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."

Um

[OverlordQ]

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?

Re:A bad move for Borders

[Aladrin]

Time. They've used the time gained by partnering with Amazon to build their system the way they want it. They've also had the experience of knowing what customers dislike about the web-store of someone who has 'done it right' and how they can improve on it.

Personally, I'm glad. 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. I'm guessing Borders also didn't like the fact that people then had a chance to buy it from someone else, possibly a lot cheaper because it was 'used'. This seems like a good business move for them.

Re:What About Amazon?

[asphaltjesus]

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.

Re:Um

[hal9000(jr)]

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!

Re:What About Amazon?

[Anonymous Coward]

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.

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.

Re:There's no margin to discount

[Anonymous Coward]

Of course a web store is easier to maintain than a brick+mortar one, but on Amazon I always only LOOK THINGS UP.

When I was in a Borders once, I BROWSED through their shelves for at least an hour, to buy more than five books, just because I found them interesting. I don't do that with web stores. They are limited by the web browser, and they don't allow the kind of browsing a real book offers. Oh, and even on broadband, sometimes they're just not very snappy (though Amazon manages rather well).

When I was done reading them, I sold most of them on Amazon, heh.

Re:A bad move for Borders

[_|()|\|]

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 don't know about the business side of it, but as a customer I rather liked borders.com, and I deleted it from my bookmarks when it merged with Amazon. In fact, it was a disincentive to shop at Borders stores. Buy.com has since taken up some of the slack, although my opinion of them has declined recently.

One thing that has changed is the rewards card program. I don't know whether Borders had one back then, but they seem to be promoting it pretty aggressively now. The FAQ list [bordersrewards.com] says that rewards can't be earned or redeemed at borders.com at this time. I would expect that to change once they ditch Amazon.

Commodities = Low margins

[sjbe]

I know a lot of computer manufacturers that would kill for 21% margins.

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% [yahoo.com]. 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 [wikipedia.org]. 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).

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:Used books by Borders

[KiboMaster]

I make another prediction: within 10 years, if Borders is still in business, you will be able to order a used book through them at their B&M store. They will cultivate a stable of online used book dealers to supply them.

Actually, you can order used books through our B&M stores right now. We have a partnership with alibris [alibris.com]. Customers can order used books from our in store kiosks, or just speak with a bookseller. The markup on used books isn't as bad as one might assume. We actually end up making a pretty good amount of money.

(I recall a clerk once telling me that they received directions from corporate about which books were to go in which display windows). But buying books from customers requires lots of on-the-spot decision making, and that is incompatible with their corporate culture.

As a manager working in one of Borders stores I actually have a large degree of freedom and I am able to make a lot of the on-the-spot decisions you're referring to. There are, however, many displays that are corporate mandated. This is due to our relationships with publishers. Many publishers pay us (as a corporation) to co-op their merchandise on displays around the store. My store is relatively close to the corporate HQ in Ann Arbor, so I'm sure we get this quite a bit more than the average Borders store.

States With Sales Tax 50

[MSTCrow5429]

"Borders would collect sales taxes in all 50 states, the company said."

Huh? All 50 States? Even those without a sales tax?