Pricing

The 2010s were supposed to bring the ebook revolution. It never quite came.

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PG’s last post on December 24 was about the following Vox article that purported to talk about what a bust ebooks have turned out to be.

If you missed it in the holiday rush, there were some good comments and, yes, it is a Vox article, so you can assume the author was born yesterday.

From Vox:

At the beginning of the 2010s, the world seemed to be poised for an ebook revolution.

The Amazon Kindle, which was introduced in 2007, effectively mainstreamed ebooks. By 2010, it was clear that ebooks weren’t just a passing fad, but were here to stay. They appeared poised to disrupt the publishing industry on a fundamental level. Analysts confidently predicted that millennials would embrace ebooks with open arms and abandon print books, that ebook sales would keep rising to take up more and more market share, that the price of ebooks would continue to fall, and that publishing would be forever changed.

Instead, at the other end of the decade, ebook sales seem to have stabilized at around 20 percent of total book sales, with print sales making up the remaining 80 percent. “Five or 10 years ago,” says Andrew Albanese, a senior writer at trade magazine Publishers Weekly and the author of The Battle of $9.99, “you would have thought those numbers would have been reversed.”

And in part, Albanese tells Vox in a phone interview, that’s because the digital natives of Gen Z and the millennial generation have very little interest in buying ebooks. “They’re glued to their phones, they love social media, but when it comes to reading a book, they want John Green in print,” he says. The people who are actually buying ebooks? Mostly boomers. “Older readers are glued to their e-readers,” says Albanese. “They don’t have to go to the bookstore. They can make the font bigger. It’s convenient.”

Ebooks aren’t only selling less than everyone predicted they would at the beginning of the decade. They also cost more than everyone predicted they would — and consistently, they cost more than their print equivalents.

. . . .

When the Kindle entered the marketplace in 2007, Amazon had a simple sales pitch: Anyone with a Kindle could buy all the ebooks they wanted through the online marketplace, and many of those ebooks — in fact, all New York Times best-sellers — would cost no more than $9.99.

$9.99 is a steal for a new book. At the time, most hardcovers were averaging a list price of about $26, and many cost more. But for Amazon, this price point was an apparent no-brainer. The first generation Kindle was expensive, and value conscious customers needed some incentive to buy into it. Why would anyone spend $399 on an e-reader if they couldn’t expect to make up at least part of the cost in a discount on ebooks?

And while this point is often glossed over, Amazon was actually following a precedent set by publishers in its pricing model. In her opinion for US v. Apple, Judge Denise Cote noted that before 2009, most publishers discounted ebooks by 20 percent from the price of a hardcover, which often led to a suggested list price of around $9.99.

But by 2009, publishers had changed their minds. Now they considered the idea of $9.99 ebooks to be an existential threat. Printing and binding and shipping — the costs that ebooks eliminated — accounted for only two dollars of the cost of a hardcover, publishers argued. So the ebook for a $20 hardcover book should cost no less than $18. And according to publishers, by setting the price of an ebook at $9.99, Amazon was training readers to undervalue books.

. . . .

Before we delve further into the weeds here, a quick primer on how book prices are set. Print books are generally sold under a wholesale model, which works like this: First, the publisher will set a suggested list price for a book; say, $20. Then it will sell the book to resellers and distributors for a discount off that suggested list price. So if Simon & Schuster wants to sell a $20 book to Amazon, Amazon might negotiate a discount of 40 percent for itself and end up paying Simon & Schuster only $12 for that book.

But once Amazon owns the book, it has the right to set whatever price it would like for consumers. The $20 list price that Simon & Schuster set was just a suggestion. Under the wholesale model, Amazon is free to decide to sell the book to readers for as little as a single dollar if it chooses to.

Until 2010, ebooks were sold through the wholesale model too. So if Simon & Schuster was publishing a $20 hardcover, they could choose to set a suggested list price of $18 for the ebook — two dollars less than the hardcover — and then sell that ebook to Amazon at a 40 percent discount for $10.80. And Amazon could, in turn, feel free to sell that ebook for $9.99 and swallow a loss of 81 cents.

