How can bookselling multiples and independents compete with Amazon

<p>Alison Clements</p><p>Amazon dwarfs its online bookselling competitors in the UK--and everywhere else in the world--typically devouring over 80% of online sales in the category. However, there's no shortage of life stirring in its shadow. As e-commerce continues to grow at a phenomenal rate, retailers are adapting their offers in a bid to differentiate from the giant. Those daring to be different are beginning to nurture sales and build loyal customer communities. </p><p>"Amazon has invested over $1 billion in its technology platform and is loved by consumers across the planet for its search capability, vast database of titles, information and user-reviews, not to mention its usability and great prices," says Hellen Omwando, analyst for consumer markets at Forrester Research. "It's simply too late now for any other player to try to replicate that buying power and breadth of operational experience. </p><p>"However, specialisation, backed with a meaningful brand and relevant services, can be the answer. Ultimately, it's going to be a lifestyle choice for a shopper to keep returning to your site, not just convenience and price, because Amazon owns that." </p><p>Omwando says tier two and three bookselling sites must be designed and operated in a way that truly engages shoppers. "Offering specialist product is only half the battle," she says. "You must also build elements into the site that will engage users and hook them in as loyal customers."</p><p>Academic bookseller Blackwell is taking this tack. Its website proclaims that it is "the knowledge retailer". Here search categories are clearly flagged as "arts", "medical" and "science", for example, to suit its target audience of students and academics, with three million titles to search. Rare books, maps, printed music and signed first editions are featured. You can access university reading lists and even sell back your old textbooks. To reinforce the "expertise" message, there is an "Experts' Choice" feature, communicating booksellers' recommendations. </p><p>Meanwhile, The Book People, traditionally a mail order company, promotes itself online as a friendly club, where all the family can find quality books at bargain prices. "The Book People's objective is to handpick the very best books from the thousands of titles published each year," says Seni Glaister, its chief executive. "By limiting the number of titles and buying in substantial quantities, we are able to offer our customers great books at unbeatable value."</p><p>The website encourages return visits by sending regular emails about new books, offering links to useful sites and a running "points passport" loyalty discount scheme. </p><p>Being truly niche has its advantages on the web, although long-term growth can be limited. The Karnac Books site introduces itself as "a site for the mind", and sells psychoanalysis and psychotherapy-related books. "When you are small, you can act swiftly," says managing director Oliver Rathbone. "When a new title is coming out we can be processing orders very rapidly. Amazon is so big it can't turn things around as quickly." </p><p>Not requiring a vast inventory and powerful search engine means the technology and overheads of a company such as Karnac Books are manageable, particularly when run alongside two bookstores and a long-established mail order business, as is the case here. And because books can be posted, an expensive delivery infrastructure is not necessary. </p><p>"The site initially cost us &#163;10,000 to set up in 1999, and it probably costs us about &#163;500 a year to run," says Rathbone. "That's a lot less than running a store, yet the sales you generate are at least that of a physical outlet." The internet now generates over 50% of total sales, with steady growth generated over the past five years. </p><p>"The back-end technology plugs into our mail order processing systems, and we can manage the front end very easily--uploading product and price information with Internet Explorer content management tools," says Rathbone. </p><p>With an obvious target audience of mental health professionals, marketing the web and mail order service is fairly straightforward for Karnac Books too. "We attend all the relevant conferences, taking exhibition space and meeting our audience to gradually build interest," says Rathbone. "Our customers pushed us into online selling, simply because they wanted the service, and we have grown because of attention to detail and real understanding of our specialism." </p><p>Trouble for the establishment</p><p>For the UK's long-established bookselling chains, the web poses more of a dilemma. If you can't compete with Amazon head on, nor offer niche expertise, what can you do? </p><p>Ottakar's dabbled with a transactional site in 1998, but since 2000 has opted to run a lively information site only. W H Smith's online business is transactional, managed totally in-house, and ranks after Amazon for share of book-related visits (see box, below right). </p><p>While securing second place amounts to a minuscule 1.27% of visits--a close approximation to share of sales, according to Hitwise--it's clear that W H Smith is at least ahead of supermarket powerhouse Tesco's book site, as well as fast-growing global book buying and selling forum Abebooks. The site pushes hard on price reductions, such as 40% off hardbacks, and has branched into a wide variety of add-on services--including Napster