> It is difficult to comprehensively track the movement of prices on Amazon, so the evidence is anecdotal and fragmentary.
I guess this is the difference between award winning journalism and essentially an editorial.
David Streitfeld of the NY Times should be inspired by the work of the Sally Kestin and John Maines of the Florida Sun Sentinel, who won the 2013 Pulitzer for Public Service for their "investigation of off-duty police officers who recklessly speed and endanger the lives of citizens, leading to disciplinary action and other steps to curtail a deadly hazard." The Sun manage to acquire and then data mine the timing data from on and off-duty police officers' toll transponders to reverse engineer their average speed, and in the process blew the lid off some seriously reckless driving by the officers.
By comparison, the data that Streitfeld and the NY Times was looking for to turn their cute anecdotes into hard hitting journalism were only an API call away. I'd love to see journalists collaborating more with hackers and the open source community, or perhaps even big data competition sites like Kaggle to collect and parse this data into a real expose. Like what we saw with Strongbox (http://www.newyorker.com/strongbox/) - the New Yorker's platform for protecting anonymous sources - or Barret Brown's ProjectPM (http://trueslant.com/barrettbrown/2010/03/24/project-pm/) - but targeting specific topics and data sets. Note to reader, you might want to visit those links via Tor...
Nothing like hard evidence to shine a bright light on anti-competitive behavior of a wanna-be monopolist. On the other hand, maybe Amazon is just intelligently pricing their products using their sophisticated proprietary models based on tried and true supply and demand. Based on this article, who can say what's closer to the truth?
By looking at the prices of a few fiction books in my collection over the period 2011-today I didn't see any evidence of the increasing price trend hinted at by the article.
The tech books I looked at might do, certainly a larger sample size would be interesting:
"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."
Now what they are really saying is that Amazon is pricing books closer and closer to "list price" which is the price that brick and mortar book stores can sell books at and survive (generally). So if Amazon were to suddenly sell every book for list price, there would be a great cheer heard from all the book sellers as they now had a viable business.
No question that Amazon has used its position to establish market dominance and its pricing has killed a lot of book stores. Amazon can't raise prices too far without allowing book stores to flourish. As the article points out, the publishers aren't changing their prices, Amazon is.
Yeah, all the booksellers would need to buy all new inventory and lease a new building and hire new staff. Brick and Mortar isn't like firing up a Linode. Amazon is basically the Walmart of the Internet.
That is pretty much it. And in many ways creating a shop setup is easier than firing up a Linode because it has both been happening a lot longer and there are literally hundreds of thousands of people around who work to make that happen.
In the US at least there is a quite a bit of excess 'store' space that is not leased. Further it hasn't been leased for a while so there are motivated property owners who will provide customization of the space as part of their 'tenant improvements' or TI. Setting up an LLC had been made more simple by the pre-created legal documents available on the web, Banks are eager to sign up a new business if they are going to process the sales, and there are a number of small business loans currently being pushed by the the US government in order to encourage the economy.
For someone willing to drive around town a bit it is possible to get the business created in a week, and with some work probably have a physical store ready to open in a two months, (less if you either start with one that was a book store before or your new landlord was really excited to get the space ready). Setting up a cash register, an accounting and filing system, all of those things have 'cook book' examples that you can just lift and implement like you might your favorite distribution. And initially the only 'staff' you need is you.
The only question is whether or not you can get enough customers to buy your books to stay afloat long term. And that depends on other places people can go to get books. As you say Amazon is the "Wallmart of the Internet" because they sell product with lower margins than someone who is paying rent on a store can afford.
If Amazon increases their margins (by selling closer to list price) they risk someone like you or I who can sell at that same margin in an actual store. And something the store offers that Amazon cannot is the ability to browse, and discuss various books. (look inside the cover doesn't cut it).
The important thing to realize for this crowd, is that setting up a single person shop is as straight forward as setting up a Linode. Yes, it takes more paperwork, and yes it helps to create an LLC, but people have been setting up shops a lot longer than they have been creating businesses on the Internet, what we do here is considered "mysterious gobbledy gook" by a lot of people, opening up a store is much more comprehensible to them. Further there is a lot of infrastructure out there that supports it.
The big difference is CapEx - I can setup a linode with my 'free time' and a few bucks a month to prove out a business.
You can't 'free time' a brick and mortar without a substantially larger risk - no bank is going to give a loan and no real estate manager is going to give a lease to a new LLC without personal guarantees from the principals or other backing.
The big difference is CapEx - I can setup a linode with my 'free time' and a few bucks a month to prove out a business.
This is absolutely true, which is why there are many more software business opportunities than there are brick and mortar opportunities, and its absolutely irrelevant in that if you want to create a bookstore (which is the market we're looking at in this conversation) trying to 'out Amazon' Amazon by setting up a Linode instance isn't really going to be very effective.