To be clear, the numbers we’re using here to get a handle on how pricing works are imaginary. (Amazon negotiates different discounts for itself at different times from different publishers, sometimes around 40 percent, but at other times higher and at other times lower.) But we do know that Amazon was making very, very little money off ebook sales in 2010, and was in fact probably losing money on most of them.

. . . .

“Amazon can still discount whatever they like on the print side,” explains Jane Friedman, a publishing consultant and the author of The Business of Being a Writer. On the ebook side, however, Amazon now lists publisher-mandated prices, often with the petulant italic addition “Price set by seller.” “So the market is very weird, and often the ebook costs more than the print,” Friedman says. “Sometimes it feels like Amazon is trying to make the publishers look ridiculous.”

And because ebooks are often more expensive than Amazon’s heavily discounted print books, traditional publishing’s ebook sales seem to have fallen off — and Amazon is more dominant than ever in the print book market. “It’s so much cheaper,” says Friedman.

In this new market, high ebook prices make it harder than ever for young authors in particular to survive. “The split has really hurt debut novelists,” says Friedman. “It’s hard to ask readers to take a chance on someone unproven at that high price point, and since the ebook market does lean towards fiction, it’s hurting the new people.”

Self-published authors, meanwhile, are flourishing. They’re allowed to set their own ebook prices just like publishers are — and consistently, they set their prices very, very low. “It’s a shadow market,” Friedman says. “Novelists with huge backlists go and put them out as ebooks independently. And if a reader has a choice between reading this great series at $2.99 a pop or a $12 novel, what are they going to pick?”

Antitrust law professor Christopher Sagers argues that the outcome of the DOJ’sebooks case shows that the real problem with the industry is not just that Amazon has a monopoly. The big trade publishers, he says, have a monopoly too.

“There used to be hundreds of publishing companies. They’re now mostly owned by five,” Sagers says. (After that Department of Justice lawsuit, Penguin merged with Random House, and the Big Six became the Big Five.) “Why are ebooks expensive? It’s not because Amazon is vicious. It’s because there’s no competition at the wholesale level.”

. . . .

The Big Five publishers “are huge, and they have been able to put in place practices that are kind of unfair and that authors have to put up with,” Friedman allows. “That said, they need that kind of size to be able to effectively deal with something like Amazon. If you look at an indie publisher, I wouldn’t want to be one of them.”

Link to the rest at Vox and thanks to DM for the tip.

PG notes that the OP devotes one paragraph to independent authors and that paragraph implies that indie authors are primarily publishing their revered backlist titles.

Unlike Big Publishing, nobody is really beating any publicity drums for indie authors.

One other point the OP doesn’t discuss is that Barnes & Noble is still cratering and, when it finally goes down the drain, retail bookselling via physical bookstores will take a huge hit and publishers who have failed to develop their chops selling ebooks and encouraging readers to buy them will regret that their profitability will take an enormous hit.

Fixed Book Prices in Germany

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From Publishing Perspectives:

A new defense of Germany’s fixed prices for books has been issued this morning (November 8) by the Börsenverein des Deutschen Buchhandels—the country’s publishers and booksellers association.

In 2018, the Börsenverein commissioned new research on the issue—described as a team of economists and a legal scholar—to study what the organization today calls “the impact and legitimacy of Germany’s fixed book price system in an independent and comprehensive manner using the most up-to-date information possible.”

. . . .

For some brief background on the issue, fixed prices on books in Germany have long been a tradition and were codified in law in 2002. The effect of the fixed price is that a book—whether sold online or in a physical retail setting—has exactly the same price nationwide. A publisher sets the price for its books in each format. After 18 months, that publisher can cancel the fixed price, and discounting is allowed in cases of defective copies or bulk pricing.

As today’s media messaging points out, 13 European countries have fixed pricing on books, and those nations include Austria, Spain, Italy, the Netherlands, Norway, and Hungary. Outside of Europe, books are sold on a fixed price system in markets including Mexico, Argentina, and Japan.

