retail news in context, analysis with attitude

The Seattle Times reports this morning that Amazon.com has been sending emails to publishers demanding biggest discounts if the companies want to continue selling their books on the site. While many publishers are loathe to criticize the world’s biggest and most influential book retailer, the story cites one specific example - McFarland & Co., where they got 19 days notice that Amazon wanted to buy its (admittedly scholarly and often arcane) books at 45 percent off the cover price, or roughly twice the discount previously given.

The folks at McFarland say that if they sell books to Amazon at that discount they’ll have to offer it to everyone, which would make their business unsustainable; they seem most irritated by the fact that they’ve been unable to actually talk to a live Amazon employee about the changed conditions.

The broader problem - and this potentially could impact every company with which Amazon does business - is that Amazon continues to generate an increasing percentage of many companies’ businesses. In the case of McFarland, the story says, “Amazon generated nearly 70 percent of McFarland's retail sales and 15 percent of its entire business.” Which makes it hard for anyone to walk away from Amazon and refuse to play by its rules ... in the same way that so many manufacturers have found themselves at a disadvantage when dealing with Walmart, which accounts for a large percentage of their revenue.

At the same time, the Seattle Times notes, Amazon has come under increasing criticism for being willing to use its considerable muscle to bludgeon its competitors - like last year, when it offered additional discounts to shoppers who went to bricks-and-mortar retailers to check out products and then placed orders for them with Amazon.

Here on MNB, earlier this year, we reported that Amazon was said to be implementing changes in what it requires from its grocery suppliers, demanding what one source called “an incredible discount from all grocery suppliers. It's my understanding that a lot of suppliers, big and small, are walking away from Amazon."

On the publishing side, Amazon also is working to compete with the same publishers with which it does business - creating its own imprint and developing systems that allow writers new ways to bring their work to market.
KC's View:
I am fond of quoting the research that shows Amazon and Walmart becoming the same size in about 2020, but that’s not to suggest that this is inevitable. Arrogance, missteps and an emphasis on short-term tactics rather than long-term strategy can derail any company.

In Amazon’s case, I would recommend that CEO Jeff Bezos read “Macbeth,” in which Shakespeare refers to the title character’s “vaulting ambition,” or intense yearning for power that allows him to misjudge the situation to the point where tragedy ensues.

You can read the entire and fascinating Seattle Times story here.

BTW...I should note here that this is not our experience with our book, The Big Picture: Essential Business Lessons from the Movies. It is my impression that Amazon does not so much buy the books for sale as it takes them on consignment and then we get a piece of the sales. Which seems eminently fair to me ... they always are reordering because they’re always running out of stock. (Michael Sansolo and I love to mention the fact that The Big Picture consistently is among the five percent of all books sold by Amazon ... which sounds impressive until you realize that they sell more than eight million books, so all you have to do is be in the top 400,000 or so. But hey ... we’ll take our achievements where we can find them.)