Posted by: nickgerlich | January 17, 2008

On The Border

In The Beginning there was Powell’s, the first online bookseller, and it was good. But not good enough for Jeff Bezos, who quit his job in Boston and moved to Seattle to start Amazon.com in a garage down the street from the biggest book wholesaler in the nation.

Other booksellers tried to emulate Amazon, who handily pushed Powell’s aside in an early e-commerce brushoff. Barnes & Noble, the venerable BAM retailer, went online and managed to stake its claim. But Borders, the second-largest BAM book retailer, foundered miserably.

BordersSo it partnered with Amazon to handle all its e-commerce business, effectively bowing at the feet of Bezos and saying, “Job well done, thou faithful e-commerce servant. We cannot compete with you, so we wish to join your tribe.”

And thus was born the notion of strategic alliances in the dotcom world.

Soon Amazon was partnering with a bevy of other BAM firms who no more knew how to create a website or process an online order than the man on the moon. Sure, they could run their BAM enterprises until the cows came home, but they were lost in the digital world. Heavyweights like Toys ‘R Us, Target, and Office Depot threw in the e-towel and joined ranks with Amazon.

It was a very good move, of course, because it did not take long for everyone to realize that Amazon was king when it came to all this. And Amazon was smart to forge these partnerships, because to this day it has no BAM stores. Thus, it was a perfectly symbiotic relationship. You scratch my back, I’ll scratch yours.

But the partners have gotten restless, and really do not like sharing sales and profits with Amazon. Toys ‘R Us has now returned to its own e-commerce doings, and now Borders is launching its own new e-commerce site, slated for debut early this year.

If anything, those alliances bought some time for the BAM shops with little or no e-commerce experience. But now armed with knowledge of how this phenomenon works, they want to reclaim what they feel is rightfully theirs. The short-term solution of partnering with Amazon was in fact a godsend, because it allowed them to have an online presence, but without the necessary resources to do so. Amazon’s mind boggling database skills and order fulfillment capacities are among the best, so it is no wonder why deficient firms would want to buddy up with them.

It’s a lot like the old UPS commercial showing a small dotcom firm’s employees standing around the computer, waiting for an order to come in. First there was one…then three…then 7…and it continued exponentially until the firm collapsed under the weight of its own success. If you cannot handle your success, you will sink.

Truth be known, that’s exactly how and why Toys ‘R Us screamed to Amazon for help. Not too many years ago, children went without Christmas presents in a timely fashion, as the giant toy retailer could not keep up with its shipments. And to their credit, UPS launched into the order fulfillment business themselves as a service to sell to struggling e-commerce ventures.

I suppose it is yet another sign that e-commerce is maturing. Sure, Amazon will no doubt mourn the loss of the shared business with Borders and Toys ‘R Us, but competition is good. If anything, the tide is rising for all, as e-commerce sales continue to increase rapidly. BAM retailers are forced to add websites in order to just maintain sales, while pureplay firms like Amazon continue to do the one thing they know best.

As for me, I’d just love to experience for once the giddy feeling of having more business than I can handle.

Dr “Up For The Challenge” Gerlich

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