And as it turns out, the Börsenverein’s study is a kickoff to a campaign hashtagged #dankbuchpreisbindung, or “thank fixed book prices.”

The organization is offering posters, site banners, email signature graphics, and other collateral materials to spread messages—in bookstores and other venues—such as “Price Comparisons Are Futile” and “We Have More [Books] for the Same Price.” This signage also reads, “You pay the same for a book anywhere in Germany. With us you get competent advice and a smile for free.”

. . . .

And the release of the new pro-price-fixing report today—in news reports characterized as costing some €300,00—is an answer, in part, to a report from the country’s Monopolies Commission which, in 2018, recommended discarding fixed prices on books. In very general terms, the commission’s opinion last year indicated that price fixing wasn’t based on a clear demonstration of its value and was out of step with contemporary market dynamics.

. . . .

The key statement issued today by the Börsenverein is: “Germany’s system of fixed book prices and the extensive landscape of bookshops it supports play a key role in the dissemination of books as essential cultural goods, while also fostering the quality and variety of books available to consumers. The system is also in line with EU law.”

. . . .

In a prepared statement, Skipis is quoted, saying, “Once again, it’s all there in black and white. Germany’s fixed book price system acts as a guarantor of quality and diversity on the book market.

“It’s one of the factors contributing to Germany’s reputation as a role model across the globe and its status as the second-largest book market in the world.

“The findings show very clearly that fixed book prices fulfill their obligation to protect books, especially in the contemporary market situation.”

. . . .

“For almost 150 years now, Germany has had a system of fixed book prices. The system guarantees a dense network of bookshops that act as key locations for the dissemination of literature and as indispensable distribution channels, especially for small and medium-sized publishers. Precisely because of this key role, price fixing for books is also widely supported in the political sphere.”

. . . .

Beurich, the bookseller, adds, “The research findings show how indispensable the stationary book trade is, especially for cultural diversity in our country. When bookstores disappear, people lose important contact points and thus access to books. Bookstores are places that foster exchange among local residents, while also promoting literary education, cultural work, literacy and a love of reading.

“The study also showed that a number of highly interesting books and authors would never have been discovered without stationary bookstores.”

. . . .

“Fixed book prices make books less expensive on average. Following the abolition of the system of fixed book prices in the UK, the average price of books there rose by 80 percent between 1996 and 2018. The increase was much stronger than in the same time period in countries that have fixed books prices, such as France (+24 percent) and Germany (+29 percent).

“Only bestsellers are less expensive in the UK than in Germany. With roughly the same share in overall sales, the 500 top-selling books make up roughly 26.6 percent of total revenue in Germany; in the UK, they make up 21.5 percent of total revenue. The analysis of the 50,000 best-selling books in the UK from 2005 to 2018 showed that the higher the sales rank a book has, the higher the average discount retailers offer on the publishers’ suggested retail price, and therefore the less expensive the book will be for the client.”

. . . .

“The stationary book trade fosters the discovery of unknown titles and authors. The studies showed that sales at stationary bookshops foster the future success of a large number of lesser-known titles and authors. Out of 420 fiction titles that did not reach the top twenty spots on the bestseller lists until after three weeks or more between 2011 and 2018, sales in local bookshops were solely responsible for that rise in 237 cases (56.4 percent) and largely responsible for that rise in the case of 171 other titles (40.7 percent).”

. . . .

  • “The system of fixed book prices in Germany does not hinder market access for foreign mail-order companies or online sellers;
  • “If, in a hypothetical case, there was an existing interference with the free movement of goods, it would be justified by the protection of books as essential cultural goods; and
  • “Germany’s system of fixed book prices is compatible with European competition law.”

Link to the rest at Publishing Perspectives

“[A]ll is in a man’s hands and he lets it all slip from cowardice, that’s an axiom. It would be interesting to know what it is men are most afraid of. Taking a new step, uttering a new word is what they fear most.”

– Fyodor Dostoevsky, Crime and Punishment

New Ways of Selling Books Clash with France’s Old Pricing Rules

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From The Economist:

A book is so much more than mere ink and paper. So insist French booksellers, who for nearly four decades have successfully lobbied to keep the forces of the free market at bay. A law passed in 1981 bans the sale of any book at anything other than the price decreed by its publisher. Authorities are cracking down on those trying to flog the latest Thomas Piketty or j.k. Rowling at a discount.

