Amazon.com And You're Done

I remember in the late 90s siting in a strategy board meeting, where one director predicted that Bertlesmann would ‘crush ‘ Amazon and that the company would not last at the level of losses is was making. I tried to explain global branding, customer service, and how retail operations can work on positive cash flow, but I only got a glazed look in return. The outcome is now history.

It is hardly surprising to find that the media that Amazon started with, books, is one that they cover so well. It is the width and depth of Amazon’s book vision and commitment that makes it different. They proved themselves adept in understanding the market’s weaknesses and seizing on opportunities. As a result Amazon is truly vertical.

Who else has a significant if not major share of:

Physical books - Sales over the internet now includes The Book Depository and ABE acquisitions. Amazon remain one of a few who openly sell new books alongside, bargain, second hand and rare. They understand that to a consumer, a book is a book and that bookselling is about selling all books, not just front list.

Ebooks - Amazon not only rekick started the ebook market, but drove the consumer adoption of eink readers and later platforms. Although they still own Mobi, it is somewhat languishing in the background and we are not sure what happened to that other acquisition, Lexcycle’s Stanza reader. They have however created a market leading and global Kindle brand, which now transcends the device itself.

POD – Amazon acquired Booksurge. Although POD never fulfilled its potential to change the model from print and distribute, to distribute and print, Amazon still acquire content through this channel and it has also established their appeal to many authors.

Audiobooks – Amazon has this base covered with market leading and aptly named Audible.

Marketplace – Amazon’s service pulls in retailers, wholesalers and publishers and creates a place where Amazon may not be the cheapest but they still gets a healthy slice of the takings from each sale. A very clever move to create a service which everyone has to be in.

Singles - Amazon Singles may still be a bit lost but could easily find a home in their new Washington Post offer.

Digital Library – The Amazon owner lending library creates a new lending model which offers the consumer a new service and the author additional new income.

This is all without KDP and its successful self-publishing arm and also Amazon’s now serious and potentially disruptive moves into being a publisher. Did we forget that Kindle brand? Did we forget that umbrella subscription service, Prime?

To achieve the above in less than 20 years and do so across the globe is significant. Together it shows a clinical understanding of the value chain, book sectors and its supply chain that has to be admired. Amazon is truly a category killer.

Now add LoveFilm video streaming and DVD rentals, a very healthy CD Rom music retail offer and music downloads, the Washington Post, Amazon’s new Art offer and we see a media conglomerate that has subtly moved in and picked the industry’s ‘low hanging fruit’.

We must not forget all the other Amazon businesses. The range of goods it now sells is diverse and generates significant revenues. Here it services the same consumers through a single marketplace portal, offering a true one stop shop, or ‘Walmart on the internet’.

Then we have the technology that underpins all their services and like their cloud and web services are now being retailed in its own right. 

Amazon is here and is here to stay.

As long as they continue to provide that comprehensive cover, service and one stop shop, they will not be dislodged. Some may want to be number two or three, but it’s like chasing rabbits and their future will be determined more by Amazon’s actions and their ability to merely track them. We now need to learn to survive in an Amazon world. To do so we must innovate and do things differently and smarter and in doing so recognise that only the agile survive a category killer.  

Amazon Buys Shelfari

We got back from a short break in Slovakia to the usual pile of email. In among them was an interesting publishing string about Amazon and their market position, digitisation and whether all this was healthy for publishers. Anyone who has read this blog over time will be able to predict our response.

Then today we open up another email to read from the Seattle Post Intelligencer that Amazon has now added its small Seattle neighbour Shelfari to its list of acquisitions.

Amazon has now bought a number of publishing related companies. These include the likes of Booksurge, Brilliance, Audible, Mobibook, ABE and now Shelfari. Couple these with its global market dominance in Internet bookselling and you have a very interesting mix which covers all but front list publishing!

Some may consider that the shrewdest move is the pincher action that they appear to have taken in covering at one end the out of print content with ABE and the self publishing end with Shelfari. When you couple this with their underpinning technology, commerce and distribution platforms you start to see a different animal and one that can certainly change publishing as we know it.

Obviously you have to add the Kindle into the mix and also appreciate their growing and significant internet marketshare and some would say you potentially have a mix to die for.

Shelfari, is the Seattle social networking start-up for book lovers whose main rival is part owned by ABE. Shelfari is a social network that allows groups of people to create virtual bookshelves and share titles with friends. So will Amazon dispose of their stake in LibraryThing or consolidate it further with their new acquisition?

