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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 More

Borders Closes the Books on Amazon

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  • Um (Score:1, Interesting)

    by OverlordQ ( 264228 )
    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?
    • Or, for that matter, drop the price to $0.02 and I'm sure they'll sell TONS of books! I think you have a winner of a business plan here! I think I'll go patent that...
    • Previous poster was a bit more tongue in check, but his basic point is quite correct. Amazon can't drop the price too...and they don't have to eat the cost of tax since they didn't have to pay it in the first place.
    • And reduce their operating profit... and then go out of business because they couldn't be profitable, right?

    • There's no margin to discount (Score:5, Insightful)

      by sjbe ( 173966 ) on Friday March 23, 2007 @12:27PM (#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.

      • Re:There's no margin to discount (Score:4, Insightful)

        by Dan Ost ( 415913 ) on Friday March 23, 2007 @12:50PM (#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.

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

          That's probably true actually. Starbucks has gross margins of almost 59% [yahoo.com] which is obscenely high for any company selling a non-software product. While it's probably not an apples to apples comparison, Borders probably does make better margins on their coffee and deserts than on their books. Even outsourcing the operations to a third party [seattlesbest.com] there still is enough margin there to make a reasonable profit.

      • 21% gross margins? I know a lot of computer manufacturers that would kill for 21% margins. Dell runs about 18%.

        • Commodities = Low margins (Score:3, Interesting)

          by sjbe ( 173966 )

          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 comm

    • ...is because they've seen their business shrink quite a bit over the past few years (relative to their competition) and they're trying to recapture whatever they pay Amazon for selling their books. Of course the cost of creating and maintaining a B2C Web site isn't trivial, so it will be interesting to see if, in the end, this move will raise their revenue - or kill them entirely. Also, in terms of the sales tax - they could reduce the price of their books a little online, still make more revenue per sale,

    • 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?

      Sales tax varies from state to state. It's easy to design the system to show the sales tax during the check-out process, when the customer has to enter his location for billing and shipping purposes, but to affect the prices Borders would either have to discount everything by the maximum sales tax rate in the country, or make customers give their location bef

    • It's the business' responsibility for calculating and paying the sales tax. It's a tax on the business, not the consumer. It's customary for it to be added to the bill and calculated as a separate item. This is not a requirement though. I charge you $10 for a book. I can either, charge the tax to you or raise the ticket price to compensate.

      • Re: (Score:2)

        by LMacG ( 118321 )
        I disagree. The tax is levied against the consumer, however it is the responsibility of the business to collect and remit the tax. Compare with use tax [wikipedia.org], which is what a citizen is supposed to remit to his state of residence for good bought elsewhere. Even on Amazon.com.
        • While I may be mistaken, I believe I am not. This comes from the time in my life when I owned a business and performed retail. As I explained it was how it was explained to me and how I conducted business. It is possible that it's not a clear line. A possibility is that the tax is levied against the item itself so that it must be paid by _someone_.
    • Or just move to Delaware!!! Haha, I love my state.

      For those not in the know, DE doesn't have any sales tax.

  • A bad move for Borders (Score:4, Insightful)

    by 14erCleaner ( 745600 ) <FourteenerCleaner@yahoo.com> on Friday March 23, 2007 @11:57AM (#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.

    • Re: (Score:3, Interesting)

      by Aladrin ( 926209 )
      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 che

      • Re:A bad move for Borders (Score:5, Insightful)

        by fm6 ( 162816 ) on Friday March 23, 2007 @12:23PM (#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!

      • Re: (Score:3, Informative)

        by xeoron ( 639412 )
        I always found Borders other website [bordersstores.com] far nicer to use and order from.
    • 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: (Score:2, Interesting)

        by 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: (Score:2)

        by Amouth ( 879122 )
        yes there are plenty of people that can put a good site together..

        but building something that is onpar to scale as well as amazon does is far from trival or easy or somehing a single person can do..

      • Re: (Score:2)

        by ScoLgo ( 458010 )
        "IE expensive, bad service."

        Huh? I was under the impression that Microsoft didn't charge for their browser.

        Can't argue with the 'bad service' part tho...

    • 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.

      Not really. They were late to the party, which is a major reason for their small market share in 2001 when they partnered up with Amazon. Overall online book sales were diminishing then, so the future looked bad for their online division. Strapped for cash, Borders traded the possibility of market share gains (long-term benefit) for cash flow from referral commissions fro

    • 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

      • 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!
        Why buy it new if you can buy [buy.com] it used [addall.com]?

        • Why buy it new if you can buy it used?

          Good question. Used books are yet another competitor that is crowding into traditional Borders sales territory. But, TTBOMR, the entire dollar value of the online used book market is still about 1/30th of the online new book market. That is barely on Borders' screen right now. Pulling customers from Amazon is a higher priority. But they will get to it sooner or later.
          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 thei

          • Re: (Score:2, Interesting)

            by KiboMaster ( 129566 )

            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 makin

      • 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!

