Tech Industry

Commentary: Trying online-offline symbiosis

With Internet-only companies and old-line businesses recognizing the New Economy's demand for online and offline service, pairings such as and will become increasingly common.

By Adam Sarner, Gartner Analyst

With Internet-only companies and old-line businesses recognizing the New Economy's demand for both online and offline service, pairings such as and an earlier, deeper partnership between Amazon and become increasingly common.

Gartner believes the Amazon-Borders alliance and its new, co-branded Web site represent a step in the right direction for both companies. However, positive results will come only if the companies move beyond short-term financial goals and aggressively work toward integrating their respective strengths into a seamless buying process for the customer.

Plagued by slow access and load times, uncommon failure rates and financial losses, the current Borders site needs to enhance its customers' online experience--and do so quickly. Although with significant investment and effort Borders Group could have tried a major upgrade on its own, an alliance with Amazon offers a much easier method of accomplishing online recovery.

Borders smartly sees the complementary strengths that a best-of-breed online retailer like Amazon can offer. Almost immediately, Borders can improve its online presence by taking advantage of the Amazon name to increase customer confidence and online traffic as well as drive online traffic into its physical stores.

In the longer term, if Amazon's strengths in personalization, fulfillment and customer service are properly integrated into Borders physical stores, customers will likely realize a host of improvements. For example:

• Incorporation of Amazon's customer retention and loyalty techniques

• Incorporation of Amazon's advanced personalization and customer-profiling technology into cross-selling efforts

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• Enhanced cross-channel integration--for example, coupons and certificates that are honored not only in stores but online as well

• Configuration that allows customers to search for and order an item online using Amazon functions and then pick it up at a physical store

Conversely, Amazon has an opportunity to get its feet planted in the physical world, where customers can more conveniently return goods, pick up orders and talk to a real person. Amazon should also take advantage of Borders' more specialized knowledge of books and connection with the book industry (avid book customers and booksellers).

All told, the alliance is another step in the evolution of multichannel retailing that takes the respective strengths of the online and offline worlds and incorporates each into consumers' buying process. In the short term, the deal is better for Borders than it is for Amazon. Borders needs help immediately because it is losing too much money online and has fallen behind in the online bookseller race. For the profit-challenged Amazon, playing the role of Borders' online service arm represents only nominal revenue.

In the long term, Gartner believes that Amazon should further integrate with Borders to start providing a physical offline channel for its customer base.

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