Internet - Profiles of Successful Internet Businesses
An Action Thriller: Bookstores
Anyone who thought books would become obsolete in the age of electronic information can put those fears to rest. Just the opposite seems to be true. Books, an $82 billion worldwide market (as of 1998), have become more numerous and much easier to buy and sell because of the Internet. The physical store where book lovers can read the jacket copy or flip through the chapters to read a couple of lines is still an option for browsers, but there’s no way like the Internet to locate the book you want quickly with a few clicks of the mouse.
There are now more than 600 bookstores on the World Wide Web. Some were created as online businesses while others are expansions of earthbound bookstores. With physical book stores limited by space to the number of titles they can carry, a Web store can carry millions of titles without worrying about the space because they send the order directly to the publisher. Even the superstores, like Barnes & Noble, can carry only a few hundred thousand titles.
According to a Goldman Sachs report on Internet retailing, book selling is third among the top dozen or so products ranked for online success (computer hardware and software are first and second). Books are ideal to sell on the Web because you don’t need to see them in person, try them on, or check out their freshness. Books are also a fairly inexpensive impulse buy.
For the book buyer, the electronic stores offer an excellent way to research what’s available. For example, you can plug in a search for books about women’s health and find a long list of books with basic information about author, date of publication, and sometimes a synopsis or review. This is much more efficient than trusting the health section of the bookstore, which may have only a few titles on the shelves. Even giant national chains cannot stock every single title that exists or is current.
And comparison shopping is a cinch, because prices must be competitive on the Web. A customer in a physical store might not bother to travel to another part of town to compare the price of the same book. On the Internet, however, you can. Customers can easily click over to another digital bookstore.
Online shoppers receive lots more information than you would at a conventional bookstore unless the author of the book you want happened to be appearing and you could ask questions. Book jacket copy and review blurbs are included and the customer is notified by e-mail when they find a new title by an author he or she likes. There are also chat groups dedicated to particular genres like mystery or romance novels.
Some sites, for example, invite customers to talk about their books by giving “customer reviews” and directing a reader to books he or she might like based on a person’s own favorite authors or genre.
A customer cannot feel and touch the book, but can wander through the sections of the virtual store and add or subtract books from their shopping basket. They can also read reviews and interviews with the authors.
Amazon.com, based in Seattle, is the most well-known bookseller on the Internet, and with its high profile has been called the poster child of the Internet. The Amazon site is perhaps the Web’s busiest location, and claims to have more than four million customers. Amazon’s inventory turned over 42 times in 1997 compared with 2.1 times for Barnes & Noble.
Amazon was founded by Jeffrey Bezos, who had worked on Wall Street for eight years. While surfing the World Wide Web one day, he came upon the amazing statistic that Web usage was growing by more than two thousand percent a year. This is what inspired him to search for the perfect Web business. Legend has it that Bezos made a list of twenty things that might sell well on the Web. Once he decided on books, Bezos’s goal became to launch the world’s largest bookstore. That he named it after the planet’s largest river is not a surprise.
Bezos knew where to get venture capital, and his strategy for Amazon.com was to get an early start and spend whatever it took to build up the business and the name. He spent heavily on advertising to establish his new venture. Amazon’s banner appears on at least 28,000 other sites on the Internet, so the temptation to go to the bookstore is always on the computer screen. For example, if a person is browsing a search engine for a particular subject, when the search brings up a menu of selections, it also brings up the Amazon banner that says, “for books about (whatever) go to amazon.com.” It took a year to produce the Amazon Web site before it opened for business in July 1995.
At the end of 1998 Amazon.com stock was selling for more than $400 a share although it was unclear whether or not the company was yet making a profit. Amazon lost $27.6 million in 1997 on $147.8 million in sales according to an article in Forbes. The competition was heating up, too. Barnes & Noble, for example, was pushing its online division (barnesandnoble.com) hard in 1998 with full page ads in the New York Times and on network television. Amazon soon followed suit with its own barrage of advertising. Then, in October of that year, Bertelsman, a German media conglomerate bought a 50 percent stake in the electronic division of Barnes & Noble while opening its own Books Online in Europe.
Borders Books & Music, Inc. made the move to the Web in 1998. The site is designed much like the store with an information desk and a cafe. They have tried to make it easy to find a book even if you don’t know what you want. There are “staff picks,” reviews and articles, and “must haves,” which help readers and listeners find what they want. If you like an author, you can check the “essentials” section for other titles.
Borders wants its customers to think of the online shop as a community, a place to share thoughts on favorite titles, where you can get to know authors and artists through interviews and online features. In the Netcafe there is a schedule of events, such as a chat at “Talk City” or the link to Salon magazine’s “Table Talk.”