As publishers dabble with social networking and self publishing, Amazon has clearly moved. When the market dithered on audio downloads to Audible and DRM free, Amazon merely swallowed up the company. As self publishing continues to grow, Amazon now gives it a shop window. As inventory and distribution costs continue to climb Amazon takes a clear POD position offering both an alternative to Ingram, but also means for them to acquire digital content and distribution channel for self publishers. As publishers focus on front and experiment with reclaiming out of print, Amazon acquires the main player and information base.

We watch Amazon with both admiration and fear and once again are reminded of that old saying ‘be careful what you wish for.’

The Disipline of Market Leaders

Having worked for market leader organisations in various industries it is easy to distinguish them from the pack. Some believe that size counts and that this determines market leadership, the truth is that size often comes through market leadership but size alone is nothing but a statement at a given point in time.

Market leaders do what it says on the can ‘lead markets’. They are focused, proactive and although they recognise the short term are very much focused on the long term and creating a unique market position and differentiator. Do we have them in the publishing sector – yes but they are not who many would think of as market leaders. An interesting example is Taylor and Francis whose growth and digital strategies have been bold and delivered huge advantage when others have merely followed. The recent article in the Bookseller (25 July, ‘Jolly Rodger’) eludes to the vision and drive Rodger Horton and his team have given this publisher.

At times of fiscal constraint we often find that market leaders remain focused and plough forward, often bucking trends.

It is hard to find many examples of market leadership and easy to see many pretenders but one company clearly stands head and shoulders over the pack for the last decade – Amazon.

An industry ‘expert’ and colleague once told me that Bertelsmann and their Bol.com would crush Amazon and that their model was nor sustainable. Needless to say he didn’t understand their model, the power of positive cash flow, their relentless drive to capture market share and their global brand proposition. It was ’98 and obvious to many that they were going to dominate, but the manner in which they have set about it continues to demand respect.

They have:
Extended bibliographic record, making the book jacket obligatory on the net, introduced reader reviews. Remember where you first saw ‘Search Inside’?
Recognised that used , rare and front list are all books and that the publication date is not always top of the consumer’s agenda. Combining this and their marketplace offer was both logical and a breath of fresh air.
Captured the audiobook initiative through acquisition of first Brilliance and latterly Audible, they have taken the audio book market by the scruff of the neck. They already had the MP3 and DRM credentials but with Audible they now have both bases fully covered.
Established themselves as a digital player. Through their acquisition of Booksurge and their POD policy they have positioned themselves not only to supply POD but like others they can now also capture the bigger prize of the digital files themselves.
The Kindle may be an ugly duckling but it has many more titles than any of its competitors and more importantly belongs to a brand that is clearly associated with books. Adobe and Sony may all command trade attention today but this is not their market, is a trade only offer. In the case of Sony they can always leave as fast as Betamax or walk away like Microsoft Live Book Search or back the wrong horse as with their original BBeb ebook format.

The list goes on but we now read of Amazon’s payment gateway offer to rival PayPal and more importantly their full acquisition of ABE. This later move is very interesting and starts to potentially tie many strings together. Some thought it good that they would continue run ABE as a separate brand and company. Some would say that there is no need to join them at the customer, but join them at the inventory and sales data. Think about what ABE offer Amazon? There is rich bibliographic on titles that often didn’t have any. There is 15 years of sales data of the long tail, not just of books in print but those gems that have long been lost and forgotten. Only Alibris has similar data and there is little chance of a new entrant today. Combine ABE’s information assets, market position, the Amazon services such as Booksurge and Kindle offer and a clearly focused market leader and you have a potential offer that is both unique, extremely interesting and one to watch.

Internet Selling Relies on Post

All Internet and mail order businesses are very dependant on effective postal and shipping services. If a physical catalogue has to be posted, it costs. The shipped order may appear free to the consumer but is not free to the seller. If the goods are bulky they can often be carried by private companies but if they are small, say a single book, or are to places such as the highlands and islands, they invariably are handled by the likes of the Post Office.

Often postal charges and rules are complex and can be based on size and weight. Importantly they are non negotiable. They can be passed directly on to the consumer or subsidised or merely included in the price of the goods. As we all try to reach new consumers, new markets and do more business over the Internet they are a cost that is not going away.

So it’s interesting to see that we not only have the carriers now pushing up their prices both in the UK and US but that this is also being done by other effected parties.

