There’s never been a more exciting time to be in the UK bookstore
The big players in this country - Waterstone’s-Dillons and W. H. Smith -
are about to be joined by one of the world giants, the US-based Borders,
which has plans for an Oxford Street megastore. Waterstone’s has similar
plans and has also been looking to take over imposing premises at 203
Piccadilly, soon to be vacated by the Simpson department store. And
there’s no better evidence of confidence in the sector than Waterstone’s
award-winning press campaign of this and last year.
But there’s a cloud on the horizon - the Amazon virtual bookstore will
formally launch a UK service this autumn. Based in Seattle, amazon.com
offers upwards of three million US titles. The website allows you to
search for books by author, title, subject or certain keywords and you
can browse through titles arranged in 28 different subject areas. You
can call up reviews and bestseller lists and have recommended titles
regularly flagged for you according to stated preferences. Having
selected your choice of books, you key in your credit card details and
the goods are posted within 24 hours.
In the US, it is not only the top online bookseller but the leading
internet retail operation (it is diversifying into CDs) and one of the
top 20 most visited websites. The numbers are truly staggering. Sales
for the whole of 1997 were dollars 147.8 million, up 838 per cent on
1996, its first full year of trading.
Amazon took 27 months to serve its first million customers and less than
a further six months to reach its second million. Cumulative customer
accounts were 2.26 million at the end of March this year, with repeat
customer orders representing 60 per cent of order volume.
Perhaps surprisingly, Amazon is still losing money - but not for long,
given those growth rates. And one of the reasons it is not in profit is
its desire to expand through acquisition. In March, it purchased two
fledgling European cyber bookstores: Telebook in Germany and the UK’s
They will soon be relaunched as Amazon operations.
Unlike for some products, the internet is a good retail environment for
books. You don’t need to squeeze them to see if they are ripe or try
them on before purchasing. And despite the dreary anorak tag, in
reality, internet users are well-educated, of above-average income and,
most importantly, they buy many more books than the population
That doesn’t entirely explain Amazon’s success though. It’s down to
three big factors: good service, excellent prices and prime location. As
in conventional retail, this last aspect is a vital consideration, and
Amazon has an all-but ubiquitous presence on the web, having signed
deals with the most popular search engines, including Yahoo!, Netscape,
AltaVista and AOL. Most internet users are confronted with an invitation
to use Amazon every time they go online. As for discount - in the US,
Amazon prices are 40 per cent lower than bookstore prices.
Will it work in the UK? The portents are favourable. The UK is one of
the world’s top four countries in terms of per capita book purchase (the
other three are Germany, Japan and Israel). The population is 20 per
cent that of the US, yet its publishing industry produces twice as many
titles each year.
Then there are the familiar rallying cries of the technophiles - the UK
is second only to the US in penetration of the internet and the rate of
uptake is faster than for previous electronic innovations such as the
telephone and television.
That doesn’t necessarily drive a retail revolution. But price might -
and the UK is the most expensive book market in the developed world.
Simon Murdoch, the managing director of Bookpages, indicated recently
that the Amazon UK service he is shortly to start running would seek to
emulate its US price policy on this side of the Atlantic - though a 40
per cent discount target might be a little ambitious.
Are the conventional bookstore groups worried? They’re certainly taking
action. W. H. Smith recently purchased the Internet Book Shop while
Waterstone’s-Dillons is joining forces with Book Data.
However, many analysts believe their approach is defensive and
fundamentally flawed. Their primary business is in the high street and
they will always have to carry the overheads of those stores, no matter
how successful their online trading is. The bottom line is that they
don’t really want to cannibalise store trade, which needs decent margins
and high volume, especially if you’re trading on Oxford Street. But they
(and indeed, web sceptics in general) are about to get the fright of
Budd Margolis, a London-based internet retail consultant, comments:
’Amazon is focused - it is only interested in servicing internet
clients. It doesn’t have any other stuff to worry about. High street
stores understand retail but find it difficult to understand how new
technologies will impinge not just on them but on the economy generally.
There just aren’t that many people out there who understand internet
So, the much-vaunted revolution is upon us at last? Perhaps - but the
world isn’t going to be stood on its head overnight. Margolis adds: ’The
internet is four or five years away from hitting mass market momentum in
the UK, so it will not be a case of Amazon replacing the conventional
retail sector in the short term. But it will impinge on it. One day the
high street stores will wake up and realise they have lost 5 per cent of
their market. That will be enough to hurt them severely.
It might be the difference between profit and loss - and that can be
enough to kill a company.’