        You can do that already...it's called Barnes and Nobles, the other big elephant, this time in the bricks and sticks playing field.

        I thought Blockbuster was brilliant, when jumping in to Netflix mail order territory, advertised that you could also bring by the mail ordered rentals to any store and pick up the next set instead of waiting for the mail.

    • 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.

      I would agree with 14erCleaner on this one. Up to this point, Amazon.com has been accepting all of the risk via the front-end. The amazon.com web site keepers have to worry about security, updates, upgrades, etc. Borders part in this? Provide the listing of books and prices to charge.

    • Re: (Score:3, Interesting)

      by _|()|\| ( 159991 )

      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

  • I think borders would only be competing with Amazon's book arm. Back in the late 90's, Amazon may have directly competed with an online version of Borders, but now Amazon is like Wal-mart, in that they sell a large swath of other products besides books. Borders may now compete more directly with Barnes & Noble, though, where before Amazon floated them clean past their physical-store rivals.

  • Re: (Score:2, Insightful)

    by account_deleted ( 4530225 )
    Comment removed based on user account deletion

    • Re: (Score:1)

      by BadERA ( 107121 )
      Most $50 books on Amazon are going to qualify for free Super Saver shipping, and they never take more than 2 days to show up for me after they ship, which is typically the same day as I order. This was true for me in Rochester, NY as well as in Albany, NY, so I'd have to think that it's pretty typical, not just locational.

      • Re: (Score:3, Insightful)

        by Ngarrang ( 1023425 )
        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.

        • Re:For a $50 book... (Score:5, Funny)

          by minotaurcomputing ( 775084 ) on Friday March 23, 2007 @02:41PM (#18463291) Homepage Journal
          "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

      • Re: (Score:2)

        by eln ( 21727 )
        I live in Austin, TX, and used to live in Boise, ID. In both locations, items shipped with the Super Saver shipping took about a week to get there.

        So, I'd have to say it's absolutely locational. Comparing two locations that are only a few hundred miles away from each other isn't really a good enough sampling to say the experience is the same nationwide.

      • Re: (Score:2)

        by AuMatar ( 183847 )
        THere's also Amazon Prime- $75 a year for free 2 day shipping on almost all orders, and reduced price next day shipping.
      • 5-7 days in Pittsburgh

    • Re: (Score:2)

      by guruevi ( 827432 )
      Where do you live? I would also like to pay less than $2/gallon for gas. Really, calculate how much gas (and time) you REALLY use for driving down to Wal-Mart or the mall instead of the slightly-more-expensive shop around the corner or getting it delivered through the web. I'm not talking about necessities here like your monthly food-shopping, but just things you would like to have and just have to drive further/around for that single item. Getting the car started (two or three times depending) and driving

    • 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...

      That's great if all you want is the latest craptacular fiction or self help bestseller. But for the kind of books I read (heavyweight nonfiction, generally very specialized), Amazon has been a godsend - because bricks and mortar stores rarely carry it. Sure, I can phone in and special order it - but why? Two minutes on the web, and UPS brings it right to my front door. (And Amazon oft

    • 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...

      We have a Borders here which I patronize when I need a book in a hurry, if they have it. But I'm always paying list price (computer/physics/nutrition books, mostly) whereas Amazon always has it for 20-30% off of list. We have a medium-sized Borders so there's a 40% chance they'll have the book I want. The big Borders are more like 80%, but they're at least an hour and a half away.

      If I
  • Delaware does not have a standard sales tax (aside from taxes affixed to certain items ahead of time like cigarettes, that is), so I suppose it would be 49 states then? Then again, Delaware may well not be the only state without sales tax.
    • Pretty sure there isn't one in Florida. Of course, that may only be on food.

      When my family went to Alabama for a while, we were near the Florida border, and we always got food there due to a lack of sales tax.
    • No, Delaware isn't the only state w/o a sales tax. In Alaska, various municipalities may institute a sales tax, but there isn't a state-wide sales tax. In Anchorage, no sales tax. Sixty miles to the southwest in Kenai, however, there is.

      Makes me wonder what sales tax Borders.com wants to charge people like you and me when/if we were to go to their web site to order a book....

    • Re: (Score:2, Insightful)

      by assantisz ( 881107 )
      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 t

  • Mail-order sales taxes (Score:2, Informative)

    by davidwr ( 791652 )
    Slightly off-topic:

    How soon before the next serious effort to force mail-order and electronic retailers to charge some form of sales tax for out-of-state purchases?

    Way off-topic:
    How many people actually bother to pay "use taxes" on goods they buy from out-of-state mail-order houses? How soon before a politician is brought down for failing to pay "use tax" on a $10,000 luxury item he bought mail-order to avoid paying a few hundred dollars in state sales taxes?
    • It's impractical to penalize for not submitting use tax for small ticket items, as such, Michigan has a very lenient amnesty program, if you earn $30k, I think it's $10 and it looks like you are free and clear for all sub $1k items.