My point is that unlike say "Pintrst for Caviar Lovers" or some other random 'online' business, book stores are already a 'proven' business, just like restaurants are a 'proven' business. If you execute well you succeed. Since the business is already proven/known, there is lots of support/infrastructure for creating it. I'm guessing it would cost you about $500 out of pocket to 'start' your bookstore, maybe $2000 if you went to a lawyer for your articles of organization.
People who do technology startups some times overlook how 'easy' that can be.
To be honest, Borders was like a library with built in coffee shop in the UK. People just went in there, checked out the book and bought it on amazon whilst sitting in the shop eating blueberry cheesecake and drinking a nice cappuccino...
I used to be an avid Borders customer; I could physically go to the store and check out their computer section and through serendipity I would find things I liked and buy them.
They were enormously overpriced, like most computing related books outside the U.S. ($100 NZD +), but I would wear that because I liked the experience.
This was in about 2003. By 2008, the section which held the long tail I liked had shrunk to maybe 2 shelves. They no longer kept the kinds of books I liked in inventory, just "Photoshop for dummies" or perhaps the odd "Learning Python".
At the point where everything I might want had to be ordered in and would take longer to arrive than from Amazon, I stopped bothering to go :/
This was my experience as well. When I first discovered borders they were very well run. They had a lot of interesting books and a very energetic staff. Then they sort of lost their way and suddenly they didn't have any books I wanted and the staff was replaced by people who always seemed to have "just started." I stopped going.
That said, every time I go to Portland I spend a couple of hours and at least a couple hundred dollars in Powell's books.
Borders (in the US) used to send out coupons for 30-40% off a single item. That usually put their price very close to Amazon's, assuming Borders had the book you were looking for.
> For Mr. Hollock, the “Born to Lose” author, the issue is readers, not dollars. His award-winning book, published by Kent State University Press, had a steep list price of $35 to begin with. In the author’s view, Amazon is simply compounding the trouble by raising its price to more than $30 from $23.
Why is the author complaining about Amazon, when the list price is as high as $35? Yes, Amazon might have gone from $23 to $30, but that is still a 14% discount.
Why was the list price so high in the first place? Shouldn't the author be complaining about the press?
It's a 14% discount only thanks to the strange way pricing in the publishing industry has developed: it's a 14% discount off of an 100% markup.
For mostly historical reasons, wholesale price has become quasi-fixed at 50% of list. So in this case what's happened is the publisher has chosen to sell the book for $17.50, and the way you do that is by setting an entirely notional "list price" at 2x the intended wholesale price. But the $35 is not a real price; the real price in the publisher-bookstore exchange is $17.50. It's then up to bookstores how much they want to mark the book up above $17.50. Here, Amazon is choosing to sell it for a 70% markup above wholesale, whereas previously they were selling it for a 30% markup.
(This is U.S.-specific; list prices mean different things in different countries. Also, I believe the 'standard' ratio of wholesale-to-list varies in some categories, e.g. it's different for textbooks.)
You are correct, but the system isn't really as strange as you imply. Many wholesalers in many different markets set a recommended retail price that's some multiple of the wholesale price they charge to their customers.
As far as I understand, Amazon works out the optimal discount for a book based on a number of factors including the popularity of the book and the prices charged by their competition. The same book at B&N is $31.49 [1], 88 cents more than Amazon is charging.
I see we had the same thought! If prices are too high, supply and demand says you should be able to increase demand by dropping the price. Books certainly fall into the elastic demand (or did I get that backwards?) category.
I'm always looking for the catch with Amazon (from a consumer standpoint, not from a labor conditions standpoint), but there's nothing at all. They're the cheapest and the ones with the easiest return policies. They even replaced some stuff that was missing from a ripped-and-patched-up parcel that I accidentally signed off as being complete.
Agree. Never had a single problem that wasn't immediately resolved in over 300 orders.
Prior to using amazon my options were basically phone up then trek to Foyles in London or go to my local book shop and try and work out how to get them to order something that wasn't top 100 dross.
If you buy used books from them as well, they are actually cheaper than a lot of the charity shops now as well and you get a better hit rate.
And that's just the books side of things. Lenovo parts from China, phone parts from Canada, phones, computer parts, memory cards, camera, laptops. Just the best experience so far.
And you can talk to a human pretty much instantly from experience.
and as much as I hate the fact there is no Australian Amazon store.. often ordering from there is fast and still much cheaper (even with shipping) than ordering stuff here in Aus.
The publishers/authors who think Amazon are making too much profit can open their own stores/sites and sell that way. It is a free transparent market.
They can also go to competitors like Walmart and give them whatever deal works for the goals. Or they can use rebates which keep the profit the same for the store (Amazon) but lowers the price the consumer pays.
