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Saturday
- July 22, 2000
Online European Booksellers
Feel the Amazon Effect
Leading European online booksellers have had a hard time
translating their local presence into sales. Faced with strong
international competition, local players risk losing the
battle against Amazon.com in Europe. In a recently published
report, IDC concludes that Amazon.com has been remarkably
successful in extending its stronghold to the European market.
In fact, a wide gap remains between Amazon and the leading
European online booksellers even today.
"Amazon has managed to
generate sales several times higher than that of its nearest
competitor, which seems surprising, given that it still
lacks local store presence in most European countries," said
Christian Asmussen, a research analyst with IDC's European
Internet Group. Presently, Amazon has stores in Germany,
Austria, and the United Kingdom, compared to Bertelsmann,
which will sell books and CDs from its BOL Web stores in
11 European countries when it acquires 50% of Bokus, the
Scandinavian bookstore.
Trends in Online Book Sales
- Mergers and acquisitions -
The alliance between BOL and Bokus is just the most
spectacular incident of the mergers and acquisition
activity in the online book market. This is partly
driven by the current investor climate, where Internet-related
companies can no longer count on the capital markets
to finance their sustained and heavy losses, and means
that most online merchants are now forced to become
profitable much faster than was previously the case.
Mediocre performers with cash-flow problems are especially
likely to be take-over targets enabling brick-and-mortar
media players to buy into the technological know-how
needed to get online.
- Increasing sales -
In the ecommerce business model, the path toward profitability
means growing sales - rapidly - by whatever means are
possible. According to Asmussen, "Often there
are only two ways for a book merchant to increase sales
volume fast enough: either through international expansion
or by introducing new product lines that complement
the books. Mergers and acquisitions are used extensively
as a swift way of achieving both of these goals."
- The fixed price system -
In some European countries, books are regulated within
a fixed-price system, meaning that online booksellers
cannot use the price discount incentive to sell local
books the way they have done with imported books. This
inhibits the demand for books in many of the markets
where Amazon's competitors operate.
- Web buyers - The
first generation of European Web buyers has primarily
consisted of well-educated individuals with high incomes.
This is a group with a disproportionately high need
for technical and academic literature and a tendency
to be fluent in English. Amazon can serve most of these
customers from its current store line-up. However,
the demand for books in other languages will increase,
IDC says, as a broader and more representative share
of the European population get online.
These trends imply better times
for the Web brands that are both local and global in their
approach. But building such a brand is not an easy task.
BOL, which is probably the most comprehensive attempt yet,
will need to prove it can handle the complexity while not
losing touch with each of its markets. "Media merchants
should choose early on between a national and an international
focus, as well as between a focused and a broad product
strategy. Changing these parameters at a later date can
mean the addition of significant costs, particularly in
adapting software investments, organizational structure,
and marketing strategy," Asmussen said.
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