From publishing professional Mike Shatzkin:
A lot of people in publishing would pay a lot of money to get a reliable answer to these two questions:
When will the growth in Amazon’s share of the consumer book business stop?
Who will be left standing when it does?
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Any discussion of Amazon’s success must acknowledge that the other key component, aside from the strategic components of long-term vision, smart use of capitalization, and customer-centricity, has been the quality of their execution.This has been true from the beginning and it is still true today. Some of this is subjective, but it still looks to me like they offer a better print searching-and-buying experience than BN.com and a better overall ebook ecosystem than Nook or Kobo. I read on an iPhone and use all the ebook purchasing systems from time to time, but I use Kindle the most because it is the best. I am close to somebody who prefers to buy from BN.com because (she says; I don’t do this research…) they give money to Democrats and Amazon gives money to Republicans, but she still does her searching at Amazon because it works better before she hops over to BN.com to make her purchase.
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This goes back to 1997. Ingram, well aware that Amazon had started its business by simply using Ingram to supply most of the books its customers wanted (Bezos put his business in Seattle because Ingram’s Rosemont, OR warehouse was a couple of hours away), decided they could put many retailers in business the same way. So they announced the formation of I2S2: Ingram Internet Support Services. I2S2 would provide the tools to allow any bookstore to start selling online. Prominent industry thinkers saw I2S2 as the way all booksellers could start to reap the opportunities of the Internet as a sales channel.
Had Amazon not quickly reacted to this threat, they could have gone away so fast that we’d have trouble remembering their name now. But they did. They promptly cut their sale prices so deeply on most of what they sold that the other retailers, focused as they were on their stores, saw no point to expanding into unprofitable web business. Almost as quickly as I2S2 was announced, it was dead.
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I2S2 was the first instance of Amazon successfully using price as a weapon but it has been an important part of their arsenal ever since. It has been a powerful one. It works for them commercially because they aren’t just a bookseller; they use book pricing to acquire customers and nurture their loyalty.
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But using price as a weapon has another benefit; it puts the customer on your side. Even when Amazon’s lower prices are subsidized by their being excused from sales tax responsibilities that fund state and local governments and disadvantage local retailers who could be their friends and neighbors, consumers want it and defend it.
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I recall in the late 1990s the suggestion was made by some pundits (but definitely not this one) that publishers should combine to compete with Amazon. If they had, they almost certainly would have failed as ignominiously as I2S2 and the Bertelsmann-B&N combination did. Publishers wouldn’t have gone into online bookselling to lose money and it would have taken vision and guts to use books the way Bezos did, as a springboard to create a global online Walmart. The point I want to emphasize is that it was not a failure on the publishers’ part to have “allowed” Amazon to grow their online hegemony. It was not in their power to have changed it.
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eBooks have enabled commercially viable self-publishing in ways never before anticipated, giving authors leverage in their negotiations with publishers they never had before. And agents now have to share the concern of the publishers and retailers that Amazon could disintermediate them as well by providing their publishing and distribution services to authors directly.
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This would all be difficult enough if there weren’t a huge cultural gap between Amazon and the rest of the publishing industry. But there is. More and more, people who have been in publishing for years see Amazon as “in” the book business, but not “of” the book business. That attitude is exacerbated because the answer to the second question above (“who is left standing?”) for many is “perhaps not me.”
Link to the rest at The Shatzkin Files
As usual, Mike’s insights are extremely valuable.
Passive Guy absolutely agrees that Amazon is not “of publishing.”
Amazon is an internet company and is much more similar to Google or Facebook than it is to Random House or Barnes & Noble. Unlike Big Publishing, which has been using basically the same operating model for well over 50 years, Amazon is all about change and, as Mike points out, has made major changes in its business model many times during its history and will undoubtedly make many more.
Amazon may have started out as a seller of books and CD’s, but it’s way beyond that right now. If you were to ask Jeff Bezos who Amazon’s principal competitors are today, PG doubts Bezos would mention Barnes & Noble. PG’s guess is Bezos thinks about Wal-Mart far more often than he thinks about Barnes & Noble.
Certainly, some senior people inside Amazon are focused on media sales, but Barnes & Noble no longer has the ability to cause Amazon serious trouble. Neither does Big Publishing.
Being a well-run organization, Amazon doesn’t want to lose in any market segment and the Kindle is evidence of that. However, Amazon is competing against Staples and Office Max in another segment and Best Buy in another segment (although that battle is mostly over) and Home Depot and Lowe’s in another segment.
Books are very important to PG and to the people who visit The Passive Voice so we tend to focus on Amazon as a bookseller and self-publishing platform. But Amazon is much more than that.
In a competition between almost anybody and Amazon, Amazon has one giant advantage – it focuses on customers with more intensity than any competitor. And Amazon understands better than anyone else that, as an internet retailer, it can understand its customers better than any supplier or meatspace retailer.
Who knows more about the people who purchase HarperCollins books, HarperCollins or Amazon? There is no contest and this is a knowledge battle HarperCollins can never win.
Every day thousands of Amazon customers buy HarperCollins books. Amazon knows exactly who they are and what other books they buy and what other non-book items they buy. That knowledge allows Amazon to serve HarperCollins customers better than HC can and better than any other bookseller can.
In PG’s view, we’re still in the early days of Amazon figuring out ways to serve and delight its customers better than anyone else who doesn’t have as many online customers as Amazon does.
And, as has been mentioned here, Amazon regards indie authors as its customers.
As a postscript to all the Amazon-as-Godzilla people, PG will simply point out that Godzilla was never focused on delighting customers.
If Amazon ever starts acting like Godzilla, some little internet startup will begin developing an oxygen destroyer or some other Godzilla-killer. Remember that only a few years ago, Barnes & Noble was Godzilla.