(click title to link to WSJ article)
Borders handed the online book business to Amazon over a decade ago but only relaunched their own site three years ago. This contributed to their current problems but Borders still is a substantial presence in the traditional book business. "...Borders is probably 8% of sales for many publishers, but on certain titles, Borders could be 20%," said Laurence Kirshbaum, a NY literary agent. This is significant for smaller titles. Mr. Kirshbaum has noticed over the past couple months that publishers have taken a reserved posture towards smaller titles due to distribution concerns.
"Once physical shelf space is gone, it's gone forever," said the CEO of an e-book publishing and distribution company it the article. This will will make the off-handed discovery of books in traditional retailing more difficult.
Word of mouth sales of books will be more significant in the future since sales will not be bounded simply by what bookstores carry. The article stated that the same marketing tools will exist for small publishers as well large ones. It was suggested that these two factors will bode well for smaller titles and smaller publishers.
Do competitors stand to gain in the seeming demise of Borders' stores? Absolutely. Barnes & Noble is estimated to potentially gain $1B in sales if Borders' closes altogether. Independents also stand to gain in markets where a Borders' store closes. When Borders liquidated their U.K. stores in 2009 they had about 4% of the market. The former Borders' U.K. CEO estimated that their sales were roughly evenly distributed between online retailer Amazon and a physical bookstore chain called Waterstones. It will be interesting to see if a similar distribution happens in the US or if the proliferation of e-books in the last couple years alone skews those numbers.
I found this article interesting because a typical Borders' customer relishes in the value proposition they provide. They go to a store, browse, touch, sample, read, eat, drink, study, socialize, surf, etc. For consumers who find their local store shuttered this void will not be filled easily for them. Where they land in the future and spend their dollars will be an interesting adventure for such a classic activity, book reading.
Questions:
1. An online distributor states in the article that Borders has an opportunity to save itself with e-books. Do you agree that a retailer like Borders, with physical stores in its DNA, can successfully adapt to selling digital content? Can they do this profitably? Do you agree with the online distributor that this can save Borders?
2. Who do you feel stands to gain more with Borders closing stores? Chains like Barnes & Noble or even a retailer like Wal-Mart? Online retailers like Amazon? Independents?
3. Is there a new opportunity for a completely new entrant into the market? If so, what do you see this new entrant offering? How would their value proposition entice new customers?
4. Do you think smaller titles are on track with their belief that word of mouth will be more significant than traditional advertising methods in the future?
5. Will this invigorate the book buying population to finally switch to e-books?
1. As unfortunate as it is, I agree that today’s book stores are going to have to introduce digital content as a main element to stay relevant with consumers. As for how successful they can be with it, only time will tell. Competitors like Barnes and Noble have struggled to get their digital readers into the hands of users, and with new technology like the iPad will only make this environment more challenging and I my opinion less profitable. I struggle to believe that adding online distribution will be the savior of Borders and others, but it’s a necessary step to simply stay alive into today’s environment.
ReplyDelete2. In certain areas where other brick and mortar book stores exist, I think the local competition will gain the majority of business. In situations where Borders was the only book store, I think the business will transfer more to online retailers.
3. With today’s economy, I don’t believe this is an opportunity for a new entrant, but a time for existing companies that base themselves physically and digitally to continue to morph into what today’s reading consumer is demanding.
4. As we are seeing in many other industries, the power of social media is taking over traditional marketing avenues. The word of existing consumers is what other potential users are looking for, as well as easily accessible information that they can research. Small titles have a valid point with their word of mouth belief, what will be the challenge is how to influence the right people to be that “word of mouth.”
5. To some extent the closing of such a well-known book stores, may invigorate buyers to go back to more physical books, because we understand that there is something special about reading a physical book. I think e-books will continue to gain in popularity, but my hope is there will be a balance between the digital and the physical that will be reached in the not so distant future.
I don't think we'll ever fully move away from bricks and mortar stores and actual books. What a terrible world it would be without physical books?
ReplyDeleteIt's unfortunate that Border's will be no more, but I'm with Elaine, there is something special about reading a physical book in a big oversized chair. The bricks are mortar stores offer access to so many books and if you want, you can sit and read there all day without paying a dime. Not a bad deal (maybe that's one of the issues...)
