Borders Dares Amazon, B&N
After two years in development, Borders Bookstores is expected to launch its online business this week, selling books, music and videos. A Borders spokesperson refused to comment, except to confirm that the site would launch by the end of April. At launch, Borders.com will have an inventory of 500,000 products. A new warehouse will help handle orders.
Affiliate bookselling partners, including online publishers Salon and CNET, have been sporting links on their sites that currently only connect to a page heralding the site's imminent arrival. In addition, CNET and Borders have an agreement to promote CNET's online service, Snap Online, throughout the 203-store chain, according to a source familiar with the arrangement. Disney and Barnes & Noble have a similar deal in which the online promotional partnership extends into stores.
Borders is entering a brutally competitive market. Amazon.com, Seattle, and Barnes & Noble, New York, have each cut big-ticket commerce deals. For example, BarnesandNoble.com currently has a four-year contract with Dulles, Va.-based America Online in which the bookseller is paying AOL $40 million for prime positioning on the service. Such mega-deals have caused Borders to enter the market warily. "Looking at the environment which we are currently in gives us all pause," Borders Group chairman Robert DiRomualdo told Merrill Lynch analysts in March.
Borders is now forced to play catch-up against not just Amazon.com and BarnesandNoble.com but Web retailers such as Jenkintown, Pa.-based CDnow and N2K, New York. The company is anticipating online sales of $25 million in 1998, but is figuring in significant losses for its Internet operation, analysts have reported. Despite amassing a combined $190 million in online sales last year, the four aforementioned online retailers are expected to spend $155 million to promote their Web businesses, according to analysts. Since the book retail industry is typically a low-margin business, the launch costs of Borders.com are expected to exceed sales. IBM and Borders Bookstore co-developed the site.