1. Describe the supply chain for books. In the supply chain where do Amazon.

com and
Barnes & Noble fit into?

The supply chain for books:

The way book supply for trade worked for years was that the publisher ordered copies
manufactured by a printer in bulk for delivery to the publisher’s warehouse. Then the publisher
shipped orders for that book, usually combined for shipment with other books from that publisher,
to bookstores and libraries and the wholesalers that served them.

So unsold copies sat on the shelves at the publisher’s warehouse, and on the shelves and
stockrooms of book retailers. The rhythm for most titles was to push out copies in advance of
“publication date” (the day on which reviews would run and the publisher would start to promote to
the public). Then, for most books, the cycle would end a few months later and unsold copies would
be returned. A minority of the titles initially shipped sell well enough across enough retailers to
become “active backlist”.

But, all along, the publisher would pay for and receive the books from the printer and hold them
waiting for orders from their customers. Over time, particularly as big accounts like chains and big
trade wholesalers evolved, certain shortcuts were developed by which books might get shipped in
bulk directly to major accounts. The basic configuration, whereby publishers ordered from printers,
took the books in, then shipped them out to customers who sometimes sent them back, was the
way it worked almost all the time in the book publishing supply chain.

Feedback from accounts — advance orders before publication and actual movement and reorders
once the title is active — is what informs print quantity decisions. When a book has a reasonably
steady rate of movement, or at least has established its appeal as enduring rather than fleeting,
publishers have to decide how much supply to reprint at one time. Print more and you get a lower
unit cost but you tie up capital for a longer time and take the risk that you’ll fail to sell them all. Print
fewer and you save cash and reduce the risk of waste, but you add to the risk that you’ll be caught
short at some point. Something will create a surge in demand and you won’t have the books.
 Table: The book supply chain

Amazon.com v Barnes and Noble:

With the new technological era, customers typically want instant access to anything they want,
whenever they want it. People do not want to have to carry around books; they want to be able to
access books from their phones, laptops or tablets.

Amazon, by far the market leader in Internet bookselling all over the world, has demonstrated that
the key to long term success is “owning the transaction.” Through affiliate programs, Amazon, and
its only true remaining competitor in the US and perhaps anywhere in the world,
Barnesandnoble.com, have empowered many, perhaps even millions, of Web sites to become
Internet booksellers to vertical and niche markets. Sometimes the referral fees are very generous, as
much as 15 percent of the purchase price for doing nothing but sending over the customer. But, in
the end, these become legacy customers to the site that books the transaction, not the one that
initiates it.

Online bookstores, are judged by their customers on their ability to fulfill. The thing Jeff Bezos
realized that enabled Amazon to exist in the first place was that the broad stock positions of
American wholesalers, particularly Ingram, enabled any Internet bookseller to satisfy the
preponderant majority of customer demand within days without holding any inventory at all. The
key, which Amazon also recognized from the beginning, was the management of “promise dates.”
Tell the customer in advance, before the order is placed, which books will take three days to arrive
and which will take three weeks or longer, and business runs smoothly with a minimum of customer
service required, even for books that take a while to deliver.
Barnes & Noble, has its own Distribution Centers stocking more titles than any wholesaler, which in
turn stocks far more titles than any other wholesaler in the US or anywhere else in the world.

The prevailing wisdom about retailing brands, is that they will have to serve customers both on and
off the net to keep their customers. Most people buy some books online and some in stores. And
while the online market is still taking new customers from brick-and-mortar every day, and will for
quite some time, most customers will split their purchases for the foreseeable future.

To the extent that having a presence both online and in cyberspace helps hold customers in both
places, Barnes & Noble has the clear edge in the US market. B&N competes with Borders on land
and with Amazon online, but nobody competes with B&N nationally as a total solution for the book
consumer. How important this will be as a success factor remains to be seen and depends somewhat
on how well B&N can exploit their presence in both places.
 2. What advantages does selling books via internet provide over the traditional bookstores?
Are there any disadvantages of selling book via internet?

Advantages

 Increased Targeted customers

 Facilitating those who can't come to shops

 Lesser Labor Cost

 Rare Books

Disadvantages

 Delivery Time

 Social Activity

Alternate Answer: :P
Advantages

• Convenience; customers can browse and buy from home: 24/7 shopping for the customers;
Geographical barriers are absent.

• Driving customer demand by introducing new books customer may be interested in though a
recommender system. This may not be possible in a traditional bookstore. On the online-
portal, even if the customer had no plans/intentions of buying a recommended book, they
might actually end up purchasing it as an impulse buy. This may result in more sales, more
customer satisfaction and therefore more profits for Amazon.

• Reduced inventory costs - Amazon offers a much larger selection of books than a typical
bookstore. Offering a similar selection at a traditional store would require a huge location
and resources for maintaining such a large inventory.

• More efficient marketing campaigns due to targeted marketing; thereby reducing marketing
costs.

• Flexible pricing based on customer demand.

• Easier and more accurate forecasting of demand and supply of books.

• No bookstore maintenance costs.

Disadvantages

• Time lag between customer placing an order and order delivery.

• Cost of delivering the product to the customer.

• Missing out on customers who prefer the traditional ‘bookstore’ experience: Customers
cannot read a few pages of the book, nor can they get the “feel” of the book.

(For obvious reasons… I prefer the alternate ‘ending’)