On GigaOm, Nathaniel Mott looks at the Amazon Books retail store and poses an interesting and incisive question—one that I’ve wondered about a time or two myself, but somehow never managed to articulate. If Amazon Books is such a threat to the model of existing brick-and-mortar stores, why aren’t more existing stores taking a lesson and doing some things the same way?
In particular, Mott zeroes in on the mutable pricing and online price-matching. Customers already use their smartphones in shopping, and it’s actually not to showroom most of the time. Frequently, they just want to look up more information about the product online even though they intend to buy the item then and there.
At the moment, the very idea of online price-matching is often treated as something new and bizarre, even if you’re trying to get a chain store such as Wal-Mart to price-match its own Internet arm, walmart.com. And if you do want such a match, you have to know the on-line price and ask for it. Mott thinks that retailers should do as Amazon does and automatically price-match their own online store. (He recognizes that price-matching competitors is an entirely different issue.)
And while they’re at it, they could also look into the idea of dynamic pricing. Amazon doesn’t actually list prices on items in-store at all, because it’s always possible the online price could change at any time. That does lead to some awkwardness among people who don’t have smartphones, of course, but it provides a great deal of flexibility that fixed prices don’t give you. (And it also makes less work for all the retail employees who have to go through and re-label everything when the price changes.)
After all, what if Amazon Books turns out to be more than just an experiment, and within a few years there’s an Amazon Books in every major city and many smaller ones? If their peculiar new model of retail turns out to be a hit with consumers, their competitors could be in danger of being left behind. Which seems to be something of a theme when it comes to Amazon’s competitors these days.
It is funny, when you come to think of it, just how little the retail shopping experience has changed since the advent of the smartphone. Before Amazon Books came about, about the only time you heard about the use of smartphones in a retail context was the retail-industry-wide howl of protest when Amazon ran a promotion around a price-checking app in December, 2011. Of course, there had been plenty of price-checking apps and services in the years prior to that, as I note in the articles I just linked, but they were always third-party services, not from places that actually wanted to be the one to sell you the thing, like Amazon.
And yet, smartphones are very powerful information-gathering tools. There are applications that will let you scan an item’s UPC code and pull up prices and other product information about it; Amazon even has one itself, a later evolution of that 2011 promotional app. Why don’t retail chain outlets make something similar? A Wal-Mart price-scanning app that would check a price on walmart.com, for example, or a Barnes & Noble app that does the same thing for BN.com. Then, if (you grant it permission to check your GPS location and it sees) you’re in a store of that chain at the moment, it could offer something Amazon couldn’t, since Amazon doesn’t have brick and mortar stores, like perhaps a discount, freebie, or other incentive for walking out of the store with the product right now.
Maybe it wouldn’t be necessary to go to quite the Amazon Books extreme of eliminating all price labels altogether, but something that makes use of the smartphones people who are shopping anyway carry with them might be a big competitive advantage. At any rate, it will be interesting to see if something like that becomes available, and who comes up with it first.
What he and you missed is that Amazon Books serves a different purpose than most bookstores.
Most retailers want to sell stuff, while Amazon books is secretly designed to collect your book browsing habits. The sale of books is secondary, which is why so much activity is routed through the Amazon app.
I used to live near that one-and-only Amazon bookstore. It’s hardly a typical bookstore location.
On one side is the University of Washington, with the largest on-campus enrollment on the West Coast. One the other side is a very upscale community where a million-dollar home would be a fixer-upper.
The shopping center includes both the Apple and Microsoft stores for Seattle. So many people shop there, this time of year the parking is almost impossible. You’d be lucky to find a space five floors up in a parking tower.
That means high-rent for retail space. Most bookstores couldn’t afford that. B&N couldn’t and closed their megastore there a few years back. Even Amazon has rented a small amount of space that was once a restaurant. Relative to Amazon’s size, this isn’t a big investment for them.
Take notice too that Amazon isn’t selling books like most bookstores. It’s selling the fast-moving items. That is called cream-skimming. If one store takes the cream, the other stores are left with the money-losing books.
Most bookstores make their profits on non-book trinketry and the bestsellers. They’re already hit badly by discounted prices on the latter by big box stores such as Costco and Walmart. The only real advantage bookstores have over those stores is location and parking. Big box stores tend to be on the outskirts and have enormous parking lots to cross. If this Amazon store is any indication, it’s targeting a different set of shoppers, those already going to highly trafficked locations in affluent neighborhoods and whose needs are a quick way to pick up those same high-volume bestsellers.
