Online bookstore

Does making documents accessible over the web eliminate the need for printing documents?

The core idea of this article is to comtemplate on a most commonly discussed  topic – Does making documents accessible over the web eliminate the need for printing documents? Here is the answer which you may not find in other all articles.

This is an interesting question! The answer is NO. The very simple explanation would be that until we build computer systems that is 100% reliable and accessible, we will require to have paper documents. Take the example of medical documents of a patient accessible by a doctor over the intranet website. Suppose there are no paper records and there is a system outage – Where will the doctor look into to review the patient’s medical history and such?

Also, Looking at the current E-Government sites of US, it seems like an islands of information. I don’t know about the current system framework that US E-Governance system, but it would be a nice strategy to categorize the scattered information, build a centralized database which improves performance and data integrity and then replicating it in multiple locations. There is lack of centralized information (authoritative, legal, sensitive) that is fully reliable. This is an issue in the global Internet spectrum. Most of it are covered by copyrights, still there is huge information out there, as you said, which has no authority.

NDIIPP’s effort is praiseworthy and is on a different line – preserving digital information that might otherwise get lost by act of nature or by negligence. High dependence on digital storage and not leaving behind structured paper documents is a real problem. In my opinion, NDIIPP’s efforts should also be directed so that it leads to storage in multiple digital formats in multiple geographical locations to aid disaster recovery.

Review copyright (c) 2010 – 2020 – Deepesh Joseph (deepeshjoseph@yahoo.com)

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Assess Barnes and Noble’s response to the substitution threat from Amazon. How did Amazon respond in turn, and to what net effect?

Barnes and Noble’s Response:

Barnes and Noble had started studying online business during late 1994. It was not in response of Amazon.com’s going online that they thought about doing online business. Their mission in starting online book retail was clear – To leverage Barnes & Noble brand name online. They soon realized the substitute threat from fully online retailer, Amazon.com. They now worked on establishing the strategy that could be in par with or possibly outperform that of Amazon. The following were their actions in response to this move -

- As an initial step, On Jan 28 1997, they entered into alliance with AOL, becoming exclusive bookseller
- Formed alliance with Firefly to develop personalized book recommendation service with the vision of incorporating this feature in its web site.
- On March 13, 1997, established transaction oriented web site that enabled online book selling. On the same day, filed suit against Amazon, challenging its claim of “Earth’s biggest bookstore”.
- Established online business strategy to bring in incremental sales by providing easy access for people to buy books and by tapping international markets.
- Established separate company – Barnes & Noble .com – with separate COO to account for centralized scope on online business.
- Established high performance logistics network that could reduce delivery times to a greater extend and that can ship on the same day an order was placed.
- Necessary upgrade and enhancements were made to the “back-office” software systems to account for online business. The existing systems provided stable back-end for the front-end web site.
- Offered deep discounts up to 40% for best selling hand covers
- Enabled direct-from-warehouse pricing for its customers
- Implemented more scalable and sophisticated user personalization tools on the web site, notably, “collaborative filtering” that presented users with books selections based on previous similar user profiles.
- Entered into alliance with other web sites to provide mutual links and thus increase site traffic.

Amazon’s response:

Amazon responded to Barns & Noble’s growth as a competitor in the following manner -

- Doubled the amount of book titles
- Expanded best-seller discounts to 40%
- Increased sales associate’s first time sales commission from 8% to 15%
- Developed user personalization tool in alliance with Firefly’s major competitor
- Eventually, increased discounts applied at various points during the competition, lead to slow pay back of Associate’s program, web site advertisement and back-end systems. It was expected to break even in 1999.

(c) Deepesh Joseph, 2006-2008

Traditional bookselling and Online bookselling – Comparing a customer’s willingness-to-pay

Traditional bookselling and Online bookselling – Comparing a customer’s willingness-to-pay for books supplied in these two business models. (i.e. Do they expect to pay less online? Why? What else do they expect from each method?)

