Amazon is the online retail behemoth which not only revolutionized e-commerce but also the sale, distribution, and publication of books on the internet. The critics of the media, commerce, and publishing giant, though, constantly allege that Amazon has destroyed the publishing industry, referencing the company’s corporate culture of sales over substance and its all-encompassing fluid character (it went from initially being an online department store of sorts to publishing to producing and distributing video content and even selling server infrastructure to startups and the CIA), instantly making it an all-consuming and intimidating entity. Now, after creating a market vacuum resulting in many physical book vendors to close their doors, they are opening themselves brick and mortar bookstores. What does this mean for the industry, and how are they doing it?
It Was Based on the Property of Books as a Product
In a 2014 New Yorker article called Cheap Words, George Packer talks about how Amazon started out as an online bookstore. But it wasn’t a love for the written word that led Jeff Bezos to start selling books; it was its viability as a product.
Books are easily shippable at a low cost, and there is a vast catalog that would be impossible to stock in a physical shop. This was instrumental to Amazon’s initial success, offering a selection no other retailer with a physical edifice could. This also allowed the company to start offering the vast array of products we see today.
A Bit More Nefarious
The biggest point of contention that Amazon’s critics bring to light is Bezos’ yet another sub-strategy tacked onto selling books: gathering data. Packer continues that, during a conference, a bookstore owner asked what Bezos’ business plan was with the books, to which the then young CEO responded: “Gathering data on affluent, educated shoppers” by selling books close to cost (to increase sales volume) and then using that information to sell other things again at extremely low prices. Keep in mind that this was way before any of the other big websites realized that their users’ information was a proverbial goldmine. Now they do. Ironically, the company has come full circle and will once again use the information they gathered online to sell products, but now as a business that Amazon’s service almost sunk: physical bookstores.
Riding the Wave
In 2014, Amazon’s annual revenue from the sale of books was $5.25 billion. Of all books sold in the US, 30% of them were eBooks which Amazon has a stranglehold on with 65% of all eBooks being sold directly through the company. They don’t do this by promotion or marketing but by getting the books from publishers at extraordinarily discounted prices: publishing giant Random House sells them their books at a 50% discount and more, and smaller publishers sell their books for up to 60%.
Now they seek to use the information they gather online about their book sales to penetrate the remaining 70% of the book market. Of course, both the publishing and the physical sales have been in crisis way before the actual financial meltdown of the early 2000s.
One substantial obstacle to the sustainability of physical bookstores was the constantly narrowing profit margin printed resellers were subjected to. Amazon, with its significant pull within the publishing industry, could logically twist publishers’ arms to sell their books to them with significant discounts, increasing its profit margins… This could be catastrophic for smaller publishers that would financially buckle under the burden of offering their titles at heavy discounts and forcing them to dig into their own profits to sell.
This would also hurt authors as they would also be pressured into taking substantially lower compensation for the work that they created. Will this happen? Judging from their track record, it seems like a possibility and, even more terrifying, it could result in a wasteland of bankrupted publishers which Amazon could easily gulp up into its affluent maw.
What do you think about Amazon starting a physical bookstore? Let us know in the comments section below!