcomes of Amazon.com's strategic alliances. The social environment factors include a decrease in leisure time, an increase in international connections for dealers, and a significant decrease in travel time. To address these factors, Amazon formed joint ventures with Sotheby's holdings and drugstore.com to create an online auction pharmacy.

In the technological environment, Amazon has established standards for online book selling and distribution channels. With its superior innovation, Amazon.com dominates the online book selling and overall online retail industry. Competitors are left imitating Amazon's strategic position, making it the perpetual leader in this industry.

In conclusion, the overall growth of online retailing is rapidly increasing. Regarding online bookstores, Amazon.com is the most favorable option available. It offers unbeatable advantages and a highly effective business model. With the industry's lowest prices, the widest range of products, and the highest brand recognition (52%), average consumers have no reason to risk trying out a competitor. All online bookstores have the potential to generate substantial profits due to the ongoing expansion of this industry. Consequently, investing in these companies could prove to be a once-in-a-lifetime opportunity.