Tuesday, January 31, 2006

Amazon vs Barnes & Noble

The Battle of the Bookstores and the Future of Electronic Commerce

Amazon
-Amazon.com opened to the public on the World Wide Web in July 1995
-Offers a variety of items from books, electronics, computers, music, movies, apparel, toys, computers, etc…
-Amazon. has six global websites: Amazon.com, Amacon.co.uk, amazon.de, amazon.fr, amazon.co.jp and amazon.ca
-Amazon was incorporated in 1994 in the state of Washington and reincorporated in 1996 in the state of Delaware
-Has been available to the public on the stock market since May of 1997
-Amazon.com works with companies such as Nordstrom’s, Gap, Eddie Bauer, Urban Outfitters, Osh Kosh, Footlocker

Barnes & Noble
1873: From his home is Wheaton, Illinois Charles M. Barnes starts a small book business
1917: William Barnes, Charles’s son travels to New York to negotiate with G. Clifford Noble and from a partnership, then opening the first Barnes and Noble
1987: Barnes and Noble acquires B. Dalton
1991: Barnes and Noble pioneers the super store concept that has huge location, wide selections of titles, experienced bookstore staff, warm atmosphere and cafes in stores
1993: Barnes and Noble goes public on the stock exchange on September28, 1993
In May 1997 Barnes and Noble opens it public site on the world wide web barnesandnoble.com
1999: barnesandnoble.com goes public on the stock exchange and raised $468 million and unprecedented amount for an internet company

Business Models
-Amazon.com’s business model is still being proven to this day
-Barnes & Noble’s business model is called Brick-and-Mortar retailing
-Brick and mortar retailing is when a company expands their business to the internet and by doing this develop new business and increase their profits

Amazon.com’s Advantages
-Innovative
-Customer Focused
-Virtually Efficient

Barnes & Noble’s Advantages
-Many retail stores that can connect with customers
-Have and established brand name
-Many years of industry knowledge

Amazon.com’s Disadvantages
-Focused on way too many products
-Unable to physically connect with customers
-Business model is not proven

Barnes and Noble’s Disadvantages
-Late to put their products on the internet (e-commerce)
-Lack of Customer focused innovation
-Unable to respond to Strategic operations

Amazon.com’s Business Model is not viable
-Amazon is in long-term debt, that fluctuates to about 1.2 billion dollars
-They have yet to reach profitability

Barnes and Noble’s Business model is viable
- they have become very profitable business

Value Chain of Barnes and Noble
-Traditional ways of selling books– physical bookstores exist:
Authors --> Publishers --> Distributors --> B&N --> Customers

Value Chain of Amazon.com
On-line sales-no physical bookstores exist:
Authors --> Publishers --> Distributors --> Amazon.com --> Delivery --> Customers

Competitive Five Forces Model (Porter)
New Entrants
The online bookstore industry that Amazon.com has pioneered in was, at first, very hard to penetrate. There were different barriers such as distributing capabilities and the variety of the selection offered that are supposed to be hurdled. Amazon successfully solved the tricky parameters as being the first one to get into the whole idea of online retail. With being the first, they had the luxury to set what were the norms for the industry. Factors that may lower these barrier tactics would be a wider selection and the ability to go to an actual bookstore to exchange or return books or other products. This network of "actual" retail spaces makes it easier for the consumer to return or exchange the products they were not satisfied with. These handicaps of Amazon were the basis for the emergence of book retail giants Barnes and Noble and Borders in the online shopping industry.

Industry Competitors
The major competitors of Amazon are Barnes and Noble and Borders. Barnes and Noble is a retail giant offering books and CDs both in their outlets all over the country. It opened their online industry in 1997 and has become the fourth largest e-commerce sites today.
Focused largely on the sale of books, music, software, magazines, prints, posters, and related products, the company has capitalized on the recognized brand value of the Barnes & Noble name to become the second largest, and one of the fastest growing, online distributors of books. Their "advantage" to Amazon is the brand name and the availability of actual retail outlets in which consumers could go in to exchange or return products easily. They also have an established book selection based in their retail operations.

The Online Bookstore industry have become a fierce business which involves discounts, varied selections and fast delivery in which all three companies are challenging each other.

Buyers
The consumers of this industry can be found in every corner of the population. These are mostly people who have had some form of higher education and have access to the Internet and computers. The segment of online shoppers has increased dramatically in recent years due to the convenience of shopping in the comforts of the home and the accessibility of the Internet. These developments have made it easier for consumers to log on and buy on the Internet. Consumers also tend to compare prices among the retail leaders such that buyers are able to buy products with very big discounts compared to ones bought in "actual" retail outlets. The bargaining power of the consumer is based on the competitive strategies of each active firm in the industry. Thus, consumers can challenge one firm for charging more than the other one such that the firm will beat the price of the competing firm.

Suppliers
Amazon’s suppliers range from the publishing and media houses to electronics’ manufacturers. Amazon buys all their books, videos and audio CDs from the multi media houses and publishing giants such as Time Warner, Doubleday etc. Amazon also has alliances with other bookstores to cover orders that they cannot serve.

Substitutes
The substitutes for Amazon and other online bookstores are the "actual" book retailer and music store, such as Barnes and Nobles. With the rise of online retail, there will be little impact from these substitutes. One impact would be some consumers who would like to hold or listen to their purchases prior to buying and those who are into the whole "shopping experience". Barnes and Nobles have jumped into online retail and have succeeded into diversifying into the new e-commerce industry.

Which Company will Dominate the Retailing industry?
Why not Amazon.com
-Amazon.com does not have a physical store
-Amazon.com has never show a profit and has lost a total of nearly $1.2 billion dollars
-Spends more for advertisement than a physical store
-Can sell a lot of books and music, but is not making a profit

Why Barnes & Noble
-Has many physical stores in many different locations with warm atmospheres as well as, an online website.
-Has shown a profit for its physical stores as well as the website.
-Has a large customer base and is a trusted company

Source:
http://students.kennesaw.edu/~maw4175/amazon%20and%20barnes%20powerpoint[1].ppt

1 Comments:

At 10:54 AM, Blogger siddharth said...

The author of this case study obviously got it wrong.. Amazon is not only making money today, its killing B&N in all aspects.

 

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