Borders Closes the Books on Amazon

theodp writes "Borders said Thursday that it was severing ties with Amazon and will compete directly against the e-tailer with its own website. The loss of Borders could cost Amazon $80-$160 million in annual revenue, according to one estimate. 'Amazon could gain market share in book selling over time because it will have an advantage over Borders, which now will charge a sales tax for all books sold. Companies have to charge a sales tax for Internet sales if they have a physical presence in states that collect sales taxes, [Stifel, Nicolaus & Co analyst Scott] Devitt said. Amazon collects sales taxes only on books sold in Washington, North Dakota, Kentucky and Kansas. Borders would collect sales taxes in all 50 states, the company said."

Um

Sales tax, schmales tax, couldn't they just drop the price of the books they sell so their price with sales tax is competitive with amazon without tax?

There's no margin to discount

Sales tax, schmales tax, couldn't they just drop the price of the books they sell so their price with sales tax is competitive with amazon without tax?

Not really, no. Amazon has gross margins of about 21% [yahoo.com] and so does Borders [yahoo.com]. In case that doesn't mean anything to you, 21% gross margin isn't spectacular. That means Amazon and Borders are not making a lot on each sale and there isn't a lot of fat to cut out. Books on Amazon are typically already discounted pretty steeply. Borders doesn't get any economies of scale [wikipedia.org] that aren't also available to Amazon and Borders has physical stores to maintain. Sure, Borders could discount down to zero profit but neither company is likely to do that unless they think they can get some advantage out of it and I can see no advantage for either side in a price war right now.

Re:There's no margin to discount

I've always suspected that Border's biggest margins are on their coffee and muffins.

Books are just a way to get you into the store.

A bad move for Borders

The reason Borders partnered with Amazon in the first place was because they couldn't come up with a good enough web site on their own. What has changed since that time? I think their greed is overcoming their common sense here, as Amazon is going to be hard to compete with.

Re:A bad move for Borders

I never liked the fact that when I went to Borders.com to buy a book, I ended up on Amazon.com to do it.

Excuse me, but why go to borders.com at all? Web sites that just rebrand content or services from other web sites have always struck me as really pointless.

The fact that many people must share my perception is probably the main reason Borders is pulling out of the agreement. The fact that borders.com is just amazon.com with slightly different graphics must be painfully obvious to anybody who goes there. So instead of Amazon helping Borders build their brand, Borders is the one helping Amazon! This outweighs any profits Borders gets from the arrangement, which are probably minimal to begin with.

But I still think Borders is fooling themselves if they think they can compete directly with Amazon. Maybe they know more than before, but Amazon is still the 600-pound gorilla in this particular marketplace. Except they may be up to a full ton by now!

borders competing with amazon?

I think borders would only be competing with Amazon's book arm. Back in the late 90's, Amazon may have directly competed with an online version of Borders, but now Amazon is like Wal-mart, in that they sell a large swath of other products besides books. Borders may now compete more directly with Barnes & Noble, though, where before Amazon floated them clean past their physical-store rivals.

For a $50 book...

For a $50 book, I'd rather pay $4 in sales tax and 25 cents in gas than pay $5 for shipping and having to wait a week... Besides, the new competition might even drive the costs down making the whole "extra cost" issue moot.

Re:For a $50 book...

"No B&M bookstore can hope to compete to with the selection and ease of search that Amazon.com offers me."

WHAT?!? Going into the shop and finding a book is a simple as:

1) Head to the section where you think the book is.
2) Give up after 10 minutes of fruitless searching.
3) Ask a clerk at the information desk where the book is.
4) Have her look in the computer.
5) You both head to the same section that you just searched in the same exact shelf.
6) Give up after 10 minutes of fruitless searching.
7) You both go to the person who has been there the longest and ask them.
8) This guy looks in the computer.
9) All three of you go back to the same section as before, except this time looking one shelf left and right just to make sure.
10) Give up after 10 minutes of fruitless searching.
11) They tell you it is not available, so you decide to go home.
12) On your way out you notice the book sitting in the knitting section by mistake.
13) You get excited and run to the front to pay.
14) You wait in line for 15 minutes while the 2 people in front of you are served by some guy talking to some other co-worker.
15) Get harrassed to join the frequent buyers club.

What could be easier?

-m

What about Delaware?

Delaware does not have a standard sales tax (aside from taxes affixed to certain items ahead of time like cigarettes, that is), so I suppose it would be 49 states then? Then again, Delaware may well not be the only state without sales tax.

Mail-order sales taxes

Slightly off-topic:

How soon before the next serious effort to force mail-order and electronic retailers to charge some form of sales tax for out-of-state purchases?

Way off-topic:
How many people actually bother to pay "use taxes" on goods they buy from out-of-state mail-order houses? How soon before a politician is brought down for failing to pay "use tax" on a $10,000 luxury item he bought mail-order to avoid paying a few hundred dollars in state sales taxes?

All 50?

Why in Oregon when don't have a sales tax?

All 50 States?

Borders will collect sales tax in Alaska, Delaware, Montana, New Hampshire and Oregon, who do not assess sales tax state-wide [wikipedia.org]? That's kind of odd.

huh

are they going to compete with Amazon? Doesn't Amazon have a patent on selling books online?

Sales tax in all 50 states

Oregon does not have sales tax. I wonder what they will do with the sales tax collected on Oregon sales?

Books Close their Borders with Amazon

I like this title better.

As for the sales tax issue, people will just use froogle or something and find the lowest price without the tax and then buy that book, most likely.

