Amazon is ubiquitous and inescapable in consumer culture. As a consumer, Amazon Prime member, Kindle owner, and Audible listener I have succumbed to its charm. They make my life easier. Their prices are often unbeatable, and they ship with no cost either to your door, or to a local pick-up point in days – almost as if by magic. And now their magical touch has extended to my food-shopping routine, where my Prime membership gets me discounts on produce on my trips to Whole Foods. What is there not to love?

interconnected globe

As in the most predictable fantasy novels, however, magic comes with a hidden price. In this article I describe how the recent, under the radar launch of the Amazon Global Store is putting local businesses at risk — a good example of this is when a publisher has an exclusive relationship with a distributor in another country, only to see their business put at risk as they are undercut by Amazon. While this may make consumers happy in the short-term, it makes those who produce goods and want to sell their goods internationally much less so. They essentially have no choice but to accede to Amazon’s business practices. When signing on with Amazon, publishers have no ability to negotiate – you sign an agreement that allows Amazon to do what they want, where they want and when they want, and boy those discounts are hefty.

Perhaps a good place to begin is to provide a sense of the scale of Amazon’s business. Approximately 560,000 people across the globe work for Amazon. Sales in 2017 were greater than $178 billion and the numbers rise dramatically every year, as do the number of Prime members, which, in the thirteen years since the launch of Amazon Prime, has grown to over 100 million. In 2017, more than five billion items were shipped with Prime worldwide. In fact, as I write it is Prime Day, an Amazon special sale day, that is likely to be the largest shopping event of the year, with many other retailers forced to engage in similar sales to keep up.

All of this sounds fabulous, and yet when Amazon decides to change the ground rules for how they sell products, there can be significant and harmful effects on retailers, including those of us in the publishing business.

Back in the year 2000, Amazon launched its marketplace offering. This meant that customers who were unable to find a book as a main Amazon offering (perhaps the book was out of stock) would be able to buy through a third party seller. This represented a problem for publishers, as what appear to be third party sellers may in fact be businesses that buy books on remainder, or low priced developing nation editions, or advance review copies, or perhaps used books cast as new, and resell them through the marketplace. In essence, they are feeding discounted books back to primary markets. It is not clear whether or how these third party sellers are vetted by Amazon. On top of this, Amazon then introduced a feature where a third party seller could be featured above the main “Buy” button – this all being achieved through some mysterious algorithm. One of the problems with all this is that the authors suffer, because books sold through this route may not be producing royalties for the author.

Over the last few years, Amazon quietly launched the Amazon Global Store among its marketplace options, beginning with China and Mexico, then India, expanding into Europe and other parts of the world. The Global Store allows customers (in those countries where the Global Store is active) to buy a book directly from an international Amazon site — for example the US Amazon store — with prices listed in their local currency, and often with low, or no shipping costs applied, and the promise of fast delivery. This all sounds wonderful at first blush, but if you think a little deeper you realize that this could spell disaster for local businesses. Let’s take the example of a book distributor based in Europe. The distributor may have an exclusive relationship to distribute books for a US based publisher. Up to now that local distributor would fulfill books for the local Amazon store, in addition to other outlets — although in some cases US-based book distributors supply books to a local Amazon store. Amazon’s Global Store is a direct threat to that distribution business, crossing international boundaries with the same products with often significantly lower prices, yet without the local market knowledge. Nor does the Global store do the personalized marketing that for many specialist publishers ensures strong sales of their books.

A recent and fascinating example of a country battling with Amazon is Australia. Australia is a recent addition for Amazon, with its local Amazon store opening in 2017. However, Australia has been very cautious in its approach to Amazon. It enacted restrictions on Amazon business, using the excuse of a new GST (Goods and Services Tax) policy that applies a 10% tax to all overseas purchases under $1000. Using this policy, Australia has forced Amazon to announce that Australians are not allowed to purchase products, books included, from an international Amazon site, such as the US site, thus preventing Australians from shopping around internationally for lower prices, and harming the fortunes of local retailers. Shoppers may go to the local Australian Amazon store to buy what they need. Amazon is enacting this for all shipments in Australia, so that even if you are a customer with a VPN that does not reveal where in the world you are located, the shipment itself will not be allowed.

At this point it is worth reflecting on Kent Anderson’s recent Scholarly Kitchen piece entitled “The Race to the Bottom – Short-term Bargains versus Long-term Vitality”.  As a consumer, you naturally look for the product you need for the lowest price available. Kent argues that this is short-term thinking and your own interests may well be harmed as fewer. less diverse products are then made available to you.

Kent eloquently states:

“Another bad idea we seem to be mimicking is the economic “race to the bottom” — the tendency for people to want to pay as little as possible now for a finished good, because bargain-hunting saves them money in the short term, even if they intuit it will do damage in the long term, damage that will somehow affect them negatively directly or indirectly, and which could prove difficult to undo. It’s the “penny wise, pound foolish” way of assessing value.

