So much for the cold war on hot hardcovers.
Wal-Mart Stores (NYSE: WMT) and
Amazon.com (Nasdaq: AMZN) are throwing the
book at one another. Bibliophiles may love the collateral
damage, but investors won't be so lucky.
Wal-Mart kicked off the hardcover hoedown yesterday,
lowering prices on preorders for hot titles such as Dean
Koontz'
Breathlessand Stephen King's
Under the Dome-- new releases that typically sell in
the high teens through the discounter -- at a mere $10. When
Amazon clenched a dagger between its teeth and matched the
price a few hours later, Wal-Mart marked down the same titles
to $9 apiece. As of this morning, Amazon is right there at
the $9 price point, too.
Beyond exploring what these markdowns will do to the
margins of both companies -- since you know that the
publishers aren't subsidizing these low, low prices -- let's
dive right into all of the players poised for punishment.
Barnes & Noble (NYSE: BKS) is selling the
same Dean Koontz book for $16.80 through its site this
morning.
Borders (NYSE: BGP) is at $19.60, and
Books-a-Million (Nasdaq: BAMM) is selling it
for an astronomical $25.20! Have fun collecting cobwebs,
guys. The bricks-and-mortar chains are conflicted when it
comes to cyberspace price wars. If they sell the books for a
lot less online, they sacrifice walk-in business. Their
well-read patrons are anything but stupid.
Amazon,
Sony (NYSE: SNE), and Barnes & Noble also
have to worry about the impact of $9 hardcovers on their
e-book readers. The primary appeal of these portable gadgets
is that digital books cost considerably less than their
hardcover counterparts. However, as of this morning, Amazon
is selling the Koontz book coming out next month for $9, even
while the Kindle version is priced at $9.99. Digital delivery
is convenient and immediate, but Amazon won't sell a lot of
Kindles if the digital books cost
morethan the hardcovers.
In other words, if Wal-Mart and Amazon are serious about
the $9 price war on bestseller pre-orders, their combat will
inevitably spill over into e-book price wars, too.
It's a great time to be an avid reader. Take advantage of
these ridiculous prices before both retailers get cold feet
and warm noggins. However, steer clear of this sector as an
investment until the rubble settles.
This article was originally published as
Amazon.com vs. Wal-Mart: Price War!on
Fool.com
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