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NY Times Discovers Amazon is Trying to Make Money Selling Books – Oh The Horror

amazonempire[1]Did you catch the article in yesterday’s NY Times?

David Streitfeld penned a delightfully absurd anti-Amazon screed in which he tries to turn Amazon’s pricing policies into some terrible misdeed. I have not seen such heights of biased unsubstantiated anti-Amazon ranting since March, when The Telegraph complained about Amazon’s ebook pricing policy (the Melville Publishing House blog sometimes comes close, though).

Do you know what Amazon is doing that is so unbelievably evil? They’re actually having the gall to sell books at prices that are only sightly discounted from the retail price set by the publisher. *Gasp*

Today I thought I would quote some of the choicer misstatements, figments of someone’s imagination, and utter nonsense found in this piece of text (I would not call it an article). I’m going to comment on the assumptions and point out how ridiculous this story really is.

Jim Hollock’s first book, a true-crime tale set in Pennsylvania, got strong reviews and decent sales when it appeared in 2011. Now “Born to Lose” is losing momentum — yet Amazon, to the writer’s intense frustration, has increased the price by nearly a third.

Mr. Hollock’s first book had decent sales when it appeared in 2011, but now that it is losing momentum, Amazon raised the price.“At this point, people need an inducement,” said Mr. Hollock, a retired corrections official. “But instead of lowering the price, Amazon is raising it.”

Let me rephrase his complaint: "My publisher put a high price on this book. Now that Amazon is not willing to sell the book at such a huge discount fewer people are buying the book. Curse you, Amazon."

It is difficult to comprehensively track the movement of prices on Amazon, so the evidence is anecdotal and fragmentary.

Translation: We have no evidence that Amazon is up to no good but we are complaining anyway.

But books are one of the few consumer items that still have a price printed on them. Any Amazon customer who uses the retailer’s “Saved for Later” basket has noticed its prices have all the permanence of plane fares. No explanation is ever given for why a price has changed.

Fact check: That has been the way Amazon has operated for the entire 6 plus years I have shopped at Amazon. How exactly is it an issue today?

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.

Rob Buchanan, a sales coordinator for the press, said the $65 list price of the book had not changed, nor had the price the publisher billed Amazon. “I can’t think of a reason on our end why they’d be charging more.”

Translation: "I don’t understand why Amazon isn’t willing to lose money on a book that isn’t selling well."

Higher prices have implications beyond annoyed authors.

Fact Check: Sorry, but I was under the impression that publishers are the ones who set the retail price of paper books, not Amazon. Why is it Amazon’s sin when Amazon sells a book at a price nearly as high as the price set by the publisher?

For all the hoopla around e-books, old-fashioned printed volumes are still a bigger business. Amazon sells about one in four printed books, according to industry estimates, a level of market domination with little precedent in the book trade.

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.

Amazon sells only 25% of print books in the US, and yet they have no competition? Really? Really?

Could someone explain the math to me? I was under the impression that a minority share of a market indicates that Amazon has a lot of competition.

Also, if B&N is still struggling then doesn’t that mean they are still competing? What about the regional bookstore chains, or the remaining independents? Have they all given up and gone home?

Stephen Blake Mettee, chairman of the board of the Independent Book Publishers Association, said that Amazon was simply following in the tradition of any large company that gains control of a market. “You lower your prices until the competition is out of the picture, and then you raise your prices and get your money back,” he said.

Okay, now we’ve ventured into Wonderland. One, Amazon doesn’t control the print book market market, and two, Amazon is still selling for below the retail price.

But never mind the facts; Amazon is evil.

Authors like Mr. Hollock say they feel helpless about Amazon’s control over their fate. Mr. Hollock says he has called Amazon several times to ask why the price of his book was going up, and never received an answer that made sense.

Oh, my. I don’t know what to say. This author is making assumptions that are so disconnected with reality that I honestly cannot refute his claims.

One small nonfiction publisher, which requested confidentiality because Amazon is a crucial account, said the retailer sold its books at a discount ranging from 25 to 35 percent for years. Then, despite steady sales, the discounts began to shrink. Their most popular book this week was 16 percent off.

For this publisher, that means less revenue and less profit as some buyers reject the more expensive books.

Translation: Curse Amazon for not selling the books at such a steep discount.

Curt Matthews, chief executive of the Independent Publishers Group, a Chicago book distributor that got in a dispute with Amazon last year over margins on e-books, speculated that Amazon could be data-mining its customers.

