Amazon Your Industry: Extracting Value from the Value Chain

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Amazon Your Industry: Extracting Value from the Value Chain
"Way cool" Web sites and measures of "hits" and "eyeballs" are clearly driving revenue in the dot-com world. To date, these metrics have provided the basis for the extraordinary market valuation of the new generation of Web retailers. In the near term, most "e-tailers" must focus on surviving the incubator phase of the Internet retail industry by gaining enough market shares to become a sustainable player. "Efficiency and productivity lie in our future," Inc. 's president, Joe Galli, has said.
Eventually, however, the basis of competition will change. In the long term, we believe that sustainable competitive advantage in the Internet Economy will result from
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Since half of each year 's sales come from backlists, the largest publishers maintain a total library that can exceed 30,000 titles.
The $5 billion United States book-printing industry has a similar structure: Though the total industry contains thousands of printers, the top-five companies account for 40 percent of the market. Trade-book printing represents a surprisingly small portion of the $210 billion printing industry. Even for R.R. Donnelley & Sons Company, the largest independent trade-book printer in the United States, trade books account for a mere 15 percent of total revenues. Commercial printing of catalogues, retail inserts, business forms, advertising coupons, instruction manuals, annual reports and marketing brochures provide the bulk of the sales. In fact, if you add up all of the commercial printing done for the General Motors Corporation, the annual total would exceed the print spending for 99 percent of the book publishers in America. From that perspective, trade-book printing looks rather minor.
For some in the publishing industry, wholesalers provide the next link of the chain. Though most large retailers maintain an integrated distribution network, independent booksellers depend on large wholesalers. Wholesalers buy in bulk from publishers and then ship smaller quantities to independent booksellers and sometimes to chain stores. Publishers ship about 40 percent of their volume to wholesalers versus about 45 percent direct to bookstores. The

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