     The major differences between the customer’s willingness-to-pay in traditional bookselling and its online version can be analyzed on the basic dimensions such as - price, brand name and time & effort. Out of these, price is essentially the major deciding factor and the rest of them are relevant in the order they are listed. In the following table, I shall try to compare and analyze both models based on these dimensions.

     Looking at current trends in online book selling and the intense competition, the customer can look forward to have more price cuts, decision power and get high valued service at low cost, time and effort.

References:

1. Bianco, A. (n.d). Virtual Book Stores start to get Real. Business Week. Retrieved on April 14, 2007 from http://www.businessweek.com/1997/43/b3550148.htm

2. MITSloan (Dec 6, 2004). Brand Still Matters Online. Retrieved on April 14, 2007 from http://mitsloan.mit.edu/newsroom/2004-internetshopping.php

Separation of Stores and Online Operations for Barnes and Nobles: Was this a good idea?? What was its intent and did it work??

The case study of Barnes and Noble would show that they split their operations into existing traditional and online bookstore, during Spring 1997. As the history states, the intent was two fold -

Avoid paying taxes on online sales:

As far as avoiding sales tax is concerned, I think it was a good idea and it worked to introduce “deep” discounts on online sales. This works in the way that if a retailer ships an item out of state, there will be no sales tax. Also by separating the customer interaction (on the web site that can accessed from any part of the world) from the actual retailer operation, sales tax can be reduced to almost negligible. Its a win-win situation for both the company and the customer.

Take bold move towards innovating the new idea of online sales and create unique identity:

Barnes and Noble had started testing their innovative online business during late 1980’s by joint venture between Sears and IBM (BarnesandNobleInc.com, 2007). Moving forward with the strategic planning to establish a full fledged web site, they started selling books online on CompuServe and later collaborated with AOL to open online bookstore.
(BarnesandNobleInc.com, 2007). Also, joining hands with Firefly, they implemented the user personalization system. Till now, they had the necessary technical and marketing skills to go ahead and go live with their own web site in mid of May 1997. These developments shows that the efforts enabled them to attract alliances and joint ventures. By creating unique identity, they were able to concentrate on continuously improving the online business model under the new COO and think about seamlessly integrating the already established back-end retail Information Management system to support high transaction intrinsic and global nature of the web site. This should also be considered as a strategic move towards extensive marketing of ‘Barnes and Noble’ brand name through the global outreach provided by the web site.

In effect, both the intents worked as expected to remain competitive and innovative in the midst of vibrant markets and technology changes.

References:
1. BarnesandNobleInc.com. History. Latest retrieved from http://www.barnesandnobleinc.com/our_company/history/bn_history.html

(c) Deepesh Joseph, 2006-2007
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The Price Cut in amazon.com: Was this a good idea? What was its intent and did it work??

Price cuts are market strategies that companies introduce when they enter into competition. Barnes and Noble’s and Amazon.com’s case was no different. As seen from the case study, Barnes and Noble introduced deep discounts of 30% on hard-covers and 20% on paperbacks, same as that of Amazon.com, to pose direct threat to online sales. Responding to this, Amazon.com introduced price cuts of up to 40% on future best sellers and on selected titles. Applying these figures, from Exhibit 5, a best seller in Barnes and Noble was priced at $21.41 while it was only $18.92 in Amazon.com. The intent of introducing price cuts in both the cases was to pose threat to each other by increasing customer base and sales.

We can easily derive at whether this was a good idea or not, from thier financials. For Barnes and Noble, the market valuation did a positive climb after mid May 1997, when it launched the deep discounts. Whereas for Amazon.com, it can be seen that there was a fall in the same during the mid of May 1997. even though it introduced more discounts. The reason for this fall in market valuation can be explained from Exhibit 7 which shows negative ratios of Operating costs and Net Income (huge values during 1997) that slowly break even by 1999 (1.58 and 2.0 respectively). So, from the above analysis, Price cut was successful in the case Barnes and Noble’s to increase its market valuation, whereas it turned out to be not so beneficial for Amazon since the huge price cuts and increased Operating costs did not break even. It was a good idea for both the companies as far as remaining competitive. Yes, it worked for Barnes and Noble, where as it turned out to be a financial burden for Amazon.com.

