A Better Place to Buy

With/© Jed R. Ryan

As the dominant bookseller in the bricks-and-mortar land (www.bn.com) collides with the young giant from the internet (www.amazon.com), competition has grown fierce, and the battle will be won through innovation. To test each bookseller, we searched for two books, Dr. Suess's Green Eggs and Ham, and Paul Katz's The New Urbanism, two very different genres. From these searches, we found many similarities, but also several differences, viz:

Amazon.com offers a wider variety of products and services, including auctions, toys & games, free e-cards, DVDs and VHS videos, and more corresponding top-seller lists.

• Amazon.com also offers a Spanish help center.
• Amazon.com has significantly more cross-selling and up-selling than Barnes. For example, a search for a book yields similar auction items, and the book's page has videos and music purchased by others.
• Barnes offers the ability to order by phone and pick up the product in the store. However, their call center is only open 12 hours/day, compared to Amazon's 24 hour call center.
• Barnes has a store locator, which will help identify customers' locations.Amazon obviously has no way to collect ZIP codes.
• Barnes offers frequent flier mileage ("Click Rewards") to encourage loyalty.
• Barnes has chat auditoriums, which we could not find on Amazon.

However, both sites could improve sales were they to offer these features:

• Side-by-side product comparisons (on price, number of pages, &c.).
• Enhanced customer satisfaction by asking customers if they were able to find everything. This will enhance knowledge of market demand and help determine new product offerings. It will also increase customer loyalty.
• A customizable help desk. For example, when on the auction page, clicking help will yield auction-specific information.Currently, clicking on "help" takes visitors to a generic help desk wherever they are in the site.
• The ability to search the site's features. For example, search for "Chat rooms" or "The Oprah Book Club." This will reduce confusing navigation problems and help new users to find features they may have learned of thru word-of-mouth.

Of course, duplication is a continual problem. However, Amazon cannot easily duplicate Barnes's bricks-and-mortar and catalog distribution network. Barnes has leveraged their distribution channel advantage to allow phone orders for people hesitant to use credit cards online and allowing people to pickup books at their store.

Amazon, however, has a greater competitive advantage in that they have a greater wealth of customer reviews, sales histories, sales lists, buyer profiles, and other buying pattern behavior that allows them to better target individual buyers. For example, while both sellers feature "Customers like you also bought" sections, Amazon's recommendations are much more accurate. When searching for a book on neotraditional town planning, Amazon brought up six books on town planning and five similar authors.Barnes, however, recommended a fiction book, a book about music, and no relevant authors. Amazon has effectively exploited this pioneer's advantage to constantly deluge users with cross-buying opportunities from their first search all the way until they submit their credit card at check-out.

Additionally, both sites are actively trying to develop online communities, however they both take different approaches. For example, Amazon is forming online clubs called "Purchase Circles" for people with similar literary interests. Along with chats and review writing people are able to debate and discuss the book's topics. The communities have the following effects on customer relationship management:

• Consumers feel greater security in buying books that have been reviewed not only by authors and publishers, but also by other consumers. Thus both testimonial and bandwagon marketing techniques are used.
• Online communities encourage browsing by providing recommendations and greater product information.  Consumers spend more time on the site when they can interact with the site, i.e. stickiness is increased.
• Online communities take the place of the human interaction that would occur in a bricks-and-mortar setting. The electronic community moreover is not limited by geographic and time constraints.

Just as consumers can build relationships with each other in online forums, they can also build relationships with the site itself. The most important element of this relationship-building is customization of the site for each user. When personally greeted users get a sense of their relationship with the seller having been acknowledged which increases loyalty. Additionally, through writing reviews, participating in Purchase Circles, and sending e-mail and cards through the site to friends, the relationship with the site becomes more comfortable and increases switching costs.

Another way to build loyalty is to offer efficient customer service online. Services such as a customized help center, increased self service, and online interaction with customer service representatives via electronic mail and chat rooms are more satisfying to many customers than traditional phone centers. For example, being on hold for one hour is highly objectionable whereas an e-mail response received in one hour would be considered rapid service. Furthermore, problems with phone centers such as abandoned calls and the necessity of staffing according to unpredictable call patterns are avoided online.

Selling online is not child's play. Problems arising with issues such as cross browser functionality, bandwidth, scalability of technology, firewalls and security, and different monitor types will continue into the future. Technology workers are also becoming increasingly expensive. Handling product returns will plague Amazon, and Barnes to a lesser extent.

Online retailers have a daunting task at hand. To be a successful online retailer requires a high level of quality interaction with the consumer. It requires quality interaction from index.html to your_order_has_been_received.html to help.html. Subtle design features will significantly impact customer loyalty and retention. For example, consider the difference between the front pages of Barnes and Amazon. Barnes' appearance is actively tied to its successful bricks-and-mortar roots. The green color scheme as well as the prevalent company logo in the important upper left hand corner, however do not render well electronically and give the site an old money, hoity-toity feeling. By contrast Amazon's light blue color scheme and the lack of a prevalent logo at top bring the focus immediately to the product tabs.

From the discussion above we feel that Amazon.com will continue to be successful in the online book market. However, Amazon's success will be largely affected by their ability to cultivate a wide variety of high margin products such as DVD, upscale men's clothing, and videos. BarnesandNoble.com will continue to be a large player in the book, video, and music markets, however they will have difficulty competing in non-core markets such as clothing, electronics, toys and games, and auctions. Amazon's principle advantage, however, will be eroded gradually. Amazon's data warehouse is unrivaled at present, yet Barnes will gradually build their own as time passes.   The ultimate success of one company over the other will depend on mastering the customer relationship through community-building and personalized site interaction.