The fixed-price rule is meant to keep customers loyal to their local bookshop and out of the clutches of supermarkets and hypercapitaliste American corporations. But the advent of e-commerce and e-readers has prompted questions worthy of their own tomes. Can you fix the price of a book if it is part of an all-you-can-read subscription service? Are audiobooks books at all? And what of authors who self-publish?

Tweaks have been made to preserve the principle of one book, one price. In 2011 the rule began to apply to digital tomes. Free delivery by online sellers was prohibited on the grounds it implied a subsidy on the delivered books (prompting websites to charge all of €0.01 for postage). But a new challenge to the policy is proving thornier.

Used books are exempt from the pricing rule. Third-party sellers on Amazon are accused of using this as a way to apply forbidden discounts: selling brand-new books as “second-hand” to make them cheaper. So fans of bleak fiction can purchase a copy of the latest Michel Houellebecq novel, “Sérotonine”, for €11.71 ($13.21) on Amazon, roughly half its mandated price. Its seller claims it is in “perfectly new” condition.

Amazon claims its practices are legal. But booksellers are fuming, and their political allies with them.

. . . .

Even with a plethora of subsidies, bookshops are among the least profitable retail businesses. Books are expensive in France—an odd way to encourage people to buy more. For now, constraining the market in the name of l’exception culturelle remains an article of faith for French policymakers. “On the internet you find what you look for,” Mr Riester told his literary allies. “But only in a bookshop do you find what you were not looking for.”

Link to the rest at The Economist

PG suggests that ebooks and the Internet make protectionist laws difficult, if not impossible, to enforce without governments attempting to disable the Internet.

PG has always loved books and bookstores, but acquiring a book through a physical bookstore is becoming a rarer and rarer practice for him (and, from the looks of the physical bookstores he has entered in the past couple of years, for a lot of other readers as well).

Amazon has spoiled PG by feeding his appetite for books on obscure and exotic topics (as perceived by most other readers) and, fortunately, PG’s local library offers an enormous online collection of ebooks through a regional library association, so an unrealistically high online price set by a publisher can also be avoided.

As an example, via Overdrive through his local library, PG is currently reading the ebook version of the English translation of Stalingrad, by Ukranian author (and Jew) Vasily Grossman, a long-suppressed book about the epic siege of that city by the German army during World War II. (PG first mentioned the book here.)

Given the publisher’s price for the printed version of Stalingrad, PG might not have risked adding it to his large collection of abandoned-partway-through-because-it-turned-out-not-to-be-PG’s-cup-of-tea physical books. Also, PG is less entranced by the chest-loading involved in reading thousand-page printed books while lying in bed than he was in former days.

Regarding the OP’s characterization of happy accidents of discovery in price-fixed physical bookstore, PG thinks most readers are far more likely to experience such discoveries online rather than in meatspace.

 

Yes, Retailers Are Colluding to Inflate Prices Online

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From Fast Company:

Have you ever searched for a product online in the morning and gone back to look at it again in the evening only to find the price has changed? In which case you may have been subject to the retailer’s pricing algorithm.

Traditionally when deciding the price of a product, marketers consider its value to the buyer and how much similar products cost, and establish if potential buyers are sensitive to changes in price. But in today’s technologically driven marketplace, things have changed. Pricing algorithms are most often conducting these activities and setting the price of products within the digital environment. What’s more, these algorithms may effectively be colluding in a way that’s bad for consumers.

Originally, online shopping was hailed as a benefit to consumers because it allowed them to easily compare prices. The increase in competition this would cause (along with the growing number of retailers) would also force prices down. But what are known as revenue management pricing systems have allowed online retailers to use market data to predict demand and set prices accordingly to maximize profit.

