2015 A.D. (Amazon Domination)

July 16, 1995 – Amazon.com began operation. To get there, you clicked on a computer icon, heard the weird dialup modem sounds, the hissing, and you were on your way to the World Wide Web. Type in www.amazon.com and there it was.

It will never catch on. People need to hold something in their hands before they buy it. According to several sources, the first book ever sold on Amazon was this: Fluid Concepts & Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought.

Ten years ago, Amazon was a good customer for publishers, doing about 5-10% of their sales at the online retailer. Today, Amazon is the #1 customer for almost every traditional publisher. In some cases, they generate over 50% of publisher revenue between physical and eBook sales. Smaller digital-only publishers and indie authors are almost entirely dependent on Amazon.

A hundred years of book publishing and retailing culture changed in less than a generation.

Not long ago, if someone told you Amazon would be dropping packages on your front steps carried by drones, you would have thought they were crazy. Who knows what the next few years will bring? Amazon spent $9 billion on research and development in 2014, which is one and half times the total annual revenues of Barnes & Noble. My guess is that Amazon is not resting on their laurels.

In 2014, the Amazon Corporation did just under $89 Billion in business (and didn’t turn a profit). Less than 10% of that revenue came from the sale of books.

Compare this to bookstore chain Barnes & Noble, which generated a little more than $6 Billion in revenue last year (had a less than 1% profit).

Prior to the growth of Amazon, publishers were very careful not to allow any individual retail customer too much control over their business. The reason mostly related to the fact that books could be returned to the publisher if they were not sold.

Publishers limited sales to giant big box retailers because they could (and would) return large quantities of a book if it didn’t sell quickly enough. If they didn’t control them, there was a potential of severe financial damage to a publisher.

Because Amazon orders products only as needed and carefully maintains inventories, they have virtually no returns and therefore are of little risk to the publisher.  Obviously the companion technology of digital printing has combined to make a much better process overall.

But while Amazon critically damaged physical bookstores, as I’ve stated before in this space, changing channels of distribution have affected the global retail economy more than a few times over the decades. Door-to-door sales, mail order catalogs, chain stores and even home party-selling each caused disruption to other retail selling markets.

Now is the time when online is that disruptive force.

So, the 20th birthday of Amazon creates an opportunity to consider the myriad ways it changed our lives.

Not surprising, a level of skepticism surrounds companies that become either too big to fail or use their size to control and dominate. The U.S. economy has always sought to have choices for consumers, to not allow a single company to dominate. Federal anti-trust laws are in place to prevent that.

And yet, we are now in a very interesting era where consumers have happily made a few companies so large and dominant, all because customer experience, products or services are so good and make our lives easier.

All this might not matter, but maybe it will. Should a few stockholder owned companies decide that the Bible is a disruptive force and Jesus is a troublemaker, authors and publishers of Christian materials might be surprised how quickly the doors can close, even in a free society.

I need to end this post. Have to order some stuff on Amazon, download an app for my iPhone and check the news on Google. Couldn’t live without them.

 

19 Responses to 2015 A.D. (Amazon Domination)

  1. Ane Mulligan July 14, 2015 at 5:39 am #

    It took me a while to get to where I’d buy on Amazon. Hubs loves it. When I finally tried it, I did too. Returns are easy. But I also find it’s really easy to over-spend when buying online. When I don’t have an armload of packages to carry, I think I’m not through yet. 😉

    • Carol Ashby July 14, 2015 at 8:18 am #

      Whether it’s Christian Book Distributors or Amazon Smile, I always have to buy “just one more” to get the free shipping. Guess it’s the McClellan in me. Or maybe the Jones. My Welsh grandfather was frugal, too.

  2. Peter DeHaan July 14, 2015 at 5:45 am #

    What a great post, Dan.

    As a consumer, I like Amazon and use them a lot. However, your second to the last paragraph sure gives me pause. May it never come to that.

  3. Len July 14, 2015 at 5:56 am #

    Dan, I’d be curious to know your thoughts on a news item I saw in the last couple of days about Amazon toying with paying e-book authors not per download, but per number of pages the buyer actually read.

