A blast from the past: Why B&N was supposed to kill Amazon

[fjtorres]

Insightful Fortune piece from 1997:

http://archive.fortune.com/magazines...2065/index.htm

The Amazon model is beguilingly attractive: Expensive inventory and bricks-and-mortar warehouses are not needed by the New Age retailer. All one needs, it would seem, is a Website to present the face that greets customers and takes their orders. Other parties handle the capital-intensive aspects of stocking inventory.

Maybe low barriers to entry are a mixed blessing, however: The big guys can just as easily join the fun. Barnes & Noble, the nation's leading bookseller, opened its own online bookshop (at www.barnesandnoble.com) three months ago and has swiftly exposed the tenuousness of Amazon's head start. It turns out that figuring out the sexy new stuff, like Web pages and online order taking, is a lot less difficult than figuring out such drudgery as how to cost-effectively finance, stock, and move the physical stuff, the books.

Anything Amazon.com can do on the Internet, so, too, can Barnes & Noble. "There was a mystique about how difficult it was to get started on the Web," says Steven Riggio, chief operating officer of Barnes & Noble, "but it's quickly fading." Hiring hot designers from Silicon Valley, B&N now offers a Web shopfront that's just as inviting and useful as Amazon's, with easy-to-use subject indexes, online author events every day, book forums, book reviews, and other features. Both Amazon and Barnes & Noble can get any book in print--eventually (so, too, can the smallest bookseller). And both have deals with heavily trafficked Websites--including Yahoo (Amazon) and the New York Times Book Review (B&N)--that send customers their way.

Once you look beyond the Website you begin to see why, in this battle at least, the odds favor the $3-billion-a-year Goliath. The one area in which B&N and Amazon are most easily distinguishable is in how speedily the two can serve their customers, and in that contest, the edge goes to the bookseller with the most books physically on hand. Amazon stocks just a limited number of bestsellers (the company won't disclose how many) but for the most part obtains books from wholesalers or publishers after receiving an order.

B&N, on the other hand, generates such volume in its real-world stores that it has become, effectively, its own giant wholesaler. It deals directly with publishers, cuts out the middlemen, and stocks its central warehouse in New Jersey with 400,000 frequently ordered titles. Consequently, observes Craig Bibb, a Paine Webber analyst, "Barnes & Noble crushes Amazon in speedy delivery."

Bezos' reply:

Jeff Bezos, Amazon's endearingly candid founder, agrees that Barnesandnoble.com can duplicate what Amazon has done. The question, he says, is, "Can Amazon.com establish a world-class brand name before Barnesandnoble.com buys, builds, acquires, or learns the competencies they need to be excellent online retailers?"

Much more at the archive.

Try not to hurt yourselves laughing.

[j.p.s]

Originally Posted by fjtorres

Insightful Fortune piece from 1997:

http://archive.fortune.com/magazines...2065/index.htm



Bezos' reply:



Much more at the archive.

Try not to hurt yourselves laughing.

Too late.

[fjtorres]

Originally Posted by j.p.s

Too late.

Sorry.
Should I move the warning higher?

[DNSB]

Originally Posted by fjtorres

Sorry.
Should I move the warning higher?

Hmm... warning at the top, the rest of the post wrapped in a spoiler tag? Damn near sprayed coffee all over my laptop keyboard.

[pwalker8]

On the flip side, if one were to look at it from the stand point of what went wrong rather than simply as an opportunity to engage in the usual internet sport of mocking those outside your tribe, it's makes an interesting case study.

Everything said in the quote above is actually true, especially looking at the positions of the two companies in 1997. When the last Harry Potter book came out in 2007, B&N was still going strong and absolutely packed for the Harry Potter event. B&N could have had a strong online presence, but they made some bad choices.

B&N never really embraced the idea that a strong online presence could expand their audience, rather than be simply a marketing tool to direct customers to one of their B&M stores. At the time, when you were looking for a specific title and couldn't find it in the store, you went to the customer service booth, where someone looked the book up on the computer and if it was available, special ordered it. The book was then delivered to the store and you got a phone call saying the book was in.

They could have made all that part of the website. Ideally, you could look up a book and see if your local B&N had it in stock, allowing you to reserve a copy (something I would do by phone at times), or alternatively simply order on line and ship it to your home. But they decided not to. I suspect they saw the website as purely a marketing device to drive business to the B&M stores.

I didn't buy my first item from Amazon until 2001. I used it to buy some game boys as Christmas presents. I didn't buy my first book from Amazon until November 2002, when I started buying specific hard to find specialty books. All the way to 2011, my usage for Amazon was electronic gifts, obscure books and obscure DVD's, slowly ramping up from 5 items in 2001 to 43 items in 2011 (excluding ebooks). If at any point during that time period, B&N had made it possible for me to order those obscure books or DVD's online and had them delivered to my home, I would have used them.

When ebooks went mainstream in 2006 (Sony) and 2007(Amazon), B&N was two years late with the nook in 2009. Even then, if they had used the previous decade to develop a robust internet store front, they would have been a much stronger competitor with Amazon.