I do think that word of mouth has been, and will continue to be the wave of the future. No matter what newspaper or news site writes a book review - the review from your best friend on a book they just finished either makes you want to run to the store and buy it or cross it off your list all together. Word of mouth is one, if not the most, powerful marketing tools a company has the opportunity to exert.
in response to question 1 I have a difficult time thinking that Borders will be able to establish themselves on-line to compete in the e-book business. I heard this week that Google just launched their eBookstore (http://books.google.com/ebooks) which has the potential to compete with the likes of Amazon. I agree with Elaine and Sarah that there will always be a place for the physical book because you don't recieve the intrinsic value with an ebook. But what you do get is the convienience.
ReplyDeletePersonally, I've found that I consume more books now that technology has advanced. While I like to read, I've found it more convienient to listen to them on my ipod while in the car. The ubiquitous acess to get the book I want helps me to turn to books as more of my liesure time than in the past.
On question 2, I think that stores like Costco may end up benefiting more as the larger brick and mortor bookstores close. As an example, my wife heard of a good book from a friend the other day. Her first instinct was to go to costco to pickup the book rather than a borders or barns & nobel. As word of mouth or on-line reviews become more important for choosing books I think quick and easy access will take a bigger role in book selection.
Overall I think this is a very interesting time to be seeing shifts in entire industries. Take rental videos for example. The internet and digital technology has transformed consumers expectations. Convienience of on-line purchases has driven most rental stores to shut down. While there will always be a desire for a good place to find a paper book, the large brick & mortor stores are on the decline and must adapt to stay alive.
It was interesting that after reading this article a couple of days ago, I received an email from Borders Rewards. It was a letter from the CEO of Borders trying to be reassuring. He wrote that the stores are still trying to maintain a strong national presence, ebooks are selling strong, programs, such as the rewards, will still be active, and Borders.com is still up and running.
ReplyDeleteAs this is a marketing class, I found it interesting that the CEO has to send out a 'pat the belly' email to keep anxieties low.
It is clear that strong presence and appearance is key to the success of any business. Although, I know that this is an marketing and PR tactic, I do still appreciate the email. Strange.
I don't see Borders being able to create the hardware necessary for an e-book reader or to offer digital content effectively. One of the evolving problems with digital content providers is how to create differentiation. Amazon has an advantage in that many people have been customers long enough that the company is able to personalize their shopping experience and offer customized product recommendations. In other words, Amazon knows what you like. That's a powerful incentive to continue to use their services.
ReplyDeleteThe Internet has absolutely made "the long tail" of the market more accessible and more profitable. I don't see any product marketed by word of mouth selling more volume than one mass marketed, however.
I own a Kindle and I absolutely adore it, but I find myself wanting the flattened trees version of many books I read. I don't think I'm alone in feeling that there's an ineffable quality that's missing and for that reason I don't read e-books exclusively. Perhaps some day I won't miss the weight of a book in my hand, but that day hasn't come yet.
1. I think, as others have stated, that e-books are almost a "must have". If Borders could find a way to integrate an in-store experience with digital books (as rival Barnes and Noble does), that could be a key differentiator.
ReplyDelete2. I think Amazon and Barnes and Noble stand to gain the most from a Borders store closing. I don't feel that there are a lot of independents left that could benefit from store closings, especially where a big box store has been operating. And I don't think an "everything" store like Wal Mart has the depth to pick up a lot of lost Borders business.
3. I think if there are any opportunities for new entrants, it would have to be something completely different from the brick and mortar booksellers today (on-demand publishing for example).
4. I think traditional advertising still has its place but word-of-mouth advertising will continue to grow to supplement that traditional advertising channels.
5. I don't think that the Borders banckrupy will necessarily invigorate e-books. If anything, I would agree with Elaine that it may have the opposite effect, spurring people to try to save the physical book.
Like other commentors, I read both from digital devices and from physical books. Despite its convience, I still prefer physical books to electronic ones.
Sarah made a comment that I hadn't considered when creating this post but it merits an additional question.
ReplyDeleteUsing her "flattened trees" comment, will GREEN initiatives threaten the paper book publishing industry? Our own WMBA program is considering offering a trial for e-text books and e-course packs. Could GREEN pave a path for e-readers?
I feel Barnes and Noble as well as Amazon.com will benefit the most by Borders going out of business, Amazon has a niche market, due to their extensive product availability as well as their cost structure. They offer a vast selection with low prices. This is better than Walmart because Walmart offers a limited selection. The e-book philosophy is truly growing and people are appreciating the convenience and innovation of the technology.
ReplyDelete