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They're a promiscuous lot, these booksellers. First Amazon.com acquires the UK's second largest online bookshop, Book Pages (www.bookpages. co.uk), as well as Germany's number one online bookstore Telebuch (www.telebook.com and www.telebuch.de). Then WH Smith goes and buys Europe's largest online book retailer, The Internet Bookshop (www.bookshop.co.uk), for œ9.4 million, in full view of Waterstone's, which it had sold just a couple of months before.

And now the two largest bookshop chains in the US want to join the throng.

The bigger one, Barnes & Noble, is thinking about setting up a UK fulfilment operation, while Borders is opening up shops in Leeds, Brighton and London's Oxford Street. What's more, the huge German media group Bertelsmann is entering the online book retail business on both sides of the Atlantic.

This orgy of acquisition and expansion is down to the fact that books have great web appeal and are such a suitable commodity for selling online.

The reasons for this are simple: users can tell remotely whether they want to buy a certain book or not; books are a low-ticket item, so users are more likely to risk buying a title they might be unsure about; and they're easy to transport, store and despatch. These advantages have paid off in practice. The largest online bookstore, Amazon, has sold books to 2.25 million customers.

Part of the success of online bookshops comes down to their business model. Most have low overheads and positive cash flow, in that they get paid for books before ordering them from their wholesalers. Online stores are also used to selling far afield, which is useful as markets expand and start to overlap. And online bookshops also offer consumers more choice.

The largest boast nearly all the 1.5 million books written in English - that's eight times more titles than the UK's largest physical bookshop is able to cram onto its groaning shelves.

However, the trump card might be pricing. Many of the major US online bookstores offer discounts of up to 40 per cent on the more popular titles, and can react immediately to market fluctuations. What's more, the demise of the Net Book Agreement has left booksellers in the UK exposed to cheaper US editions being sold over here.

Some insiders predict the imminent arrival of even cheaper editions arriving from the Far East, and presage the doom of the high street bookshop. High street bookstores sell mostly UK editions, they say, and even those with an online facility can't cut prices in case they cannibalise high street sales.

Arguments like these have persuaded analysts that the UK online book market will emulate the growth of the market in the US, where it almost doubled in the past year and no doubt played a part in WH Smith's acquisition of The Internet BookShop as well. According to Tim Blythe, director of group corporate affairs for WH Smith, the buy was a sort of insurance policy.

"We're more of a popular, mid-market high-street store than a specialist bookshop, and our current customers are less likely to use the internet," he says. "However, we do recognise that the internet is a growing shopping mechanism and WH Smith has only been around for 204 years because it has adapted to change. The question for us was how to embrace e-commerce. Do we do it internally or do we buy someone who already knows how it works? We went for the second option.

"The acquisition has given us the capability immediately," he continues.

"In the short- to-medium term, we'll ring-fence The Internet Bookshop and let it continue operating exactly as it is. In the longer term, we might provide additional WH Smith-branded access to The Internet Bookshop, and effectively sell books online using their system. Having said that, we do honestly believe that there'll always be a place for bookshops on the high street, so customers can flick through and browse any books they want to buy."

One of those at the helm of The Internet Bookshop is Ross Beadle, its marketing manager. "We were always upfront about seeking investment, and it's fortuitous that the best offer coincided with what we think is the best approach to iBS," he says.

"We'll be carrying on as an autonomous entity, and going ahead with the strategy we devised for the next three or four years. WH Smith's is a powerful brand whose safe, trustworthy face will give us credibility on the web."

He affects an unworried air about Amazon's incursion. "It has been a fact of our lives for the past two years, so any strategic moves were on the assumption that it would move into our market," he says. "The route that it's taking - buying up Book Pages - simply reduces the competition from two to one."

In any case, Beadle sees himself in a different market. Many customers approach The Internet Bookshop having failed to find obscure books in their local high street stores. "The people I'm interested in are the book obsessives," he continues. "They account for seven per cent of book buyers, yet buy 35 per cent of all books and read between 30 and 40 books a year. They're notoriously promiscuous, and buy books spontaneously wherever it's most convenient. Hopefully, that will be us."

Sally Taplin, new-media manager of Waterstone's, now owned along with Dillons bookshops by the EMI Group, is similarly phlegmatic about the US onslaught. She believes that US booksellers will find it difficult to make inroads into the UK market and stresses that established high street bookshops hold a number of advantages, not least their many years' experience of the UK bookselling market. "Bookselling is an especially intimate form of merchandising," she comments, "and our customers invest a lot of trust in us. So we feel we have to be faithful to our high street brand.

"That's why we don't offer personal recommendations yet : because we want to do it in a way that rings true. We want to maintain the affinity that our customers have with our high street stores and we also want to make sure that our web site doesn't replace other parts of our business.