These systems have been exceptionally popular within the hospitality and tourism industry, particularly because hotels have fixed costs, perishable inventory (food that needs to be eaten before it goes off), and fluctuating levels of demand. In most cases, revenue management systems allow hotels to quickly and accurately calculate ideal room rates using sophisticated algorithms, past performance data and current market data. Room rates can then be easily adjusted everywhere they’re advertised.

. . . .

These revenue management systems have led to the term “dynamic pricing.” This refers to online providers’ ability to instantly alter the price of goods or services in response to the slightest shifts in supply and demand, whether it’s an unpopular product in a full warehouse or an Uber ride during a late-night surge.

. . . .

However, new algorithmic pricing programs are becoming far more sophisticated than the original revenue management systems because of developments in artificial intelligence. Humans still played an important role in revenue management systems by analyzing the collected data and making the final decision about prices. But algorithmic pricing systems largely work by themselves.

. . . .

The algorithms study the activity of online shops to learn the economic dynamics of the marketplace (how products are priced, normal consumption patterns, levels of supply and demand). But they can also unintentionally “talk” to other pricing programs by constantly watching the price points of other sellers in order to learn what works in the marketplace.

These algorithms are not necessarily programmed to monitor other algorithms in this way. But they learn that it’s the best thing to do to reach their goal of maximizing profit. This results in an unintended collusion of pricing, where prices are set within a very close boundary of each other. If one firm raises prices, competitor systems will immediately respond by raising theirs, creating a colluded non-competitive market.

Monitoring the prices of competitors and reacting to price changes is normal and legal activity for businesses. But algorithmic pricing systems can take things a step further by setting prices above where they would otherwise be in a competitive market because they are all operating in the same way to maximize profits.

This might be good from the perspective of companies, but is a problem for consumers who have to pay the same everywhere they go, even if prices could be lower. Non-competitive markets also result in less innovation, lower productivity and, ultimately, less economic growth.

. . . .

The European Commission has warned that the widespread use of pricing algorithms in e-commerce could result in artificially high prices throughout the marketplace, and the software should be built in a way that doesn’t allow it to collude.

Link to the rest at Fast Company

In the US, price-fixing is illegal under U.S. antitrust laws.

From The Federal Trade Commission:

Price fixing is an agreement (written, verbal, or inferred from conduct) among competitors that raises, lowers, or stabilizes prices or competitive terms. Generally, the antitrust laws require that each company establish prices and other terms on its own, without agreeing with a competitor. When consumers make choices about what products and services to buy, they expect that the price has been determined freely on the basis of supply and demand, not by an agreement among competitors. When competitors agree to restrict competition, the result is often higher prices. Accordingly, price fixing is a major concern of government antitrust enforcement.

A plain agreement among competitors to fix prices is almost always illegal, whether prices are fixed at a minimum, maximum, or within some range. Illegal price fixing occurs whenever two or more competitors agree to take actions that have the effect of raising, lowering or stabilizing the price of any product or service without any legitimate justification. Price-fixing schemes are often worked out in secret and can be hard to uncover, but an agreement can be discovered from “circumstantial” evidence. For example, if direct competitors have a pattern of unexplained identical contract terms or price behavior together with other factors (such as the lack of legitimate business explanation), unlawful price fixing may be the reason. Invitations to coordinate prices also can raise concerns, as when one competitor announces publicly that it is willing to end a price war if its rival is willing to do the same, and the terms are so specific that competitors may view this as an offer to set prices jointly.

Not all price similarities, or price changes that occur at the same time, are the result of price fixing. On the contrary, they often result from normal market conditions. For example, prices of commodities such as wheat are often identical because the products are virtually identical, and the prices that farmers charge all rise and fall together without any agreement among them. If a drought causes the supply of wheat to decline, the price to all affected farmers will increase. An increase in consumer demand can also cause uniformly high prices for a product in limited supply.

. . . .

Antitrust scrutiny may occur when competitors discuss the following topics:

  • Present or future prices
  • Pricing policies
  • Promotions
  • Bids
  • Costs
  • Capacity
  • Terms or conditions of sale, including credit terms
  • Discounts
  • Identity of customers
  • Allocation of customers or sales areas
  • Production quotas
  • R&D plans

A defendant is allowed to argue that there was no agreement, but if the government or a private party proves a plain price-fixing agreement, there is no defense to it. Defendants may not justify their behavior by arguing that the prices were reasonable to consumers, were necessary to avoid cut-throat competition, or stimulated competition.