The damage of “race to the bottom” financial and economic thinking in society at large can be seen in many ways, from cramped airliners to stagnant wages to cheap clothing to abandoned local storefronts to outsourced jobs and lower wages to the decimation of entire swaths of certain regions as consolidation has sucked jobs into urban power centers.”

One can argue for and against consumer choice. The issue for me here is that while the consumer clearly wants the best deal available, publishers risk losing the income they need to produce the books, forcing them to publish fewer, less diverse materials. The principle at stake here is that diversity of business across nations, and across retailers, is important for a thriving publishing economy, and yet Amazon does what it wants, where it wants, when it wants. Are we OK with this?

Robert Harington

Robert Harington

Robert Harington is Associate Executive Director, Publishing at the American Mathematical Society (AMS). Robert has the overall responsibility for publishing at the AMS, including books, journals and electronic products.

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Discussion

12 Thoughts on "The Oligarchy of Amazon"

Back in my days in the book world, we would do low-priced versions of books for developing markets. People in a developing nation can’t afford the same prices as those in wealthier nations, but we wanted them to be able to have access to the books, so we did cheap versions for those markets at little to no profit. The problem here is that if you eliminate those regional boundaries, then everyone can buy the cheap version, rather than keeping that limited to the areas that need those low prices, and then publishing the book becomes economically unviable.
So ultimately, the result would be eliminating the low-priced editions for developing countries, and just charging one (higher) price across the board for everyone. This removes access to the book in developing economies, and is perhaps an unintended consequence of doing away with geographical restrictions, but a very real one that should be considered.

A further insidious Amazon offering is the ‘Fulfillment by Amazon’ service. I try to avoid using Amazon, as I strongly disapprove of their commercial, employment and delivery practices. Typically I buy via eBay, and indeed I am willing to pay a little more on eBay to avoid Amazon. But increasingly I find that things that I buy on eBay, from independent retailers, are actually picked, packed and delivered by Amazon. I now have to question each eBay retailer to see if they are using FBA before buying.

But haven’t we heard these clarion calls before?
To think if the dreadnoughts at Pearl Harbor set to see the loss of life would have been even more horrific. Sears had 10% or more of the retail market but it seems those stores called K Mart and Walmart are making inroads. Lastly, GM may have to spin off Chevy because of its dominance in the car market.
The question is not how big Amazon is but can it still be managed at the size it is or is becoming. Will it have to split off enterprises much like Ma Bell did.
Remember the retail market on a global scale is about 27.7 Trillion and Amazon’s 178 billion is really small change! https://www.statista.com/statistics/443522/global-retail-sales/

The short-sightedness of Publishers was not to accept e-books as a viable business model. They are the cheap and yet totally accurate edition of any book with numerous inexpensive ways to update and can be sold globally. Their rejection of the digital opened the door to Amazon. There was short sighted for you.

We are all in danger of becoming the “sandal makers” for Amazon. Customers don’t realize how tightly they squeeze business, even the ones trying to do business with them. They are squeezing them to death. My concern is that soon EVERYONE will be working for Amazon, even the companies making the products because the only one making a profit is Amazon. If you can’t sustain yourself from what you produce, then the reason to produce it goes away. Once they control all of it, then there is no fair market competition for value and the price will of course increase.

“Kent argues that this is short-term thinking and your own interests may well be harmed as fewer, less diverse products are then made available to you.”

Absolutely! Have you noticed how the selection of cookies in your local supermarket have dwindled to a handful of brands. I have… and it is seriously affecting my cookie consumption! If you are sick of Oreos or chocolate chip cookies, well, you are simply out of luck! Then, periodically, a brand that controls the distribution network says “Here, try another version of our Oreo cookie, with orange filling!” Where is the true innovation in that?

I therefore agree wholeheartedly with this article by Robert, and Kent’s prior statements, and wish to add, that consumer trend volume (the race to the bottom) will dictate and prolong cycles of lack of diversity, and ultimately stagnate innovation and/or competitor entry into the market… whether for cookies, publishing, or just about anything. Not only will there be less product diversity, but barriers to entry will rise to the point that others will not even try to compete, because it will be too expensive.

One can suggest that this is a process of “natural selection”, but I will argue that the label doesn’t really apply once you get to the level of Amazon, since the concept of natural selection infers equal opportunity to compete — well maybe not exactly in a Darwinian sense, but you get the point.

So, back to Robert’s article. One risk of such distribution pressures is not only price, but stifled innovation and competitor entry. An innovative product needs deep financial pockets to get past the threshold of the proof of concept stage, and onto a commercially sustainable uptake/distribution footing. A controlled distribution network, whether in publishing or cookies, stifles the potential breakthrough of innovative products; and, at minimum, the cookie scenario has the potential to have serious consequences for me, personally, over the long term!

Now let me take this discussion in another direction that Jason Roberts (Origin Editorial) has publicly talked about. If the publishing industry wishes to make it hard for predatory publishers to thrive, then, among other things, they need to make the publishing experience and value proposition so attractive (throughout its publishing practices, author engagement, and other customer-oriented strategies) that the predatory publishers lose allure in the eyes of the author — much like the powerful Amazon customer experience that Robert talks about in his article.