Some online start-ups have done things that work well, but most of them seem to me to be trying to ape Amazon in their look and feel, which I think reflects this market's immaturity.

"I'm not obsessive about discounting, because we consider customer service more important," she continues. "Why the US booksellers are all jumping on board I can't quite understand. It's a highly competitive and interesting market, but it hasn't been growing exponentially and there will be some losers. Naturally, we're making sure we're here for the long haul." Taplin maintains that the purely online players might be those most at risk from Amazon's arrival, as they have no heritage to fall back on.

Such lack of heritage doesn't disturb Simon Murdoch, however. Only a year and a half ago, he founded the UK's second biggest online bookshop, Book Pages, which Amazon has now taken over, making Murdoch effectively Mr Amazon UK. He has spent recent months in pursuit of the Amazon motto 'Get Big Fast' - which essentially means working to capture market share as quickly as possible - by recruiting, increasing distribution capacity, and ensuring that the operation is scaleable.

"Before I started Book Pages, my background was in Triptych systems, which does the bookshops' stock management software, so I know how the UK booksale industry works," he says. "By buying Book Pages, Amazon has probably saved six to 12 months by using our expertise rather than going it alone. We have aggressive expansion plans for Europe, no doubt, but then Bertelsmann are a formidable force, so we can't be complacent."

Darryl Mattocks, the founder of The Internet Bookshop, might wish his ex-colleagues had had the same approach. At the end of March, he resigned as managing director after a boardroom row. "I couldn't agree with the majority of the other directors on future strategy: I wanted us to become the Amazon of Europe," he says.

"To compete in the online market, and especially against the might of Amazon and Bertelsmann, you need a stout marketing budget," continues Mattocks. "Every day that high street bookshops postpone entering this market, the cost of doing so goes up. UK booksellers can't afford to remain the old, sleepy, cardigan-wearing retailer any more, no matter how passionate they are about books."

Especially now that Bertelsmann is entering the fray with what it describes as a sizeable investment. "If everyone who says they're going to enter the online books market does so, it's going to be a bit rough and tumble for a while," warns Nancy Valentine, until recently vice-president general manager of Bertelsmann's online bookshop, BOL. "The result may resemble what's happened in the US, where there are a few major players for the mainstream, and thousands of small niche players."

Herb Kim, marketing head for Blackwell's Online Bookshop (www.bookshop.blackwell.co.uk), has a target market of academics, medical practitioners and researchers, technicians and other professionals, and considers himself a largely neutral observer of the consumer book wars. He finds the Bertelsmann aspect is the most interesting, due to the media group's decades of experience in direct selling. That despite the fact that BOB is setting up a distribution facility in the US, enlarging its number of titles by a million to 2.5 million.

"Bertelsmann really knows how to do it," says Kim. "For it, an online catalogue is the perfect evolution from the paper variety, and obviously it will be saving money on printing costs. Even if it can get its existing book club members to migrate over to the net, it will be worth it. But it also knows what kinds of promotions work, and will be able to attract new members. Bertelsmann will be a long-term global player - I can even see it eclipsing Amazon. What's interesting is that it will be up against competition with the same business model, which isn't the case at the moment. I mean, who else has book clubs?"

Although consumer high street bookshops are right to be worried by what's going on, the presages of doom aimed at them seem wide of the mark. To start with, the overheads of online bookselling are not necessarily low, as Matthew Pollock, director of The Book Pl@ce (www.thebookplace.co.uk), testifies. Set up as a consumer-driven division of database creator Book Data, The Book Pl@ce has found life as an online bookshop difficult.

"Selling books online carries roughly the same overheads as running a bookshop. You have to ring customers up because their given credit card number doesn't work, or check to see if they really did want to order six copies of the same book," says Pollock. "Our initial software didn't work at all, and we've had to rebuild the whole thing from scratch. Now it's a question of trying to woo back disgruntled former customers. Our strength remains our database, providing users with a detailed description of the million or so books we sell, allied to our 60-page online magazine Book Ends."

The lack of space for the bookselling industry's current and imminent players makes it inevitable that some will fail. But they won't necessarily be of one type. For example, putting sofas and coffee bars into high street bookshops will help them to maintain an image distinct from the online bookshops. And although high street bookshops will promote their web sites in-store and, conversely, use them to attract people into their shops, they are likely to view the web as a complementary channel. Price-cutting might be less damaging than had been feared, too, now that some book retailers selling US editions of books whose UK rights had been sold have been legally challenged in the UK.

Physical bookshops have coexisted with retail book clubs for a long time, and the same is likely to prove true for online bookshops. Indeed, the traditional book club business might contract because the mail order model fits so well with the internet. What's clear is that the bookselling landscape is changing dramatically, and many predict that it will become a truly global industry with a pricing system to match. In which case, whether online or offline, size might be all that matters.



