by Mike Shatzkin

One of the trickier aspects of thinking about the Internet is that it can be so many different things. In one exercise our company is involved in at the moment, we are recommending to a large publisher that every editor have a Web site to facilitate a variety of internal and external processes that already occur, as well as creating a jump-start to give a marketing impetus to every book online. Here we'd be talking about Web sites that can be created like internal documents with no more cost associated with them than the costs of creating memos or internal reports.

So in the brief time we have today, we will be very focused. We will entertain the Internet as a medium for selling books and particularly, what a UK-based bookseller needs to do to stay competitive in a world where the Internet will increasingly be used to sell books. To suggest what should be done requires first that we determine where were going.

We do so even though the volume of online book sales has not become really measurable yet. With market leader Amazon dot com announcing a current sales level roughly equivalent to one Barnes & Noble superstore, it is unlikely that many alternate avenues to the consumer have felt a squeeze from Internet competition yet.

But we know some things that should make us pay attention. We know that Amazon's experience of growth of 20-to-40 percent per month is shared by a number of online booksellers: some, like Amazon, who sell only online and others who are primarily terrestrial booksellers with much less sophisticated online presences.

And we know that the medium of the Internet is perfectly suited to selling books. That is because what nothing can do better than the Internet is to deliver information arranged in databases, permitting searches by various criteria. And since the day arrived, so long ago we can't remember when it was, that a bound volume of Books-in-Print became so fat it isn't even wieldy for the customer in a bookstore, providing access to information about *all* the books has been a challenge for every bookseller.

In the period of less than two years since Amazon dot com started in business, the tools to compete with them have become cheaper and more accessible by orders of magnitude. Although Amazon is hands down the best marketer among the Internet-only booksellers, they have formidable competitors in that category, including The Internet Bookshop in the UK, and Bookstacks and Bookserve in the United States.

As we will see, their numbers are about to grow.

There are really four arenas in which online booksellers can compete.

The first is the extent of what is offered. In the early days, that has meant "how many titles in your database?", a marketing device which now has a questionable shelf life.

The second is the old standby, price. But this is complicated from what occurs at retail by the need to apportion postage and handling costs.

The third is speed of delivery and, within that context, the accuracy of delivery promises.

And the fourth is service and information; which is a catch-all way of saying "everything else".

In a moment, well examine the each of these areas of competition, so you can adjust or begin to map your own Internet strategy. But first we need to enumerate two important aspects of Internet sales that provide a different competitive context than what retailers deal with in their stores.

The first of these is: Internet competition, and the Internet market you will serve, is global. Amazon dot com reports in their IPO that more than a third of their business is from outside the US. When we surveyed US internet booksellers last fall, we found many who estimated their offshore business at 50%. And The Internet Bookshop has reported their non-UK sales as 80% and more.

The second of these key context points springs from the first. Because the customer from anywhere can buy from the bookseller from anywhere, the built-in advantages created by the US wholesaling infrastructure are so compelling that all Internet booksellers, everywhere in the world, will have to avail themselves of it to be competitive.

Indeed, the US wholesaling structure is the key to Amazons whole business. With the most profound sense of irony, they bill themselves as "Earth's Biggest Bookstore", even though they very seldom "carry" as many as 1000 titles. In fact, they buy 60% of their stock from one big US wholesaler, Ingram Book Company, and most of the rest from a handful of other wholesalers.

What the slogan refers to is the number of titles Amazon carries in its searchable database. Starting with a Baker & Taylor archival database of over a million titles, Amazon grew it to nearly 1.5 million before adding a database of 1 million out-of-print titles a month ago. The out-of-print titles are clearly indicated as "not necessarily available"; they'll "search", as used booksellers have for years, and let you know when they find it, if they find it, how much it will cost.

But what is made less clear is that they can't get most, or at least many, of the 1.5 million other titles either. Of course, case by case it is made clear; if you order a title that one of the wholesalers doesn't carry you'll be told it will take longer, or that it isn't currently available at all. What is far too complicated for the average consumer to figure out, or for any of us to figure out for that matter, is whether any more books are available from Amazon dot com than from Bookserve or The Internet Bookshop or from The Tattered Cover in Denver, Colorado.

The huge, and for these purposes somewhat bogus, Baker & Taylor database is apparently no longer for sale to anybody else. So it will be very tough for anybody to match the huge number of searchable titles Amazon can claim.

But it really doesn't matter. The roughly 500,000 titles carried today by Ingram, Baker & Taylor, and a handful of more specialized US wholesalers like Yankee Book Peddler, satisfy more than 95% of demand. Ingram all by itself plans to stock as many as 500,000 titles by the end of 1997. Most of those books can be delivered to a US address in one day. Amazon, Bookstacks, and Bookserve, or any US bookstore, can take your order today for a book they don't have, promise you'll have it by Thursday and often get it to you by Wednesday.