I don't see any reason why they are making demands on Amazon's pricing and profits, but don't see fit to adjust their own.
Amazon is intensely interested in finding the right price for everything. If you pay attention you can see small adjustments in the prices of a lot of products; they're most likely doing the equivalent of A/B testing to discover their most profitable point for every product. A product without competition will be less price sensitive, so they'll end up pricing it higher. An interesting question is whether Amazon could end up in legal trouble for what their pricing algorithm does.
A major theme of the small publishers and authors quoted in the article is that Amazon's price is higher than the publisher would want. If Amazon pays a fixed price for every book, then there's a fundamental conflict between the parties. Amazon wants to make margin, the publisher wants to make volume. If the publisher wants Amazon to keep their best interests at heart, they'll have to change the nature of their deal with Amazon so that their interests align.
I think there is a lot less black magic than you think. The overwhelming majority of the time the small price fluctuations are in response to changes in the price by 3rd party sellers (the ones selling the same item in "new" condition).
They virtually always undercut the 3rd party - which always begged the question: why do the 3rd parties even bother trying to sell on amazon?
Actually if you think about the kind of testing you're talking about, it doesn't make a whole lot of sense from a human psychology perspective. You don't look for a camera and think: "This should cost $123.76" and anything less will be huge turn off. There are probably more drastic things at play, like if the price ends in .99 or if it's more than a hundred dollars, or maybe people don't like certain price numbers for some completely random reason.
They probably have some internal database of the average (across all inventory) of the rate-of-sales vs. the listed-price and the algo just looks for a local maximum around the price that is a bit lower than the 3rd parties.
Keep in mind that Amazon is not the seller of most of these books, it's 3rd parties using Amazon as a platform. There are a host of SaaS products for these people to help optimize prices.
Just seems like typical retailing to me. Non mass-market books don't get discounts. If someone is really searching to purchase "Jim Harrison: A Comprehensive Bibliography, 1964-2008", they're probably going to buy it with or without the discount attached.
Btw, Kindle price of "Born to Lose" is $9.34 at the moment. Seems like a good discount to me.
Amazon kindle price here is US$20.35 even though I'm using Amazon.com. Usual excuse for gouging us here is the cost of transport to our small market.
Never thought that applied to electrons too :(
> Amazon, which became the biggest force in bookselling by discounting so heavily it often lost money
IANAL, but this sounds like a potential anti-trust case to me. "Predatory pricing practices may result in antitrust claims of monopolization or attempts to monopolize. Businesses with dominant or substantial market shares are more vulnerable to antitrust claims. However, because the antitrust laws are ultimately intended to benefit consumers, and discounting results in at least short-term net benefit to consumers, the U.S. Supreme Court has set high hurdles to antitrust claims based on a predatory pricing theory. The Court requires plaintiffs to show a likelihood that the pricing practices will affect not only rivals but also competition in the market as a whole, in order to establish that there is a substantial probability of success of the attempt to monopolize." (http://bit.ly/12pG6gq)
Amazon's sales are just 29% of the book selling market (2012 share, even after Borders was out of the picture for over a year). B&N's are 20%. If their discount pricing hasn't even gotten them 1/3rd of the market after all these years, it'd be hard to prove that they're soon going to monopolize it.
I agree with your overall premise, but anti-trust law is far broader in scope than monopolization. Indeed, there's nothing about anti-trust law that forbids a monopoly, and there's no specific market share requirement.
Market share is but one market-power consideration when the government looks at whether a company has caused harm.
There are several angles to anti-trust, such as collusion and predatory pricing, that can matter even at modest market share points, if the government can prove consumer harm.
Honestly the more I read about predatory pricing, the more it seems like a complete fiction. One of those things that seems to make sense in theory, and maybe makes for a good political screed every now and then.
If low prices drove the competitors out, then high prices will surely see them flood back in.
Any firm that gains monopoly power and hikes the prices without inviting fresh competition probably worked out some sweetheart deal with the government--and even then, they're better off keeping margins fairly low, since a govt-approved monopoly is easier to justify when the firm is not obscenely profitable.
Ultimately I don't think a business born out of deep discounts is suited well to massive price hikes. It destroys the identity they've built with consumers and if they weren't in the game to be deep discounters over the long haul, then I'd say they'll die. They would be better off maintaining the discounts while improving their cost structure.
> If low prices drove the competitors out, then high prices will surely see them flood back in.
Why? The business of selling books is, like most businesses, capital-intensive and risky. On the other hand, if anyone does go back into the business Amazon just has to change a few lines in their database and the new competitors are out of business with a whole bunch of stock they can't shift and a huge loss for investors.
It's definitely an anti-trust issue, but there is not a good record of proving predatory pricing in the courts (even when it's pretty obvious that's what's going on).
