Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (30) | Ignore Thread Prev | Next
Author: ZumaWave Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 58841  
Subject: Re: A Publisher's Perspective Date: 2/24/1999 5:50 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
I recently visited Ingram at its LaVergne, TN headquarters and had a chance to discuss the possibility of squeezing Amazon.com once the B&N acquisition is complete. The unanimous belief was that no change in business terms would happen.

Some contributors to this board seem to think that B&N considers Amazon to be its biggest competitor. But it doesn't. Amazon is a small fish in the overall bookselling pond. It is the biggest fish in the relatively small online bookselling pond. That's for now, anyway. Whether or not Amazon eventually diverts enough buying online to make it the biggest part of the bookselling industry has yet to be seen. The example in an earlier post where a person who does not normally buy books decided to purchase one from Amazon bodes well if it becomes a bigger trend.

For now, though, B&N's real world competitors are its biggest concern. Borders is a great bookseller and has plans for aggressive real world expansion. The remaining independents are holding their positions in local markets better than before. They have adapted and have learned how to compete with superstores.

Despite this, B&N is currently viewed as the big, bad corporation that everybody loves to hate. The American Booksellers Association has objected strongly to the Ingram acquisition and tried to get booksellers to switch alliances from Ingram to Baker & Taylor, Koen, and other wholesalers. Few did so, which has put a lot of industry pressure on the B&N/Ingram deal to treat all booksellers fairly. You can well imagine the anti-B&N backlash that would surface if Ingram suddenly began charging all non-B&N customers a higher price for books. My guess is that hundreds of accounts would disappear overnight.

The situation would be even worse if B&N/Ingram put the screws to Amazon alone. First of all, that would be illegal. I'm assuming that Amazon signed the same contract that all other booksellers signed with Ingram guaranteeing industry terms. If that contract is changed in isolation while other booksellers continue enjoying the same terms, then Ingram would have breached Amazon's contract. A high-publicity lawsuit would follow. The dozens of other wholesalers salivating over Ingram's volume would quickly step in to fill Amazon's needs. At the same time, the publicity would boost Amazon's profile and tarnish B&N's.

If Ingram changed its policies toward all non-B&N booksellers, then the entire industry would flee Ingram to friendlier waters at Baker & Taylor, Koen, et. al. Publishers would no longer see the Ingram account as a must-have entry point to the industry, and they would begin seeking relationships with other wholesalers.

This is exactly what B&N hopes to avoid. It did NOT buy Ingram to kill Amazon. It bought Ingram so that it would continue enjoying the profits from books that it sells, but also a portion of profits from books sold by other stores. That includes Amazon.

After the acquisition is complete, B&N's perspective on the bookselling business changes dramatically. It no longer cares only about increasing its slice of the pie, it suddenly cares more about increasing the size of the whole pie. Why? Because it will profit off nearly every book sold anywhere. That's good news for the whole book biz -- but only if the industry continues to place high importance on Ingram wholesaling.

As you can see, changing terms at all would be risky for B&N/Ingram. Changing terms for Amazon alone would be disastrous.

ZumaWave
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (30) | Ignore Thread Prev | Next

Announcements

Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Economic Implications of Cuba
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement