Why Amazon Suceeded and Borders Failed

Topics: Amazon.com, Borders Group, Jeff Bezos Pages: 5 (1611 words) Published: February 24, 2012
Amazon.com compared to Borders Books

A look into the History of these two companies and how Amazon became profitable while Borders ended in Bankruptcy.

By Robert H. (Bob) Travis
Strayer University
Winter Quarter, 2012

BUS 302 – Management Concepts
Professor Charles Wittenberg

Abstract

This paper will examine the history of both companies, Amazon.Com and Borders Books. In addition, I will highlight some of the critical decisions that each company made that have led to the wild success of Amazon.Com and to the eventual liquidation and closure of Borders Books. I will examine how the internet, changing demographics of readers in general and the introduction of the e-reader and e-books have forever changed the face of the bookselling industry. I will answer the question, “How did the newer, more nimble company (Amazon.Com) prosper while the more established and older company (Borders Books) fail.”

In the immortal words from a Grateful Dead Song from the 1980’s, “What a long, strange trip it’s been” for Jeff Bezos and Amazon.com. Mr. Bezos decided in 1994 to leave his lucrative position as a Senior Vice President at D.E. Shaw, a Wall Street Investment Bank firm and move to Seattle, WA with an idea to make money from the burgeoning idea of the internet and selling products over the internet. He had read that internet usage was growing at 2,300 per cent per year, and he was confident that this was his opportunity to make his million. Mr. Bezos hit upon books – with over 3 million in print at any one time, he knew that no physical bookstore could stock more than a fraction of that number. His idea then of a virtual bookstore that could offer a much greater selection and compete comfortably on price because there were less overhead costs, made sense to him. He also saw that the dynamics of book publishing were also favorable. He knew that there were over 2,500 publishers in the United States and the two largest retailers, Barnes and Noble and Borders, together owned a mere 12 percent of total sales. This meant that there were no “800-pound gorillas” in the market. With this idea and a business plan he felt comfortable would work, Bezos went to work securing capital for his new venture. He was able to raise several million dollars from private investors and in July 1995 Amazon.com opened for business on the web. Amazon offered consumers four compelling reasons to shop there: (1) selection (a database of 1.1 million titles), (2) convenience (shop anytime, anywhere with ordering simplified by Amazon’s patented “1-Click” express shopping technology), (3) price (high discounts on bestsellers), and (4) service (e-mail and telephone customer support, automated order confirmation, tracking and shipping information, and more.) Table one shows just how simple the original Amazon.com website looked when launched. In 1998 Amazon expanded its product line, first adding music CDs and then videos and DVDs. Also in 1998, a new business strategy emerged: “To become the best place buy, find and discover any product or services online.” 1999, however, was the pivotal year for Amazon, both in business results and in long-term planning for the phenomenal success that was to come. Bezos announced his goal of making Amazon the “Earth’s Biggest Store” and set about making that a reality. Also during 1999 the site added electronics, toys, home improvement products, software and video games to its offerings. Additionally, Amazon introduced several marketplaces, including Amazon.com Auctions (similar to E-Bay), zShops (online storefronts for small retailers), and sothebys.amazon.com, a joint venture with the auction house Sotheby’s. During 2000 and 2001 Amazon continued to have success, but its losses had grown to $720 million for the year 2000. The luster had begun to wear off of Amazon on Wall Street. It also announced a target for profitability, promising a “pro forma operating profit” by the fourth quarter of...

References: Amazon at 10: Profitable at Last. Introduction to E-Commerce. Retreived January 26, 2012 from Pearsonhighered.com/samplechapter/0131736160/pdf.
Austen, B. (2011 November) The end of Borders and the Future of Books. Bloomberg BusinessWeek. Retrieved January 23, 2011 from www.businessweek.com/magazine.
Jaffe, T. (1998, September 21). Borders overboard? Forbes Magazine, 104, Retrieved January 23, 2012 from http://elibrary.bigchalk.com
Norris, M. (2011) Borders: A Case Study of Bookselling Gone Wrong. Book Publishing Report, volume 36, Number 2. Retrieved January 23, 2012 from www.bookpublishingreport.com.
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