THE WORLD ACCORDING TO AMAZON'S JEFF BEZOS

This is a tale of a bored 30-year-old Wall Street drone called Jeff Bezos who chose to resign his job, up sticks and migrate to the far gentler pastures of the online bookselling industry.

By 1995, he had set up an internet bookstore in Seattle and called it Amazon.com. It succeeded beyond anyone's expectations. Today Wall Street values it at $2.4 billion.

And now that Amazon has announced plans to set up a distribution system in Europe, many in the UK book industry are starting to regard Bezos as a major threat over here.

Still aged only 34, Bezos remembers clearly why he headed off to the North West coast: "I decided that when I was 80 I wouldn't regret having quit Wall Street when I was 30, but I might really regret having missed a great opportunity." After considering 20 different products with which to launch an online mail order business, he narrowed it down to CDs and books. He chose books.

"There are three million books in print worldwide; no other category has this many products," he says. Amazon offers a catalogue of around three million books and CDs.

The company's philosophy, adds Bezos, is that if someone enters a virtual bookstore and is recommended what should be the most appealing book for them, they'll buy it. It's worked.

Even when the major US chain Barnes & Noble decided to respond, setting up its own web site offering similar discounts, it only managed to capture an online market an eighth the size of Amazon's.

"We generate more than $300,000 a year in revenues for each operating employee," says Bezos. "A traditional bookstore makes about $95,000 per employee."

Amazon can thank its understanding shareholders for its expansion - the company spent some $40 million on itself last year. Yet the sheer romance of his route to success allows Bezos to get away with it.

The question is, as the third largest bookseller in the US, has Amazon got the infrastructure to prevent itself collapsing under its own weight?



BERTELSMANN AIMS TO BE THE WORLD'S BOOKSHOP

The spectre of Bertelsmann entering the global online retail book business has loomed large since February. One of the world's largest media groups, Bertelsmann's revenues exceed $14 billion a year.

Bertelsmann has called its online bookselling venture BOL.com, and is considering the possibilities of joint ventures with existing internet providers and retail services. The group also plans to develop its long-standing direct marketing by launching a consumer book clubs business on the internet.

Bertelsmann has described BOL.com as a natural progression of its ever-growing international database marketing operation, which includes customer relationships with 35 million active book and music club members in the US and Europe.

The service will complement Bertelsmann's BCA book club operation, and its stated goal is to sell all books by all publishers to all countries in all languages while matching bookshop prices.

"BOL.com is a very sizeable investment for us," says Seth Radwell, vice president and general manager of BOL US. "On 15 November, we will be simultaneously launching our online bookselling service in six countries: the US, the UK, Germany, France, Spain and the Netherlands.

Scandinavia will feature in our second phase next year. We're aiming to be competitive with high street bookshop prices, although price is just one component of the overall service we will provide. You might be able to buy books significantly more cheaply online than in some bookshops, but by the time you add delivery charges and the two to three-week arrival time, it's often only worth it for those who buy many at a time." BOL.com will differ from other major online booksellers, says Radwell, by having an even larger database and offering more content and features.

Although in six countries, the service will be branded consistently throughout.

"Why waste ad money on promoting separate brands in different countries if their market segments are largely the same in each country?" he asks.

"That said, we'll have to be recognised at a local level in order to compete with the online bookshops." Radwell doesn't forecast a revolution in the bookselling industry, but rather a slow migration into new distribution channels such as online bookshops. "The bookselling industry is clearly not going to change overnight.

But consumers on both sides of the Atlantic will continue to gravitate towards what will remain another viable medium through which to buy books."



THE ONLINE BOOK MARKET

Online book sales are doubling every year, but the UK online market remains small. The largest player, The Internet Bookshop (bookshop.co.uk), has a turnover of about œ2 million, while the online book market in the UK and Europe together is worth only about œ16 million.

And when you consider that Waterstone's Manchester branch, the company's largest retail outlet, turns over more than œ8 million a year, that's not very much.

But that's just the start, as the amazing success of Amazon.com demonstrates. In its short history, Amazon has posted books to 2.25 million customers and offers discounts of up to 40 per cent on around 400,000 titles. And of the $87m of books it sold in the past three months, nearly a quarter were outside the US.

Large sales call for large fulfilment operations, and Borders has revealed rampant optimism in this regard. Working with IBM as a technology partner in the US, it has built a gigantic warehouse with more than 10 million real-life items in stock, promising quick turnaround times. Amazon, in contrast, doesn't stock much, sourcing orders direct from publishers or from large wholesalers.

Offering a wide range is an essential part of the proposition for online bookshops. This is especially the case in light of a recent finding by Barnes and Noble that so-called bestsellers account for less than three per cent of its sales, while titles from smaller publishers, independents and university presses continue to grow.

And purchases from the top ten publishers have declined from 75 per cent of the total just three years ago to 46 per cent. This makes the number of different books for sale even more important.