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Borders Closes the Books on Amazon
theodp writes "Borders said Thursday that it was severing ties with Amazon and will compete directly against the e-tailer with its own website. The loss of Borders could cost Amazon $80-$160 million in annual revenue, according to one estimate. 'Amazon could gain market share in book selling over time because it will have an advantage over Borders, which now will charge a sales tax for all books sold. Companies have to charge a sales tax for Internet sales if they have a physical presence in states that collect sales taxes, [Stifel, Nicolaus & Co analyst Scott] Devitt said. Amazon collects sales taxes only on books sold in Washington, North Dakota, Kentucky and Kansas. Borders would collect sales taxes in all 50 states, the company said."
The reason Borders partnered with Amazon in the first place was because they couldn't come up with a good enough web site on their own. What has changed since that time? I think their greed is overcoming their common sense here, as Amazon is going to be hard to compete with.
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For a $50 book, I'd rather pay $4 in sales tax and 25 cents in gas than pay $5 for shipping and having to wait a week... Besides, the new competition might even drive the costs down making the whole "extra cost" issue moot.
Slightly off-topic:
How soon before the next serious effort to force mail-order and electronic retailers to charge some form of sales tax for out-of-state purchases?
Way off-topic:
How many people actually bother to pay "use taxes" on goods they buy from out-of-state mail-order houses? How soon before a politician is brought down for failing to pay "use tax" on a $10,000 luxury item he bought mail-order to avoid paying a few hundred dollars in state sales taxes?
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Borders will collect sales tax in Alaska, Delaware, Montana, New Hampshire and Oregon, who do not assess sales tax state-wide? That's kind of odd.
are they going to compete with Amazon? Doesn't Amazon have a patent on selling books online?
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Maybe dealings with Amazon have gotten too bad for borders? IE expensive, bad service.
Also, it's 2007 and there's many more people out there with the skills to put a good site together.
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If one presumes that Borders is trying to go head-to-head with Amazon, then it looks bad. But Borders has spent billions upgrading their B&M stores in the last decade or so. ( Remember when a B&M bookstore was 2000 sq ft with no coffee and a much smaller selection? ) Borders is trying to get some of the online crowd into B&M stores. Borders will be delighted if their online sales break even, or even operate at a small loss.
I predict that we will see Border's web site saying: You can order this book and it will be delivered in x days, OR you can drive y miles and have it today!
Seriously, unless you have an emergency or dire need for something, does anyone actually buy much from B&M stores these days?
Yep, Internet shopping is not as prevelant today as you might think. The average American user is still nervous making on-line purchases and the more they see on the news about ID theft of any kind, the longer they will remain nervous.
Besides, the price difference isn't that much. Unless your buying $100's of dollars worth of books, the tax is chump change. What I hate is the publishers charging exobitant prices for book, especially reprints. There are some classics that re-published on better stock and are priced out at $15-$20 for a paper back!
Not really, no. Amazon has gross margins of about 21% and so does Borders. In case that doesn't mean anything to you, 21% gross margin isn't spectacular. That means Amazon and Borders are not making a lot on each sale and there isn't a lot of fat to cut out. Books on Amazon are typically already discounted pretty steeply. Borders doesn't get any economies of scale that aren't also available to Amazon and Borders has physical stores to maintain. Sure, Borders could discount down to zero profit but neither company is likely to do that unless they think they can get some advantage out of it and I can see no advantage for either side in a price war right now.
Congrats for being deliberately obtuse to show off your pedantry. The correct sales tax in your state is 0%, which Borders will collect and pocket. Now STFU.
A long time ago..? I remember going to the Borders website, found which store location had the DVD I was looking for in stock, went and bought it.
Different customers have different needs, but for me, the ability to search a store's inventory is more useful than being able to place a mail-order an item over the web. I can order something from a gazillion places, but if a store nearby physically has it, I'll swing by and pick it up.
I'm always a little surprised that not all stores w/ web presence do this. The inventory search doesn't even have to be that current -- at least narrow down the availability for me, and I can call the store and double check.
Also, it's 2007 and there's many more people out there with the skills to put a good site together. We have a winner folks. Without going into details, I can tell you with a reasonable amount of certainty that Borders was not happy with their relationship with Amazon. Borders was treated as a second-class citizen with regards to most things, and their site wasn't supported very well with regards to bug fixes, etc.
These are the US states that have a 0% state sales tax:
Alaska, Delaware, Montana, New Hampshire, and Oregon.
That said, individual cities are allowed to charge sales tax, though. While the state sales tax in New York is somewhere around 4% you will pay more than 8% in New York City. If you shop in Bethel, Alaska, you will pay 5% in sales tax even though Alaska itself has 0%.
Other states make distinctions between the products that are being sold. Groceries, for example, are very often not taxed. Clothing up to $110 per item is exempt from city sales tax in NYC but you still have to pay the 4% state sales tax (or was that the other way around?)
Yes, there are worse businesses to be in than book sales. I assume that is your point? Airlines, consumer electronics, and several others come to mind. UAL (United Airlines parent company) has gross margins of 14%. Consumer electronics (and I include PCs in that category) is a low-margin cut-throat business. What do books, airplane seats, and PCs have in common? They are all effectively commodities. Anytime you are selling a commodity of any sort, margins are going to be thin unless demand greatly outstrips supply (see oil) for a period of time or there is some other barrier to market entry such as patent protection (see drugs).
There's a lot more experience on the market for setting up and maintaining major web sites, so it will be easier for Borders to setup a *profitable* site now. The big problem with the Borders/Amazon co-mingle is that many times you ended up in Amazon and not Borders. A lot of times, I would order a book from "Borders.com", then discover that I can't use my Borders gift card because I am buying from Amazon and not Borders. Plus, now that Amazon is selling everything, the book side is merely a side business for Amazon where it's Border's bread and butter.
With Border own site, it will be easier for customers to order books and pick them up at a Borders store (and save shipping). The web store and B&M store can now be merged into a single shopping experience. More important, Borders will now own the information gleaned from web orders and not Amazon. Loyal customers may get special marketing promotions and be told when new books are available.
It was bound to happen. I see the day when other major retailers will pull out of Amazon's marketing agreement and build their own sites.
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