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Free NewsletterThe “new recession” is different. We’re seeing traditional successful business models crashing all around us. Profit margins in many highly successful brick and mortar businesses have disappeared, but this time they may not be coming back. Businesses are forced to get more efficient or die.
I dropped by the Borders Bookstore “Going out of business” sale a few weeks back, where literally everything in the store including the furniture and computers are for sale. It made me think hard about the changes we’ve seen in just a few years.
Book stores have been a successful business since the invention of the printing press by Gutenberg in 1492. The press made it possible to mass produce books and allowed the explosion of information that modern society was built on. From 1492 until the 1990′s the business model for a bookstore remained largely unchanged.
In the 1990′s we saw the rise of the “super bookstore” – stores like Borders and Barnes and Noble built huge “book supermarkets” where you could find tens of thousands of titles, browse in a casual setting and even grab a cup of coffee at the bar. This drove many small bookstores out of business, but with the exception of the store size which took advantage of lower margins the bookstore had not changed much.
Amazon which started in 1995 and became popular a few years after that took the book superstore model online. By offering an even larger selection, great web site, user reviews, and even deeper discounts they put a lot of pressure on even the brick-and-mortar book superstores. But still their model had not changed much – they were offering mail order books at a discount much like catalogs had offered for many many years. The internet just made the catalog more accessible and more interactive.
However look at what has happened in just four short years since 2007. In 2007, Amazon introduced the Kindle reader – to allow people to download books electronically instead of having any physical product at all. This drove prices down even further as the cost of producing and delivering a book was nearly zero. A simple reader, combined with their powerful online store and significant leverage over publishers, Amazon has dominated the e-book market and now sells more e-books than real books.
The traditional bookstore existed as a great business model for 518 years. But in just four years (2007-2011) the traditional book market has nearly collapsed – replaced by a new market in ebooks and e-readers.
This is the kind of disruptive change we’re seeing across the board as access to the internet and near-perfect information is chipping away the margins of traditional business models forcing them to rethink everything about business. What about your business? Are you building it online?
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Great post. It’s really extraordinary how fast this has happened! I even remember doubting Amazon’s staying power. The book store model follows the CD/record stores of a few years ago – now essentially replaced by iTunes as the number one music retailer. (We have lost some things… I think the music business is artistically fractured by the tracks vs. complete disc model, and the mp3 itself is a step back in fidelity from the CD’s audio quality.) If that’s been the price with music – what’s the price with books? Design, fonts, craftsmanship — do eBooks have these? Maybe they do.
My own “business” and “skills” definitely have adapted with these fast moves. I guess I hope that rather than work in your own region, these new models allow everyone to nurture 1,000 – 10,000 customers per year in any niche from a worldwide customer base. I’ll let you know how that works out after it happens!