As Competition Wanes, Amazon Cuts Back Discounts (trims free lunch)

[fjtorres]

Originally Posted by Graham

In Nate's piece he mentions that Amazon have 25% of the US print market. The other 75% is hardly 'no competition'.

Graham

Correct.
There are literally thousands of indie bookstores out there.
There are several large regional chains with hundreds of stores each.
There are thousands each of newstands, drugstores, supermarkets, and department stores.
Rakuten/Buy.com sells pbooks online.
And B&N does both online and B&M.

And, nothing stops the publishers from selling books direct to consumers as they used to do before the corporate mergers of the 80's and 90's.

(I used to get regular newletters from ACE, Berkely, and Ballantine and buy mail order direct from them. On occasion, they even sold grab-bags of dozens of slow-selling books in blind bundles at nicely discounted prices; I discovered quite a few excellent b-list SF writers that way.)

[fjtorres]

Originally Posted by murraypaul

So to summarise, the authors and publishers want Amazon to continue to pay them the same amount for the book, but sell it for less?
If they want to lower the price, then they should lower the price they sell to Amazon at.
Why should Amazon take all the pain?

Exactly.

They want Amazon to accept the same low margins they accept on high-volume sellers (where they, ahem, make it up in volume) as they do on slow movers that are barely selling.

They really need to take a remedial course in modern retailer economics.

[HoraceWimp]

Originally Posted by Graham

In Nate's piece he mentions that Amazon have 25% of the US print market. The other 75% is hardly 'no competition'.

I’m not familiar with the nate article you refer to and therefore can’t really comment on the veracity of the percent market share Amazon has. Even assuming that it is the 25% as quoted I’m not sure how relevant that might be to the broad spectrum of books being sold.

What I do know is that Amazon has been predatory in the book market by slashing prices on books that bricks and mortar stores could not compete with and now many of those bricks and mortar stores have stopped stocking those books, Amazon has started raising prices on them. Presumably to claw back some of the lost profits that their price slashing caused in the first place.

It’s noticeable that Amazon is not raising prices on the more popular best sellers where they do still have plenty of competition, presumably from that 75% of the market they don’t control.

I dislike any predatory company that tries to manipulate and monopolise a market in the way that Amazon is trying to do. It’s underhand, not good business practice and ultimately bad for consumers. Healthy competition is good.

[Nate the great]

Originally Posted by HoraceWimp

I’m not familiar with the nate article you refer to and therefore can’t really comment on the veracity of the percent market share Amazon has. Even assuming that it is the 25% as quoted I’m not sure how relevant that might be to the broad spectrum of books being sold.

This one:
http://www.the-digital-reader.com/20...oh-the-horror/

The 25% figure is actually from the original NYTimes piece, and it is a good example of just how nonsensical that piece was.

Originally Posted by HoraceWimp

What I do know is that Amazon has been predatory in the book market by slashing prices on books that bricks and mortar stores could not compete with and now many of those bricks and mortar stores have stopped stocking those books, Amazon has started raising prices on them. Presumably to claw back some of the lost profits that their price slashing caused in the first place.

It’s noticeable that Amazon is not raising prices on the more popular best sellers where they do still have plenty of competition, presumably from that 75% of the market they don’t control.

How do you know that is predation? It sounds like standard retail pricing strategy to me.

[DiapDealer]

Originally Posted by HoraceWimp

What I do know is that Amazon has been predatory in the book market by slashing prices on books that bricks and mortar stores could not compete with and now many of those bricks and mortar stores have stopped stocking those books

If it was truly "predatory," they'd be the ones getting calls from the DoJ. Was Borders and B&N also guilty of "predatory pricing" when they put Mom & Pop out of business? Or was that somehow different?

Selling things cheaper doesn't automatically equate to predatory pricing like you seem to need it to. Either that, or every thriving business out there is guilty of it.

[HoraceWimp]

Originally Posted by Nate the great

How do you know that is predation? It sounds like standard retail pricing strategy to me.

