amazon.com triggered an online bookselling price war last week when it announced that it would sell all New York Times bestsellers at a 50% discount. The retailer's decision, motivated by what experts say is a desire to bolster its customer database, prompted other booksellers to deepen their discounts and, in some cases, their losses.
The Seattle online bookseller announced early last week that it was moving to a 50% discount model, effective immediately, and would even refund the difference to customers who bought bestsellers in the days leading up to the announcement. Within 24 hours, Barnesandnoble.com, Borders.com and Booksamillion.com all instituted bestseller discounts of at least 50%. (Booksamillion.com offers a 55% discount to members of its Millionaire's Club, who pay a one-time fee to join.)
Amazon.com attributed its new policy to larger orders, a more solid distribution infrastructure and, consequently, a decreasing reliance on wholesalers. "Buying for 8.4 million customers, we have efficiencies of scale. We want to pass this on to our customers," said spokesperson Lizzie Allen. The proliferation of price-comparison tools such as Pricescan.com have also made both shoppers and retailers hypersensitive to price points.
Until now, the largest book discounts on the Web were offered by Buybooks.com and Shopping.com, two mass merchandisers that sell selected titles at 50% off. But discounts this deep -- which are loss leaders -- are a first for traditional cyberbookstores. "We never try to look at anyone else's cash register," Barnes &Noble CEO Len Riggio told PW, "but we did react to remain competitive." Barnesandnoble.com is particularly annoyed by the move because it occurred during a "quiet period" for the company as it plans its IPO. Borders.com spokesperson Rich Fahle commented that New York Times bestsellers "are such a small part of our business, it would have been silly not to do it."
Kate Delhagen, a consultant at Forrester Research in Cambridge, Mass., emphasized the importance of securing customers in the relatively early stages of e-commerce, even at the expense of profits. The consequences of Amazon.com's actions, she noted, are still murky. "Everyone is forced into this low-price marketplace. Now the question is: Can prices go any lower?" She added that she expects eventual discount synchronicity between B&N bricks-and-mortar stores and Barnesandnoble.com.
Competitors are irked at how a company that is substantially broadening its product base has driven down prices for those who primarily sell books. Particularly vulnerable are those online booksellers who work with a relatively small volume and narrow margins. "The small online bookseller will have a hard time competing," Delhagen predicted.
The ABA, on the verge of launching Booksense.com, is also concerned about the move. "Ultimately, these [price wars] have serious, long-range consequences," said ABA chief operating officer Oren Teicher. "It is troubling, to say the least." Simon &Schuster's Jack Romanos told PW he thinks the discounts could benefit his company, at least in the short term.
The repercussions have also been felt at online booksellers who haven't actively adjusted their prices. Books. com features a price-comparison tool that allows savvy shoppers to search for the best price on any given title (not just bestsellers) among Amazon, Barnesandnoble.com and Borders. com. If another retailer's price is lower than Books.com's, customers are offered the lowest price plus an additional 1% deduction.