Thursday, February 16, 2012

Oh, Sweet Irony

by Michelle Gagnon

I suppose it was inevitable once Amazon started their own publishing wing. A company that was founded on the premise that you need never set foot in a bookstore again (which expanded to never setting foot in any store, for many) has started opening...wait for it...stores. They're sussing out their first bricks & mortar location in Seattle, where their corporate headquarters is located.
Mind you, this won't really be a bookstore; apparently the focus will be on pricier items such as tablet computers (and, I'm guessing, their rapidly expanding Kindle line).

It's an astonishing reversal for the company that insures there's a UPS driver coming down my street every day, sometimes even multiple times a day.

Mind you, I don't intend to launch a bout of Amazon bashing here--I'm as guilty as my neighbors when it comes to online ordering. I signed up to have kitty litter, toilet paper, and coconut water shipped to my door every month once I realized that it was cheaper than buying those items in the supermarket. I did the vast majority of my Christmas shopping online this year, a significant chunk of it while getting my hair cut, which is a far cry from past Decembers when I drove from store to store trying to cross everyone off my list. And most importantly for me as a writer, thanks to Amazon I consistently sell backlist copies of books that vanished from store shelves years ago.

So I'm definitely no Amazon hater. And once Barnes & Noble, Books a Million, and other stores issued statements declaring that they would (understandably) refuse to stock titles from Amazon's new publishing imprint, launching their own physical retail wing made sense.

Still, it is ironic, isn't it? When companies like Amazon first arrived on the scene in the heady days of the dotcom boom, they loftily promised that within a decade, no one would have to leave their house for anything (fantastic news for agoraphobes; maybe not so great for the rest of us). Websites would sell everything from beds to orange juice to mouthwash and deliver it to your front door, all for less than you'd pay in a store since the overhead of rent, utilities, and payroll would be largely removed from the equation.

And lo and behold, here we are a little more than a decade later, and they were largely right. Except that there no longer are a slew of websites providing the online equivalent of roaming from store to store: instead it's a one-stop shopping experience. Amazon has become a behemoth, the place where you can buy pretty much anything you desire and have it delivered to your front door, usually within two days. And now, after driving so many mom and pop stores out of existence, they're backtracking and opening a place where you can get the personal touch; one-on-one interaction with a sales staff.

I have very mixed feelings about all of this. For one thing, the tech boom has spawned a modern day equivalent of the types of monopolies that held the nation at their mercy around the turn of the last century, with Amazon and Microsoft replacing Standard Oil and U.S. Steel. In some regards, aren't Jeff Bezos and Mark Zuckerberg contemporary robber barons?

And now that so many stores that I loved have shuttered, it seems unseemly that the company that helped drive them out of existence is stepping in and taking over the shelf space they helped destroy. (For the record, I buy all of my physical books in bookstores, and I still buy as many as I did before I got my Kindle. I've actually found that having an eReader has increased my weekly book consumption).

But I'm also guilty of getting those deliveries every month, of using them to make my holiday shopping easier; and I've received the gains in sales that wouldn't have been possible if my books were only available in print. And I have many friends whose contracts weren't renewed, but managed to continue publishing their books independently thanks to Amazon, an outlet that wouldn't have been available to them otherwise.
So I'm curious; what do you all think about Amazon's latest move?


  1. I hadnt heard about this, Michelle. I'm a bit stunned & perplexed by this move. This will definitely be worth watching. Great post!

  2. Back when got into POD, it looked to me like their goal was to have electronic copies of every book they sell, so they could cut down on warehousing costs by printing them on demand. At that time, I thought they would either have their own brick and mortar store or partner with existing stores. The landscape has changed significantly and the rise of e-readers has changed the delivery method of electronic copies, but I'm still not surprised. I can think of many good reasons for them to have store. And with Barnes and Noble shooting themselves in the foot again, I would expect to take up the slack.

  3. I'm going to withhold judgment, Michelle, until I actually see the stores, the inventory, and the pricing of the items within. I think their biggest problem, however, is going to be finding competent people at the retail level to work the stores.

