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Originally Posted by murraypaul
I think you are probably right that they are not generally selling at a loss in the US market, it is a much more established one for them, and they are in a different stage of growth.
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I don't believe they were taking losses on sales when they were originally ramping up the Kindle and ebook business in the US. I don't see why they would do so elsewhere.
Yes, the Kindle platform had development costs, and it would have been a while before they recouped those in Kindle sales, but the ebooks intended to be read by the Kindle are another matter.
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If they are not selling at or below cost in the UK, but are selling at less than 50% of the price of other stores then either they have a much better deal with the publishers or the other retailers are really ripping people off. I believe that in the UK they are willing to run eBook sales at a loss for 6-12 months to grab marketshare.
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Let's drop loaded words like "ripping off". Producers and retailers set prices they think they can
get.
Producers will have minimum prices they
must charge, simply to cover production costs. They will sell to wholesalers/retailers at a discount, with the amount of discount normally depending on the volume of the sale. The more you buy, the lower your unit cost will be.
The retailer will have a Manufacturer's Suggested Retail Price, which will be the cover price in the case of a book. To boost sales and compete with other retailers, a retailer may choose to charge less than MSRP. The difference will come out of their margin. The retailer makes a guess at how many copies they can sell at full price, and makes a bet that they will sell enough additional copies at the lower price to make up for making less money on any individual sale, and make more total revenue and profit overall.
Amazon probably
does have a better deal with the publishers. What is paid by Amazon to the publisher for each sale is determined by contract. Amazon is the world's largest catalog retailer, and sells a hell of a lot of books, so you can assume Amazon will get the most favorable terms from publishers.
This sort of cutthroat retail competition has been a factor in US bookselling for decades. Smaller bookstores and "Mom and Pop" operations are dying like flies. They can't get the level of discount someone like Barnes and Noble can get, can't match B&N on pricing, and fold, because buyers shop for the lowest price. Warehouse stores like CostCo and Sam's Club have even greater economies of scale, and put pressure on B&N. Amazon puts pressure on everybody.
But pricing is always "What the market will bear". If the retailer can
get enough sales of an item at a particular price to meet their targets and make the desired amount of money, they'll charge that price. The fact that
you don't like it is
your problem. Enough other folks
don't think it's a rip off to keep retailer and producer happy.
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Dennis