      A $10k item is a different matter. If it's a vehicle, then that is covered by the title fees. I'm not sure if politicians are really properly held accountable for not proper tax filing.
    • My guess is that people are growing less antagonistic to the idea of charging tax on internet sales as the novelty wears off, and web-order companies are less fragile than they were perceived to be even 5 years ago. But there's still the logistical problem of tracking and assessing the correct taxes for every state, county, & city, not to mention international sales.

      I can't remember the reason why a mail-order (or web-order) outfit doesn't have to collect sales tax based on the location of the *company
      • "That would shake things up quite a bit (for better or for worse)!"

        It would be for the worse, as every company will move to Delaware of some other tax haven depriving every other state of income.

    • Re: (Score:2)

      by mutterc ( 828335 )

      How many people actually bother to pay "use taxes"

      Me. I don't know if anyone else does.

      My home state of NC has a line on their income tax returns for use tax. Thanks to GnuCash, I have records of all purchases of anything. Thanks to the fact I do my online shopping with a different credit card than my B&M shopping, it's not too hard for me to collate all my online purchases. Since the first year they had this line (when it took me by surprise), I note in GnuCash whether a purchase collected sales tax or not.

      It's my style of taxes - very conservat

  • All 50? (Score:1, Redundant)

    by Shadow Wrought ( 586631 ) *
    Why in Oregon when don't have a sales tax?

    • Why in Oregon when don't have a sales tax?
      Didn't you get the memo about the new smug bastard tax?
      • Well if there's anyone who knows smugness, its a NYer. How's A-Rod doin' these days? ;-)
        • I was just about to file my smug bastard return for the year, but had to re-figure it. It seems pointing out to you how I don't follow sports and needed to Google "A-Rod" to get your reference has bumped me into the next higher smug bracket.

  • All 50 States? (Score:5, Informative)

    by rherbert ( 565206 ) <slashdot,org&ryan,xar,us> on Friday March 23, 2007 @12:00PM (#18460485) Homepage
    Borders will collect sales tax in Alaska, Delaware, Montana, New Hampshire and Oregon, who do not assess sales tax state-wide [wikipedia.org]? That's kind of odd.

    • Re: (Score:2, Funny)

      by Volante3192 ( 953645 )
      Yep, they'll collect the sales tax for those states at the proper rate: 0%

      They just won't bother reporting it.

    • Re: (Score:2, Funny)

      by Anne_Nonymous ( 313852 )
      >> Amazon collects sales taxes only on books sold in Washington, North Dakota, Kentucky and Kansas.

      Amazon built facilities in four states. In three of those states the populace can't read. That's kind of odd.
    • You can't charge someone a tax that doesn't exist, and then pocket the money.

      • Re: (Score:2)

        by TypoNAM ( 695420 )
        Didn't companies like BellSouth in the south east of the states use to charge a Universal Recovery Fund (a tax) or some crap like that until half a year ago that they were pocketing?

  • huh (Score:2, Funny)

    by mastershake_phd ( 1050150 )
    are they going to compete with Amazon? Doesn't Amazon have a patent on selling books online?
  • I like this title better.

    As for the sales tax issue, people will just use froogle or something and find the lowest price without the tax and then buy that book, most likely.
  • 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. T
  • Amazon also charges sales tax in Tennessee (all 9.975% of it) because they use distribution warehouses there to ship out literally tons of merchandise every day.
  • How about those states who not only have sales tax, but an out-of-state "use" tax for all material being mailed in. Dell actually collects that!
  • There seems to be some sort of misconception regarding sales taxes.
    Sales taxes cost a B&M absolutely zero. That's something that they collect on behalf of the government and then give to them. (So they also don't profit from it either.)

    And technically, you should declare all items that you didn't pay sales tax on to your state when you file your (state) income tax so you can be taxed accordingly. For those states without an income tax, I'm not sure exactly how that would work.

  • Good Move for Borders (Score:4, Interesting)

    by qazwart ( 261667 ) on Friday March 23, 2007 @02:05PM (#18462589) Homepage
    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: (Score:2)

      by Shippy ( 123643 )
      With Border own site, it will be easier for customers to order books and pick them up at a Borders store (and save shipping).

      Yep, this is actually why I always use Borders' online site [bordersstores.com] when looking for music or a book. I live in Washington so I don't actually order much from Amazon anymore due to the tax + shipping. Instead, I can just reserve something from Borders online and go pick it up 5 minutes from my house and avoid the shipping. It's nice.
    • 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.

      Indeed it was, but even if the brick and mortar companies create their own sites and do them as well as Amazon's, which is a tall order considering the flashy AJAX stuff being rolled out by Amazon now, they would still be at a competitive disadvantage because of the cost of maintaining retail stores whereas Amazon can ship most of their products from a warehouse or par
  • Move headquarters and all operations to Oregon (and/or any other states with no sales tax.)

    B-)
  • Wow, that's pretty impressive... What percentage rate will they be charging for sales tax in Delaware?

    How about Alaska, Montana, New Hampshire or Oregon?
  • "Borders would collect sales taxes in all 50 states, the company said."

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

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