The strategy of "sell all, carry none" was actually originated by Charles Stacks of Bookstacks, recently purchased by a respected direct marketing company called CUC. But Amazon built a big business on it. They started out by locating in Seattle, to be close to a large Ingram warehouse in Oregon. Bookserve is in Nashville, Ingram's headquarters, and was started by two sons of a former Ingram CEO. The point is: Ingram is very aware of the opportunity to be the main source of supply for the practical Internet bookseller, so they've set out to create some more of them.

They have recently formed Ingram Internet Support Services, a separate company, to offer what amounts to an Amazon "package". Using anybody else's Web site as a front door, you can seamlessly go to a "bookstore site" featuring the Ingram database of soon-to-be 500,000 titles and all the secure server and shopping cart technology a customer could want. Then they ship, bill, collect, provide any necessary customer service, and remit a healthy share of the proceeds to the originating site.

Ingram Internet is a perfect device for non-bookstores, providing full bookselling capability to subject specialists on the Net who are getting a lot of hits. Amazon has also moved to satisfy that niche with the Amazon affiliates program. In their scenario, if you have a Web site on embroidery or business systems or Egyptian art, you offer a "bookstore" by linking to Amazon, which pays a bounty to the originating site. Amazon will attract the smaller prospects; it is free to become an Amazon affiliate and it costs money to set up with Ingram Internet. But the specialist sites that really can sell books will switch over. Ingram pays a much bigger percentage, more than twice as much, has the advantage of shipping faster as well, and leaves the key pricing and marketing decisions and ownership of the customer database in the hands of its store partner.

The new booksellers created by Ingram Internet and Amazon affiliates signal a shift in the concept of "complete selection" which has heretofore been framed in terms of the size of the database. These potential booksellers on the Net already offer a range of information, if nothing else, that no bookstore can match. Some are offering other products, as well. This adds a complicating facet to the product offerings. If I want a book on WordPerfect, do I want to buy it from a store that also has novels or one that also has modems? Or, put another way, will the bookseller find that I already bought my book on WordPerfect at the last Internet stop I made, when I bought my modem?

Existing bookstores go on the Web with the ability to provide faster service than Amazon, or any Internet-only bookshop not working through Ingram Internet, on any book they already have in the store. In the early days, most have missed the opportunity to broaden sales using the Amazon model: offering a larger database than their own to offer the full range of easily-available titles.

Price competition on the Internet is just beginning to heat up. Until recently, it has been a relatively minor factor. Amazon offered discounts ranging up to 30% on a small number of their titles, and postage and handling charges claimed all or most of that back, depending on the size of the order. Now, with the US bookstore chains about to go on the Web and Barnes & Noble already selling on AOL, the discounting tool that helped them build their terrestrial business is being employed on the Web. Still, the number of heavily-discounted titles is limited, and postage and handling charges continue to confuse the issue.

One other point we must mention on the subject of price. Base retail prices in the US tend to be lower than elsewhere in the English-speaking world. We dont believe price is the biggest driver of business on the Internet, but to the extent that it is, another advantage falls to those resourcing through US suppliers.

The arrival of non-booksellers as competitors through the Net also complicates the competition in service and information.

Amazon has provided a virtual blueprint of how to provide good automated service. They set meetable expectations for when they'll deliver each order they take; they send you emails to confirm your order and, if shipping is delayed, to let you know again when they've shipped it.

Web booksellers can email alerts of new books coming out and, as publishers become more sophisticated, even become the conduits for sample chapters delivered to the prospective book buyers mailbox.

There are a whole range of helpful things we might expect to become automatic in the future: universal availability of publishers catalog copy, flap copy, press release copy, and jacket images, for example. These things will increasingly be featured as enhancements to the databases now offered by Ingram and Baker & Taylor, which already include many covers and annotations.

So let's sum up where the Internet bookselling world is today and, to the extent we can call the future obvious, where it is going.

Internet bookselling in the medium term consists of three sets of players: Internet-only bookselling specialists, who have been the dominant group so far; a coming breed of Internet-only other specialists, who are being introduced as competitors by Ingram and Amazon; and the terrestrial booksellers who have ventured into cyberspace.

The Internet customer for an English-language book can come from anywhere. The best and fastest source of supply is most frequently a US wholesaler, and, either directly or consequently, any Internet bookseller supplied by a US wholesaler.

Because of the US wholesalers, Internet booksellers can easily offer many more titles than most bookstores can stock. Ways to do that will increasingly become automated. All the books, or at least a vaster selection than any consumer shopping on the ground could ever imagine, will be available from many, many sites.