    Coconut water? You can buy that?

  4. Interesting post, Michelle. As writers, we tend to think of Amazon as a bookseller. In reality, they are one of the biggest (if not the biggest) retailer around with books being a very small segment of their revenue. Next time you need ANYTHING, Google it first and you’ll find that Amazon will probably be the top choice with the lowest price. Their success is based on becoming the middleman for anyone selling anything. I’ve ordered replacement parts for my BBQ grill, an O-ring for my water filter, a Blu-ray player, a BUNN coffee maker, and an over-sized toaster oven, all from Amazon. I’m not sure what they will choose to sell in their brick and mortar store. For Amazon to have a store with even a small sampling of their offerings, it would be about the size of the Superdome. I live a long way from Seattle (South Florida), so I don't expect to be wandering into their store anytime soon. But as far as buying from Amazon, if I could figure out how to buy my groceries online and have them shipped fresh to my door, I would.

  5. Joe H. Here's the link to buying coconut water on Amazon:

  6. Amazing! I'm not sure what I think. I'm going to park myself in the 'wait and see zone'.

  7. I'll be very interested to see the stores. As a certified couch potato, I use Amazon for the convenience of not having to shop, more than price. They'll probably come up with some marketing gimmick to cause people to flock to their stores, a la Apple's.

  8. Michelle:

    "...the tech boom has spawned a modern day equivalent of the types of monopolies that held the nation at their mercy around the turn of the last century, with Amazon and Microsoft replacing Standard Oil and U.S. Steel. In some regards, aren't Jeff Bezos and Mark Zuckerberg contemporary robber barons?"

    That is really not a fair comparison. The issue back then was not monopolies but cartels (what used to be called "trusts"). The "robber barons" got control by collusion and price fixing, not true competition. OTOH, a company that achieves massive success and then most of a market is not an illegal monopoly.

    The economic danger of a monopoly is that a company in control of a market will charge more than it could with true competition. But Amazon is another animal entirely: it rose to prominence by charging less than the competition, which is good for the consumer. They've done it by taking risks and being innovative, which is exactly how a business is rewarded. Remember, there have been a thousand Amazon wannabes that have failed. That's the free market system. (I remember when Barron's ran a story on Bezos early on, his face on one of those round bombs with a fuse on top. The title of the piece was "Amazon dot bomb." They were predicting massive failure for this enterprise. Well well...)

    There is still a free market for books and booksellers. There are indie bookstores that are figuring out ways to survive by offering services like hand selling and in-store events and coffee bars. I'll be signing my new book at one of these on Saturday, Mysterious Galaxy in Redondo Beach. This is competition working to create "evolution." And that's the best system we've been able to muster for society as a whole. Coercive markets under central control work the opposite way.

  9. Michelle-- This is the first I'm hearing of it. If I were a conspiracy theorist, I'd think this was a dastardly plot on Amazon's part to destroy the competition the take over the world!

    Otherwise, I'd have to think that as much as we love the ease of Internet shopping, we still are social creatures and can't keep away from hands-on shopping. That said, even Amazon has to cave and open stores.

    But, really, I'm leaning toward the conspiracy theory. . . just sayin'.

  10. I am assuming the Amazon store will end up being like an Apple store of Microsoft store, primarily marketing their own wares. But what would be really cool would be is Amazon were to build a virtual reality store, like the kind you walk into but is like a Star Trek Holo-Deck kind of experience where you can actually get a 3-d virtual hands on experience with all the products sold online. That'd be a place I'd often hang out...especially if they sold real coffee and had good music in the background.

    speaking of Amazon, I just got what I am considering my favourite ever book review for 65 Below at Amazon UK: "Despite its implausible scenarios, unbelieveable and usually unlikeable characters, and incessant xenophobic flag-waving post 9/11 patriotism, it's still, oddly, a page-turner."

    That's why I like Amazon - stuff like this happens.

  11. I have to agree with Jim, Michelle. Amazon has gotten where they are not through price fixing or collusion, but through innovative and timely business practices, all the while operating well within the law.

    They found a need and they filled it. The very bedrock principle of the free enterprise system.