Amazon Vs Barnes and Nobles – How both companies differ in online book selling business

Since 2000, the competition between http://www.amazon.com/ and www.barnesandnoble.com/ has become intense with the entrance of competitors such as Borders and Books-A-Million Inc. Currently, as per the last traded values – 60.60 & 40.77 (Yahoo! Finance, 2007, April 27) and customer ratings – 97% & 92% (BizRates.com, 2007, April 27) , Amazon is ranked #1 in online bookselling. The best tool to analyze how the battle went on till now, is the last traded chart available for the entire company history at Yahoo! Finance.

The chart is as follows for Barnes and Noble -

The chart is as follows for Amazon.com -

Comparing the two charts, its evident that B & N was constantly trying to keep up with Amazon’s high market values and there was constant falls where it took time to come up with a competitive alternative or introduce the same technique that Amazon has already implemented. Amazon on the other hand was constantly improving its market share, expect for the time of recession during 2001. When we come to the end of 2003, the situation is interesting as B & N picks up, denoting introduction of new functionality to their web site as major enhancements. Amazon on the other hand, has a constant increase in traded value till now and continues as the leader. Right now, the technology innovation is almost stable and the graph looks stable in both cases.

Amazon’s game plan is to become a mass Internet marketer that sells a variety of products, not only books. Looking at B & N’s current web site (www.bn.com), its quite interesting that it is tuning its systems towards this trend too, by selling other products such as toys and such. This looks like deviating from its stated TOB that concentrates on selling books. Thus, looking at the history and current trends, it is evident that Amazon is the leader who initiates all major innovations and is likely to continue its trend creating substitution threats (William, 2007). Possibility is also there for Barnes and Noble to emerge as the leader, if they concentrate fully on books and when mainstream book consumers come online.

Mutual Funds and company stocks are unique product domain that is not so ubiquitous as books. The amount of individual knowledge required to market, sell and consume these products is very significant when compared to books. Such web sites will make more money by marketing these single product offering. Whereas, in the case of online selling of books, the competition is so high that companies can only make considerable profit if they utilize the e-commerce medium to implement innovation streams and try to stay ahead of others, like Amazon.

References:
1. Yahoo! Finance. (2007, April 27). Amazon.com Inc. Retrieved April 27, 2007, from http://finance.yahoo.com/q?s=AMZN
2. Yahoo! Finance. (2007, April 27). Barnes and Noble Inc. Retrieved April 27, 2007, from http://finance.yahoo.com/q?s=BKS
3. BizRates.com. (2007, April 27). Consumer Ratings for Amazon.com. Retrieved April 27, 2007, from http://www.bizrate.com/ratings_guide/cust_reviews__mid–23.html
4. BizRates.com. (2007, April 27). Consumer Ratings for www.bn.com. Retrieved April 27, 2007, from http://www.bizrate.com/ratings_guide/cust_reviews__mid–625.html
5. Knowledge@Wharton. (1999, October 27). It’s a Page Turner: Amazon vs. Barnes & Noble. Retrieved April 27, 2007, from http://knowledge.wharton.upenn.edu/article.cfm?articleid=91&CFID=11410451&CFTOKEN=17476760&jsessionid=a83021dbf34e10756a6b
6. Erhart V. (2007, April 7). Amazon vs. Barnes & Noble: Battle of the Brands. Retrieved April 27, 2007, from http://www.bloggingstocks.com/2007/04/07/amazon-vs-barnes-and-noble-battle-of-the-brands/
7. Williams C. (2007). Management: Innovation and Change (4th ed., ch. 7, p. 204-210). Thomson South Western