Posted by: nickgerlich | February 20, 2008

Borderlands

The battle for book buyers is about to intensify. Just a few weeks ago, Borders Books announced it would end its strategic alliance with Amazon.com, the result being a new stand-alone e-commerce site for Borders coming sometime in April. Borders, the #2 BAM bookseller behind Barnes & Noble, is try to dig in its heels in an industry that has been rocked by pureplay book vendors like Amazon.

BordersPureplay firms have an enormous advantage in that they have much lowerhead and operating costs, and often employ virtual inventory. BAM stores often inhabit very expensive commercial real estate, the result being that customers pay for that books-and-coffee atmosphere. And pity the poor independent bookseller trying to survive in an industry that often sees retailers hawking best sellers at 40% off (which is pretty much the entire profit margin).

Borders’ strategy is to try to move away from intense price competition, and instead give shoppers multiple reasons to visit their stores. To this end they just announced the rollout of 14 concept stores this year that will feature interactive kiosks where shoppers can download songs to MP3 players, burn CDs, print pictures, and more.

In academic jargon, what Borders is doing is a classic case of a multi-channel retail strategy. This approach entails selecting two or more of the following points of sale:

  1. BAM storefronts.
  2. E-Commerce sales.
  3. In-store kiosks.
  4. Catalogs and other direct marketing efforts.

The thinking is that by covering multiple bases, customers can be reached anywhere, and customers can access the store likewise.

Offensive move? Perhaps, but more than likely this is just good defense. In the pre-internet era, BAM storefronts need only worry about mail order firms, which played a small role in the total retail mix. But so powerful is the threat from pureplay e-commerce sites that traditional BAM retailers have had to adapt, or risk sales declines.

I must confess that I like this idea. A lot. Even though I am an Amazon Prime member (meaning I pay about $80 a year for unlimited 2-day shipping), I still frequent the local Barnes & Noble and Hastings stores. I like the ambience of a serious bookstore. And while Hastings falls short on this count, I still go there periodically to see what they have that the other guy doesn’t. Our kids also love going to bookstores, making their academic Dad swell with pride.

The real question, though, is whether this concept store has the right mix of technological toppings (kind of like all the fun stuff you add at Cold Stone Creamery) to lure the targeted demographic into the store. I have a hunch that 30- and 40-somethings will like it, but I am not sure about the younger (who are less likely to buy books anyway) and the older (who are often befuddled by technology). As long as the middle-agers (who have more discretionary income anyway) can be enticed to enter the store, it is already well established that the longer one lingers, the more they will spend themselves senseless.

I should know. I have crossed that border many times before.

Dr “Word Out” Gerlich

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