Can you remember when Abebooks last wrenched up their commission there was much noise about them exploiting their market position. Last week they did it again and this time it simply flew past most observers unnoticed. They cite the currency exchange rate at dramatically impacting their buying power by 30% over the last 5 years. As a result from the end of the month they will raise subscription rates for sellers listing over 50,000 titles on the service. Yes we said 50,000 and they have a rate card for those with over 500,000 listings!
However, far more relevant is the news that Abe now are including shipping and any extra charges into their 8% commission charge. They cite ‘our customer feedback indicates buyers are unhappy with unusually high shipping costs. We want to avoid the negative buyer experience created by very low book prices that are subsidised by higher shipping charges.’

Abe is clearly a global trading operation and facilitates the selling and buying of many rare and hard to find books and often you can find a wide range of prices, locations and shipping costs available. What Abe has done has effectively not only made the vast range of titles available but in doing so has introduced more competitive pricing which in turn has lowered their own commission. If the unit price drops then the commission payable costs – that is until you start to include the one often fixed cost that is hard to effect – shipping. Abe’s business is about lots of single shipment orders so shipment is usually against a single book. The impact is that many will have to increase the cost of the books to offset the shipping cost being included. Where the cost of the book is high the shipping charges may have relative little impact.

Used Books and Stars for All

Used books have always been here but the Internet is simply make them more available. First came ABE and Alibris, then Amazon and now eBay. Gone are the days when private collections only had one channel to and Albris now suggests that `house clearances' will become a rarity. For collectors, it may be difficult to gauge a seller's ability to accurately describe a book, its condition and its faults with the descriptive terminology used being often a different language to many.

ABE have embarked on a scheme that is based on the seller’s rating. Apparently the scheme is based on 5 Stars and aims to help promote those booksellers who reject the least number of orders and receive the least number of returns. Obviously those sellers with a higher rating will benefit from increased buyer trust as well as greater resulting revenues. Buyers will see a dealer’s six month rating in the search results, and can also view a dealer’s 3, 6, 12 and current monthly ratings. The scheme doesn’t appear to deal with sellers who ‘white label stock’ and have it drop shipped by a 3rd party.

ABE are waiting for reactions and comments from their sellers’ before implementing the scheme.

Independent Bookshops 'must …'

Advice to independent bookstores is offered by everyone.
There is the collective approach offered by Stephen Poulter, owner of Books@Hoddesdon who warned at LBF that independent retail is at risk unless shop owners unite to publicise their stores. Last April, he launched a "Love Your Local Bookshop" campaign and loyalty card scheme, now supported by wholesalers. But is the issue visibility? Does the local bookshop need visibility outside its catchments? How does being seen as part of a larger federation improve local visibility? There is merit here but it is not the silver bullet.

A number publishers are backing independents with various ‘support independents’ campaigns. Some offer better discounts, others semi exclusive stock, others a better interface but the question is whether these are merely fudging the discounts and muddling the available stock.

Others such as Michael Holdsworth offering some thought provoking words in his “High Noon on the High Street” article in the Bookseller’s LBF daily. It was a sobering wake up call and a gloomy picture of the potential impact of digitisation from someone who is well versed in digital matters as many academic and campus bookstore will tell you. Michael makes a very valid point when he states that certain genre will move quicker than others into digital and travel, religion, reference are clear areas where the consumer may want more than the tome.

Then today we read Michael Gove in The Times who believes the supermarkets are to blame. The lack of joined up thinking here makes one worry that the man is an MP. He is a serious used and rare book man and loves both stores and ABE but blames the dismiss of the independent on the supermarket? Clearly he doesn’t speak to the shop owners who did embrace ABE found a big market and although they also are held to ransom on commission and payment often find it cheaper to fulfil books out of the garage than a high maintenance store.

So who is right and who is wrong?

Generalists will continue to be picked off by the efficiencies and economies of scale of the likes of Amazon. Best sellers will always be cheaper at Tesco, Asda etc. Rare book dealers now sell more but their prices are in the open and falling as a result. Continuing to let publishers wallpaper shelves with their ‘best sellers’, ‘celebrity dross’ and the perennial ‘chick lit’ is a clear abdication of buying. Alan Giles has a point in his recent article on remainders but puts it across so badly and condescendingly, it dilutes any real message. Mail order is viable, as is the internet as are remainders, as is selling other stock such as stationary but these require different skills and aren’t just a simple offers.

Retailers need to recognise that the consumer seeks all books not just front list or new. What is clear is that innovative, hard working, open minded retailers such as the Countrybookshop will succeed and adapt. They and others have taken the bold steps to create experience, build loyalty and importantly sell books of all shapes, sizes and sources. Many can learn from what they are doing I building local community and visibility. It will not be right for all but they are certainly approaching the challenge with the same vigour they showed when establishing their successful internet store.

The independent bookstore is not dead but hopefully adapting to a changing and more demanding world.