“They are wondering, ‘If we knock off only 10 percent as opposed to 35 percent, where do we come out ahead?’ ” Mr. Matthews said. “They don’t care how many books they sell. They want to know how many dollars they get.”

Translation: I am shocked, shocked I tell you, to learn that Amazon is in business to make money. Publishers, of course, are only interested in producing unique cultural artifacts.


Yeah, the text published yesterday has absolutely no substance to it. But you don’t have to take my word for it; go read it yourself. Be prepared to laugh derisively, though.

NY Times

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Peter Turner July 5, 2013 um 10:46 am

While I agree with some of what you say here, Nate, what’s missing is the reaction many book consumers might have to what looks like a bait and switch. That is, you buy from Amazon because they’re just so much cheaper and more convenient. Your local bookstore goes out of business, which saddens you but that’s life. Then Amazon raises its prices (if true), but your local bookseller is gone for good.

fjtorres July 5, 2013 um 11:19 am

Bait and switch? Really?
The Daily deals, with clearly specified expiration times, are bait and switch, too?
How’s about Holiday sales at any other retailer?
Time-limited discounts are a staple of modern retailing; "buy now before the price goes back up!"
Well, golly gee, if that message is to have any bite, prices *have* to go back up towards the list price.
Any survivor of the consumer society knows *that*: If you see a product you like at a price you like, you either buy or risk the price going back up. Unless you’re willing to gamble on a clearance sale bringing it down further later. (Key word: Gamble. "You place your bets, you take your chances.")

Bait and switch?
Not even close.
Here, *this* is bait and switch:

[A deceptive sales technique that involves advertising a low-priced item to attract customers to a store, then persuading them to buy more expensive goods by failing to have a sufficient supply of the advertised item on hand or by disparaging its quality.]

Or this:

[bait and switch n. a dishonest sales practice in which a business advertises a bargain price for an item in order to draw customers into the store and then tells the prospective buyer that the advertised item is of poor quality or no longer available and attempts to switch the customer to a more expensive product. Electronic items such as stereos, televisions, telephones are favorites, but there are also loan interest rates which turn out to be only for short term or low maximums, and then the switch is to a more expensive loan. In most states this practice is a crime and can also be the basis for a personal lawsuit if damages can be proved. The business using "bait and switch" is an apt target for a class action since there are many customers but each transaction scarcely warrants the costs of a suit alone.]

Syn July 6, 2013 um 2:45 am

Bait and Switch is what Apple/AT&T did over that unlimited data plan they promised on iPad 1 then yanked the offer less than 2 months later.

Nate Hoffelder July 5, 2013 um 11:23 am

I would hope that the people who make claims like that don’t shop at Amazon, otherwise they would be just as guilty as Amazon. They would also be hypocrites for bemoaning an event that they helped cause.

And furthermore, all this talk about Amazon hiking prices after driving the competition out of the market is nothing more than a conspiracy theory. There’s no evidence to support it at all. Even this article talks about Amazon selling at a price lower than what the local bookstores would charge. That does not fit with the bait and switch claim.

flyingtoastr July 5, 2013 um 4:00 pm

It isn’t a conspiracy theory – it’s what monopolies have repeatedly done throughout history. If you think Amazon is any different you’re delusional.

Nate Hoffelder July 5, 2013 um 4:17 pm

Got any proof that Amazon in particular plans to do this? No? Then it’s a conspiracy theory.

fjtorres July 5, 2013 um 5:45 pm

just curious: 25% pbook market share is a monopoly?
A few thousand indie bookstores would beg to differ.

fjtorres July 5, 2013 um 11:09 am

Amazon’s prices vary over time.
That is a fact of life.
They are in business to *sell* merchandise.
Nowhere does Amazon say their sale prices are permanent. In fact, that prices can (and do) go up is the incentive they offer to get consumers to buy when the price is acceptable.

Second, the price is a function of volume; the more a book sells, the more likely they are to discount it. The idea of the discounts is to draw traffic in and get them to buy. Slow movers (in both rate and momentum) are not traffic draws but rather beneficiaries of traffic generated by other products. (Unlike B&M stores that discount books that *don’t* sell to get them off their hands, Amazon has no incentive to discount slow movers. )

Third, if a product is losing sales, it is up to the *producer* to promote it. If they want to see the price go down, they should be reducing its price, nott expecting the retailer (out of the goodness of their heart) to sacrifice *their* profit margin to do the promotion work that propery belongs to the producer. (If the XBOX is moving slowly, it is *MICROSOFT’S* job to run ads, reduce the list price, bundle games, or give the retailer a lower temporary price so they can discount it.)