I'm not surprised

I've only ordered something on Amazon once for in-store pickup in Borders, and I actually ended up getting the book for free because the Borders store employees didn't know how to properly complete the transaction. When the charge never showed up on my credit card I even called Borders and talked to the manager (felt like stealing to me) and he said that it was their screwup and that I could keep the $30 book. Admittedly this is probably an anomaly, but I'm sure it's happened to more people than just me.

Damnit. Christmas just became more difficult.

i was just getting relatives to give Borders gift cards instead of B&N ones so that I could use them on Amazon. that was extremely useful. rats!

Didn't Borders used to have its own website?

A long time ago..? I remember going to the Borders website, found which store location had the DVD I was looking for in stock, went and bought it.

Different customers have different needs, but for me, the ability to search a store's inventory is more useful than being able to place a mail-order an item over the web. I can order something from a gazillion places, but if a store nearby physically has it, I'll swing by and pick it up.

I'm always a little surprised that not all stores w/ web presence do this. The inventory search doesn't even have to be that current -- at least narrow down the availability for me, and I can call the store and double check.

The article omitted at least one state

Amazon also charges sales tax in Tennessee (all 9.975% of it) because they use distribution warehouses there to ship out literally tons of merchandise every day.

Same difference to the honest man

If I don't pay the sales tax at the time of purchase, I'm still legally obligated to report untaxed purchases and pay up when I file my taxes, right?

Of course, I know few people who presently keep track of all of their online spending, but isn't Amazon's advantage here only an advantage to those who lie on their tax forms?

Maryland, and use taxes

How about those states who not only have sales tax, but an out-of-state "use" tax for all material being mailed in. Dell actually collects that!

Tax Misconception

There seems to be some sort of misconception regarding sales taxes.
Sales taxes cost a B&M absolutely zero. That's something that they collect on behalf of the government and then give to them. (So they also don't profit from it either.)

And technically, you should declare all items that you didn't pay sales tax on to your state when you file your (state) income tax so you can be taxed accordingly. For those states without an income tax, I'm not sure exactly how that would work.

Borders. Will. Lose.

UNLESS they stop charging up to 50% OVER retail for their CDs and DVDs. Honestly, how do they actually sell that stuff in their brick-and-mortar stores? $30 for regular, non-collector edition DVD's? $18 for the latest Brooks & Dunn CD ($14 at Amazon)? I honestly feel sorry for anyone who buys those there and doesn't know any better...

Good Move for Borders

There's a lot more experience on the market for setting up and maintaining major web sites, so it will be easier for Borders to setup a *profitable* site now. The big problem with the Borders/Amazon co-mingle is that many times you ended up in Amazon and not Borders. A lot of times, I would order a book from "Borders.com", then discover that I can't use my Borders gift card because I am buying from Amazon and not Borders. Plus, now that Amazon is selling everything, the book side is merely a side business for Amazon where it's Border's bread and butter.

With Border own site, it will be easier for customers to order books and pick them up at a Borders store (and save shipping). The web store and B&M store can now be merged into a single shopping experience. More important, Borders will now own the information gleaned from web orders and not Amazon. Loyal customers may get special marketing promotions and be told when new books are available.

It was bound to happen. I see the day when other major retailers will pull out of Amazon's marketing agreement and build their own sites.

Lesson for Internet companies:

Move headquarters and all operations to Oregon (and/or any other states with no sales tax.)

B-)

They'll charge sales tax in Delaware?

Wow, that's pretty impressive... What percentage rate will they be charging for sales tax in Delaware?

How about Alaska, Montana, New Hampshire or Oregon?

States With Sales Tax 50

"Borders would collect sales taxes in all 50 states, the company said."

Huh? All 50 States? Even those without a sales tax?

They are ripping people off!!!!

"Borders would collect sales taxes in all 50 states, the company said." If that is true, then they are ripping people off. Not all states (such as Alaska for example), have sales tax. If they are charging people here sales tax, then they are pocketing it as extra profit - probably illegally too.

For an insider's view of an indy Borders.com...

...in the late 90's check out this weblog [camworld.com]. Site search. [google.com]

Re:In all 50 states?

Montana.

Re:Have You Ever Been To a Clean Borders?

Yes, I have.

The Borders I go to is Des Moines is clean and well stocked, and full of friendly and helpful people. I wonder if it's where you live, as opposed to the company?

I know that when I visited my sister when she was stationed in California, most of the stores we went in there were usually filthy and poorly stocked compared to the same company's stores in Des Moines (not talking Borders here, but stores in general, such as K-Mart, etc.) Perhaps too many people crammed into one area?

Re:Have You Ever Been To a Clean Borders?

I've been impressed with every Borders store I've been in. Clean floors and well organized shelves.

Particularly, Borders does a better job than anyone else in organizing their technical books section in a way that actually makes sense. In a B&N, I have to look through the entire technical books section to make sure they don't have something where in Borders, if they've got it, it's where I would expect it to be. Borders is also far more likely to carry historically important books like K&R, Mythical Man Month, the Latex Companion, etc.

Re:Have You Ever Been To a Clean Borders?

All that I have been to in Virginia have been pretty nice.

I am huge fan of Amazon (prime member and all) and they get most of my business. But sometimes I want to be able to page through a book before I buy it and for those times I go to Borders.

Re:Nevada?

Yes, Amazon charges me Nevada sales tax when I order from them. They have a large warehouse/shipping depot here. Just another case where a summary (and perhaps fine article) on /. is inaccurate.