Distribution Channels
Introduction
In modern economies and in many other parts of the world, most producers or service providers
do not sell their products directly to consumers or final users. Between the producers and the
final consumers, there are several intermediaries who perform a variety of other functions in
connection with the products including such functions as transportation and storage. These
intermediaries are mostly the wholesalers, retailers and other middlemen who perform other
functions in the channel of distribution. There contribution in the distribution channel is
significant and they mostly have long-term commitment to other firms in the distribution
channel.
2 MKT 501 Module 4 – Case
Broken Distribution Channels
Amazon Inc and Barnes & noble seem to have found themselves in a position where some of the
expected long-term commitment between their own distribution channels in the distribution and
stocking of e-books is no longer cordial. Barnes & Noble has made good its threat not to stock
Amazons products in its 689 stores as the recent move by Amazon to deal with authors directly
came to light (Turner, 2012). Amazon.Com, Inc that has its headquarters in Seattle, Washington
is currently the largest and most popular internet-based retailer globally. Its popularity has
intensified with its popular Fire tablets and Fire phones that are competing with other Apples
products in the market (Herther, 2012). The decision to enter into publication is not a wise
decision as it would jeopardize its efforts in the distribution chain. The effects of the decisions
made by Barnes & Noble have very bad ramifications for Amazons future agreements with
publishers. The publishers too have a share in the market and Amazon cannot ignore that fact.
The publishers are against the efforts by Amazon to publish individual books from
authors as its seen as an affront against the publishers who for many years have dominated the
literary industry. However, the authors according to Nora Krug (2012) have a different view and
they prefer to deal directly with Amazon whom they say has better terms and more efficient than
publishers. The chances of having a book published are much higher with Amazon than with
traditional publishers (Krug, 2012). If I were an author today I would approach Amazon for the
publication of my children books as they have a larger market and the book is likely to take a
shorter time to be published as a result of Amazons latest applications and digital technology. Its
marketing ability is also better. Barnes & Noble has vowed not to stock any books from Amazon
nor deal with any Authors who are directly involved with Amazon. A for me It would matter if
the initial publisher was successful as majority of publishers have a poor record of publishing
3 Accounting
books from independent authors (Krug, 2012). Going to Amazon is more preferable than
attempting my luck with a new publisher.
Genesis of the Amazon and Barnes & Noble war
However, the battle between Amazon and Barnes appear to have started much earlier when
Barnes & Noble begun to stock its Nook tablet that rivaled Amazon’s Fire tablet and other
tablets in the market. Barnes & Noble spent millions of dollars trying to fight and acquire part of
Amazon’s tablet and e-readers market but it has finally decided to bow out after making
substantial losses (Trachtenberg, 2014). In the last one year, Nook revenues dropped by 34%
while the sales of Barnes & Noble new invention HD tablets never achieved its projected
forecasts. The losses before taxes, interests and depreciation amounted to $177 million from a
previous loss of $77 million the previous year (Trachtenberg, 2014).
Acquisition
Microsoft Corp has pledged close to $605 million to support the new company, Nook Media
LLC including equity investment totaling to $300 million. However, the declining prices in
digital tablets and e-readers are threatening the lucrative e-book market (Gelles, 2014). The fight
against Amazon is not wise as Amazon already has its own share of the market just as much as
Barnes & Noble controls the physical books and e-books market, both firms can have greater
market if they collaborated and partnered in some ventures. The acquisition seems to be the best
option for Barnes & Noble as the prices of the e-readers and tablets continue to plunge.
Conclusion
4 MKT 501 Module 4 – Case
To conclude, the e-book wars between Amazon and Barnes & Noble is expected to continue as
Barnes & Noble has retreated to consolidate its grip in e-book marketing together with its
strategies in the black and white Nook e-readers that mostly accounts for its major e-book sales.
The recent government’s decision on the antitrust settlement that favored Amazon was also a
blow to Barnes & Noble as the decision allowed Amazon together with other retailers in the
market to discount most titles after a period of many years. This move is seen as positive drive in
the right direction for retailers such as Amazon. The sales by Amazon are expected to increase
given the effect of the government decision on antitrust settlement.
5 Accounting
References
Trachtenberg, J. A. (2014, Feb 27). Corporate news: Barnes & noble posts profit as digital device
sales tumble, Wall Street Journal.
Gelles, D. (2014, Feb 22). Barnes & noble receives conditional offer, New York Times.
Krug, N. (2012, Oct 31). Amazon books getting no shelf space, The Washington Post.
Herther, N. K. (2012). THE E BOOK WARS, Amazon versus the rest. Searcher, 20(4), 20-23,
26-30.
Turner, K. (2012, Feb 05). Independent retailers turn page on business. McClatchy – Tribune
Business News.