So the issue isn't that the idea that B&N had the advantage in 1997 and could have developed a strong internet presence is laugh worthy, the issue is that B&N for various reasons, didn't have the vision to develop their internet presence properly. Once again, I suspect they never really wrapped their head around the idea that their internet presence if used properly could have expanded their customer base to people outside range of their B&M stores rather than simply a marketing tool to drive traffic to their B&M stores.

[darryl]

@pwalker8. It is ironic that this piece appeared the very same year that Clayton Christensen's "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail" was first published. B&N faced the Innovator's Delimma and, like most large firms in that position, failed to recognise let alone meet the challenge. This failure was compounded by some terrible decisions. Their continued survival is now most unlikely.

Your argument is in fact supported by Jeff Bezos's reply quoted in the OP. Hindsight is a wonderful thing. Had B&N read and taken his comment seriously who knows where we may have been today.

[fjtorres]

Originally Posted by darryl

Your argument is in fact supported by Jeff Bezos's reply quoted in the OP. Hindsight is a wonderful thing. Had B&N read and taken his comment seriously who knows where we may have been today.

Hindsight is only part of the story here.

Part of the humor is that the article was laughably wrong even in the light of known 1997 facts.

1- The B&N website was far from being as usable as the Amazon site. Even then it was understood that IT consultants routinely overpromised and under-delivered. That marketing had the habit of making promises their staff was unable to keep was a common theme on Dilbert. Throwing money at a website problem was mocked by even IBM a couple years later.

https://www.youtube.com/watch?v=xHTNu5UQvH4

2- In 1997 a deal with Yahoo would send far more traffic to your site than a deal with the NYT. Yahoo was still relevant then.

3- The writer assumed that bestsellers was the heart of online sales when even then it was backlist driving Amazon's growth. That was why ABE was one of Amazon's early acquisitions and by 2000 they were being vilified for selling used books online.

4- The author assumed Amazon depended on the traditional "special order" delivery process that took even B&N weeks to deliver deep backlist when from day one, Amazon did its own pickup at the distributor warehouse and did its own shipping. By 1997 Amazon was the biggest customer of that Ingram warehouse and their daily orders were processed in hours. They were also getting discounts comparable to B&N instead of paying non-chain bookstore prices. The playing field was level and already starting to tilt Amazon's way. B&N warehouses stocked 100,000 titles. Amazon "warehouse" was Ingram. And it cost them nothing to run it. if anything, the net 30 day terms paid Amazon to use Ingram courtesy of the float.

All this was knowable if the author had bothered to actually leave the office and research the matter.

But everybody assumed that B&N money would bury two year old Amazon.
In three more years, they would instead by fretting over Amazon's ascendance.
And that is a textbook case of "ironic".

https://www.msn.com/en-us/lifestyle/...F3Q?li=BBnb7Kz

Seriously, B&N did most everything necessary to succeed.
They just did it very very poorly. And in the most expensive way possible.

Anybody around here can list their missteps by the dozen.

Contrary to today's whiny memes, it wasn't "AMAZON'S DEEP POCKETS" that sunk B&N. It was their own incompetence and arrogance.

https://newrepublic.com/article/1509...rnes-and-noble

Hindsight simply adds to the humor.

[darryl]

@fjtorres. Don't get me wrong. I still find it enormously humorous. But being outside the US I was missing some of the points you made, which make it even funnier.

I also find it quite humorous that Jess Bezos openly gave them a few tips. Of course, in 1997, what was Jeff Bezos and Amazon to B&N?

[pwalker8]

Originally Posted by darryl

@pwalker8. It is ironic that this piece appeared the very same year that Clayton Christensen's "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail" was first published. B&N faced the Innovator's Delimma and, like most large firms in that position, failed to recognise let alone meet the challenge. This failure was compounded by some terrible decisions. Their continued survival is now most unlikely.

Your argument is in fact supported by Jeff Bezos's reply quoted in the OP. Hindsight is a wonderful thing. Had B&N read and taken his comment seriously who knows where we may have been today.

Certainly that's true.

I didn't realize that the Christensen book had been out that long. I picked it up last winter.

I would argue that B&N's issue wasn't an Innovator's Dilemma situation. They understood the need for a Website and an ebook reader, even if they were late to the table. That's not a killer per se. Apple is rarely the first to the table with their innovations. There were mp3 players before the iPod and smartphones before the iPhone. They just brought superior user interface and vision to the table. B&N could have done the same if they had understood the vision thing and the possibilities.

I give Bezos a lot of credit. He had the vision. The question for Amazon is will they move to the next step from a vision point of view, or will they focus on cost cutting.

[pwalker8]

Originally Posted by darryl

@fjtorres. Don't get me wrong. I still find it enormously humorous. But being outside the US I was missing some of the points you made, which make it even funnier.

I also find it quite humorous that Jess Bezos openly gave them a few tips. Of course, in 1997, what was Jeff Bezos and Amazon to B&N?

