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Location, location, location. The first rule of retailing.
But in cyberspace, distance, hence location, means nothing.
Amazon.com has attracted a lot of attention advertising itself
as the world's largest bookstore. With revenues of about $16 million
per year, that claim has has been irritating to booksellers like
Barnes and Noble, a chain of bookstores with annual revenues of
about $2.5 billion and Borders with revenues of about $2 billion.
The claim is based on the 2.5 million titles listed and available
through Amazon's Web site. By contrast, the largest bookstores
in the physical world stock about 160,000 books.
It turns out that Amazon doesn't stock many of the 2.5 million
titles they offer. They stock only about 1000 of the most popular
titles. Orders for less popular titles are passed on to the world's
largest wholesaler, Ingram Book Company, which picks the order
and ships direct to the customer. Ingram fulfils over half of
Amazon's orders. For books not among the 400,000 titles stocked
by the Ingram, orders are passed on to either publisher or to
used bookstores.
Today the amount of business conducted on the Net is negligible
compared with comparable markets in the real world. But many expect
online sales to grow considerably.
Amazon is just one bookseller on the Net. Others include Bookstacks
and Bookserve as well as Barnes and Noble and Borders claims to
be opening up shop in cyberspace soon. Whether large or small,
how many general bookstores are there likely to be on the Net?
Not many. Probably one dominant bookstore and perhaps a couple
smaller competitors. There may be lots of niche retailers as well...those
that specialize in some small market such as science fiction or
books on gardening in Texas, but for general bookstores, there
will eventually be only a few on the Net. The fundamental reason:
distance doesn't mean anything in cyberspace...all online stores
have essentially the same location.
The exciting opportunity today is that, although it's clear
that this is coming, there are no markets where the leader has
yet become dominant. But for those who want to dominate what may
be a very large retail market, the time to act is now.
Books, CDs, software, computers, name brand components and so
on...each will be one market worldwide and so probably dominated
by one retailer in each product area.
©1997, Harry Tennant & Associates |