Borders began in 1971 when Tom and Louis Borders opened a bookstore in the heart of Ann Arbor, a Michigan college town. The store quickly gained a reputation as a place where customers could get friendly, well-informed help from the staff and browse forever. The store was so successful that the Borders brothers decided to open more. In 1992 the brothers sold the company to Kmart Corporation, an affiliation that lasted only three years. In 1995, Borders bought back its stock from Kmart, joined forces with Waldenbooks, the leading mall book retailer, and raised new money by going public.
Now a publicly owned company, Borders is the world’s second largest retailer of books, music, and video, after Barnes & Noble. With its subsidiaries, Borders now has 1,000 locations in the world, concentrating on European expansion with traditional superstores in London and Singapore. Ten of the Borders stores have their own Web sites, with more to follow.
While Amazon is the best known of the virtual bookstores, BookStacks claims to be the original online bookstore. It was founded in 1991 by Charles Stack, a Cleveland-based bookseller who got his Web site up and running as early as 1992.
In 1996 Stacks’ book business was acquired by the Cendant Corporation in Stamford, Connecticut, and the name was changed to the simpler books.com. Cendant is part of the CUC, or Comp-U-Card, an international consumer buyers membership organization. Cendant also operates other Web sites, including Musicspot and GoodMovies.
Books.com claims to have four million titles (compared to Amazon’s claim of 2.5 million) and sells them at a 20 to 40 percent discount. Buyers also earn credits, called Bookmarks, toward free books, much like the traditional mail order book clubs do. The site also has a Book Café where visitors can chat with other book lovers and shoppers.
Books.com also claims to have the Web’s most extensive collection of electronic books, which can be downloaded directly to the users home computer. The Web has led not only booksellers, but book publishers into a whole new way of doing business. Ultimately, it is expected that books will be sold “on demand” because computer technology and Web sales mean a book can be instantly printed when a customer needs it. This will eliminate the need for publisher’s guessing at how many books should be printed. It will also eliminate the warehouses needed to store and ship books to stores. In the future readers may be able to order books online by having them downloaded to a special disk. This could eliminate bookstores altogether, if a publisher can send a book this way directly to the customer’s computer.
Finding the Needle in the Global Haystack: Out-of-Print Books
Rare book and out-of-print dealers have all gone on the Web to attract more and faster sales. Small used and rare book dealers used to charge search fees of $10 to $15, which would be added to the price of the book, but this has all but been eliminated by the ability of the reader to find his or her own book on the Web. There is generally a markup of one third to one half on the price of the book. Naturally, as a book becomes more and more rare, it gets more expensive. Dealers who know the market can make a good amount of money on rare books.
While every store will do a search, and there are many used and rare book dealers out there, MX Bookfinder (mxbookfinder.com) has apparently become a treasure to book searchers because it has the best software and best networks for a fast find. Anirvan Chatterjee, a graduate student from the University of California, opened up the MX BookFinder to praise from book seekers who had about given up finding the out-of-print or rare title they wanted. Customers tell stories of searching for decades for books that MX turned up in five minutes. Bookfinder is recommended by the Library of Congress, and Money magazine called it one of the two best book sites, the other being Amazon.
Chatterjee is a computer specialist who designs Web systems and strategies and also likes books. His recent reads are listed on his site. Chatterjee’s goal for MX Bookfinder was to work with vendor networks and book dealers in a way that would bring a unified interface to the best collection of used, rare, and antiquarian books available online. Chatterjee likes networks that can do “rich” searches in multiple fields such as author, title, keywords, and price. His site is designed to work with all browsers. They offer both tables and list-based output views, so the site should be usable on everything from the latest versions of Netscape and Internet Explorer to minimalistic wonders like Lynx.
MX Bookfinder is linked with the Advance Book Exchange, the major dealer network for out of print books, the Amazon catalog, and Antiqubook, a Dutch vendor network with a strong European focus, Interloc, and Powell’s books.
While Chatterjee admits that the superstores are a threat to local community bookstores, he also believes that these local stores in “reading communities” can pool their listings online to make them reachable by millions of bibliophiles around the world. By becoming a partner with these independents, Chatterjee feels he is playing an important part. From his site, customers can search “a bunch of sites” where used book shops have posted their wares with amazing speed. The seeker was able to make a choice, e-mail the store with the book, and had a response the same day. MX Book Finder hooks you up with those small independent booksellers and you buy the book directly.