This store has also targeted the one weakness of Amazon’s online business model. Go to a regular bookstore and you can walk out the door with one of the current bestsellers. Go to Amazon, and you may get it tomorrow or the next day. For some, that is an issue. Amazon is testing whether that is enough of an issue to make a profitable business.
I also agree, at least in part, with a previous poster. Amazon is collecting mountains of data on customers by name and it’s using that data in ways it probably doesn’t want us to know about. When I lived in Seattle and meet an Amazon software developer, I always asked if he could set the “superbit” on my books. I’d then explained that superbit flagged my books to go to the top of search results. None offered to do that but my reason for asking was achieved. None told me that Amazon would never do such a thing. In fact, one told me rather bluntly to “never truest Amazon search results.” Amazon is apparently setting a lot of bits on users and their purchasing habits.
What I actually wonder is if Amazon has a “sucker bit” meaning one that’s the result of monitoring each user’s purchasing habits and perhaps even sensing how desperate they are to buy. I know that in certain circumstances, Amazon hides lower prices from some third-party retailers and only shows the higher-priced sources for an identical item. I’ve seen that so often, I never buy without a lot of probing around. The only real question is whether Amazon has an internal rating system for buyers. Shrewd buyers don’t get a run-around. They get the best prices. On the other hand, naive buyers, those with more money that sense, get steered to the higher-priced retailers. The flip side of variable pricing is that it can be used as easily to raise prices as to lower them.
I believe that was a furor a few years back over evidence that Prime buyers, who were getting free shipping, were getting steered to the higher-priced retailers. Perhaps the only issue wasn’t that that was happening—evidence for that was clear—but whether it was deliberate or an artifact of some up scheme to hide lower-priced items from less shrewd, more buy-crazy customers.
Apps with location sensing could pay a similar game. Knowing where you are, they could covertly price-match for Walmart where you are but not for a store half-a-mile away that has a better price. It wouldn’t just price match. It’d price-match for your location in all sorts of devious ways. Even the fact that you’re scanning a bar-code implies that you’re at some store.
And by the way, it’s actually quite easy to use various apps to check on the price and value of an item whether retailers intend that or not. I regularly do that with Amazon, Home Depot and Lowe apps before buying. That helps me justify the cost of the data plan on my iPhone, mostly by giving me a reason not to buy.
It’s not far to expect bookstores or publishers, or other retailers to match Amazon’s resources in a host of areas as you claim. Even B&N is a small fraction of Amazon’s size in book sales, and the typical bookstore isn’t remotely capable of competing. Publishers, even the larger ones, are in a similar situation.
That’s why the real purpose the the DOJ lawsuit against Apple and the major publishers wasn’t about “price fixing.” That argument was so stupid, only getting a really dumb judge allowed them to win. Apple, with literally 0% of the ebook market of its alleged crime, couldn’t price fix and more than I could. And if agency pricing is so evil, why hasn’t the DOJ gone after the app, music and movie markets, who sell identically with agency pricing? All involve a file download after a credit transaction. The business models are identical. Why is one the height of evil and the others business as usual. Like I said, this judge was really stupid.
And the reason is that this wasn’t about an evil conspiracy to fix prices. The Seattle law firm that put the DOJ onto that lawsuit is literally a ten minute walk from Amazon’s corporate headquarters. Even journalists ought to be able to figure out what was going on there. My hunch is that the Obama-administration DOJ at that time wanted to look like it was pro-consumer by suing and didn’t care about the details. Image was all that mattered. Now, they wouldn’t bother. Everyone who’s not a fool knows the current administration’s DOJ is hideously corrupt. It and the IRS rank dead last in public trust. They’ve given up even trying to look like good guys. Like Chicago politicians, they don’t care.
No, if you want to know why something was done, look at what resulted. Amazon put the DOJ up to that lawsuit because its effect is precisely what Amazon intended it to be. It has made if very dangerous for anyone else in the book industry to work together, lest they be accused of engaging in a price-fixing conspiracy.
That’s why remarks like yours that publishers and other retailers should be more like Amazon are unfair bosh. No one of them could afford to do for themselves the types of changes to how they do business. They lack Amazon’s huge size. And if they tried to work together, as they did with Apple and agency pricing. the feds under our current Chicago-machine politics, will go after them.
