Amazon is one of the largest, most profitable retailers in the world. They have built a customer base of 30 million. Their speed, efficiency and customer service are second-to-none. They did not get to be number one by being nice. We shouldn't expect them to start now. If anything, we should expect them to buckle down and start fighting to keep their spot on top of the online shopping mountain. That is what they have done in the case of Hachette, who is currently in a nasty dispute with Amazon over the pricing of their e-books.
Amazon's biggest advantage is that it's cheaper than its competition. No matter how loyal you are to your local mom and pop bookshop, you've probably ordered something on Amazon when you saw it was ten bucks less and had free shipping. So, how do you think Amazon manages to maintain such good deals and customer perks? They are master negotiators.
Amazon has what book sellers need. Customers. A distribution system. Global scale. They have the ability to handle massive numbers of pre-orders, which is what determines best sellers, and therefore aids the success of a publishing house. They also offer as close to immediate shipping as possible, and even true instancy by selling through their e-book readers. They have an extremely low return rate, pay publishers within 30 days, and offer an efficient book review system that serves as a secondary promotion tool.
As Amazon works to negotiate prices for e-books with Hachette, they are exercising a number of powerful tactics: pulling pre-orders, buying less inventory, extending shipping time, and not offering promotional pricing. You can still buy Hachette books from Amazon, it will just take longer and cost more. In a statement released today, Amazon said that if book buyers don't like it, they're welcome to shop elsewhere.
They are flexing their business muscles. They've used that muscle before, and they'll do it again.
Hachette's authors are understandably upset, because this fight is hurting their sales. Now the seller is reminding Hachette and their authors why they wanted to do business with them in the first place: Amazon moves books.
Negotiating for acceptable terms is an essential business practice that is critical to keeping service and value high for customers, both in the medium and long-term. Amazon is squeezing Hachette with all their might, because, as they said in statement today, "when we negotiate with suppliers, we are doing so on behalf of customers." Amazon's loyalty is to its customers. Part of that loyalty means offering the lowest price possible. Most often, this negotiating is done behind closed doors, out of the customer's realm of vision. It's not a pretty process, as we have seen. Now, online shoppers are seeing exactly how dirty the game is that allows them to order a book at 30 percent off with free shipping.
For some, it is a difficult pill to swallow, and perhaps even to believe, that Amazon is doing this for their customers. Of course, their bottom line is also a factor, but that bottom line is based on keeping customers happy. Amazon knows that unless they offer the best possible price, which they can achieve only through negotiation, they won't have very many Hachette orders, meaning they won't be any worse off than they are now with limited Hachette orders.
Eventually, Amazon and Hachette will come to some kind of agreement (though likely not any time soon.) Books will once again be shipped quickly, pre-orders will be taken, and discounts offered. And James Patterson fans will go right back to buying bestsellers on Amazon. Now that you've seen how cheap books are made, you might feel off put by Amazon's tactics. But next time you go to order a book and see Amazon has the best price and the fastest shipping, you might find yourself clicking "Order Now," because it's instinctual. That instinct for cheapness and immediacy is how Amazon has become one of the biggest book sellers in the world, and they aren't changing because one publishing house is hurting.
As for the burning question, is what they're doing "right"? Amazon isn't in the business of being right. They're in the business of selling books.
This article is from the archive of our partner The Wire.