Mike, you said Let's face it, the book industry is far more internet compatible than most industries.
I respectfully disagree. The problem is that there is entirely too much human intervention and warehouse space required, given the level of pricing. Michelle Harris, on the Dell thread, made what I believe to be a brilliant observation. She noted that e-commerce is best suited for commodities. That's why DELL is so well suited to this kind of business. I expanded her observation by noting that the fewer SKUs carried by the e-commerce vendor, the greater the probability of a profitable e-store. If you look at Amazon's 10-Q you will see that their variable costs are greater than their revenues. This in spite of the fact that they have outstripped their existing distribution center and need to build a new one. And they cannot push inventories upstream, because if they did shipping delays would be untenable. That means they need to carry tons of inventory (hence the need for a new distribution center).
Oddly enough, these weaknesses in e-commerce are precisely the reasons I like BKS. They bought Ingram, which is the major book wholesaler in the industry. That means that they have created a real profit center and can use the web sales as a loss leader. In other words, because of their net profit derived from Ingram they can maintain pricing pressures on their competitors (who are still forced to buy from Ingram). This is a brilliant strategic stroke IMO.
Bottom line: Barnesandnoble.com generate the sales and keeps the pressure on, but Ingram generates the profits.
TTFN,
CTC |
