As Competition Wanes, Amazon Cuts Back Discounts
nytimes.com
nytimes.com
I guess this is the difference between award winning journalism and essentially an editorial.
David Streitfeld of the NY Times should be inspired by the work of the Sally Kestin and John Maines of the Florida Sun Sentinel, who won the 2013 Pulitzer for Public Service for their "investigation of off-duty police officers who recklessly speed and endanger the lives of citizens, leading to disciplinary action and other steps to curtail a deadly hazard." The Sun manage to acquire and then data mine the timing data from on and off-duty police officers' toll transponders to reverse engineer their average speed, and in the process blew the lid off some seriously reckless driving by the officers.
By comparison, the data that Streitfeld and the NY Times was looking for to turn their cute anecdotes into hard hitting journalism were only an API call away. I'd love to see journalists collaborating more with hackers and the open source community, or perhaps even big data competition sites like Kaggle to collect and parse this data into a real expose. Like what we saw with Strongbox (http://www.newyorker.com/strongbox/) - the New Yorker's platform for protecting anonymous sources - or Barret Brown's ProjectPM (http://trueslant.com/barrettbrown/2010/03/24/project-pm/) - but targeting specific topics and data sets. Note to reader, you might want to visit those links via Tor...
Nothing like hard evidence to shine a bright light on anti-competitive behavior of a wanna-be monopolist. On the other hand, maybe Amazon is just intelligently pricing their products using their sophisticated proprietary models based on tried and true supply and demand. Based on this article, who can say what's closer to the truth?
The tech books I looked at might do, certainly a larger sample size would be interesting:
http://camelcamelcamel.com/Joel-Software-Occasionally-Develo...
http://camelcamelcamel.com/The-Innovators-Solution-Sustainin...
http://camelcamelcamel.com/Hackers-Painters-Big-Ideas-Comput...
I'd like to see the results of deeper analysis. A report following an investigation. I suppose that would be investigative reporting?
"Now, with Borders dead, Barnes & Noble struggling and independent booksellers greatly diminished, for many consumers there is simply no other way to get many books than through Amazon. And for some books, Amazon is, in effect, beginning to raise prices."
Now what they are really saying is that Amazon is pricing books closer and closer to "list price" which is the price that brick and mortar book stores can sell books at and survive (generally). So if Amazon were to suddenly sell every book for list price, there would be a great cheer heard from all the book sellers as they now had a viable business.
No question that Amazon has used its position to establish market dominance and its pricing has killed a lot of book stores. Amazon can't raise prices too far without allowing book stores to flourish. As the article points out, the publishers aren't changing their prices, Amazon is.
They were enormously overpriced, like most computing related books outside the U.S. ($100 NZD +), but I would wear that because I liked the experience.
This was in about 2003. By 2008, the section which held the long tail I liked had shrunk to maybe 2 shelves. They no longer kept the kinds of books I liked in inventory, just "Photoshop for dummies" or perhaps the odd "Learning Python".
At the point where everything I might want had to be ordered in and would take longer to arrive than from Amazon, I stopped bothering to go :/
That said, every time I go to Portland I spend a couple of hours and at least a couple hundred dollars in Powell's books.
In the US at least there is a quite a bit of excess 'store' space that is not leased. Further it hasn't been leased for a while so there are motivated property owners who will provide customization of the space as part of their 'tenant improvements' or TI. Setting up an LLC had been made more simple by the pre-created legal documents available on the web, Banks are eager to sign up a new business if they are going to process the sales, and there are a number of small business loans currently being pushed by the the US government in order to encourage the economy.
For someone willing to drive around town a bit it is possible to get the business created in a week, and with some work probably have a physical store ready to open in a two months, (less if you either start with one that was a book store before or your new landlord was really excited to get the space ready). Setting up a cash register, an accounting and filing system, all of those things have 'cook book' examples that you can just lift and implement like you might your favorite distribution. And initially the only 'staff' you need is you.
