Online Booksellers Feel the Amazon Effect, IDC Says

LONDON – JULY 20, 2000 – 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.

Online Booksellers in Europe: The Amazon Effect (IDC #I06G) reviews the online market for books and other media products in Europe. It includes comprehensive profiles and analyses of the seven largest players: Alapage, Amazon, Bokus, BOL, Buecher, FNAC, and WHSmith. Included in each profile is the company’s marketing, internationalization, and product diversification strategy as well as their results in terms of revenue and growth. This report is available to purchase from your local IDC office.

Forthcoming Events

Amazon's Founder and CEO, Jeffrey Bezos, will be speaking at this year's European IT Forum, which takes place at the Grimaldi Forum, Monaco on September 11-13, 2000. For further details, see http://emea.idc.com/forum/forum2000.

About IDC

IDC delivers dependable, high-impact insights and advice on the future of ebusiness, the Internet, and technology to help organizations make sound business decisions. IDC forecasts worldwide markets and trends and analyzes business strategies, technologies, and vendors, using a combination of rigorous primary research and in-depth competitive analysis. IDC provides global research with local content through more than 500 analysts in 43 countries worldwide. IDC's customers comprise the world's leading IT suppliers, IT organizations, ebusiness companies, and the financial community. Additional information can be found at http://www.idc.com.

IDC is a division of IDG, the world's leading IT media, research, and exposition company.

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