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Borders Closes the Books on Amazon 173

Posted by Zonk
from the closing-that-chapter dept.
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."
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Borders Closes the Books on Amazon

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  • by 14erCleaner (745600) <FourteenerCleaner@yahoo.com> on Friday March 23, 2007 @12:57PM (#18460425) Homepage Journal
    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.
  • For a $50 book... (Score:2, Insightful)

    by beckerist (985855) on Friday March 23, 2007 @12:57PM (#18460437) Homepage
    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.
  • by Harmonious Botch (921977) * on Friday March 23, 2007 @01:14PM (#18460709) Homepage Journal

    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.
    What has changed is that Amazon got a whole lot bigger than Borders expected.

    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!
  • by fm6 (162816) on Friday March 23, 2007 @01:23PM (#18460843) Homepage Journal

    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!

  • by Ngarrang (1023425) on Friday March 23, 2007 @01:23PM (#18460849) Journal
    Very true. That $50 book would most likely have free shipping on it.

    I think Amazon.com did a smart thing with the free shipping offer. That $25 minimum to quality has encouraged me to add one more item to many of my purchases to avoid paying the shipping. No B&M bookstore can hope to compete to with the selection and ease of search that Amazon.com offers me.
  • by sjbe (173966) on Friday March 23, 2007 @01:27PM (#18460901)

    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% [yahoo.com] and so does Borders [yahoo.com]. 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 [wikipedia.org] 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.

  • by Anonymous Coward on Friday March 23, 2007 @01:33PM (#18460989)
    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.
  • by openaddy (852404) on Friday March 23, 2007 @01:37PM (#18461077)
    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.
  • by Dan Ost (415913) on Friday March 23, 2007 @01:50PM (#18461273)
    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.
  • by assantisz (881107) on Friday March 23, 2007 @02:21PM (#18461825)
    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?)

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