The essence of Chicago-machine politics is an unholy alliance between businesses and politicians. Businesses that pay to play, meaning give money to politicians, get favorable treatment. That means government contracts and exemption from regulations. One illustration is Obama’s first job as a lawyer, protecting slum lords with rat-infested apartments from prosecution. On the other hand, those who don’t pay—not to mention those who dare to campaign for cleaning up government—bring down on them the wrath of government. The city will cite them for every regulation imaginable, even grossly unfairly. Transfer that to the federal government, and you have the IRS going after non-profts that oppose the Obama administration. Those two, now Chicago-run federal agencies, the DOJ and IRS, are the key reason public trust in the federal government is now at record lows. And a press that won’t go after that corruption isn’t exactly winning public trust awards either.
When you get a chance, Chris, check out the upper executives at Amazon. I did a few years back and was amazed to discover how many had backgrounds in law rather than business. In one sense, Amazon is a business run like a large corporate law firm. Dirty tricks, like that DOJ lawsuit are fine. Bullying is the norm. Deceptions are fine. All are routine characteristics of much corporate legal practice.
I saw all of them in my copyright dispute back about 2003 and simply had to learn not to take the other side’s lies and bullying seriously. When they lie, calmly expose their lies. When they attempt to bully, keep in mind that it’s what the judge thinks that matters and turn their lying against them.
The real problem with the book market is that book publishers have a tradition of gentlemanliness that makes it hard to stand up to bullying. After all, most of the major ones are in Manhattan. They belong to the same clubs, dine at the same restaurants and send their kids to the same schools. They’re friends and compete as friends.
And the typical writer is so terribly passive, that he or she is of little value in a fight. Read Amazon’s FAQ to authors and its easy to walk away with the impression that Amazon is paying 70% like Apple. You have to go elsewhere and sort out muddled remarks to realize that Amazon never pays 70%. It only pretends to pay that for books priced $2.99 to $9.99 and even then accessed a hugely inflated “download fee” that no other retailer charges. Otherwise it pays half what Apple pays (35%). And any scoundrel can dominate a market if it’s paying half what its competitors have to pay.
In short, what Amazon is doing with ebooks takes no great talent. Just a heart of cold stone, one that cares not that many authors can’t afford to even take their kids out for hamburgers once in a while.
No, the real problem isn’t Amazon’s superior use of technology. It’s Amazon’s use of nasty law-firm tactics with people—authors, publishers, and bookstores—who aren’t used to those levels of deception and bullying. One illustration of that is the corrupt DOJ lawsuit, whose purpose was to crush any efforts by authors, publishers and other retailers, to mount any effective competition to Amazon. Amazon even stuck taxpayers with the cost of it. How’s that for scum?
And if Amazon succeeds, watch out. If they’d won, that law firm that sued me for copyright violation did not just want my book not published, it wanted all copies destroyed. Do you get that. Book burning just like the Nazis. The nasty side of law doesn’t want to just win. It wants to crush opponents out of existence.
That was so mean, an ACLU lawyer who was helping me at the time accepted into his privileged files a copy of my book. They can’t get at them there, he said.
In response to Nate’s comment: “Most retailers want to sell stuff, while Amazon books is secretly designed to collect your book browsing habits. ”
Seems to me every retailer collects my overall shopping habits on ALL the stuff I browse for and what I eventually buy.
Go to site #1 and search for X, and within minutes at site #2 I see ads for item X. So unless I have adblocking and tracking software running, I’m being followed and my browsing habits are being noticed.
The same is true for actually shopping in brick and mortar stores. Go to store #1 and buy X, and a few days later at store #2 I am given a register coupon for item X. Sometimes it’s the same credit card being used, sometimes not (which I honestly find a bit creepy). So someone somewhere tracks my shopping habits — unless I pay in cash.
Short of living totally off the grid and only being paid in cash under the table and using cash, I don’t see how one avoids being tracked; but I could be totally wrong on this. Yes, I’m a bit paranoid, but it doesn’t stop me from living my life.
Yes, but we’re talking about b&m behavior, not online.
Where other b&M stores track your buying behavior, Amazon Books can track your browsing behavior even when you don’t buy something. There’s a huge difference.