The rise of electronic commerce has revolutionized the manner of conducting business. One of the most affected industries is the book retail industry. There has been a significant shift in the means that people buy books. By simply placing an order online, one can purchase the book of their choice at the most competitive price. Furthermore, the sellers also offer delivery services of the book(s) ordered by the customer. These types of trading activities have posed a serious challenge to business enterprises founded on the traditional means of trading; which involves a customer and a seller carrying out a physical transaction. This paper will explore such a scenario by pitting Amazon.com against Barnes & Noble. The paper will compare and contrast between the two companies. Additionally, the paper will highlight how the differences between the two companies influence each of the companies in terms of their efficiency, valuation, solvency and performance.
The major difference between Amazon.com and Barnes & Noble is their platform of operations. Since its founding in 1994, Amazon.com has operated from its storefront based on the internet. On the other hand, since 1971 Barnes & Noble has operated from over 1000 physical bookstore points. Additionally, they plan to open an extra 500 stores by the next decade. However, in order to maximize the profits, the company also seeks to launch its own internet bookselling platform, named, barnesandnoble.com. Not only does Amazon.com not have a bookstore that is physical, but also lacks the books in physical state. Only minimal number of the listed books is in Amazon.com’s possession, stored at the company’s warehouses. Amazon.com does not place an order to the book distributor until they receive an order from the customer. This helps the company to avoid any overhead costs as well as carrying charges related to keeping large inventories. The advantage of this system is that, Amazon receives payment after one day by the customer’s credit company. However, Amazon may take up to one month to pay the book distributor, enabling the company to spend the customer’s money for a good duration (Ghemawat, Baird & Friedman, 1998).
In contrast, Barnes & Noble, a physical bookstore has to place stocks totaling to 160 inventory days in order to be able to supply the selection amount that can be able to satisfy the clients. Additionally, Noble & Barnes have to pay the distributors and publishers within 45 and 90 days. Since Amazon.com lacks physical stores, it has to incur large sums in advertisement compared to Barnes & Noble. Apart from the high advertisement costs, Amazon.com relies on extremely expensive information systems. Most of the information system used is in-house developed and highly expensive to maintain. In order to expand its market niche, Amazon.com has expanded to selling other products such as electronics, CD’s, toys, hardware and several other items. Despite being a leading market player, Amazon.com has posted poor returns with only loses to show for its efforts. However, these losses are as a result of the managers’ marketing and expansion plans which have been particularly costly. However, they justify these losses by claiming that the expansions consolidate the market to attain profits in the future. Similarly to Amazon.com, Barnes & Noble prioritize customer experience and have invested extensively in the aesthetics of their buildings. The challenges that it faces includes carrying vast inventories and that it requires a whole a multitude of people, up to 7600 employees (Barnes & Vidgen 2002).