US threat to publishers

Giant online bookstore expands to Britain

IN A MOVE that threatens UK book publishing and retailing, Amazon.com - the "Earth's biggest bookstore" - is expanding into Britain.

The online bookstore is to establish a British depot to serve Britain and other European countries. This will significantly reduce the delivery times and costs of books from Amazon.com and make internet book-selling even more competitive in this country.

"Jeff Bezos, our founder, is interested in shipping books as swiftly and as cheaply as possible. We are planning for an international expansion," said a company spokeswoman.

Amazon.com currently lists 2.5m books, compared with the 150,000 to 200,000 stocked by a large British bookstore. It offers discounts of up to 40 per cent on American prices - which are already lower than their British equivalents.

Birthday Letters by Ted Hughes currently sells for pounds 14.99 at Dillons in Kingston-on-Thames, London - Amazon.com's price is pounds 8.50 ($14). Amazon.com discounts 400,000 books, cutting the price of paperbacks in the US market by 20 per cent and hardbacks by 30 per cent. Add in the generally higher cost of books here, and British buyers using the internet retailer stand to save 40 per cent on purchases.

The world's biggest online bookseller is enjoying phenomenal growth. Sales last year reached $148m, compared with $16m in 1996. Its customer accounts rose seven-fold to 1.5 million, and half its orders were repeats. "We intend to continue to invest aggressively in building our business and brand," said Mr Bezos.

Barnes & Noble, a bitter American rival of Amazon.com, has already announced it will be setting up a book depot for its internet service in Britain, after failing to find a superstore site in central London. Barnes & Noble, the world's largest bookselling chain, has been engaged in a price war with Amazon.com and offers equally competitive discounts through the internet.

The online retailers threaten to change the British publishing industry. General publishers fear that Amazon.com and Barnes & Noble could undermine margins on British books. Imports of American books from Germany already pose a threat to the regional copyrights held by British publishers and sold by their authors. Territorial rights could ultimately become unsustainable, creating one world market for English-language books. The great beneficiaries would be multinational publishers such as Harpers & Collins, Bertelsmann and Penguin.

Janice Hughes, director of Spectrum Strategy Consultants, fears that online bookselling could cripple one of Britain's important creative industries. She says: "Internet retailing will bring the globalisation process to publishing. The global market does not care where a product is made, the only thing that matters is price. It will undermine the local book industry and its links to creative talent."

Internet use is soaring in Britain and clearly set to become a mass-market retail channel. According to NOP, 9m adults will have used the internet by next June and usage by women and the important young adult consumer groups is soaring.

The trend will receive a further boost when digital terrestrial television is introduced by Carlton at Christmas. This technology will ultimately make the internet, currently restricted to 1.5m personal computers, available to 22m domestic television sets.

Bookselling is proving to be one of the great retail successes of the internet. Customers clearly like the wide choice and the discounts. Mr Bezos said: "Businesses can do things on the Web that simply cannot be done any other way. We are changing the way people buy books."

Browsing an internet bookstore is a different experience to a physical bookstore. Amazon.com and Barnes & Noble have extremely attractive websites, which offer newspaper book reviews, interviews with authors, images of dust-jackets, chapter-long excerpts and readers' reactions.

Above all, they are the best way to find a specific book. Clive Bradley, the retiring chief executive of the Publishers' Association, said: "There is cause for the conventional bookshop to worry. Their great advantage is that they are excellent for searching for books."

This advantage has enabled bookshop.co.uk plc, the British-based internet bookstore, to take off. Founded in 1993, the company, whose shares are traded on Ofex, claims to be Europe's largest internet bookseller. It offers only limited discounts and does not discount its list of best- sellers but has nevertheless seen soaring sales growth, recording 51,000 orders in the three months before Christmas.

Darryl Mattocks, managing director of bookshop.co.uk, said: "We are slightly larger than a large city-centre bookseller. We will be much larger than that by the end of the year." Mr Mattocks expects to have to reduce prices once Amazon.com and Barnes & Noble start offering discounts on British books. "The internet is inherently a low-cost selling channel, with much lower costs."

The arrival of Amazon.com and Barnes & Noble in the UK comes at a time of upheaval in British book retailing. WH Smith is to sell its Waterstone's chain to EMI, which will merge the chain with its Dillons and HMV chains. Borders, the US book-selling giant, has acquired Books Etc for pounds 40m and is to open an American-style cultural superstore offering books, CDs, cake and coffee on a 39,000 sq ft site in London's Oxford Street this summer.

The high-street chains and the book publishers will come under considerable pressure if, as Mr Mattocks believes, online retailers force prices lower and take 15 per cent of the pounds 2.5bn British book market.

Publishers are just recovering from the abolition of the Net Book Agreement in 1995, which has not proved the disaster anticipated as higher sales have offset the lower book prices.

Figures from the Office of National Statistics show spending on books rising sharply, and the advent of internet bookselling may not be bad news for all. The innovative marketing it brings could expand the book market even faster than is currently anticipated.

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