BUSINESS

Shop around the clock

Canadian bookstores duke it out on the Web

ROSS LAVER December 21 1998
BUSINESS

Shop around the clock

Canadian bookstores duke it out on the Web

ROSS LAVER December 21 1998

Shop around the clock

BUSINESS

Canadian bookstores duke it out on the Web

ROSS LAVER

It is a few minutes past one o’clock in the morning, and precisely 420 people are inspecting the merchandise in Larry Stevenson’s newest bookstore. Stevenson is the CEO of Chapters Inc., Canada’s largest bookseller with 52 superstores and 272 smaller outlets across the country— not one of which is actually open for business in the early hours of a Wednesday. These 420 shoppers are sitting at their computers, staring into their monitors at the virtual reality of ChaptersGLOBE.com, an online store that Stevenson is betting will one day become the biggest retail source of books in Canada. “I’m excited because any time in retailing that you can add space, you expand the market,” he says. By space, he means both the depth of selection—the Internet makes it possible to display a limitless number of books—and also what he likes to call “timespace.” Stevenson’s eyes widen as he ponders the possibilities. “You can shop for books at 1 in the morning. Our customers can buy a book on Dec. 25 if they want to.”

Stevenson is hoping some of them will, and it’s unlikely he’ll be disappointed. Canadian retailers and consumers have been slower than their American cousins to join the online shopping wave, but the tide appears to be turning. Most of the country’s major department stores and specialty retailers now have at least a token presence on the World Wide Web and are moving fast to expand their online divisions. At the same

time, Internet users are becoming more comfortable with the idea of shopping by computer. “The online retail industry is still in its infancy, but is poised to grow dramatically,” says David Pecaut, a Toronto-based

SELLING IN CYBERSPACE

Dozens of Canada's major retailers have set up shop on the Web, but most sell only a smattering of items found in their traditional stores. Examples:

Sears (www.sears.ca)

Currently the widest selection of any online department store in Canada, with an assortment of clothing, tools, furniture and electronics.

The Body Shop (www.thebodyshop.ca)

Gift baskets with soaps and fragrances.

CD Plus (www.cd-plus.com)

A searchable catalogue of more than 65,000 CDs.

Eaton’s (shop.eatons.com)

Small selection of clothing and items for the home.

The Bay (www.hbc.com)

Gift registry only.

Roots (www.roots.com)

Selected jackets, shirts and shoes.

Birks ( www.birks.com)

Watches, jewelry and gifts.

Future Shop ( www.futureshop.com) Wide variety of electronic goods and appliances.

vicepresident with The Boston Consulting Group, who recently completed a study of electronic commerce in North America.

Nothing illustrates the growth better than the battle now heating up in the online book trade. In the United States, the bestknown and most successful Internet retailer is Amazon.com, a Seattle-based operation launched in 1995 by Jeff Bezos, a former New York City hedge fund manager who caught Internet fever after reading a report about the Web’s burgeoning growth. Bezos promptly quit his job and k moved to the technology-friendly West Coast with the aim of starting an online store. At first, he wasn’t sure what to sell. He chose books because they are relativeid ly inexpensive, easy to ship and generic enough that consumers generally don’t feel the need to touch the merchandise before they buy. On top of that, the Web makes it possible to list, and conveniently search, millions of titles, more than could ever be stocked by a conventional bookseller.

Three years later, Amazon.com still does not operate a single physical store, yet its 1998 revenues are expected to hit $800 million—almost double what Toronto-based Chapters pulls in from its 324 Canadian locations. Critics sneer that Bezos’s company has yet to turn a profit, but that is mainly because Amazon.com is spending heavily on advertising and marketing in an attempt to solidify its position in a rapidly evolving marketplace. Analysts and investors clearly support that strategy: the company’s market capitalization now stands at $17.6 billion, more than double the value of Barnes & Noble Inc. and Borders Group Inc., the world’s two largest bookstore chains.

The blistering growth of Amazon.com was a major factor behind this fall’s launch of ChaptersGLOBE.com. Stevenson’s ballpark estimate is that Canadians will buy $10 million worth of books from Amazon this year—money he would naturally prefer to see remain in Canada. ‘We’re three years behind them in terms of selling on the Net, but it’s early days and we have tremendous advantages in the Canadian market,” he says. Among them is that 30 per cent of the books purchased in this country are Canadian titles, many of which are not readily available in the United States. “I checked this morning and Amazon only had two of the six nominees for the Giller prize,” he said in a recent interview. “And they only had three of the 11 Canadian titles on Maclean’s best-seller lists.”

Jeff Bezos, however, isn’t the only competitor Stevenson faces. At least 100 Canadian Web sites currently peddle books, although most are shoestring operations that focus on specific subject areas: business books, travel guides, how-to financial books and so on. The site that Stevenson will have to watch most closely is Indigo.ca, the online

division of Toronto-based Indigo Books & Music Inc. Last month, only four weeks after the launch of ChaptersGLOBE.com, Indigo CEO Heather Reisman announced that her company had acquired a majority stake in Bookshelf, ca, an online retailer developed jointly by Sympatico.ca—an Internet access provider run by the country’s major telephone companies—and The Bookshelf, an independent bookstore in Guelph, Ont.

Under Reisman’s direction, the utilitarian Bookshelf site is being spruced up and expanded to compete more effectively with ChaptersGLOBE.com. One of the first things to change was the pricing strategy. Bookshelf charged full list price for most books, while Indigo’s policy—much like Chapters’—is to give online customers a discount of between 20 and 40 per cent on hundreds of popular titles. “We have a more aggressive pricing strategy than Bookshelf,” says Reisman, whose company currently operates seven stores in Ontario, Quebec and Alberta. “In general, we believe things should be available less expensively online because of the lower operating costs.” (ChaptersGLOBE imposes a minimum $6 domestic shipping fee, while Indigo charges $4, plus 95 cents for each book. In practice, that means a single book ordered online often costs the same or more than one purchased in the store; orders of three or more books, Stevenson says, are generally cheaper over the Internet.)

Reisman and Stevenson have been feuding for more than two years, dating from an attempt by Reisman to forge a partnership with Borders, a deal ultimately vetoed by the federal government. The Internet represents a new front in their battle. The Indigo CEO says her company has the online edge because it understands the bookbuying audience better than Chapters and plans to offer a more user-friendly site. Stevenson, while acknowledging that his service has had teething problems, says Chapters will be the big winner by virtue of its new 27,000-square-metre distribution centre in Brampton, Ont.—the secondlargest book warehouse in North America with 300,000 titles in stock and available for shipping in 24 hours. “Do I worry about the Canadian competition? No, and the reason is that no one in this country can fill orders as well as us.” Neither company will discuss its current rate of Internet sales, but Stevenson says the online book market in Canada could reach $250 million by the year 2002.

Practically the only thing Stevenson and Reisman do agree on is that retailers who hesitate to go online will likely live to regret it. “This is all about giving customers the opportunity to do business with you any way they want to, whether that’s in person, over the Internet or by telephone,” Reisman says. “And if you don’t do it, your competitor surely will.” □