    They put up a lot of money to get their business off the ground. They put up a lot of money in designing the Kindle. They took risks every step of the way. And now they're reaping the rewards. I think they should be applauded.

    It is indeed ironic that they're opening a store. But hey, it's their money. If they want to risk it in a B&M store, I say let them. If they fail, they lose their investment. If they succeed, more power to them.

    You shouldn't feel "guilty" for buying items on Amazon. They're providing you the products you want at a very competitive price, all without having to leave your home, gas up your car, and go stand in line at a store to be checked out by a 21-year-old for whom "customer service" is a foreign phrase.

  12. I'm with Basil...

    I like the Holodeck version of the new store. I'd hang there, no doubt.

    Too cool on that review, Basil - that's what amazon does.

    I've been amazed with the few times I've needed customer service from them. They've stepped up to bat for me, and I've been pleasantly surprised.

    Maybe this new niche for them is a good thing...

    Let me know when they get the holodeck up and running.


  13. Legal monopoly or not, it's never a good idea to have a market dominated by a single player--look at Cable. It's not a "monopoly" but try to find an option that doesn't suck the money out of your wallet. It's choosing which devil to dance with...

    On the B&M Amazon store, I wouldn't worry too much about being Assimilated just yet. It's most likely going to be an interesting attraction for the time being. Amazon stores won't be on every street corner for a long while yet--after all, even Wal-Mart did not achieve Borg-style coverage without 15-20 years of expansion behind it.

  14. How very interesting. I wonder how far this will go. Maybe they want to take over and open storefronts once they put all the other bookstores out of business.

  15. Actually, the whole agency model challenge was based on the tenet that Amazon was engaging in price fixing, by artificially charging less for eBooks. The publishers fear was that once Amazon seized those reins, they would essentially be able to dictate the cost of books, regardless of what the true costs were. So I'd argue that those pricing systems were laying the groundwork for a potential monopoly takeover of the market. And since independent bookstores are increasingly closing their doors, there remain an ever-diminishing number of outlets for that type of free market.

    Oh, and I'm with Basil on the holodeck shopping experience...

  16. I see these being Apple Store style - mostly for Kindles and Kindle Fires, devices people are much more likely to buy if they get their hands on them. Then upsell them on an Amazon Prime membership. This is a smart move imo.

  17. Michelle, what you just described isn't "price fixing" as that term is properly used. "Price fixing" requires collusion between buyers or sellers to artificially INFLATE a price. What OPEC does is an excellent example of price-fixing; Amazon is not. What Amazon is doing is not price fixing, but price-setting, which, in the case, of e-books, is an attempt to nail a market price that takes into account 1) the absence of the cost of physical manufacture of the goods (i.e., books) and 2) the absence of the cost of bringing the e-books to market (shipping to the merchant, then to the buyer).

    To put it another way, "price-fixing" would be involve Amazon, Barnes & Noble, Wal-Mart, etc. to all agree to 1)sell books at their list price; or, 2) for a dollar less than list (which would theoretically hurt independent booksellers); or after driving all the independent booksellers out of business, 3) for a dollar more than list.

    What Amazon, and virtually any other profitable business does, from Apple to North Face to Chipoltles, is price-setting. Amazon, with books, operates on a combination of loss leaders and the "long tail." Your local Lucky's does the same thing with food. The majority of grocery aisle products in supermarkets are either sold at a loss (those weekly sale items) or at a profit of a fraction of a penny or so. They make it up on produce, meat, deli, delicacies, bakery, etc. as well as adding up those penny profits on volume sales. Those gross profits all pay for the cashiers, lights, the people who stock the shelves, the guys who hunt down the carts, etc. Whatever is left over after all the bills are paid --- the net profit ---goes back to the evil corporation which is in competition with other evil corporations to keep their own pieces of turf open. If they all agree to set the price of milk at 4 dollars a gallon, that's price fixing; if Lucky's unilaterally decides to drop the price to a buck, and leave it there indefinitely, while raising the price of something else to make up for it, that's price-setting. And that is what Amazon is doing.