    • Dan Balow July 14, 2015 at 6:05 am #

      It is great for Amazon and consumers. Terrible for authors.

  4. Lisa Evola July 14, 2015 at 7:01 am #

    It is amazing to me how we as a people let others control us. We don’t see it as control until one day we lose everything that is precious to us to those we gave it all over to. It is a slow slippery slope, one that we are all trying to navigate. I personally prefer to go to the bookstore. I love the smell of books, and I love to see the colors swirl all around me as I walk through. For me that will never change…until I am forced to, I suppose. It is truly frightening that the land of the free becomes less so with each passing day….I pray that we aren’t all sorry one day for our lack of attentiveness to the signs set before us. Wake up world!

  5. Jenny Leo July 14, 2015 at 7:26 am #

    I support my local indie bookstore, but also use Amazon all the time. Living here in the back of beyond, I’m grateful for the technology to order books (and other things) with ease. The instant gratification of a new book in my Kindle, or boxes appearing on my porch like Christmas morning, would be hard to pass up. I also like that I can donate through Amazon’s “Smile” program. Still, I would be very sad if my local brick-and-mortar store closed, so I purchase there, too. As I explain to my husband as he shakes his head over the Visa bill, it’s important to support my industry. 🙂

  6. Carol Ashby July 14, 2015 at 8:35 am #

    American culture has already degraded to where we need to be missionaries in our own land. It doesn’t take much imagination to picture the Bible becoming restricted merchandise.

    Anglican churches in Africa send missionaries to England, and El Paso, TX, has missionaries in Spain. The harvest fields in the U.S. need workers at least as much. It isn’t love to let someone we know die without sharing the good news of Jesus with them before it’s too late.

  7. Sandy Faye Mauck July 14, 2015 at 10:12 am #

    If we buy all our books on-line and all publishing is electronic, it will be so easy to shut off Bibles and Christian books. And we thought they would come and drag them away and burn them.
    I remember when Amazon started, I thought what a dumb name…little did I know it would be the giant it is today and what a huge amount of landscape this river would cover.

  8. Teresa Pesce July 14, 2015 at 11:01 am #

    Our lives are framed in two stories. We begin with a birth announcement that tells everything there is to tell about us so far. It’s not much. Name, weight, length, sex, date/time of birth, our parents. And we end with an obituary that tells our life story.

    Before writing, stories and histories were told. Now they are written. Or filmed. The medium may change, but stories … not only is story-telling culturally imbedded, it seems to stem from our souls. Jesus told stories to relate and communicate.

    What I mean is … it scares me, frankly, that changes are happening so quickly in our story-telling system (writing & publishing) because a societal response may be fairly rapid, but societal consequences may take a generation or two to register. A great deal of good – or a great deal of harm – may occur.

    But no matter what behemoths arise and roar and then sink back into the tar pits, I think writers will always write and readers/listeners/watchers will always experience those stories. I hope everyone involved in the process always will be financially rewarded. But even if (gasp) we’re not someday, we won’t stop writing.

  9. Carla Jo July 14, 2015 at 12:48 pm #

    For example:

    The last couple days when I typed in Steve Laube and before I typed Agency there came a pop up with a couple options with Steve Laube Agency. It seems it is now so popular that the Agency has become an important … brand.

    Just like that, you rate as important.
    And tomorrow what is and is not important?

    I type in your site because I tried months ago to join the daily sending system and it did not work. Then it seemed important to know how to spell your name correctly with practice. Dry humor coming out. Oh well.

    • Dan Balow July 14, 2015 at 1:19 pm #

      These internet machines are pretty picky about spelling. Just like my phone, if I miss one number I get a person in an entirely different town! Or state!

      Sheesh.

      😉

      • Carol July 14, 2015 at 2:56 pm #

        Ever wonder if that wrong number might be because God wanted that person to speak with you, and, if so, why?