. . . .

Q: The gasoline stations in my area have increased their prices the same amount and at the same time. Is that price fixing?

A: A uniform, simultaneous price change could be the result of price fixing, but it could also be the result of independent business responses to the same market conditions. For example, if conditions in the international oil market cause an increase in the price of crude oil, this could lead to an increase in the wholesale price of gasoline. Local gasoline stations may respond to higher wholesale gasoline prices by increasing their prices to cover these higher costs. Other market forces, such as publicly posting current prices (as is common with most gasoline stations), encourages suppliers to adjust their own prices quickly in order not to lose sales. If there is evidence that the gasoline station operators talked to each other about increasing prices and agreed on a common pricing plan, however, that may be an antitrust violation.

Q: Our company monitors competitors’ ads, and we sometimes offer to match special discounts or sales incentives for consumers. Is this a problem?

A: No. Matching competitors’ pricing may be good business, and occurs often in highly competitive markets. Each company is free to set its own prices, and it may charge the same price as its competitors as long as the decision was not based on any agreement or coordination with a competitor.

Link to the rest at The Federal Trade Commission

Price fixing is illegal whether competitors set minimum or maximum prices or establish a range of prices within which they will price their goods.

One of the key elements of illegal price-fixing is an agreement (written, verbal, or inferred from conduct) among competitors. A third party that mediates, organizes or facilitates price-fixing among competitors is also guilty of price fixing. (See, for example, Apple and a group of major publishers agreeing to fix prices on ebooks and force Amazon to increase its ebook prices, in PG’s indescribably humble opinion, one of the more inept attempts at price fixing in the hundred-plus years that the practice has been outlawed in the U.S.).

The OP raises an interesting question about whether pricing systems executed by computers using artificial intelligence constitute illegal price fixing.

Under present law, it is clear that price-fixing agreements established among competitors through a third party are illegal and, per Apple and other cases, the third party is also chargeable with price-fixing. If each competitor appoints a third party and the third parties agree to fix prices or set up a system for establishing uniform prices, PG believes that’s also a slam-dunk price-fixing violation.

The issue of whether artificial intelligence systems that look at the same market data and set prices in a similar manner are engaged in price-fixing is very interesting.

Competitors who each look at market, pricing and available competitor data without using artificial intelligence and set the same prices are not guilty of price-fixing so long as there is no agreement between them to fix prices. Competitor A can look at the prices being charged by Competitor B and use that information to adjust its prices. As described in the OP, that’s how many gas stations typically set prices within a given geographic area.

In the gas station illustration, each station is sending pricing signals to the general public, including other gas stations.

If gas station A reduces its price, other gas stations may respond by matching the price cut, cutting prices below those of A as a competitive move, or leaving prices higher than A and banking on other competitive advantages – a more convenient location or better prices on Diet Coke, for example – to offset A’s pricing advantages.

Not matching a price cut represents a temporary strategy, however, because, based on its own decision factors, a competing station can adjust its prices at any time if it perceives its pricing strategy is less than optimum.

Going back to the OP, PG doesn’t see that AI systems watching the prices other AI systems are setting constitutes illegal collusion. If the AI systems somehow communicated with each other and simultaneously increased or dropped prices, the owners of those systems might be guilty of price-fixing.

However, in the absence of some sort of connection beyond closely watching the public pricing activities of competitors, PG doesn’t see any sort of illegal collusion or conspiracy to fix prices. Setting prices to maximize profits is not, by itself, a violation of any law of which PG is aware. It’s a fundamental principle of capitalist economies.

Back to the gas station example – If two gas stations are located across the street from each other and each station assigns an employee to watch the posted prices of the other station and immediately change prices whenever the station across the street changes its prices, that’s not an illegal price-fixing agreement between the two stations.

