business news in context, analysis with attitude

The New York Times has a piece about how a company called the Educational Development Corporation (EDC), which publishes children’s books, decided earlier this year that “it was fed up with Amazon’s scorched-earth tactics” and removed all its titles from Amazon’s site, an act that “eliminated at a stroke $1.5 million in annual sales, a move that could be a significant hit to the 46-year-old EDC’s bottom line.”

“Amazon is squeezing everyone out of business,” Randall White, EDC’s CEO, tells the Times. “I don’t like that. They’re a predator. We’re better off without them.”

The story goes on: “Amazon was buying EDC’s books from a distributor and discounting them to the bone, just as it does with everything it sells. This might have been a boon for readers, but it was creating trouble with other retailers who carry the company’s titles, as well as with EDC’s network of independent sales agents, who market its books from their homes ... Amazon is generally reluctant to explain its business practices and declined to comment for this article. But its executives say it is shaking up an antiquated business model by eliminating middlemen and passing the savings on to consumers. Publishers that try to cling to the past, they have said, will die.

“The retailer’s growing list of critics, however, argue that Amazon has $48 billion in revenue but hardly any profit, proof that its approach is opportunistic and unsustainable. When traditional publishers, booksellers and wholesalers are destroyed, these opponents say, Amazon will be left with a monopoly that will be detrimental to the larger health of the culture.”

Here’s the interesting part: “Somewhat to Mr. White’s surprise, EDC is doing better without Amazon, at least for the moment ... Sales in March rose, in part because of new accounts like a toy store in Round Rock, Tex., that placed an initial order for 61 books. And colleagues in the business have been congratulating the publisher, or at least expressing their admiration for Mr. White’s guts.”
KC's View:
Listen, I’ve been saying and writing for some time that while Amazon is projected to be potentially the same size as Walmart by 2020, it also is possible that it could screw it up through a combination of avarice and arrogance.

But I also think that people have to let go of the notion that Amazon’s business model may not be sustainable; people have been saying that for fifteen years, and Amazon just keeps growing.