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."

Comments

A bad move for Borders

[14erCleaner]

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.

Re:A bad move for Borders

[fm6]

I never liked the fact that when I went to Borders.com to buy a book, I ended up on Amazon.com to do it.

Excuse me, but why go to borders.com at all? Web sites that just rebrand content or services from other web sites have always struck me as really pointless.

The fact that many people must share my perception is probably the main reason Borders is pulling out of the agreement. The fact that borders.com is just amazon.com with slightly different graphics must be painfully obvious to anybody who goes there. So instead of Amazon helping Borders build their brand, Borders is the one helping Amazon! This outweighs any profits Borders gets from the arrangement, which are probably minimal to begin with.

But I still think Borders is fooling themselves if they think they can compete directly with Amazon. Maybe they know more than before, but Amazon is still the 600-pound gorilla in this particular marketplace. Except they may be up to a full ton by now!

All 50 States?

[rherbert]

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.

There's no margin to discount

[sjbe]

Sales tax, schmales tax, couldn't they just drop the price of the books they sell so their price with sales tax is competitive with amazon without tax?

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.

Re:There's no margin to discount

[Dan Ost]

I've always suspected that Border's biggest margins are on their coffee and muffins.

Books are just a way to get you into the store.

Good Move for Borders

[qazwart]

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.

Re:For a $50 book...

[minotaurcomputing]

"No B&M bookstore can hope to compete to with the selection and ease of search that Amazon.com offers me."

WHAT?!? Going into the shop and finding a book is a simple as:

1) Head to the section where you think the book is.
2) Give up after 10 minutes of fruitless searching.
3) Ask a clerk at the information desk where the book is.
4) Have her look in the computer.
5) You both head to the same section that you just searched in the same exact shelf.
6) Give up after 10 minutes of fruitless searching.
7) You both go to the person who has been there the longest and ask them.
8) This guy looks in the computer.
9) All three of you go back to the same section as before, except this time looking one shelf left and right just to make sure.
10) Give up after 10 minutes of fruitless searching.
11) They tell you it is not available, so you decide to go home.
12) On your way out you notice the book sitting in the knitting section by mistake.
13) You get excited and run to the front to pay.
14) You wait in line for 15 minutes while the 2 people in front of you are served by some guy talking to some other co-worker.
15) Get harrassed to join the frequent buyers club.

What could be easier?

-m