As for where this is going, we only know one thing for sure. More and more books will be sold online. Every bookstore customer will come to require service that is more easily provided online than from a shop.

So that's the background. What should you in this audience, the booksellers of the UK, DO to address this confusing and rapidly-changing marketplace.

Perhaps it will surprise you that my first suggestion is NOT "get your bookstore's Web site up immediately." Actually that's the second suggestion.

The first one is: tap into the US supply network. Set up an account with Ingram International immediately and follow that by opening accounts at Baker & Taylor and a couple more specialized wholesalers.

A bookseller in the UK respects the publishers territorial integrity at the peril of his own business. Your shop customers can reach Amazon dot com and every other bookseller in the world that is on the Web. If you are going to compete, you have to use every tool that is generally available that can help you. The US wholesalers are the most important tool available, delivering many books fast at prices based on the US retail price.

UK wholesalers simply do not offer a comparable service. The number of titles they stock is a fraction of what is available through Ingram and other big US wholesalers. And for many titles, the UK list price will be higher as well.

UK publishers cannot look happily on the notion that their previously captive market will start systematically "buying around" whenever it is a commercial advantage to do so. But UK publishers can't stop the globalization of the book business, and they can't really expect UK booksellers to continue on a suicide course, which trying to compete without US wholesaler supply soon will become.

When UK publishers recognize the realities of the new global English-language market, there are avenues open to them to exploit it too. They can stop selling US rights on their big books and publish themselves in the US through such organizations as National Book Network and Publishers Group West, which we might call rent-a-publishers. They offer sales, warehousing, publicity and marketing, billing and collecting on a percentage of sales basis. So a UK publisher can retain the publishers profit, pay the author a full US royalty, keep the subsidiary rights, and remove the concern about what source of supply the UK bookseller employs to buy the book

Indeed, the second suggestion I would make is to get up a Web site that sells as wide a universe of titles as possible. As we said earlier, an existing bookshop might well prefer the bigger gross margins and operating flexibility they can get by ordering themselves and fulfilling themselves, rather than employing the Ingram Internet Support Services model. But at the very least, your Web site should offer the nearly half-a-million titles that can be accessed quickly through Ingram and other US wholesalers. These titles can satisfy such a high proportion of demand that it may not even be necessary to add further ordering capabilities for US books.

One option to consider is to use Ingram Internet for Web-based selling and fulfillment, even as a temporary expedient. That permits a store to develop a presence on the Web quickly, selling a competitively wide range of titles. Using that approach makes your terrestrial store and your cyber store two separate entities. The advantage is that you can offer real service on the Web quickly, and sharply reduce the short-term learning curve and investment requirement.

And you may actually find it a long-term value to avoid a large volume of single-copy fulfillment, which many terrestrial stores are ill-equipped to handle.

Once a UK bookseller has approximated US ordering capabilities with an account at Ingram, albeit you are removed by time or money from getting those books as fast as US stores do, you have actually flipped the availability situation and gained superiority. Because YOU can get many, if not most, UK books, which your US competitors can't. And there isn't a single place for them to set up an account that will facilitate it for them, either, so catching up with your capabilities once you pass them might not be so simple.

The suggestion that you employ US suppliers is designed as much to keep your existing customers as to get new ones. You want to be able to tell your customers in good faith that they can come to you on the Web; they don't have to go to Amazon. And while the big cyber-booksellers are differentiating themselves by claiming to offer more titles or perhaps lower prices, your differentiation to your existing customers is that they know you. This may help keep them until your Web presence grows into something that is differentiated in an attractive way even to somebody who doesn't know you.

The third suggestion wed make is to employ all the intellectual capital in your store on your Web site. Every staff member can contribute reviews; so can customers, for that matter.

Think as broadly as you can to extend the intellectual capital net from your store. Local sources of book reviews or regional leisure information might make a distinctive addition to your site and facilitate a useful local alliance at the same time.

Whatever your store specializes in, even if it is local information, should have its own home page, an alternative front door to capture traffic interested in the subject itself rather than the broader availability of books.

The fourth suggestion is to use all this Web-developed capability in the store. Make computers available to your customers to search your database and additional information in your store. Finally, you can put the modern equivalent of "Books-in-Print" back in their hands.

It is interesting to think about how using Ingram Internet in parallel with your store could work in your store itself. If you have a Web store that is Ingram Internet based, your customers can search in the store for books you may not have and order them shipped to their home, right from your store. In a similar vein, Ingram is now talking to one European store that will use Ingram Internet to create an "American books" section on their Web site.

