****Online Bookselling Getting Even More Competitive
Newsbytes - May 05, 1998 14:19
%BUSINESS %MSP AMZN BKS BGP V%NEWSBYTES P%NBYT
CHICAGO, ILLINOIS, U.S.A., 1998 MAY 5 (NB) -- By Bob Woods, Newsbytes. Who would have thought that people would go
to that fantastic new frontier known as cyberspace - to buy something as old fashioned as books? Amazon.com [NASDAQ:AMZN]
bet its whole business on such a thought, and Barnes & Noble [NYSE:BKS] and Borders Group [NYSE:BGP] are extending their
real-world stores into the untamed frontier to make a buck. Now, even more companies are eyeing the Internet for revenues.
On Monday, Borders told investors at a meeting that its online e- commerce site would open sometime this week. (Newsbytes, May
4, 1998). Details regarding the site would be released when it launches, Borders officials said. Web surfers interested in Borders'
Web site can enter their e-mail address at the site to be informed when it opens, Newsbytes notes.
Other retailers are moving into the online bookseller market, too: Bertelsmann AG will soon open an international mall that will
sell books in many languages, and discounter Crown Books will soon open a version of its bricks-and-mortar location in
cyberspace.
Also, Amazon.com filed with the US Securities and Exchange Commission (SEC) to sell $275 million in 10-year, unrated
high-yield senior discount notes, otherwise known as junk bonds (Newsbytes, May 4, 1998). Company officials also said in the
filing that proceeds from the offering will be used to retire about $75 million in debt and for "general corporate purposes."
But all of the moves several of these companies made into the world of e-commerce have taken their toll on their respective bottom
lines. Last week, Amazon.com reported a first quarter net loss of $9.26 million or $0.40 per share, better than the $0.47 Wall
Street expected, as measured by First Call (Newsbytes, Apr. 27, 1998). Amazon.com depends solely on the Internet for sales,
unlike its real-world based counterparts, Newsbytes notes.
Barnes & Noble's Web site made $5.6 million over the 1997 holiday season, and revenues for the site, doubled in each of its first
three quarters. But Barnes & Noble wrote off $9 million in net losses in the start-up of BarnesandNoble.com.
And Borders' management said that its earnings improvement in the first quarter would be "offset by strategic spending on
Borders.com." International operations and "other strategic initiatives" also impacted first quarter performance, officials said.
But even with all of the red ink and competition, Gartner Group electronic commerce analyst Roy Satterthwaite told Newsbytes
that the "flurry of activity" in the online bookselling marketplace signifies the tremendous economics of books online. "And not
only just from the low cost of taking orders," he said, "but it's really the demographic."
"Once you win that 'Internet customer,' you have a high-earning, low maintenance customer," Satterthwaite said. "What a dream
for an Internet marketeer."
Satterthwaite also said that even though the bookselling market is getting more crowded, the category in general will grow because
of what he called "the rich information and easy access to books," as well as the easy transition of the real-world bookstore to
cyberspace. But, Satterthwaite said a lot of the growth will come at the expense of other channels, like direct mail and retail
storefront sales.
"I think what we're seeing is the realization that the Internet is a viable channel, and Borders and Barnes & Noble realize that this
is a viable channel, the demographics are tremendous, and the demographics are favorable -- it's time to build a brand online."
He also said that although Amazon.com has not posted a profit as of yet, he agrees with the company's strategy of forsaking
earnings in favor of building a strong brand. "Just ask Coke or Pepsi about the importance of a strong brand," Satterthwaite said.
Last week, Amazon.com bought three companies, one of which would help it enter the world of online music sales (Newsbytes,
April 27, 1998). But Satterthwaite said he doesn't agree with Amazon's diversification move, because it should concentrate
building a brand within its primary category.
Satterthwaite added that in most e-commerce markets, companies need to concentrate on their specific categories and consumers
"who limit their choices to the top three in each category."
Amazon.com's Web site is at amazon.com .
Barnes & Noble's site is located at barnesandnoble.com .
Borders' site is at borders.com .
Reported By Newsbytes News Network: newsbytes.com .
(19980505/WIRES BUSINESS, ONLINE/ONLINEBOOKS/PHOTO) |