Fjtorres' time line is somewhat off. In 1997, a lot of what fjtorres points to didn't exist and wasn't a thing. Now, if the article was dated 5 years later, he might have a point. In 1997, Netscape had 86% of the web browser market while Sun and SGI were kings of the web servers and Sun was just starting to push java. I was running the company web site on a SGI indigo.

[DiapDealer]

Originally Posted by pwalker8

I give Bezos a lot of credit. He had the vision. The question for Amazon is will they move to the next step from a vision point of view, or will they focus on cost cutting.

They've been experimenting with drone-delivery for how long now? Who else is actively pursuing it? Someday when residential drone delivery becomes common-place, other businesses will be complaining that they can't compete with Amazon in that arena (when in fact it will merely because they were too late to the game). No doubt they're focusing a bit more on cost-cutting right now, but I certainly don't think for a second that it's at the expense of "vision."

[fjtorres]

Originally Posted by darryl

@fjtorres. Don't get me wrong. I still find it enormously humorous. But being outside the US I was missing some of the points you made, which make it even funnier.

I also find it quite humorous that Jess Bezos openly gave them a few tips. Of course, in 1997, what was Jeff Bezos and Amazon to B&N?

I think he was slyly saying there was no way in heck B&N was ever going to catch up to him.

(edit: For example, B&N didn't get a fast checkout feature on their website until 1999, EXPRESS LANE, and it was too close a copy of Amazon. So they got sued over the 1-click patent and lost. Had to ditch it. Apple just licensed it and put it in iTunes. Of course Apple had a patent portfolio to cross license and B&N didn't. Bezos knew that.)

He doesn't lack for confidence. The dude had a long term blueprint from day one and books were only intended to be the launching pad for the industrial conglomerate he intended to build. Amazon is simply a spectacle unfolding. I don't think we're even close to seeing peak Amazon.

I have no idea what's next but I wouldn't be shocked to see him go after agrarian robotics. That is one market that's going to explode next decade and he has most of the pieces onhand.

[fjtorres]

Originally Posted by DiapDealer

They've been experimenting with drone-delivery for how long now? Who else is actively pursuing it? Someday when residential drone delivery becomes common-place, other businesses will be complaining that they can't compete with Amazon in that arena (when in fact it will merely because they were too late to the game). No doubt they're focusing a bit more on cost-cutting right now, but I certainly don't think for a second that it's at the expense of "vision."

HQ2 isn't about cost cutting, you know.
There's a second shoe just waiting to fall.
Maybe a whole store worth of shoes.

[pwalker8]

Originally Posted by DiapDealer

They've been experimenting with drone-delivery for how long now? Who else is actively pursuing it? Someday when residential drone delivery becomes common-place, other businesses will be complaining that they can't compete with Amazon in that arena (when in fact it will merely because they were too late to the game). No doubt they're focusing a bit more on cost-cutting right now, but I certainly don't think for a second that it's at the expense of "vision."

Yes, they have been experimenting with drone delivery, but that's more of a solution in search of a problem than anything else. Maybe it's useful for delivering small packages in gridlocked cities. I'm not sure that counts when it comes to vision.

Amazon figured out what consumers wanted and how to get it to them. With some of their more recent ventures, it seems to me that they are falling into the old trap of trying to give consumers what Amazon wants to deliver.

Let me give an example. They have home delivery of WholeFood in my area. I figured that was great, I would love to order certain items from WholeFood about once every 3 or 4 weeks. But that's not what Amazon wants to deliver. First, they want you to sign up for a subscription service. Second, they only deliver a small subset of what WholeFoods carries. Needless to say, several of the items that I normally pick up from WholeFood when I go there are not on the list. I'm sure there is some internal rational behind only delivering a small subset of what is in the store, but it's a deal breaker for me.

[DiapDealer]

Originally Posted by pwalker8

Yes, they have been experimenting with drone delivery, but that's more of a solution in search of a problem than anything else. Maybe it's useful for delivering small packages in gridlocked cities. I'm not sure that counts when it comes to vision.

Without the power to see what the future brings, I'm afraid you (and I) are entirely unqualified to determine what will ultimately count as "vision" in this regard.

You may end up being right, but right now, we have no idea in the least how successful (or un-) the future of drone delivery might be.

The point is that Amazon has always taken chances--have always experimented with cutting-edge technologies and practices in order to be ahead of everyone should some idea take the world by storm.

Vision is not always about seeing the future. Sometimes it's about getting your fingers in the pies of as many things as possible (as ridiculous or unlikely as some of those things may seem right now) in the hopes that a few of them become reality. Sometimes it will pay off and sometimes it won't. But one thing will always be true: you won't be an innovative company by waiting on technologies to be viable by today's standards before taking a serious look into them now.

I have no doubt whatsoever that there will be a lot of future whingeing about Amazon's "monopoly" on something everybody else originally saw as a pipe-dream, or a "solution in search of a problem." After all ... what's the difference between predicting a future and creating one, where business ventures are concerned?