“Amazon.com and Border Books”

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Bus 302 xxxxxxxxxxxxxxx 05-13-12

Amazon.com and Border Books

History
Amazon.com is a Fortune 500 e-commerce company based in Seattle, WA. It was started by Jeff Bezos in 1994. He started this business out of his garage in Bellevue, Washington. Initially he was able to fund his new venture from Nick Hanauer who provided the first investment of $40,000. A second investment of $100,000 from Tom Alburg was what the company needed in order to become more user friendly. During the first month of business, Bezos was able to fulfill domestic as well as international shipments to more than 48 countries. Amazon was one of the first big companies to sell goods over the Internet. Amazon serves a worldwide audience. Its website was launched in 1995 and is available in English, Chinese, French, German and Japanese. Amazon began as an online bookstore. This gave it the advantage of having more titles than the traditional brick-and-mortar stores. It has since grown way beyond this to sell all kinds of products. Amazon has branched into clothing, gourmet food, watches, jewelry, baby products and apparel, beauty products, sporting goods, music CD’s, DVD’s, video tapes, home appliances and electronics. In September 1997 Amazon.com opened an East Coast distribution center in New Castle, Delaware. This expansion improved and also increased the ability of the company to stock and ship items quicker. This gave way to the company’s goal of 95 percent same-day shipping. This allowed quicker shipping of orders to the customers much faster than before.
In 1962, the first Waldenbooks was opened in Ann Arbor, Michigan, in 1971 as an international book and music retailer. It was founded by brothers Tom and Louis Borders during their undergraduate and graduate years at the University of Michigan. Serving the academic community of the University of Michigan and Ann Arbor's smaller colleges, the store soon became very popular in the community and within the next several years; the Borders brothers opened two more bookstores in Michigan, one in Atlanta, and another in Indianapolis. In addition, Louis and Tom started a wholesaling business they called BIS (Book Inventory Systems). In 1985, superstore was opened that included a coffee bar. This proved to be very attractive to customers. In order to Market the business and increase sales a Harvard graduate names Robert DiRomualdo was hired to help expand the business. The Borders bookstore chain grew rapidly under his leadership. In 1992, Kmart purchased Borders and created the Borders-Walden Group. Profits from books did not go as anticipated and as a result in 1995 they decided to spin off go public. Both Amazon and Border’s management recognized the need to grow and expand their business and each took steps to do so by. Amazon expanded by going from an on-line bookstore to offering lots of different products on line. Borders was associated more with superstores catering to book and music lovers, with a wide selection of hard-to-find titles and tapes as well as a growing number of varied forms of electronic media. These superstores, which numbered 116 in early 1996, provided customers with plentiful sitting and browsing areas, a well-versed customer service team, and even espresso bars featuring live entertainment.
Success of Amazon
Despite not turning a profit for the first five to six years in researching Amazon I have found it is successful because of its ease of use. There are lots of consumers who are not computer literate and do not appreciate having to search tons of information just to purchase an item. Amazon’s website is not cluttered with unnecessary information. You do not have to click too many times to find the book you are looking for. You simply use the search engine or browse by category. Amazon realized that the customer should be able to find product quickly so they may sure to categorize their products in a way that benefited the customer. Amazon recognized that because the consumer would not be able to touch the products they had to appeal to them in other ways such as providing clear pictures and detailed and accurate description of their products. At Amazon.com all of their pictures are high quality and have a synopsis of every book on the website.
With identity theft such a big problem I like the fact that Amazon has a trusted website that the consumer can feel safe in provide their credit card information. With the help of a merchant account and merchant account service provider Amazon is able to accept payments from various credit and debit cards and these payments can be tracked and cancelled if necessary. Because their payments can be tracked has provided even more trust in their website. Amazon also keeps you updated once you have placed your order if there is going to be any delay for any particular reason.
The fall of Borders
In 2003 Borders operated more than 1,200 stores but was not making a profit during this time. In fact the last time it actually made a profit was in 2006. Shortly after their success, Borders Group began scaling down its Waldenbooks outlets in order to focus on the U.S. stores. Borders was hit extremely hard during the financial crisis and the business continued to suffer, never regaining its lost sales. Borders demise was caused by poor management decisions during a critical time for Borders. The company made a bad move when it changed the Borders Rewards loyalty program. Another bad decision was made when it closed the music and video department in each store. Hiring employees and CEO’s with little experience about book and authors also helped to contribute to the decline in business. Borders was in serious debt and needed relief to keep them from going under. In 2008 Borders made a bad decision to borrow $42.5 million from the company’s major stockholder, Pershing Square Capital Management. Borders used the money to remodel stores and upgrade technology to compete with Barnes & Noble. Despite these attempts Borders did not see an increase in book sales and the company continued to crumble. Because the company was not able to make a comeback it announced that it would file Chapter 11 bankruptcy because of debt of $1.29 billion and assets of $1.28 billion in December 2010.
Adapting in a changing market Borders’ management was faced with many constraints like store leases that hindered its ability to adapt with changes in the market. Companies such as Borders needed to be able to adapt to market situations in order to hold up in an ever changing economy. Borders failed to shift from paper to electronic and Internet. This is evident when in my research I discovered that within many Border stores the Café was usually packed with customers who were there to use the free Wi-Fi service. The did purchase coffee but most used the internet and browsed or read magazines that they did not have at home and would most likely never purchase when they could read free at Borders. This in my opinion lead to a lot of usage in the store that did not result in a purchase. It was obvious that the Border stores had potential to capitalize on all the customers that visited daily but chose not to.
Amazon was able to adapt to changing market conditions by having their business positioned correctly in the event of a recession. For example, customers could continue to buy and sell books on-line allowing Amazon to go through a recession with little financial impact to the business. Customer were more apt to find what they were looking for on-line and have it delivered to their homes rather than spending gas and visiting a local branch like Borders.
Flexibility
Companies can adapt to changing market conditions by hiring and recruiting employees who are very flexible in the workplace. In keeping with market changes employers should look for employees who have a variety of skills. Another way companies can build flexibility is to back up any decision made by management, set priorities and take advantage of new opportunities. This is especially beneficial if the old way of doing business is no longer effective. And most importantly a company should listen to its employees as well as its customers A company should want the employees to feel comfortable enough to share their ideas or concerns.