Standard retail pricing generally endeavours to put a product in front of a customer at a competitive price with their competitors. The customer makes a buying decision based on that price and factors in other considerations such as value for money versus service, convenience of buying etc. That price doesn’t always have to be the lowest one.

Predatory pricing is deliberately designed to undercut competition prices with the sole aim of putting them out of business. So far Amazon’s strategy has worked reasonably well, they’ve held them down for long enough to put competitors out of business.

Now the prices can rise to recoup some of their earlier losses.

[SteveEisenberg]

Originally Posted by DiapDealer

If it was truly "predatory," they'd be the ones getting calls from the DoJ.

Do most violations of federal law actually result in prosecution? I doubt it. And is predatory pricing illegal per se?

Originally Posted by Graham

But surely Amazon are under no obligation to discount at all?

Obligation? No. Just as the publishers of copyrighted literature are under no obligation to allow heavy discounting -- or any discounting -- except for the publishers who agreed not to do it, until late 2014, as part of the antitrust settlement.

Amazon is doing just what could be expected if they used loss leader pricing to put competition out of business so they could then raise prices. They are under no obligation to avoid such tactics, true.

Originally Posted by fjtorres

There are literally thousands of indie bookstores out there.

Mostly small ones with limited backlist selection. That's why Amazon reduced discounts the most for less popular books.

[Andrew H.]

Originally Posted by HoraceWimp

Standard retail pricing generally endeavours to put a product in front of a customer at a competitive price with their competitors. The customer makes a buying decision based on that price and factors in other considerations such as value for money versus service, convenience of buying etc. That price doesn’t always have to be the lowest one.

It doesn't have to be, but it usually is because that's what customers are most interested in. Having said that, Amazon is *also* pretty convenient, has good service, etc.

Predatory pricing is deliberately designed to undercut competition prices with the sole aim of putting them out of business. So far Amazon’s strategy has worked reasonably well, they’ve held them down for long enough to put competitors out of business.

No, you don't understand predatory pricing. It is perfectly fine and 100% legal to have prices so low that they drive the competition out of business. Whether or not your competition goes out of business is none of your concern; it's certainly not something that you should think about when setting your own prices.

What predatory pricing actually is is selling your products *at a loss* to unfairly hurt your competition. (And this expressly doesn't include loss leaders, which retailers have used for a century). There's plenty of evidence that Amazon has not engaged in predatory pricing, and no evidence that they have. This is well documented. The fact that other companies can't match Amazon's prices probably has more to do with legacy costs that they have and Amazon doesn't. That's hardly Amazon's fault.

[fjtorres]

Originally Posted by HoraceWimp

Standard retail pricing generally endeavours to put a product in front of a customer at a competitive price with their competitors.

No.
Not always.
There are other strategies.

Where Amazon seems to be confounding a lot of people is that they are not running their company to maximize *present* revenue but rather to maximize *future* revenue. They are running a tech industry-standard growth-based strategy where you leverage your first-mover advantage in a virgin field to grow as big as possible as quickly as possible *before* any competitors can emerge.

And that last point is key; Amazon is *not* competing against B&M bookstores or even B&N. They are competing against eBay and against Rakuten and against Walmart.com. And against physical shopping mall operators. B&N and the bookstores are just collateral damage.

What so many people see as "predatory" practices is nothing of the sort. What it is is the unfortunate reality that Amazon can sell the exact same prducts to the exact same customers for a lot lower operational cost than the B&M retailers and they can sell *more* products than the B&M guys to those same customers and, even more importantly, they can sell that bigger catalog to people the B&M guys can't reach at all.

They are more efficient *and* have a bigger reach because they are paying to a broader audience.

To paraphrase Lois MacMaster Bujold about one of her characters; "Amazon is running a get rich *big* play, not a get rich *quick* play."