Fifth: as your Web business grows and your Web specialties become defined, push out your concept of what you sell to capitalize on your Web specialties. This is an essential point. A stores selection of books has always been its defining characteristic. This distinction will lose its allure if virtually every title is available to anybody with a computer. So the successful bookseller will have to redefine the concept of "complete selection". If your specialty is business books, add corporate annual reports to what you sell. If your specialty is travel books, add brochures from travel destinations. A very savvy Web computer bookseller we know was looking for old software manuals. If you sell gardening books, maybe you'll have to sell seeds.

Redefining the concept of "complete" is a big part of the next stage of the online bookselling battle. As with everything, Amazon keeps trying to stay ahead of that game. They were the first to offer to take an order, though not necessarily fill it, for every book in print. They mounted a database nobody could duplicate to try to define the number of available titles in an ambitious way. They just added a database of out-of-print titles they also can't necessarily get. And at the time they announced their stock offering at the end of March, they said they would soon add videos and music to the product mix.

But no matter how nimble they are, Amazon can't create customized information resources for every subject niche in the world. Subject specialists, aided by tools like what Ingram provides for the full range of books, will proliferate despite Amazons best efforts to be worthy of a monopoly. And neither can this business be dominated by the American retail giants Barnes & Noble or Borders, as they enter the fray.

The suggestions we are making here are designed to permit a transition from today's bookstore into tomorrows information specialist; to keep you competitive in the world of today and permit you to survive in the world of tomorrow.

But how about the day after tomorrow?

In a speech I delivered at a Vista Conference two years ago, we considered the end of the printed book. At that time, I suggested the book would someday be replaced by the Book Simulator. I credit one of Americas great independent booksellers, Ed Morrow of the Northshire Bookstore in Manchester Center, Vermont, with stimulating this thinking. We agreed that someday somebody would create a pair of hinged, flat screens that would deliver everything a book now delivers, and more, for a much more economical price. We figured then, in 1995, that the Book Simulator would arrive by 2010, making books not "obsolete", but "elite". We'll still have books then, but nobody who wants reading material in its most convenient or economical form will want it on paper.

There are three different entities we know of working on this technology. Two of them have prototypes in experimental use, or about to be, in college classrooms.

The good news for old-style book lovers is that the screen technology, the battery technology, the readability necessary to make the Book Simulator competitive with the book is definitely not around the corner. The original date of 2010 still looks reasonable, but much sooner than that doesn't.

So people will be reading books on paper for a long time.

That's the good news.

Here's the bad news: my hunch is they'll be printing many of them at home.

Many full-length books are already available as file downloads on the Internet. A wide array of Internet services deliver customized news digests or clippings of articles from many sources. Almost every significant magazine has a Web presence, and the ability to deliver itself online into a computer.

The practical shortcoming of this Web-offered material is the inconvenience of reading it on a computer screen. Only slightly less cumbersome is the alternative of reading it printed on one side on unbound sheets of paper.

The lack of utility in the Web-delivered versions is essential to the current economics of magazine publishing, at least. The Web-delivered versions dont have the same advertising ratios, in space but particularly in dollars of support. Up to now, it has been believed that the online distribution of the information from the magazine is generating print sales, not costing them. That perception is likely to change when the day comes that we can print a very readable version from the download. How will we feel about printing ads?

There is a fairly widespread notion that stores could someday soon "print on demand", keeping stock of one copy per title, printing another one in the store when that one sold. I find that an illusory notion, for many reasons. Store copies would need a full color cover, which requires a more expensive printer and which provokes serious quality issues. And while returns and shipping costs are reduced or even eliminated, serious margin erosion would occur because the publisher buys paper so much more cheaply in the bulk quantities and roll sizes used in commercial manufacture.

But if printing on demand in stores is an illusion, printing on demand at home is not. If a printer that could print two sides and bind a couple hundred sheets were available for some hundreds of dollars, perfectly serviceable copies of the latest hot novel could be generated at home from printing instructions downloaded from the Internet. And frankly, a machine with those capabilities at that price doesn't seem a very tall order.

Just developing the printer alone wont be enough, of course. The newspapers, magazines, and books to be printed on it will have to be presented online in a compatible format. And publishers may need technology to help them avoid having 100 printed copies created from one sold download.

But the day may not be far off when many of the books now centrally printed and distributed through the booksellers retail shops will be sent as computer files to the home or office and printed there.

So, the challenge is to evolve with the times: from today's bookseller offering centrally-printed and distributed books from a shop, to a subject specialist working from both a shop and a Web site tomorrow, and finally offering downloaded files from a Web site for the customer to print at home the day after tomorrow.

Every bookshop represented in this room enters that battle armed with knowledge of the literature and with a customer base. If you add to that a willingness to employ technology, there is a special spot in the information marketplace for you to fill. And you'll find it.