On Selling Used Books on Amazon for a Penny

3523201889_7a4faf84d7_bDavid Nicholls may decry those who buy their books online, but even he knows why we do so. We shop online because the books are cheap, and the reason the prices are so low is that supply exceeds demand.

Take those one cent books on Amazon.com and other sites, for example. I'm sure you've browsed the Amazon Marketplace sellers and wondered where those ebooks came from and how a company can make money selling a book so cheap.

The Guardian looked into it, and they found that many of the largest sellers of used books ran highly automated operations which collected books from charity shops, libraries, and schools.

These books were mostly going to be thrown away, and in fact 90% still are thrown out. But the remaining 10% still amounts to more books than the market can handle.

Basically you can take the origin story of one online seller and multiply it by a hundred:

Colin Stephens, founder and director of Sunrise Books in England, was thumbing through a charity shop’s bookshelf when the manager told him how much she’d come to hate used books. Every few days, she complained, she would have to load the trunk of her car with the shop’s excess donations and shuttle them to the landfill, in her own spare time and at her own expense.

Back then, Stephens happened to be out of work; he had long enjoyed buying and selling books on eBay, and suddenly saw an opportunity to turn his hobby into a full-time job. He told the manager that he would come by once a week to take the books and find them a new home. She was thrilled.

“The next day I got a call from one of her friends who manages another charity shop,” Stephens told me by phone, “and then another, and another.” He started selling these orphaned books online, out of his living room. Ten years later, Sunrise Books has four warehouses to its name, and is about to take over a fifth. “We have two vans out on the road every day that go around to charity shops on set runs,” he explains. They take in upwards of 20 tons of used books each week.

I was surprised to learn that the reuse/recycle operations had grown that large and that organized. While I had know that the internet had concentrated supply to such a degree that it forced prices down, I had never realized the degree to which the supply exceeded demand.

This is what the used book operations see, day in and day out:

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One could look at this and blame the internet for ruining the book business, but what I see is evidence that the publishing has been over-producing a durable good for far too many decades (but we already knew that from the fact that publishing had a word for remainders).

In the pre-internet days, the publishing industry could continue blithely over-producing and count on an inefficient aftermarket to make sure that the excess disappeared.

But thanks to the internet, the aftermarket - the used book market - is now as efficient as the new book market.

Your potential supply of books has expanded beyond the shelves of the bookstores in your limited geographic region to include every shelf in every warehouse in the world.

Folks, this is part of the reason I've said that any workable plan for a future bookstore will have to include an online component, and it will have to include used book sales.

So long as books continue to be over-produced, the aftermarket will remain quite large. There's acres and acres of books for you to buy online, and any bookseller looking to thrive is going to have to figure out how to stake out a claim and make money off of that excess supply.

images by Sapphirebluenet_efekt

About Nate Hoffelder (11582 Articles)
Nate Hoffelder is the founder and editor of The Digital Reader:"I've been into reading ebooks since forever, but I only got my first ereader in July 2007. Everything quickly spiraled out of control from there. Before I started this blog in January 2010 I covered ebooks, ebook readers, and digital publishing for about 2 years as a part of MobileRead Forums. It's a great community, and being a member is a joy. But I thought I could make something out of how I covered the news for MobileRead, so I started this blog."

7 Comments on On Selling Used Books on Amazon for a Penny

  1. Excellent article!

  2. Ummm, the feel and smell of all those books in the dumpster must be exquisite. Someone should be selling hourly rentals to the “real book” fetishes.

  3. Over the years I have purchased a number of hardbound classic works of history and literature for a dollar from a local used bookstore. The bookstore holds its dollar books for a month before dumping them. Because what is available varies from month to month, I would not be likely to find a specific title I was looking for in the dollar bunch. When I have wanted a specific book, I have often found it in the one cent + postage area of Amazon.

  4. Here’s something a little crazy. (I wrote an article on this that I hope will soon appear on EntertainmentTell and TeleRead.)

    There’s a really nifty damaged/overstock goods liquidation outlet near where I live that has a huge selection of $5 Blu-rays. Some with damaged cases, others nearly new. I snagged a pristine-save-for-lack-of-shrinkwrap copy of Birdman there. It even had a digital copy code that hadn’t been used by anyone yet. It had the white label over the bar code you usually see with overstock items.

    This is a Blu-ray that came out only two months ago, mind you, and is still selling for $20 on Amazon. When I talked to the employee at the store who was stocking them, he said that their Blu-rays are overstocks and damaged goods from Amazon itself.

    There are a couple of takeaways from this. First, Amazon likes to err on the side of having too many items rather than not enough when it places initial orders. Not surprising given Amazon’s reputation for getting you what you order as soon as you order it.

    Second, somewhere in Amazon’s computerized inventory management system, an algorithm decided Amazon could make more money by dumping a two-month-old, Oscar-winning movie at a price low enough that a liquidator could sell it for $5 and turn a profit, and using its warehouse inventory space for something else, than by keeping it until it could sell it. The liquidator employee said that sometimes they even get movies from Amazon before their actual release date.

    That’s some seriously finely-tuned inventory-management software. Just goes to show, Amazon makes its profit by making low margins on everything, but making them very, very fast. Given the choice, it’ll make money now rather than money later. Which is an old principle I learned in accounting class—it’s better to have the same amount of money now rather than later, because you can use it now or just earn interest on it—but Amazon takes that to the same sort of extreme as Wall Street automated stock trading programs.

    It’s a business model that could never have been executed to such an extent before computerization. Small wonder Amazon’s competitors and even its suppliers have tried, unsuccessfully, to hobble it.

  5. This is interesting and nicely done but a bit overly simplistic in certain respects. Books get “overproduced” (in the sense that print runs exceed market-clearing levels) for essentially the same reasons that lettuce does. The marginal cost of producing more is small and by filling the distribution channel sellers ensure that they can meet the full potential demand for the title. Then they exploit the high price elasticity of demands for books in order to sell much of any overage at prices that still exceed marginal costs. The penny sellers further exploit the elasticity to sell to even more price-sensitive buyers. All classical economics in action.

    There’s little doubt that Internet bookselling has greatly increased the overall efficiency of the book market by improving discoverability and product mobility. I make use of this to acquire research materials for my writing that would be far more slow and cumbersome to obtain through interlibrary loan (which has also benefited greatly from the Internet), and overall less costly as well.

    The effects on the costs of individual titles has been quite mixed. Overall used book prices have declined, most strongly exemplified by the penny book. But there are notable exceptions. A few years ago I bought a copy of a rather esoteric book on the development of aircraft engines and fuels for $50, which seemed like quite a stiff price at the time. Today you cannot find a copy of that book for less than $500. I’ve seen much the same thing with some other titles.

  6. I thought it was a fascinating article too. One thing jumped out at me though – which was how cheap print books is almost always presented as a good thing. Contrast that to the general media treatment of cheap ebooks, and how it’s some kind of danger to literature or authors’ prospects. (And, of course, they have it backwards because because authors/publishers don’t make anything from used print sales, and very much do from cheap ebooks.)

5 Trackbacks & Pingbacks

  1. 1 Cent pro Buch: Das Geschäft mit überschüssigen Buch-Spenden » lesen.net
  2. Books for a penny | Making Book
  3. Print-On-Demand Is Not and Never Will Be the Silver Bullet Which Slays Amazon | Ink, Bits, & Pixels
  4. On Selling Used Books on Amazon for a Penny, Redux | The Digital Reader
  5. My Local Used Book Shop is Closing: a Cautionary Tale | The Digital Reader

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