The only question is whether or not you can get enough customers to buy your books to stay afloat long term. And that depends on other places people can go to get books. As you say Amazon is the "Wallmart of the Internet" because they sell product with lower margins than someone who is paying rent on a store can afford.
If Amazon increases their margins (by selling closer to list price) they risk someone like you or I who can sell at that same margin in an actual store. And something the store offers that Amazon cannot is the ability to browse, and discuss various books. (look inside the cover doesn't cut it).
The important thing to realize for this crowd, is that setting up a single person shop is as straight forward as setting up a Linode. Yes, it takes more paperwork, and yes it helps to create an LLC, but people have been setting up shops a lot longer than they have been creating businesses on the Internet, what we do here is considered "mysterious gobbledy gook" by a lot of people, opening up a store is much more comprehensible to them. Further there is a lot of infrastructure out there that supports it.
You can't 'free time' a brick and mortar without a substantially larger risk - no bank is going to give a loan and no real estate manager is going to give a lease to a new LLC without personal guarantees from the principals or other backing.
This is absolutely true, which is why there are many more software business opportunities than there are brick and mortar opportunities, and its absolutely irrelevant in that if you want to create a bookstore (which is the market we're looking at in this conversation) trying to 'out Amazon' Amazon by setting up a Linode instance isn't really going to be very effective.
My point is that unlike say "Pintrst for Caviar Lovers" or some other random 'online' business, book stores are already a 'proven' business, just like restaurants are a 'proven' business. If you execute well you succeed. Since the business is already proven/known, there is lots of support/infrastructure for creating it. I'm guessing it would cost you about $500 out of pocket to 'start' your bookstore, maybe $2000 if you went to a lawyer for your articles of organization.
People who do technology startups some times overlook how 'easy' that can be.
That might as well be a tautology - if you don't succeed, obviously you didn't execute well.
Unless money has gotten tremendously cheaper, $500 seems at the absurdly low end of out-of-pocket to get a business loan/etc.
> For Mr. Hollock, the “Born to Lose” author, the issue is readers, not dollars. His award-winning book, published by Kent State University Press, had a steep list price of $35 to begin with. In the author’s view, Amazon is simply compounding the trouble by raising its price to more than $30 from $23.
Why is the author complaining about Amazon, when the list price is as high as $35? Yes, Amazon might have gone from $23 to $30, but that is still a 14% discount.
Why was the list price so high in the first place? Shouldn't the author be complaining about the press?
For mostly historical reasons, wholesale price has become quasi-fixed at 50% of list. So in this case what's happened is the publisher has chosen to sell the book for $17.50, and the way you do that is by setting an entirely notional "list price" at 2x the intended wholesale price. But the $35 is not a real price; the real price in the publisher-bookstore exchange is $17.50. It's then up to bookstores how much they want to mark the book up above $17.50. Here, Amazon is choosing to sell it for a 70% markup above wholesale, whereas previously they were selling it for a 30% markup.
(This is U.S.-specific; list prices mean different things in different countries. Also, I believe the 'standard' ratio of wholesale-to-list varies in some categories, e.g. it's different for textbooks.)
As far as I understand, Amazon works out the optimal discount for a book based on a number of factors including the popularity of the book and the prices charged by their competition. The same book at B&N is $31.49 [1], 88 cents more than Amazon is charging.
[1] http://www.barnesandnoble.com/w/born-to-lose-james-g-hollock...
By "cuts back discounts", the headline means "Amazon is selling books for slightly more, which is still less than brick and mortar stores."
Prior to using amazon my options were basically phone up then trek to Foyles in London or go to my local book shop and try and work out how to get them to order something that wasn't top 100 dross.
If you buy used books from them as well, they are actually cheaper than a lot of the charity shops now as well and you get a better hit rate.
And that's just the books side of things. Lenovo parts from China, phone parts from Canada, phones, computer parts, memory cards, camera, laptops. Just the best experience so far.
And you can talk to a human pretty much instantly from experience.
