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Amazon and the destruction of choice?

May 13, 2013

Amazon and you're done? Are Amazon and Publishers both doing themselves out of potential revenue?

Amazon and you’re done? Are Amazon and Publishers both doing themselves out of potential revenue?

Intellectual weariness, it is argued, is a consequence of familiarity. Choice, it is countered, offers variety to quell the familiar. Western business theory attributes choice as a fundamental dynamic in economics. Yet in being given too much choice we can observe that definition of quality becomes more difficult to determine or – as a customer – to assess prior to purchase. This is of significant consequence to a publisher. Information becomes commoditised.

Let’s look at Amazon – a classic case where choice creates a model but where choice, by nature of its subsequent overwhelming nature, serves to commoditise value. Once value is commoditised, it can therefore be argued, choice ceases to exist. In a grey cloud, despite environmental analysis and empirical proof that it exists, no-one can see the water. Yet Amazon, a big puff of knowledge in a cloud of unknowing, still asserts a credible position in the consumer’s mind: good products, low prices, fast delivery.

The Amazon phenomenon

Amazon is a noted success story in digital economics. It has created an interface where service and delivery, combined with apparent low price, have engendered considerable consumer attraction and made it loyal. Who today does not shop on Amazon? Publishers themselves have become so terrified of this phenomenon that many have abandoned all sense of brand ownership and have either: constructed their own e-commerce platforms to tie in with Amazon; have re-routed their web sales to Amazon; or they have put their head in the sands. You can lead a horse to water but if Amazon’s tastes better…

The Amazon method

A singular conceit of the Amazon story is that it gives customers what they want at a price apparently guaranteed to be lower than elsewhere. Amazon has come to resemble the evergreen ivy – symbiotically thriving off the marketing initiatives of others to provide sales to consumers. Publishers market their products, the customers buy elsewhere. On Amazon.

Some producers – and publishers in particular – have attempted to conclude that Amazon can be fought by offering a lower online price. This curiously blunt response is inefficient: if publishers lowered their prices, consumers would flock to them – right? Wrong. This is the power of brand. Amazon has fought for the space in the battle ground of perception and has won handsomely, it seems.

Amazon has now created a machine and a brand so powerful that perception lies in the mind of consumers far bolder than individual brands themselves. “Want a Penguin book? Buy it off Amazon.” How can publishers survive when they have, in terms of brand apparently, ceased to exist?

The Amazon pricing myth.

If we study Amazon carefully we can observe that, as sales of a given product increase, so algorithmically the price of that product goes down. The machine appears to be designed to respond to products which sell well – allowing Amazon to manipulate its generous publisher discounts and to deliver margin by volume transaction.

By contrast, products which do not sell well are priced with minimal discount: Amazon deems, logically, that low volume transaction requires higher margin. It can be observed therefore that lower prices are not a function of generosity but of trend. Volume has rarely proven to be a route to margin save when driven by sudden and consistent demand.

The Amazon problem for publishers

How can publishers survive in an environment when already in excess of 50% of the retail price of a book may have been surrendered to Amazon in terms of “trade discount”? How can they survive when a significant proportion of the remaining 50% is spent on marketing and promoting the book in the first instance? How can the already slender pocket price be managed so that publishers retain enough to stay in business and promote new books, e-books and other products?

What makes a book desirable is one of the great publishing conundrums. As Philip Kogan, chairman of business publisher Kogan Page, once wryly observed “if you can write me a book that will sell then I will publish it”. The onus is on publishing staff therefore to be commercial rather than functionary. Yet many fall into the latter category. Many publishers and their staff have ceased to propagate consistent imagination; complacency has overtaken desire; professional pride has taken second place to “a job in publishing”.

It can be observed that if publishers are no longer imaginative in output, and if Amazon as a tool offers little but a vast lake of literature ill-defined beyond digital categorisation, then consumers will become weary. Choice becomes a chore, not the outcome of selective enquiry. In this world, even the brightest pearls remain hidden in the encrusted oyster shell of publisher and retailer ennui.

How Amazon fights against itself and its suppliers do likewise

If we re-cap: Amazon owns a significant portion of the digital retail space. It owns a significant chunk of margin. It benefits from publisher marketing spend. Amazon’s function to a publisher is to clear stock in sufficient volume so as to render the initiative worthwhile. Yet in offering so much choice in one brand space, Amazon also serves to negate its own success by diverting attention from product assessment in favour of salient “best-sellers”.

The publisher too does not help itself. We have also observed that significant rafts of publisher output is uninspired as a consequence of a publisher’s commercial imperative, which is to say the production of enough books in a year to deliver an overall margin at the end of it. The demand for revenue leads inexorably to the disintegration of quality unless the creation of quality is placed at the centre of publishing operation.

It is also an inherent problem with publishers in that they are unable to define the value behind their books and load them into the shop window of Amazon in the hope of passing trade. Reading many descriptions of books on Amazon is akin to visiting an art exhibition in a village hall: mediocre quality aspiring to be seen as great. Marketers and copywriters are woefully ill-equipped to do the fundamental job needed in today’s online retail world: to describe the essence of a book in order to engender its successful purchase.

It can also be observed that any search of Amazon may well yield a raft of entries for the same product. The current edition. Old editions. Other retailers selling the same edition. Entries with the book jacket showing. Entries without an image. Out-of-print editions from second-hand stalls. At the same time, Amazon is prepared to help the publisher but only, it appears, if the publisher is prepared to pay – for example, to appear in a promotional email to Amazon customers. More pocket price given away in the hope of further sales. Through Amazon. At 50% discount or whatever.

Amazon today, therefore, is often now a tool offering a shop window for products which are not attractively wrapped and neither are they inherently visible. In Amazon’s shop window, Tiny Tim would never see the toys he wishes his parents could buy for him. There are too many books, too poorly described.

Amazon, ultimately, is not helping itself. And publishers are not helping themselves – or Amazon – either. Which probably accounts for the fact that, even for Amazon, its book retailing margins are barely more impressive than those of the publishers themselves.

A way forward?

In creating a tool designed fundamentally to service volume sales of attractive items, Amazon in many ways has created a platform where significant potential is lost. By the same token, Publishers still remain unable to define why any reader should choose its products over those of another publishing company. Price and value once again fall away on the altar of doing the easiest things as quickly as possible.

This article argues therefore that a better model for Amazon be created where retailer and producer combine to create a platform of informed choice. Amazon should insist on certain descriptive and marketing standards for what it sells and publishers ought to know what it is they are selling by being more understanding of the value inherent in their product range. Amazon should refuse multiple entries of the same title and should not permit product entries deficient of key elements such as book jacket design, contents listings and other judgement criteria. Publishers ought, too, to create books of real quality.

In such an environment, consumer choice and product visibility become easier, volume-based products will continue to sell well and lower-volume items will be more accessible to retail at acceptable margins. But such a development is unlikely in the short term. Amazon has no financial need to change and publishers in response will continue to tread water. The consequence of which is the continuation of the same problem which has dogged publishers and booksellers for years: the idle pursuit of an acceptable level of income irrespective of the value surrendered through laziness and intellectual incapability.

In the meantime, the consumer remains confused, unable to make informed choices and the publishing and retail industry – Amazon included – will continue significantly to perform below their real potential.

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