...brick-and-mortar book stores ...: Part 2 -- The online store

As I had discussed in Part 1, Barnes & Noble and Borders need to consider three initiatives to compete against Amazon (in addition to shutting down unprofitable retail stores and reducing employee count):

• Create a more credible online option to compete against Amazon
• Use brick-and-mortar as a competitive advantage
• Align inventory to demand

In this post, I shall focus on how B&N and Borders can create a more credible online option to compete against Amazon:

• Collaborative filtering: CF algorithms produce personal recommendations by computing the similarity between your preference and that of other people. Amazon produces CF recommendations for the search history and the purchases of a user. Borders.com does not have CF recommendations whereas BN.com has CF recommendations for items in the shopping cart only. Some unique things about Amazon.com:

1. It tracks the IP address/ cookie on the computer so that a user revisiting a site instantly gets recommendations based on previous searches on the site
2. Amazon suggests what people buy after viewing a certain item. This is called sequence analysis.
   
3. It offers auto-fill for search words when a user types a search item e.g., typing "snowball" offers "snowball warren buffett" as the first auto-fill option

• Pricing of online offers: I compared the prices on a couple of bestsellers and a couple of new releases.
  

1. The pricing on Amazon is lower than that of bn.com by 5% (for BN members). The BN membership price is usually lower than the Borders.com price. In this competitive business, it goes without saying that bn.com and borders.com need to lower prices.
   
2. Also an often overlooked aspect is the presentation of 'used' book prices alongside new book prices. By doing that Amazon caters to the price-sensitive user who doesn't mind buying used books.

• Wider variety of offerings: Amazon.com has a wider variety of offerings especially for long tail titles among technical books (a simple check for SAS textbooks yielded 121 results on bn.com and 9272 results on Amazon.com) and for children's books ("Elmo" yields 492 titles on bn.com and 13,985 titles on Amazon).
  

• Online used books strategy: Clearly a part of Amazon's variety advantage is its role as an exchange of used books.BN buys used books and sells it themselves. This could be a risky strategy and may not be attractive to sellers either. BN also has an authorized seller program, which is attractive for large volume sellers. Borders has an alliance with Alibris for used books. However Borders 'Marketplace' has a separate sign-on and is not integrated with Borders.com, which is a bummer. (also sellers having to pay more to sell on Borders.com than on alibris.com, which is clearly a hindrance). Amazon's fee structure is much lower than that of Alibris for small volume sellers (<40 items). BN and Borders should take a Go/ No-Go decision based on profitability.
  

So much about online operations... My next post in this series will be about how Barnes & Noble and Borders can improve their brick& mortar operations.