As online book superstores Amazon.com and BarnesandNoble.com try to outdo each other with discounts and advertising campaigns this holiday season, some smaller specialty online bookstores are quietly competing for a share of the holiday spoils--an estimated $156 million in sales.
While analysts expect Amazon and BarnesandNoble.com to take the lion's share of book sales on the Internet this quarter, some more modest efforts may also be successful at drawing customers online, if they learn from the superstores' experiences.
The two giants' price wars and aggressive advertising campaigns may not stifle all competition from independent bookstores on the Web. Instead, analysts say, Amazon and BarnesandNoble.com may be expanding the market by getting mass consumers to buy online for the first time. If the giants impress first-time buyers enough with the convenience and security of online transactions, the consumers will soon feel comfortable doing some of their online shopping at smaller locales.
Amazon and BarnesandNoble.com "have raised the level of awareness for online shopping and bookselling in particular," said Mary Fair-Taylor, director of marketing for Book Stacks, a general-interest bookstore on the Web. "They have made the customer more comfortable buying from whoever has the lowest price."
Some stores, such as Alt.Bookstore, say they can pass savings on to customers because their overhead is so low. "By being a lower-cost operation, we can do the same things that [larger stores] do, but we can do them for less," said Michael Kelm of Alt.Bookstore.
However, Scott Smith, an e-commerce analyst for Current Analysis, cautions smaller companies that they will not beat the bigger players by trying to undercut them on price. Companies such as Amazon and BarnesandNoble.com can afford to swallow some expenses including shipping costs and deep seasonal discounts, which can wipe out smaller companies.
Smith pointed out that although smaller companies save on overhead costs, they lose in other areas. "Their costs are numerically lower, but not proportionally," he said. "They don't have the same buying clout with the distributors."
Instead, analysts say, smaller companies stand a better chance for success by appealing to a smaller market. Just as independent bookstores can be very successful at building brand loyalty, small online bookstores can appeal to consumers who are already comfortable buying online, but are interested in finding more depth in certain areas than some superstores can offer.
"Bookselling is a very fragmented business in the physical world," said Nicole Vanderbilt, an e-commerce analyst with Jupiter Communications. "I think you'll see that online, too."
Vanderbilt pointed to online specialty bookstore Computer Literacy as an example of a business model that is thriving by offering technology-oriented books, many of which the superstores don't stock.
Chris MacAskill, chief executive of Computer Literacy, gives much of the credit for the success of his site to the buying habits and backgrounds of his customers.
"By the time people find out about us, they're really serious about buying books," he said. "They are coming to you because they want to buy a book, not because they want to browse for entertainment."