    • Steve Laube July 14, 2015 at 6:13 pm #

      Carol,

      Believe it or not spelling is one reason I also own stevelobby.com. If you type that into your browser it takes you to the correct site despite the misspelling.

      In marketing it called the “radio test.” If a listener can spell your name or book title or web site just by hearing it, you have passed the test.

      It has always been a challenge for those of use with unusual names.

      Steve

  10. Lisa Taylor July 14, 2015 at 1:41 pm #

    Fortunately outside of North America, Amazon isn’t quite the big fish it is there. (Ok, in Europe it’s pretty big too — and ok they opened in Australia last year).

    I was cheerfully snubbing Amazon for years (easier when they want to charge you $40 to ship a book) — and going with UK’s “Book Depository” (free shipping to other side of the world… yipee!). Got knocked off my high horse when I found out the Book Depository had been acquired by Amazon.

    Moved to NZ-owned Fishpond. They’re probably good for another year before Amazon buys them out. 🙁

    All that to say, if any of you need a bible in the next year, I can probably still get you one (but could one of you order me a set of running shoes for my daughter, from Amazon… her birthday is the 16th as well 😉

  11. Angela Breidenbach July 14, 2015 at 5:28 pm #

    A publisher I know had regular returns on books each month. (This is from a discussion I had two years ago, but is valid to the discussion here because it’s my understanding this is standard procedure still.) Then Amazon reorders that same book each month. Why? Because Amazon purges their books regularly and then reorders the same book. That’s been killing the publishers because they have to pay shipping and return shipping. So the same books go back and forth because Amazon has ordered large quantities, then sells a few, then sends the remainders back. Cycle starts all over again. I had no idea this was happening behind-the-scenes to our publishers until I did some investigating for a class I was teaching on publishing. Shipping is a significant cost/loss. I’m still trying to figure out how publishers make enough money to sell to/through Amazon with books flying back and forth all the time. Some accountant in those companies needs to put all the shipping numbers together to show to their boss.

    • Dan Balow July 14, 2015 at 6:11 pm #

      Before online selling and ebooks, publishers needed to account for from 20-35% of their sales reversed out in returns. One retail chain used to pay monthly invoices by returning inventory to a publisher, then re-order the same products shortly thereafter.

      Publishers have been driven out of business by returns.

      Amazon is very good at inventory control overall, but publishers still need to account for some returns. Compared to what it used to look like, today’s process is much better.

      In traditional publishing author contracts, this is why there is an option for a publisher to withhold a “returns reserve” on royalty payments for a limited time. It gives them some protection from paying royalties on sales that end up being returned.

      Yes, accounting is a big job at a publisher!

  12. Linda Rodante July 14, 2015 at 7:51 pm #

    I thought you were going to bash Amazon, but I was pleasantly intrigued by your post instead. JA Konrath says in his article, Authors United Epic Fail-O-Rama, “Amazon doesn’t have power over the marketplace of ideas, or control over the retail book market. They don’t have a monopoly or a monopsony. They have an online store, which managed to become very large by being customer centric, innovating, offering a wide selection, keeping prices down, and prioritizing customer service. In doing so, they’re hurting a bunch of entitled, archaic publishers who innovated nothing, restricted choice, colluded to raise prices, prevented authors from reaching readers, and offered zero customer service.” That sounds a little harsh, but I just talked to an author whose contract with a traditional publisher was cancelled out of the red, and she is minus the money she was depending on to pay bills. She knows three other authors whose contracts were cancelled, too. Loyalty should work both ways. No wonder so many authors are jumping ship to Indie publishing or going “hybrid.” And the other change happening? Indie authors are selling lots of Christian fiction. Traditional Christian publishers need to take a real look into what’s happening today and why.

Trackbacks/Pingbacks

  1. Five Things that Changed the Publishing World - The Steve Laube Agency - December 7, 2015

    […] Dan Balow wrote an excellent piece on this earlier this year. It still is quite astounding when you think about it. In 20 years this little online startup (founded 1995) became the most dominant online retailer in the Western world. Bookselling will never be the same. […]

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