With much of the focus on the new online challenge, Barnes & Noble’s rate of store expansion began to slow in the late 1990s, and the company made a bid to buy La Vergne, Tenn.-based Ingram Book Group, the country’s biggest book distributor, in order to get rid of the middleman and boost profits in book sales. Ingram’s distribution centers could also help Barnesandnoble.com get books to customers more quickly than Amazon.com. (The deal was ultimately abandoned after the Federal Trade Commission voiced antitrust concerns.)

Meanwhile, the staff of Barnesandnoble .com was struggling to put together a competitive e-commerce site. "We had to do everything on our own," Stephen Riggio says. "At that point [1997], there weren’t any third-party technologies or consulting companies to help out. Not everything we did worked very well." Barnesandnoble.com was like many e-commerce startups at the time, but the stakes were much higher. If it failed, a successful site was just a click away at Amazon.com.

Specifically, the company was "besieged with orders" without having adequate technology to handle them, Stephen Riggio says. Although the search technology has always been effective, CRM and personalization technologies?areas in which Amazon.com was excelling?were completely absent, he says. Some companies were building those in-house at the time, but the vast majority were just getting started in that area, and software packages were largely unavailable. The result was a site that lagged far behind Amazon.com when it came to ease of use and customer friendliness. However, "once you open your doors in e-commerce, you can’t shut them," Stephen Riggio adds.

Barnesandnoble.com wasn’t alone. "Most retailers stumbled with ease of use," says Carrie Johnson, an e-commerce analyst at Forrester Research in Cambridge, Mass. "Barnes & Noble was up against Amazon, the easiest site to use on the Web, and they fell victim."

"When Barnesandnoble.com first launched their site, it was the Internet gold rush. The assumption was that if you put your product out there, you’d get the traffic and everything would be wonderful," says Michael S. Katz, senior vice president in the IT group at Booz, Allen & Hamilton in New York City.

In reality, Barnes & Noble’s Web venture frustrated users with its lack of integration to the 483 retail stores, where there were no signs of the e-commerce arm. At the time, Barnesandnoble.com was locked in a discounting war with Amazon.com, and remaining separate allowed the company to avoid charging sales tax for online sales in states where it had stores. Barnesandnoble .com and its brick-and-mortar parent were pushed further apart in 1998 when the GŸtersloh, Germany-based publishing giant Bertelsmann took a 36 percent stake in the company, becoming equal partners with Barnes & Noble. The following year, Barnes & Noble sold 20 percent of the online company to the public in an initial public offering that was roundly panned by the financial press. The company’s stock rose only 27 percent the first day of trading, a paltry showing at the time.