Fourth, Amazon is "eeee-vile!" when they discount because they "devalue" books and they are "eeee-vile!" when they don’t?

If publishers want backlist titles to move like they did when new, hoszabout *they* bite the bullet and cut the wholesale price? Or actually do some promotion for a change?

stevesup July 5, 2013 um 8:33 pm

Amazon raising prices? Probably means it has destroyed most other booksellers. Time to out the screws to customers.

Sherri July 5, 2013 um 10:38 pm

Amazon is still discounting these books more than any bookseller did prior to Amazon, yet Amazon is the one screwing people? Before Amazon, if that small press was lucky enough to get their books into a bookstore, those books were going to be sold at full retail price.

Chris Meadows July 5, 2013 um 11:24 pm

There’s also this piece by Laura Miller on Salon a few days back:

After dismissing the idea that Amazon just wanted to sell heavy readers on Kindles, or lure people to its store to buy more stuff, Miller writes:

The most popular theory by far holds that Amazon intended from the start to totally dominate the e-book marketplace. By using its wealth to subsidize the sale of e-books at a loss, it could drive any competitors out of the market. Bricks-and-mortar chains like Barnes and Noble and online start-ups like Kobo (both of which would introduce their own e-reader devices) or device-neutral rivals like Google would simply not be willing or able to bleed cash as long as Amazon could.

Never mind that there were no serious e-book competitors on the market at the time, or that if Amazon wanted to drive bookstores out of business it was already doing a bang-up job selling paper books at great discounts over what brick and mortar stores were able to offer. Also note the subtext that the most popular theory must therefore be the correct one. Because it’s popular.

Richard Adin July 6, 2013 um 6:05 am

I think the point is being missed. The point is not that Amazon doesn’t have the right to raise prices not is it that Amazon has raised prices but to the point that they are still a bit less expensive than other bookstores nor that Amazon has always had price fluctuations.

I see the point of the article as an indication — not proof positive, just an indication — that Amazon is finally going to start pricing books at a level that generates profit, not barebones breakeven, and that this change in attitude breaks "faith" with all those consumers who proclaimed from the beginning that Amazon was their friend and would never raise prices as a result of driving some of its competition out of business via its extra-low pricing.

If you recall, I said several years ago here on TDR and on other forums that once Amazon’s pricing reduced its competition sufficiently and once shareholders began exerting pressure for quarterly returns, Amazon would raise prices. I think this is the beginning of that new era at Amazon.

Amazon has had the luck that has not been afforded to any other major publicly held company, at least to the best of my knowledge, of being able to go 16 years with little to no shareholder return and minimal profits. Bezos did a great job selling major shareholders on the idea that market share and control is more important than quarterly profits. However, I think his iron grip on the shareholders is starting to slip and the pressure is on to focus on quarterly profits and returns.

And, FWIW, what counts is market power, not percent of market ownership, when determining whether something is a monopoly. It is quite possible for a company to exercise the power of a monopoly even with less than 51% market share. And if you insist that the rule is governed by percent, then Amazon certainly has monopoly power in ebooks where it has 60% or more market share and B&N is retreating.

It is also important when determining monopoly power to define the market. I suspect that Amazon has more than 50% of the market for online sales of hardcover books; if you eliminate sales by B&N’s brick-and-mortar stores of hardcovers, I suspect that B&N has less than 30% of the market for hardcover books sold online.

The nice thing (and the bad thing) about talking about monopoly is the difficulty in pinning down the definition of what is the market. That failure lets us all be right in our pronouncements.

BTW, as one of those who decries Amazon’s market power and who has said from the start that given the opportunity, Amazon will slowly raise prices, I make it a point not to buy books from Amazon; I am willing to spend the little bit more that B&N and other booksellers charges.

fjtorres July 6, 2013 um 8:54 am

I think that Amazon’s pricing of a handful of slow selling, expensive books is hardly a bellweather of any kind and trying to read anything into it is a Rorschach test. 🙂

(Amazon can just as easily be trying to prod the publishers into dropping the list and wholesale price.)

And the problem with the "Amazon makes no profit" meme is that Amazon *does* make substantial profits and has for years now; they just reinvest it on the fly into growing the company. Which is why stockholders stick with Bezos; they understand Amazon is a future value play, not a present dividend play.

The true bellweather sign *I* look for is when Amazon *stops* building distribution centers.
At that point we’ll see exactly what kind of machine Bezos is building.

I do applaud those that have the courage of their convictions and do no business with Amazon.

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