So, how do we do this? How does the ethical publishing industry innovate in its author customer experience? How does the publishing industry change the conversation? Well, it’s actually a no-brainer… insisting on, and delivering value and full transparency throughout the customer experience and workflow, in a timely manner, in ways that fit the needs of the author is the answer — not that different than Amazon’s charm! Speed of corporate decision-making (as per comments made by Judy Verses of Wiley, at the recent STM meeting) is also a factor that will allow such innovation to take place… also, not so different than at Amazon.

You say that transparency is the key, but Amazon is the LEAST transparent company operating today–though, of course, closely followed by Google and Apple. I am not aware of any *business* case for transparency. There are social and ethical cases, to be sure, but those are very different things.

I hear you, and so as not to split hairs, I simply say that by “transparency” (in the customer experience workflow sense) I meant that through Amazon systems you know: where your purchased package is; by when you will get it; you have an archived legacy of your order/interaction; the systems/services are easy to use, etc. Essentially, from the customer experience point of view, you are not in the dark. You feel that the service is “working” for you. If you have a problem with an order, there is usually and amicable solution offered (like for Zappos, and others; Apple, not so much!).

Compare this to an author’s journey, as they wait for outcomes and decisions on their submitted manuscripts. Can they easily tell where their manuscript is throughout the process, by going online? Is there publisher accountability related to any timelines throughout the editorial and peer review processes? Is there ease in cascading a manuscript (an analogy to a change of order)? Is there a customer service rep or help desk to support ESL authors with their queries or concerns? Admittedly, some journals/publishers have mechanisms or systems in place to somewhat address these issues. However, such solutions are not widespread.

The publishing industry has come a long way toward putting focus on the author as the customer, and the customer’s publishing success and return rate as their KPI; rather than the published paper as “their” product. The journal is, as a vehicle, in reality, a service to the author — it always has been, but it was never perceived/positioned as such by the publisher (internally or externally).

Hence, the challenge in front of publishers is to re-tool the workflow of the service to be efficient for, and transparent to, the customer. Those who excel at this will achieve customer satisfaction and author loyalty. When this is achieved, the publishing “experience” expectation will be raised in the minds of an author, and “quality” versus “predatory” will be easily apparent.

This, not to be confused with corporate/business transparency, which is a whole other story.

Thank you for the clarification. We really were talking about two different things here. As for your comment about “THE challenge” for publishers, I don’t think it’s workflow. That’s tactical and may or may not be important, depending on the strategy that is pursued. Let’s not raise production, customer service, etc. to the level of organizational strategy. The real question–THE challenge–is where the next dollar is going to come from.

Not that this is the thrust of your argument but part of the issue in Australia is that consumers are staying away because the prices are too high in the Australian store compared to the US (or UK) store. When people compare (using a VPN or other service) they can see that they are paying considerably more before postage than they would through other Amazon stores. I was astonished how ubiquitous Amazon was when I spent a week in Brooklyn earlier in the year.

I’d also dispute the idea that Australia forced Amazon to take this approach – there was no reason Amazon couldn’t collect GST via their US and UK stores just as they add sales tax state by state in the US. I suspect that this was an excuse to funnel Australian customers to the Australian storefront where, as noted above, the prices are higher.

Amazon has ultra low profit margins, resulting in low profit. Their high volume of sales and other resources contribute to their success. Impossible to compete. Then there are the Boeing planes on order, to complement the white vans. This is all nothing new. More of the same.

Global creep and product creep, no surprise. Funny, AT&T crossed my mind, too. What sticks in my mind, I used to sell newly released Harry Potter books to customers receiving a 50% discount from the publisher since they weren’t allowed the customary returns allowed bookstores receiving a less favorable discount (I always thought returns long outlived their usefulness or generous industry courtesy). Getting to the point–My customer paid $15 for a HP book with SRP 29.99. Amazon sold it for $17. And picked up millions of customers. A bookstore was likely paying more for wholesale. The cut for the middleperson is only a couple of dollars.

They are smart and their various products and business models work. That is admirable and interesting. I use the library more in recent years. I have received gifts from others through them. Tend not to spend with them. Prefer to shop in person. Easy returns of no interest. I don’t buy to return, can’t be bothered.

As far as publishing, aside from self publishing I still think small publishers will continue to spring up supporting writers just as clubs support talented musicians and smaller galleries support artists. Folks in the arts have to do what they do. Full time employment with great benefits has decreased among publishers for at least 25 years, but they take more flack than they deserve. Good people. Smart people. Caring people. Publishers were always ahead on tech. Not so backward. But, yes, blindsided by the online sales behemoth.

Don’t we have similar things going on in publishing with the large publishers moving into the supply chain? (e.g. Elsevier, Wiley) I’ve advocated for small, modern technology companies for years – yet most publishers ignore these vendors. They would rather do business with large, old, monolithic technology companies, and pay more. When the landscape is devoid of good alternatives everyone will be eating Oreos, like it or not…

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