Waterstone's takes on might of Amazon

UK bookseller Waterstone's is taking on the awesome Amazon with its online bookstore. But will it really beat its arch-rival...

UK bookseller Waterstone's is taking on the awesome Amazon with its online bookstore. But will it really beat its arch-rival hands down? Lindsay Nicolle reports

Amazon may think it's got the world of book sales sewn up, but the £1bn HMV Media Group, which owns high-street book chain Waterstone's, is determined to give the mighty Internet upstart a run for its money. At first glance, it's hard to see how a high-street chain can compete against the prices and convenience of buying books...

online 24 hours a day, but Waterstone's believes that its physical store chain is a powerful weapon in the online book sales war.

The company's Internet bookshop, Waterstone's Online, went live in 1996 as a separate business to its parent, based on an existing mail order service. The site was revamped last year to make it more flexible, scalable, and interactive, and to support more aggressive marketing against some 400 online book-selling rivals, including Amazon.co.uk, Bertelsmann and WHSmith.

Today, Waterstone's Online is among the top five sites in its market.

Waterstone's strategy is to use its e-commerce site to strengthen rather than replace its 208 stores, providing a more rounded service to specialist book buyers.

"The online business is about ordering and sending books on demand, while the retail business is about informed staff helping people find the right book, select similar works by other authors, or return books when the wrong choice has been made. The two services are complementary," says Jonathan Wilson, Internet business manager for Waterstone's Online. "Our retail outlets are invaluable because they are, in effect, customer service centres."

Wilson adds: "I think online businesses will try to emulate that kind of personal help and assistance, but I don't think you can do that effectively without a high street presence. There's a lot more to selling books than just price."

Waterstone's clearly intends to fight its corner even though it's up against more competitors than can fit into the ring. Its long-term business strategy is to box clever by playing to its high street strengths while taking on the aggressors at their own game, and adding value.

As Waterstone's consolidates its recent merger with the Dillons book chain, and counts down the days to its imminent flotation, the company oozes confidence. It asserts that its goal is still to become the most profitable bookstore in the world without losing its identity and heritage: a commitment to offer the widest range of books on demand, backed up by informed and enthusiastic sales staff.

When set against the huge success of Amazon, and the rapid invasion of the book market by supermarkets and music stores, which has sparking off a discount war, that seems a vain hope. But Waterstone's has several aces up its sleeve. It is the most successful specialist bookseller in the UK and Ireland with an 18% terrestrial market share, beating WHSmith and Ottakar's among others, on sales.

Waterstone's is also one of the largest decentralised businesses in Europe, employing 5,000 staff in local business units that serve local markets. This recognition that book lovers come in all shapes and sizes is a customer service proposition that the company believes distinguishes it from its pure online competitors.

Waterstone's also has a strong brand image established over 17 years and it is determined to capitalise on this in its revamped Web site.

The redevelopment of the site took just 16 weeks. The systems cost £750,000 without counting the significant sums spent on new premises and the hiring of Web-savvy customer service personnel. Hosting was outsourced and custom programming was kept to a minimum. The successful result earned Waterstone's the accolade of finalist in two categories of the 1999 BT eBusiness Innovation Awards.

The star suppliers were e-commerce partners Intershop and Nvision - hired by Siemens to evaluate the system requirements, and design, implement and deliver the fully tested e-commerce solution on time, and manage all transactions thereafter.

The key requirements were that the site should support a minimum of 20,000 page impressions per day, over one million titles in the product database, and five full text searches per second. Searching for book titles is made easier by the use of the Alta Vista search engine, fuzzy logic, and phonetic matching.

For those customers nostalgic for their local shop, there are hyperlinked branch pages to inform customers about in-store events. Conversely, shoppers in the branches who need to do complex book title searches can use an in-store kiosk linked to the site.

Future enhancements include plans to incorporate the knowledge of the company's high-street staff into the Web site to enhance the quality of the Internet sales service, and to support personalised one-to-one marketing and e-mail.

So, is the new-look Waterstone's Online, backed up by its high-street presence, a good enough proposition to hold off Amazon?

"I think it's more than enough," says Wilson. "Amazon's business is limited to sending books by post, whereas we can have a far richer relationship with the customer - through the branches, online, or by phone. What Amazon has done is build a brand for buying things online, but the winner in online bookselling will be the business that can offer specialist advice."

He adds: "I can see a future where Amazon will establish physical premises to get closer to their customers, whereas we've already got them. It's far easier to create a Web site than to create real estate penetration."

Meanwhile, Waterstone's is evaluating strategies for selling books through mobile phones and digital TV, and is keeping an eye on the progress of e-book technology.

"We want to build a single book sales business that you can contact in any way that suits you," says Wilson. "I think that one day soon, people may start to wonder why they can't physically visit Amazon for an even better service, and such pure page specialists will begin to appear a little remote. I hope so!"

Online technology

Siemens project-managed the new-look web site, working with system developer NVision.

The heart of the e-commerce solution is Intershop software. This runs on a Sun E450 box along with an Oracle 8.0 database, and the whole is hosted on a second Sun E450 box. The Oracle database holds the details of one million books.

The search engine is Alta Vista running on a Siemens Primergy 870. Internet connectivity is provided by BT's dedicated Web World platform with a two megabit line.

Siemens project-managed the new-look web site, working with system developer NVision.

The heart of the e-commerce solution is Intershop software. This runs on a Sun E450 box along with an Oracle 8.0 database, and the whole is hosted on a second Sun E450 box. The Oracle database holds the details of one million books.

The search engine is Alta Vista running on a Siemens Primergy 870. Internet connectivity is provided by BT's dedicated Web World platform with a two megabit line.

Waterstone's strategy

UK specialist bookseller Waterstone's Online is among the top five sites in its market in the UK, but the leader, Amazon.com is way out in front of the rest on sales. To rise to this challenge, Waterstone's is integrating its online and high street business services to provide a richer customer service to book buyers.

The company is positioning its shops as customer service centres that complement and back up Waterstone's online presence with their in-store Internet kiosks and knowledgeable staff. Despite its awesome competition, Waterstone's believes that its strategy will eventually enable it to become the most profitable bookstore in the world.

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