From The Scholarly Kitchen:
The view of Amazon among trade publishers has changed quite a bit over the last 3-4 years, from benign opportunity for growth to a powerful player in the distribution chain that takes pleasure in throwing its weight around. Some publishers (young ones, mostly) think Amazon is the most aggressive company ever to operate in the publishing industry, but older hands know that with market dominance comes brutal trading practices. I remember making a sale calls at Barnes & Noble where the meeting began with the senior B&N executive smiling and saying that he planned to throw all of our books out of his stores. Librarians who complain about Elsevier and John Wiley should see how things look on the other end when you have to do business with the likes of Wal-Mart or Amazon. Welcome to the free market!
However dominant Amazon is for the trade, the fact is that it plays an even bigger role in scholarly book publishing. It has become a significant distributor to libraries and is by far the leading retailer for academic publishers that sell books outside of libraries. I heard a publisher call Amazon the 800-pound gorilla, to which another publisher immediately responded by calling it a 10,000-pound gorilla. I don’t know how big gorillas can get, but you get the idea. In any event, Amazon plays a bigger role in academic book publishing than any other organization.
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When talking about market share for books, the secondary question is whether the books are print or electronic. That’s counterintuitive; you would think that would be the primary question, but in fact the primary question is where books are purchased: at physical stores or online. Amazon is the leading online bookseller for print books and without question the dominant seller of ebooks, which are also purchased online. Combine the 2 formats and Amazon may have a market share for some categories of books over 50%. And that market share will continue to grow as more and more books are sold in electronic form, since Amazon’s market share for ebooks is even greater than for print. So we should not be surprised to wake up one day to find that Amazon is responsible for the sale of as much as two-thirds of all the books sold outside of libraries in the U.S.
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A rival to Amazon will be hard to come by. No one really believes that B&N has a chance any more in becoming a potent competitor, and even a combined effort by other retailers is not likely to amount to much. It seems possible to me, though, that pressure on Amazon could come from 3 different directions:
- From within the publishing industry
- From other large retailers
- From the tech industry
Within the publishing industry there is really only one candidate, since B&N is out of the picture. Penguin RandomHouse (PRH), a product of a recent merger, controls about half of the huge bestsellers, which drive consumer publishing. The new entity is bigger than the next 4 trade publishers combined. PRH may be in a position to create its own online bookstore and they may even invite other publishers to put their books on the site as well. This would be a huge direct marketing company, which could indeed chip away at a few points of Amazon’s enormous market share.
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One way the competition from the tech sector could play out is to choose to torture Amazon in its signature category of bookselling. It’s one thing for a couple of kids in Brooklyn to set up an online bookstore, another thing entirely if an HP or a Xerox decided to use such a service as a showcase for their technologies. And a lot of the pieces are not hard to find. The tools for ecommerce, once very hard to create, are now widely available; print distribution can be handled with agreements with Ingram and Baker & Taylor; devices can be licensed and white-labelled from Korean consumer electronics manufacturers (e.g., LG); ereading apps are available from a number of outfits (e.g., BlueFire). So this raises the question of whether Amazon’s sheer arrogance is now inciting competition.
It’s important for publishers to realize that with the exception of the example of Penguin Random House above, all of these hypothetical challenges to Amazon would be by organizations whose heart really is not in books.
Link to the rest at The Scholarly Kitchen and thanks to SFReader for the tip.
Not everything in tech succeeds at warp speed.
For at least 15 years, a lot of people have tried to make the idea of using the internet as a tool for establishing close relationships between retailers and customers into reality. In fact, PG was working on this about 15 years ago.
Amazon has succeeded building an ecommerce and customer relationship platform that customers love. It’s a combination of a superb user interface, extraordinarily skilled analysis of customer data and a genius logistics system.
The comment in the article about “the tools of ecommerce” being readily available for competitors reflects a lack of understanding about how hard it is to do what Amazon does. Randy Penguin doesn’t have the money or talent to do it. Neither does Apple. (Yes, PG knows Apple sells a bazillion apps and songs each year, but do you really think iTunes is even in the same universe as Amazon’s store?)
Nobody in the publishing business can displace Amazon at this point and probably forever. The intellectual and technical bandwidth is just not there.
Until Amazon begins to make serious mistakes (and it will, but probably not soon), no large tech company can displace Amazon. Walmart might have had a chance to seriously challenge Amazon, but PG thinks that ship sailed about ten years ago without the very smart folks in Bentonville onboard.
What Amazon worries about is some small tech startup that might figure out a new and better way to connect and stay connected with customers – reaching through a smartphone to create a mind meld or something like that. Amazon has some protection because startups have an almost impossible task getting funded if they want to compete with Amazon, but, if you’re looking for a real threat, PG thinks that’s where it will come from.