The only way to counter that strategy is to meet them on the same turf-- using the same tools: logistics, automation, customer srvice, advanced tech, and a heavy online component--or, conversely, get the heck out of their way and find a business model that caters to the peope Amazon can't appeal to.

[speakingtohe]

Originally Posted by murraypaul

So to summarise, the authors and publishers want Amazon to continue to pay them the same amount for the book, but sell it for less?
If they want to lower the price, then they should lower the price they sell to Amazon at.
Why should Amazon take all the pain?

Kind of like having your cake and eating it.

I think if an author is unhappy with Amazon they should select another vender, I doubt Amazon cares enough about the complaints to attempt retribution, and they do seem a little silly to me (just my opinion) but biting the hand that feeds you is not always wise.

Helen

[rhadin]

Isn't the ultimate point that Amazon "promised" book buyers large discounts all the time as it campaigned to get your business and deny it to the indie bookstores and B&N and is now breaking faith with that "promise" as it gives in to pressure from shareholders to provide higher quarterly profits and returns?

The problem with only buying from a company like Amazon is that the pricing model it follows is not sustainable forever. At some point the company has to meet shareholder demands. Amazon has gotten a free ride -- a ride that no other major company I am aware of has gotten -- from investors/shareholders that has allowed it to focus on gathering market share at the expense of quarterly profits and returns. Now the investors/shareholders are agitating for that quarterly return, which is forcing Amazon to alter its pricing model.

My question is this: If Amazon raises its price so that it is just barely less than the price your indie bookstore or B&N charges, will you continue to support Amazon at the expense of possibly losing the indie/B&N? At what point, if any point, are you willing to support competition?

What happens, do you think, to pricing if B&N follows Borders? We all know that WalMart and Target aren't competitors to Amazon or other bookstores once you get past bestsellers. If all you read are bestsellers, then competition may well remain once B&N goes. If your reading is broader, like mine is, then there will be a problem once B&N dies and Amazon considers itself free to raise prices as high as possible.

I think the NYT story is just a precursor to the stories we will be reading in the not-so-distant future.

[HarryT]

Forgive the obvious question, but if the author wants Amazon to lower the price, why doesn't the author simply lower the price? I don't believe that Amazon will ever sell a book for more than the price that the author specifies.

[speakingtohe]

Originally Posted by HarryT

Forgive the obvious question, but if the author wants Amazon to lower the price, why doesn't the author simply lower the price? I don't believe that Amazon will ever sell a book for more than the price that the author specifies.

I am thinking, based on other comments in this thread, that if the author lowers the price than the author's royalties go down accordingly.

Helen

[DiapDealer]

Originally Posted by rhadin

My question is this: If Amazon raises its price so that it is just barely less than the price your indie bookstore or B&N charges, will you continue to support Amazon at the expense of possibly losing the indie/B&N? At what point, if any point, are you willing to support competition?

My answer is simple: at no point am I willing to inconvenience myself (or spend more money) to "support" competition. I'm the consumer; that's not my job. It's up to the competing businesses to entice me to be a patron. If they (the business) need to rely on assistance from their customers--in the form of being willing to spend even slightly more money than they have to (for no added service), or going out of their way a little more than they might have to--then they're already out of business... they just haven't accepted it yet.

The only exemption to my own philosophy would be if I personally knew the proprietor of a business. But even in that instance, my altruism only goes so far: meaning I'm only willing to help ... not perform CPR on a dying business model at the expense of my own financial common-sense.

Bottom line is this: I feel no loyalty|sympathy|obligation to businesses (or industries). Especially those businesses who were free to make the same decisions--to recognize the same future business potential--that Amazon did long ago. I'm not going to reward anyone for getting beat at their own game.

[HarryT]

Originally Posted by speakingtohe

I am thinking, based on other comments in this thread, that if the author lowers the price than the author's royalties go down accordingly.

Helen

The author claims to be worried about the price that the customer is paying. He surely doesn't expect to be able to have his cake and eat it - if he wants the book to sell for less, he should also be willing to get less money for it himself.