music, DVD rental, online vouchers, and a flower delivery service--in a bid to generate sales. </p><p>Meanwhile, Waterstone's and Borders both run their websites in conjunction with Amazon, taking a cut from sales generated through their branded sites, but handing over fulfilment to the market leader. Waterstone's is reportedly debating whether to spin off on its own though, particularly if the Ottakar's takeover goes ahead, and judging by the level of interest in this brand among web users, this could be advantageous. </p><p>According to Hitwise, which monitors consumer behaviour on the web, Waterstone's is the second most searched-for bookselling site after Amazon. "There's clearly a very strong mindset for Waterstone's among the book-buying public, and it would easily push W H Smith out of second place for visits, if it split off from Amazon," says Heather Hopkins, director of research at Hitwise. </p><p>She says that while Tesco may be moving ahead with online book sales, these tend to be generated by shoppers who are already on the Tesco site for other products and are attracted to deep discounts on bestsellers. Similarly, Play.com's site encompasses music, mobiles, DVDs, games and gadgets as well as books, so it is catering for a whole host of consumer interests, and will grow book sales only in a limited way. </p><p>"Waterstone's is just the kind of lifestyle brand that could create a really dynamic forum for its web customers," says Hopkins. "Also, a serious online bookshop could be particularly well placed for digitalisation when the electronic book format takes off." She adds that Amazon itself is under competitive pressure to keep prices down and must generate volume sales if it is to achieve long-term profitability. "Amazon's strategy is to diversify into different markets for this reason, knowing that value growth in books is limited, so it is selling everything from toys to white goods alongside books." In this sense, Amazon is relinquishing its USP as a dedicated book specialist, possibly leaving room for such a player in the UK market, Hopkins suggests.</p><p>According to media information provider TNS, 8% of total UK book industry sales are now generated online. Forrester predicts that by the end of this year e-commerce will account for 12% of total retail sales, and the organisation is expecting 70% growth in UK online book sales between now and 2011. </p><p>With sales clearly migrating online, small independent retailers may be wise to sell through an online marketplace. This is the thinking behind the Abebooks site, which calls itself the world's largest online marketplace for books, and claims to offer 80 million books through more than 13,500 booksellers. New, second-hand and rare books are all available, with booksellers paying a fee to list their titles, utilise the technology, and reach a global audience. </p><p>Based in Canada, Abebooks is a private company with European offices in D&#252;sseldorf, Germany, and Oviedo, Spain. This "international community for booklovers", as Abebooks describes itself, embodies the cross-border spirit of the internet, which many booksellers have failed to harness, says Omwando at Forrester. "Research shows that more Europeans would shop without frontiers if they could, and that applies particularly to book buyers, because books can be so easily posted internationally."</p><p>Her advice is to think big. "Online booksellers, whether large or small, should be thinking about growing scale geographically. Remember that the internet is a medium without borders, so why not exploit that?"</p><p>Vast inventory, local feel </p><p> In 1997 the Country Bookshop transactional website began operating from a remote, one-off bookshop, housed in an old railway station near Bakewell in the Peak District. </p><p>Remarkably, online sales took off. The site survived the dot.com crash, and now boasts a customer database of 100,000, with 60% of sales generated through the web. </p><p>The Country Bookshop site claims to retail more titles than any other European bookselling site--an incredible 3.2 million American and European books and magazines. It can do this by ordering directly from publishers and wholesalers, making use of the latest technology to act quickly. The site also offers discounted magazine subscriptions, music, DVDs, games, software, outdoor accessories and gifts, and sends out a regular e-newsletter to customers. </p><p>Director Sridhar Gowda says marketing of the site has always centred on local events, and business has grown thanks to becoming a supplier to schools, libraries, local institutions and Open University students. "We also promote local authors and get in touch with the community. For instance, we set up the Peak Literary Festival," says Gowda. Around 30% of sales come from outside the UK though, thanks to the site's prominence when overseas browsers are searching for titles. </p><p>www.countrybookshop.co.uk</p><p>Books websites in the UK by share of visits for week ending 08/04/06</p><p> Rank Website Market share of visits </p><p> 1 Amazon.co.uk 71.07% </p><p>2 Amazon.com 13.18% </p><p>3 Whsmith.co.uk 1.27% </p><p>4 Abebooks.co.uk 1.13% </p><p>5 Amazon.co.jp 1.06% </p><p>6 Abebooks.com 0.93% </p><p>7 Tesco.com/books 0.70% </p><p>8 The Book People Online 0.35% </p><p>9 My Favourite Magazines 0.30% </p><p>10 Audible 0.27% </p><p>Source: Hitwise (www.hitwise.co.uk)</p><p>www.blackwell.co.uk </p><p>www.karnacbooks.com</p><p>www.tesco.com/books</p><p>www.abebooks.co.uk</...