One of the largest used book sources online is Powell’s (powells.com), a large, sprawling, earthbound store in Portland, Oregon. According to Internet World, Powell’s had “the best search engine in the business.” Powell’s buys thousands of used, rare, and out-of-print books a day, making it one of the largest sources of such books.
Powell’s claims that more people sell used books to them than to any other bookstore, so there is a wide assortment. They actively pursue purchasing good quality used, antiquarian, and scholarly books. They also buy publisher’s samples, library deaccessions and donations, academic collections, bookstore inventories, and, of course, private libraries from all over the country. People from other areas can send their books to Powell’s. For very large libraries or collections, Powell’s may send a team of buyers directly to the books. Some sellers drive their entire collections from as far away as Los Angeles, Denver, or Houston.
The Typing Demon of Cyberspace: The Amazing Instant Novelist
While this novelist has not yet hit the New York Times bestseller list, he has hit the America Online (AOL) bestseller list. The Amazing Instant Novelist was launched in September 1995. The site is now AOL’s largest writing-related site, pulling over 1.5 million hits per month. For example, when they did a tongue-in-cheek contest on writing a sequel to Titanic, the site received over 14,000 original submissions!
Why did this quirky, oddball concept work? Because Dan worked twenty-four hours a day, seven days a week, including weekends and holidays to make it happen. “Anyone who thinks a Web business is easy is insane!” Hurley said. “There is no harder business. It’s not merely 24 hours (like TV and radio) but its got endless pages, more than the world’s biggest magazine. And they’ve all got to stay fresh and updated or people get bored.”
Dan started the site as part of AOL’s now defunct “Greenhouse,” which was run by Ted Leonisis, AOL’s creative content guru. Three years ago, AOL was actively seeking unusual sites to be run by what they called “infopreneurs.” Greenhouse offered Hurley a start-up payment in return for a modest ownership stake.
Hurley said his basic reason for doing it was to expand his original sixty-second novelist idea. He had started with a manual typewriter on the streets of Chicago and New York in 1983. “You could say I was interactive before interactive was cool,” he said. With nothing more than a 1947 Remington, Dan talked with people, got a sense of who they are, and then wrote an instant “novel” (just one page long) based on and inspired by his conversation with the person. “People loved it,” he said. “I got on the Today Show, in People magazine and the Christian Science Monitor. I quit my job as an editor and became a full time sixty-second novelist. When AOL’s Greenhouse came along, I saw it as one more way to extend my concept of taking writing from its lofty tower and down to the people.”
Hurley’s secret weapon has always been contests. He has run countless writing contests on all subjects (write a poem about Mom for Mother’s Day or make up Seinfeld’s last episode), with new contests on an almost daily basis. Contests are successful because they’re not just “content” that people can read in magazines far more comfortably lying on their couch eating pizza. Contests transform “readers” into participants. The site does humor, opinion, poetry, stories, memoir, anything that people are interested in. Participants have to come back to see if they won, and they get hooked and want to enter the next contest and the next. Then he gives feedback to every single entrant. It’s participatory, it’s moving, it’s fun, it’s exciting. It’s the distinctive difference that magazines, newspapers, radio, TV, and movies cannot offer.
The Amazing Instant Novelist site changes weekly. For example, for Mother’s Day, users are offered a contest on writing a true story about your mom. You could win a flower arrangement, a signed copy of the book Stop and Sell the Roses, or a gift certificate courtesy of 1-800 FLOWERS.
Hurley believes you’ve got to program your main screen as though you were writing the cover blurbs for Cosmopolitan. They’ve got to reach out and grab people by the throat.
How does Hurley make money? In his early years, America Online paid him based on the number of hours people spent online. Now AOL pays him a flat rate, which is equivalent to what his wife earns as a senior copy writer at Good Housekeeping magazine. Hurley also sells advertising, which is difficult but has grown by leaps and bounds. In the spring of 1998, he launched a members-only section to give personalized feedback to people’s writing. Membership costs $75, and he got over fifty members in the first month. Hurley has also sold over 300 copies of his thirty-six-page booklet, “How to Be An Amazing Writer,” in which he reveals his secrets to writing success. Hurley has also sold hundreds of personalized sixty-second novels for people willing to pay the $25 fee.
Hurley has also been booked for a handful of major sixty-second novelist performances across the country. Finally, the site has brought him incredible positive coverage in USA Today, MSNBC, Wired, the New York Times, and much more. As a result he has a book agent and is optimistic about a book deal.
Hurley’s secret weapon for success has been a large number of enthusiastic volunteers. He has over 160 of them who do everything from host the chat room to judge the contest entries. For this work, they get free America Online membership and the glory, fun, and prestige of being associated with AOL’s number one writing site.
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