Borders Closes the Books on Amazon 173
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."
A bad move for Borders (Score:4, Insightful)
Comment removed (Score:2, Insightful)
NOT a bad move for Borders (Score:3, Insightful)
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!
Re:A bad move for Borders (Score:5, Insightful)
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!
Re:For a $50 book... (Score:3, Insightful)
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.
There's no margin to discount (Score:5, Insightful)
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.
Re:Sales tax in all 50 states (Score:2, Insightful)
Didn't Borders used to have its own website? (Score:2, Insightful)
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.
Re:There's no margin to discount (Score:4, Insightful)
Books are just a way to get you into the store.
Re:What about Delaware? (Score:2, Insightful)
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?)