Book site wars bring price cuts

One day after (AMZN) garnered $54 million with its initial public offering, another Internet bookstore is slashing its prices.

Book Stacks Unlimited, known as Books.com, is knocking 40 percent off the suggested retail price for all New York Times bestsellers. In addition, it's discounting the majority of the titles in its online database by 15 percent.

"We did it in order to have our prices meet the competition," Mary Fair-Taylor, Books.com's director of marketing, said today.

The war between online book sellers has electronic commerce spectators transfixed as they wait to see who gets rich and who gets burned. Unlike their brick-and-mortar counterparts, bookstores on the Net make browsing huge inventories simple with search engines and sell at lower prices because they don't have to maintain expensive shelf space.

The market got tighter this week after Barnes & Noble opened its cyberdoors. The brand giant kicked of its grand opening by suing Amazon.com, challenging Amazon.com's claim that it is the largest online bookseller.

But suing rivals over sales pitches isn't the best way to eliminate the competition, analysts say. Keeping prices down and building an online community is a better tactic. "When you move to the Web, a lot of the traditional factors such as location become moot," said Nicole Vanderbilt, senior analyst for Jupiter Communications.

"No matter how nice any one bookseller makes their site, if somebody can undercut their prices, they're probably going to lose some business," she added.

Barnes & Noble dressed up its site by holding almost daily chat sessions with authors and by printing book reviews, commentary, and book excerpts, some with audiovisual effects.

Another potential big player that will soon enter the arena is Borders Books. No launch date is set, but visitors will be able to search its inventory, ask staff questions, chat with authors and musicians, and buy books, music, videos, and new media products.

"Bookselling is really flourishing on the Web because the products are a known quantity, so people aren't as afraid to buy remotely," Vanderbilt said. "But it's going to be hard for Amazon.com to compete with a household name like Barnes & Noble."

Others say Amazon.com will fare fine against the physical world's top sellers, especially after its impressive IPO and online brand power.

"Companies other than Amazon.com, Barnes & Noble, and Borders are not going to survive," said Bill Bass, senior analyst for Forrester Research. He said one advantage Amazon.com has over the big "Bs" is that more than 9,000 Web sites link Amazon.com within their book reviews and other content. "They have thousands of storefronts woven into the fabric of the Internet. Barnes & Noble and Borders will have a hard time recreating that."

But, he added, "There is going to be huge price pressure on Amazon.com from Barnes & Noble and Borders because of the power those companies have with suppliers. They buy books in bulk at lower costs and can pass on those savings over online."

As for companies like Books.com, Bass said, "Amazon.com is the only exclusively online bookstore that is going to end up mattering."

His comments aren't deterring Books.com, however. The site has pushed books over the Web since October 1994 and has even turned a profit for the 30-person company. The vendor also started a frequent buyer club in which members pay an annual fee of $29.95 to receive 30 percent off about 350,000 titles.

"Our main strategy is to base our business model on a membership model," Fair-Taylor said. "We'll offer our books at the lowest price possible and generate profit based on membership revenue."

Book Stacks Unlimited is owned by CUC International, a membership-based consumer services company with approximately 66.3 million consumers worldwide.