Indeed, Barnes & Noble already has a 350,000-square-foot New Jersey warehouse stocked with 400,000 titles for its 435 superstores, 566 shopping-mall bookstores (under the B. Dalton name) and a $30-million dollar catalog business; by fall the retailer promises next-business-day shipping on 400,000 titles ordered online--a capability Amazon.com currently doesn't match. The company may also find it difficult to compete on price; Barnes & Noble's gross margins are about double Amazon.com's--an industry-leading 40%.
But Amazon.com has so far proved scrappy. In June it matched Barnes & Noble's discounts of 30% on most hardbacks and 20% on all paperbacks. The company has increased to 2.5 million the number of titles it offers, even though critics say about a million of those are thought to be out of print and extremely hard to find.
The tenor and timing of Barnes & Noble's entry into online bookselling and its lawsuit seem only to increase the likelihood that Amazon.com will be seen as the noble challenger. The lawsuit and subsequent advertisements deriding Amazon's marketing claims, Weintraut says, "were widely viewed as a cheap shot. It was reflective of a competitor scared, as opposed to one feeling secure.'
But the skirmish may also offer a preview for countless other industries of exactly what works best in cyberspace. Will it be the classic Internet start-up, armed with venture capital, ideas and marketing promise? Or the traditional retailer, digitizing its brand, leveraging its inventory and capitalizing on its existing retail might?
So far, most Internet retailing successes have been products or services that naturally lend themselves to electronic selling: stocks, airline tickets and computers. What separates books is that they remain an odd combination of the physical and the virtual--they're paper and binding, but they're also thoughts and ideas. A clothing retailer can easily glean someone's size and style preferences from purchases. An online bookseller might learn what you like to read and perhaps even what you believe.
To Amazon.com and its many backers, electronic bookselling will rejuvenate publishing and reading, once thought to be doomed by the inexorable advance of technology. "The sense of community created by the old independent bookseller is vanishing,' notes Jack Romanos, president of Simon & Schuster's Consumer Group, a leader among major publishers in incorporating high technology. "Being an optimist, I'd like to think that some of that could be re-created through online sites.' Alberto Vitale, chairman and CEO of Random House, sums up the possibilities: "It could be very big.'
Last year, Euromonitor, an international market-research company, estimated U.S. book sales at a whopping $26 billion, of which Amazon.com, with its $16 million in sales, did not compose even one tenth of one percent. Though it impressed Wall Street by eclipsing its entire 1996 sales in the first quarter this year, Amazon.com is a long way from being a major business, let alone a profitable one. To make it, the company must gain the acceptance of mainstream America. Amazon.com's No. 1-selling book of 1996--"Creating Killer Web Sites'--didn't exactly climb the New York Times bestseller list. And after walking its Seattle warehouse, I can report that a lot of the "books' Amazon.com sells are pseudo manuals for programmers. So far, Amazon.com has built a large portion of its business on selling nerd books to nerds.
But after scanning the orders I saw printed out, I was surprised at the variety of reading done by Amazon.com's customers. The same geeks who'd order "NT Server & Workstation' would type in their credit card numbers for a Dean Koontz novel. And a lot of these geeks were in Europe, South America, even China. A large percentage of Amazon.com's sales have been abroad, a trend that matches other industries. With worldwide book sales reaching $82 billion last year, it's a tempting market. Coca-Cola has already done it with soda pop, and Nike with sneakers. Why not words?
It's hard to overestimate how much is riding on this little Northwest online retailer, which, as of March, had lost $9 million real dollars to generate sales of $32 million. Amazon.com is leading the way on forging what drooling marketers call a virtual community, an electronic meeting place where people can share mutual interests and spend money. Books are just the start. If we want the whole package, Amazon.com may be the place we can order our dreams online.
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