There is no direct evidence to support Amazon did so because it always made "pocket change" as the article pointed out. So as long as Amazon broke even/made a slight profit it would be hard to push an anti-trust case.
Maybe I'm hopelessly naive, but why don't the publishers drop their prices by 5-10%? Since Amazon is selling books at a percentage of the cover price, dropping the cover price should theoretically offset the decreasing Amazon discount. I know that books have the price printed on them, but what a great marketing project it could be: "Look, we're dropping our prices across the board by 5%. Go buy a book!"
It was hinted at in the article, but the publisher sells the book to Amazon for less than the cover price. Of course, I have no idea if Amazon's purchase price is a percentage of the cover. But if it's not (and that's what I would have negotiated) then changing the cover price won't affect the revenue to the publisher.
Then I guess it's up to the publisher to do the math and see what works out to more profit in the end: keeping prices the same w/ less volume, or dropping the price and (hopefully) increasing the volumn.
It seems strange that there is no mention of inflation in the article given that they are comparing prices from up to four years ago to today's prices.
> When Mr. Striphas’s book, “The Late Age of Print: Everyday Book Culture from Consumerism to Control,” first appeared in paperback in 2011, Amazon sold it for $17.50, the author said. Now it is $19.
Well, given that the 2011 $17.50 price would be ~$18.12 today (due strictly to inflation) then it is not as big an increase as suggested.
> 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.
2009: $43.87
Today: $59.87
Correcting only for inflation the price would be: $47.63
Inflation doesn't even account for the majority of the price increase in this case but still this article appears to draw rather strong conclusions from rather flimsy analysis.
What keeps publishers and authors from starting a non-profit that sells books at exactly the price they determine?
I realise that selling books from their own websites is difficult, especially for individual authors, and it gives them less visibility than Amazon provides. Banding together would solve that problem.
you might find that the accumulated cost (admin/server/people etc) might end up making that sort of service on par with amazon, not cheaper, and thus find that it is either unsustainable (can't sell at a loss), or is at amazon's price level (and so no real benefit?).
I buy most of my books on Kobo and O'Reilly. Kobo is usually quite a bit cheaper than Amazon. I am in Canada, so they have a great selection here, but I am not sure what another country's store would look like. Further, they use ePub, which I prefer as almost every device supports it, with the notable exception of Kindle. They also use adept for DRM, which I really like ;) Their store also contains over a million public domain books available without drm, but the quality varies dramatically (OCR without editing is typical)
bookdepository.com is the one I often hear about. Particularly because Amazon isn't available in all countries, and The Book Depository's prices are sometimes pretty comparable. Shipping is still 1-2 weeks though.
I've bought tons of books via Alibris, they're great. (Especially if you're looking for an out-of-print title -- I've found books that were completely unbuyable via Amazon and B&N on Alibris, and they were even reasonably priced.)
I dont understand why they are complaining to amazon. The publishers are the ones negotiating the deals with amazon so they should complain to their publisher to renegotiate the deal. Or else they could just open their own amazon seller account and price the books how ever they wanted
I'd argue that the real issue here is not Amazon reacting to less competition, it's Amazon reacting to less demand for printed books. I suspect ebook pricing is still as sharp as ever, and that the affected authors should be looking at their format and market.
It isn't actually all that hard. There is an API call to get the prices for each seller on an item. Not sure if that also works for Amazon as the only seller listings but you can definitely track the marketplace with it.
I guess this is the difference between award winning journalism and essentially an editorial.
David Streitfeld of the NY Times should be inspired by the work of the Sally Kestin and John Maines of the Florida Sun Sentinel, who won the 2013 Pulitzer for Public Service for their "investigation of off-duty police officers who recklessly speed and endanger the lives of citizens, leading to disciplinary action and other steps to curtail a deadly hazard." The Sun manage to acquire and then data mine the timing data from on and off-duty police officers' toll transponders to reverse engineer their average speed, and in the process blew the lid off some seriously reckless driving by the officers.
By comparison, the data that Streitfeld and the NY Times was looking for to turn their cute anecdotes into hard hitting journalism were only an API call away. I'd love to see journalists collaborating more with hackers and the open source community, or perhaps even big data competition sites like Kaggle to collect and parse this data into a real expose. Like what we saw with Strongbox (http://www.newyorker.com/strongbox/) - the New Yorker's platform for protecting anonymous sources - or Barret Brown's ProjectPM (http://trueslant.com/barrettbrown/2010/03/24/project-pm/) - but targeting specific topics and data sets. Note to reader, you might want to visit those links via Tor...
Nothing like hard evidence to shine a bright light on anti-competitive behavior of a wanna-be monopolist. On the other hand, maybe Amazon is just intelligently pricing their products using their sophisticated proprietary models based on tried and true supply and demand. Based on this article, who can say what's closer to the truth?