This video will investigate what the competitive environment is and how amazon and independent
bookstores compete in the UK book retail sector.
When a business is looking at the competitive environment they are looking at how a their
business is affected by its competition and how it can adapt its businesses practices
in order to stay relevant and continue to succeed in the market.
Decisions will need to be made based on what the competition is doing and how they are
performing in certain areas.
Five common areas to look at when assessing the competitive environment are:
Price Quality
Location Product Range
And Customer service Throughout this video we will look at the
competitive environment that amazon and independent bookstores operate in and how independent
stores have made decisions and adapted based on the huge influence amazon has had on the
book industry.
Strengths and weaknesses in these 5 areas of the competitive environment need to be
understood and what decisions can be made in order for businesses to remain relevant
and competitive in the market.
The first one is price.
Price refers to how much a product or service costs to purchase.
Knowing how much competitors charge for their products is very important.
If a competitor sells similar products at a lower price then this may force a business
to adapt its strategy.
This often leads to competition in price.
The competitive environment for independent bookstores has changed since amazon came on
the scene as they have huge buying power and can purchase in large quantities driving their
unit costs down and allowing them to charge rock bottom prices.
independent bookstores cannot purchase in these quantities and therefore struggle to
compete on price with amazon.
There are even instances of Amazon selling books at 40% off RRP with people speculating
that these are being sold at a loss to gain more custom and in turn is steering customers
away from independent book stores.
When looking at the competitive environment from an independent bookstores perspective
they cannot compete with amazon in terms of price.
And is certainly a weakness.
But how to they fair in terms of quality?
Quality, how well is the product made or how good is the level of service that you receive.
Quality tends to take various forms when it comes to the book retail industry.
As a paperback copy of rich dad poor dad is the same item whether it is purchased from
amazon or an independent bookstore.
Both amazon and independent book stores compete on quality in different ways.
Amazon does not have physical stores in the UK and only a handful in the US so instead
they compete in terms of convenience.
A book can be easily searched for and purchased in a couple of clicks with delivery the same
or next day.
This means that the whole process of purchasing a book from amazon is convenient and efficient.
You do not have to leave your home to purchase what you want.
This again is an advantage of amazon in the market and in my opinion they cannot be matched
in terms of convenience.
Many independent bookstores cannot compete with amazon in terms of convenience and the
quality of online service they provide, however they do have something that amazon doesn’t…
a physical store.
This is where independent bookstores can utilise their physical presence in the market and
create a USP for visiting their stores.
They can do this by having a clean, friendly environment with an ambience that you cannot
get from buying a book online.
They can build a community feel around their store as a place to go to discuss books, offer
niche titles by local authors, have book signings and host instore events.
These things cannot be replicated by amazon without having a physical presence.
We will touch on some of these in more detail as they come under customer service.
However such things are strengths of an independent compared to amazon and have become a USP for
independents in this competitive environment.
Location is where the business decides to sell the products it has on offer.
A location is important as it needs to be accessible and convenient for customers.
If a business has a prime location then they are located where many customers can access
their store easily.
With things such as public transport, main roads and parking near by.
Independent bookstore are usually located locally and serve the community around them.
They can often be found in city/town centres where there are lots of people walking by
and a lot of footfall.
Having a prime location is a strength of an independent bookstore as they have the possibility
of customers making sales when out shopping for other things in towns and cities and may
attract customers through an inviting store front.
This again can be seen as an advantage in the competitive environment for independents
as they are not having to compete with amazon on the traditional Highstreet.
However over 70% of book sales are made online and because of this some independent stores
offer an on line service but this still cannot compete with amazon in terms of things like
free delivery and next day delivery at rock bottom prices and therefore the vast majority
of online book sales are made via amazon.
Not having physical stores could then be seen as a negative for amazon as they are not competing
directly in these town and city locations, despite this amazon benefit form being located
solely online as they never have to close which means they avoid expensive city centre
rents and can provide customers with a 24/7 service.
Product range refers to the number of different products a business has for sale.
If a competitor only has a few products then this can be a weakness as they are reliant
on a few products selling consistently whereas if a business has a large product
range then this could be seen as a strength as they are likely to be able to target a
wider range of customers.
It is usually beneficial for a business to have a range of products to sell.
When an independent bookstore is looking at the competitive environment and amazon in
particularly they will see that there range is significantly less than amazons and is
a weakness in comparison.
Amazon have a huge advantage in this respect as they stock over 33 million different titles.
This obviously cannot be matched anywhere near by an independent bookstore as your average
bookstore can hold roughly around 10,000 different titles making it have much less of a product
range.
In order to try and compete, independent stores can adapt and try and tailor what it does
stock to local tastes and best sellers that their target market are interested in.
This decision will be made to limit the impact of not being able to compete with the range
of amazon, but again helps them fit into the local community and tries to differentiate
them from a faceless corporation such as amazon.
There is no doubt that amazon have the advantage when it come to product range and this area
of the competitive environment.
Finally we come to customer service.
One area an independent book store can really compete and carve out a USP in comparison
to amazon is via its customer service and the experience customers get when in store.
If done correctly this can really help a store differentiate itself from an online retailer
and give customers a reason to visit their store as online retailers like amazon do not
have the opportunity to connect with customers in this way.
Independent bookstores can do this by: Offering a unique experience in terms of having
a theme to the store, adding extra services like a coffee shop or having quiet areas to
relax and read.
But also they can really get to know their customers and create a relationship via regular
face to face customer interaction that keeps them coming being if it means paying more
for a good, friendly customer experience.
This part of the competitive environment is where some businesses are thriving and is
something Amazon cannot replicate as they do not have physical stores.
This is a strength of the independent bookstores in the market.
Amazon still do very well with the customer service they offer but in a very different
way as they offer free delivery with amazon prime, fast delivery times and a very robust
returns policy.
The customer experience and service at amazon is based on convenience, price and an extended
range of titles.
There is no atmosphere or feel that can be created by amazon unlike the bookstores.
Overall if an independent bookstore was to look at the competitive environment and focus
on amazon they would identify that amazon has a competitive advantage in the environment
in areas such as price, convenience and product range but also that they have an opportunity
to diversify their offering by focusing on customer experience and the quality customers
receive in store.
If they make these types of decisions they could find a profitable path to competing
in this market dominated by the monopoly of amazon.
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