A Tale of Two Booksellers

It was the best of times for the Riggios. By the early 1990s, after 25 years of running campus bookstores in lower Manhattan, and buying up chains one by one, the tough entrepreneurial family from Brooklyn had amassed an empire that stretched across the country, with hundreds of superstores selling discounted best-sellers. Their company, Barnes & Noble, had battled such formidable competitors as Borders Group, the bookstore chain based in Ann Arbor, Mich., and had used comfy couches, fragrant cappuccino bars and a massive selection to change the rules of bookselling. And with more bookstores and market share than its closest rivals, Barnes & Noble had plans to grow even bigger.

But it was soon to be the worst of times. Although e-commerce was only a glimmer on the horizon, entrepreneurs across the country were developing plans that would change the status quo for Barnes & Noble and other large retailers. In July 1995, Seattle-based startup Amazon.com launched its ambitious website, sending the first e-commerce shockwaves through corporate America and directly threatening the Riggios’ perch atop the bookselling world.

At Barnes & Noble the reaction to the upstart online competitor was anything but swift. The retailer first set up shop on America Online and waited 20 months to launch an e-commerce site. When it did, the spinoff Barnesandnoble.com was barraged with criticism: The site was slow and hard to use, and there was little connection between the well-known stores and the website. It reached millions fewer online shoppers compared with Amazon.com. Like other retailers, it struggled with order fulfillment glitches and miscalculated the enormous importance of creating ties between its physical stores and its online one. And its stock debut during the raging IPO season of 1999 was a whisper for such a well-known brand. All told, Barnes & Noble’s predicament gave rise to a new term for what happens when an online competitor knocks an established business on its heels: getting Amazoned.

Four years after the website’s launch, Barnesandnoble.com is far from down for the count. The online book merchant’s story is in many ways a parable for what went wrong when traditional companies approached e-commerce during the early days of the dotcom boom and how a major brick-and-mortar presence can learn from its initial missteps.

Now, even as e-commerce has largely fallen out of favor?and Amazon.com is still struggling to eke out a profit?Barnesandnoble.com is refocusing the venture to take advantage of its brand name and 40 million regular in-store shoppers. Customers can now return online purchases in the stores?where they initially met with frustration?and dozens of customer service counters are opening in Barnes & Noble superstores across the country, allowing shoppers to check inventory or order books online.