They can also go to competitors like Walmart and give them whatever deal works for the goals. Or they can use rebates which keep the profit the same for the store (Amazon) but lowers the price the consumer pays.
I don't see any reason why they are making demands on Amazon's pricing and profits, but don't see fit to adjust their own.
A major theme of the small publishers and authors quoted in the article is that Amazon's price is higher than the publisher would want. If Amazon pays a fixed price for every book, then there's a fundamental conflict between the parties. Amazon wants to make margin, the publisher wants to make volume. If the publisher wants Amazon to keep their best interests at heart, they'll have to change the nature of their deal with Amazon so that their interests align.
just check for yourself at http://camelcamelcamel.com/
They virtually always undercut the 3rd party - which always begged the question: why do the 3rd parties even bother trying to sell on amazon?
Actually if you think about the kind of testing you're talking about, it doesn't make a whole lot of sense from a human psychology perspective. You don't look for a camera and think: "This should cost $123.76" and anything less will be huge turn off. There are probably more drastic things at play, like if the price ends in .99 or if it's more than a hundred dollars, or maybe people don't like certain price numbers for some completely random reason.
They probably have some internal database of the average (across all inventory) of the rate-of-sales vs. the listed-price and the algo just looks for a local maximum around the price that is a bit lower than the 3rd parties.
Btw, Kindle price of "Born to Lose" is $9.34 at the moment. Seems like a good discount to me.
IANAL, but this sounds like a potential anti-trust case to me. "Predatory pricing practices may result in antitrust claims of monopolization or attempts to monopolize. Businesses with dominant or substantial market shares are more vulnerable to antitrust claims. However, because the antitrust laws are ultimately intended to benefit consumers, and discounting results in at least short-term net benefit to consumers, the U.S. Supreme Court has set high hurdles to antitrust claims based on a predatory pricing theory. The Court requires plaintiffs to show a likelihood that the pricing practices will affect not only rivals but also competition in the market as a whole, in order to establish that there is a substantial probability of success of the attempt to monopolize." (http://bit.ly/12pG6gq)
Market share is but one market-power consideration when the government looks at whether a company has caused harm.
There are several angles to anti-trust, such as collusion and predatory pricing, that can matter even at modest market share points, if the government can prove consumer harm.
If low prices drove the competitors out, then high prices will surely see them flood back in.
Any firm that gains monopoly power and hikes the prices without inviting fresh competition probably worked out some sweetheart deal with the government--and even then, they're better off keeping margins fairly low, since a govt-approved monopoly is easier to justify when the firm is not obscenely profitable.
Ultimately I don't think a business born out of deep discounts is suited well to massive price hikes. It destroys the identity they've built with consumers and if they weren't in the game to be deep discounters over the long haul, then I'd say they'll die. They would be better off maintaining the discounts while improving their cost structure.
Why? The business of selling books is, like most businesses, capital-intensive and risky. On the other hand, if anyone does go back into the business Amazon just has to change a few lines in their database and the new competitors are out of business with a whole bunch of stock they can't shift and a huge loss for investors.
> When Mr. Striphas’s book, “The Late Age of Print: Everyday Book Culture from Consumerism to Control,” first appeared in paperback in 2011, Amazon sold it for $17.50, the author said. Now it is $19.
Well, given that the 2011 $17.50 price would be ~$18.12 today (due strictly to inflation) then it is not as big an increase as suggested.
> When the University of Nebraska Press brought out a bibliography of the novelist Jim Harrison four years ago, Amazon charged $43.87. The price this week: $59.87.
2009: $43.87 Today: $59.87 Correcting only for inflation the price would be: $47.63
Inflation doesn't even account for the majority of the price increase in this case but still this article appears to draw rather strong conclusions from rather flimsy analysis.
I realise that selling books from their own websites is difficult, especially for individual authors, and it gives them less visibility than Amazon provides. Banding together would solve that problem.
http://www.publishersweekly.com/pw/by-topic/industry-news/pu...
[data upon which entire thesis of article rests] -> stopped reading