Barnes & Noble Vs. Amazon

To attain a competitive advantage over Amazon.com, Barnes & Noble needs to develop a proper strategy and implement a successful marketing plan.

SITUATION ANALYSIS

Barnes & Noble first must consider the issues and problems facing their company, and then perform an opportunity analysis to determine their strengths and weaknesses in relation to their customers, competitors, and company capabilities. In regards to the main concerns of Barnes & Noble, the company needs to worry about the uncertainties associated with the expected rapid growth of the Internet, the changing profile of Internet users, increased competition and indeterminate future developments in electronic retailing from publishers, wholesalers, and retailers, and intense price competition. By 2000, more than 80 million users will be on the World Wide Web, with an increase in females and a broader spectrum of education levels and age, changing the market demographics. Additionally, some book publishers, namely Simon & Schuster and Bertelsmann, have expanded online, while the national leading wholesaler, Ingram, is developing a website where wholesalers could ship directly to consumers. In the meantime, small publishers and universities have started to publish directly on the Web, avoiding print versions completely and thereby challenging the posterity of conventional books. Within the Barnes & Noble Corporation, their smaller traditional bookstores such as B. Dalton and Scribner's already face cannibalization from the growth of superstores and online purchasing. Finally, some claim that the burgeoning nature of the Internet will lead to increased bargaining power and decreased brand loyalty, even though B&N's main competitor, Amazon.com, has an advantage in that more than 50% of its customers are repeat customers. Barnes & Noble has a number issues to address, and so must perform an opportunity analysis with these considerations in mind.

Barnes & Noble's web customers differ from the traditional book consumer, a fact that needs to be considered when implementing their marketing strategy. In a benefit-based segmentation scheme for traditional book retailers, the most meaningful consumer segments are: customers who desire value, expansive product selection, convenience, or the amenities offered, such as customer service, the ability to browse and listen to authors at book signings, and relax at in-store cafйs. Web retailers can satisfy some of these benefit-based segments, but they will be unable to offer all of them. Barnes & Noble's online division, for example, provides discounted books for the value customer, offers an extensive selection, and due to the nature of the Internet, convenience based shoppers can order books during non-conventional business hours. However, web retailers including Barnes & Noble would be unable to satisfy the customers who desire the in-store amenities benefit-segment. Through its online book reviews and interviews with authors, Amazon.com tries to fulfill this segment, though these benefits are far from equivalent to those of traditional retailers. When considering the various benefit-based segments, Barnes & Noble reaches both the growing online niche of value and convenience oriented groups, but additionally they reach the in-store amenities segment with traditional small retail units (B. Dalton) and superstores. Even though the traditional and web operations are kept separate, their well-known name can be used in both sectors, maximizing their branding strategy and developing brand loyalty. Consumers can physically go to a Barnes & Noble superstore on a weekend, or they can quickly make a purchase online if they are searching for an obscure book or if they are looking for deeper discounts and ultimate convenience (the ability to order from anywhere at any time). With the rapidly growing number of web users, Barnes & Noble caters to both the traditional and web-oriented segments, avoiding the alienation of consumers who desire in-store benefits, as does Amazon.com.

In addition to an analysis of consumer benefit expectations, corporate competition is another area to consider. Because of the competitive threat from Amazon.com, Barnes & Noble decides to go online and cut prices. Instead of using its brand equity to correlate the online store with the traditional retail venue, Barnes & Noble keeps these separate, a decision that increases but does not maximize competitive advantage. Web users are discount and value oriented, and so by cutting prices online and offering a convenient purchasing method, Barnes & Noble positions itself as an operationally excellent firm in competition with other web retailers. Unlike Amazon.com who can only attract the market segments that are ambivalent to in-store amenities, Barnes & Noble covers both markets and positions itself to actively compete with Amazon.com in the Internet world. To maximize its competitive advantage, Barnes & Noble can easily link its well-established traditional retail brand image with that of their online operation. In this way, customers could order books online directly from a Barnes & Noble bookstore, and they could pick up their online purchases at a store close to home. A strategy such as this would certainly increase their competitive advantage over Amazon.com, who has no means of establishing a widespread traditional venue at this time.

The final step of opportunity analysis is to determine company capabilities. Barnes & Noble has developed several strategies to strengthen its market position. With AOL, the world's most popular Internet online service, Barnes & Noble has a unique relationship. BarnesandNoble.com revolutionized Internet shopping with the introduction of personalized web pages for each viewer, and to increase their edge over Amazon.com, they linked with the world's most popular Internet online service, AOL, to be their exclusive bookseller. With their traditional stores, Barnes & Noble established a 2.5 million-title database designed to help consumers find books, but despite this advancement, the company's distribution structure is far inferior to Amazon.com's. Both the tax-exempt online purchased books and the traditionally purchased ones are routed through the same distribution center in New Jersey and have to be separated from each other to avoid confusion. Contrarily, their main competitor is much more efficient and cost reducing. Amazon.com's West Coast operation permits non-Washington state residents from paying sales taxes, and instead of working with publishers, the company depends on wholesalers to provide fast turnaround in shipment, allowing them to have few books on hand at their distribution center. In the marketing channel,