 

 

Amazon’s Curious Case of the $2,630.52 Used Paperback

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From The New York Times:

Many booksellers on Amazon strive to sell their wares as cheaply as possible. That, after all, is usually how you make a sale in a competitive marketplace.

Other merchants favor a counterintuitive approach: Mark the price up to the moon.

“Zowie,” the romance author Deborah Macgillivray wrote on Twitter last month after she discovered copies of her 2009 novel, “One Snowy Knight,” being offered for four figures. One was going for “$2,630.52 & FREE Shipping,” she noted. Since other copies of the paperback were being sold elsewhere on Amazon for as little as 99 cents, she was perplexed.

“How many really sell at that price? Are they just hoping to snooker some poor soul?” Ms. Macgillivray wrote in an email. She noted that her blog had gotten an explosion in traffic from Russia. “Maybe Russian hackers do this in their spare time, making money on the side,” she said.

. . . .

“Amazon is driving us insane with its willingness to allow third-party vendors to sell authors’ books with zero oversight,” said Vida Engstrand, director of communications for Kensington, which published “One Snowy Knight.” “It’s maddening and just plain wrong.”

. . . .

The wild book prices were in the remote corners of the Amazon bookstore that the retailer does not pay much attention to, said Guru Hariharan, chief executive of Boomerang Commerce, which develops artificial intelligence technology for retailers and brands.

Third-party sellers, he said, come in all shapes and sizes — from well-respected national brands that are trying to maintain some independence from Amazon to entrepreneurial individuals who use Amazon’s marketplace as an arbitrage opportunity. These sellers list products they have access to, adjusting price and inventory to drive profits.

Then there are the wild pricing specialists, who sell both new and secondhand copies.

“By making these books appear scarce, they are trying to justify the exorbitant price that they have set,” said Mr. Hariharan, who led a team responsible for 15,000 online sellers when he worked at Amazon a decade ago.

Amazon said in a statement that “we actively monitor and remove” offers that violate its policies and that examples shown it by The Times — including the hardcover version of the scholarly study “William T. Vollmann: A Critical Companion,” which was featured for $3,204, more than 32 times the going price — were “in error, and have since been removed.” It declined to detail what its policies were.

. . . .

Buying books on Amazon can be confusing, because sometimes the exact same book can have more than one listing.

. . . .

“Let’s be honest,” said Peter Andrews, a former Amazon brand specialist who is manager of international client services at One Click Retail, a consulting firm. “If I’m selling a $10 book for $610, all I need to do is get one person to buy it and I’ve made $600. It’s just a matter of setting prices and wishful thinking.”

One of the sellers of Ms. Macgillivray’s book is named Red Rhino, which says it is based in North Carolina. The bookseller’s storefront on Amazon is curiously consistent. One of the first books on the store’s first page was Anthony Bourdain’s “Kitchen Confidential.” It was priced at $607, a hundred times what it cost elsewhere on Amazon.

All the books on the first few pages of the storefront — including such popular standbys as “Fahrenheit 451,” “The Very Hungry Caterpillar” and “1984” — also go for $600.

Link to the rest at The New York Times and thanks to Nate for the tip.

PG says buying dishwashing detergent in Kroger can be confusing because Costco can sell the exact same detergent for a different price. And so can 7-Eleven. With all the confused consumers, it’s a miracle that there are any clean dishes in existence. Maybe that’s why Costco also sells clean dishes.

 

Barnes & Noble Stores are (Finally) Price-Matching Their Website

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From The Digital Reader

For the longest time now B&N has been annoying their few remaining loyal customers by charging a higher price in store than on their website. This negated most of the value in buying a book in a bookstore (hence the ever declining same-store sales ).

B&N has not removed that policy, but they have revised it. A source told me, and I have confirmed with the B&N store in Manassas, that starting today B&N is matching the prices on its website for purchases made in store.

This is not an advertised sale, so there won’t be any signs or emails. But I was told that it is only available to B&N club members when they request it, and that this special will only run through the tenth of December.

Link to the rest at The Digital Reader

PG says this reflects very poorly on the marketing and customer relations savvy of Barnes & Noble management.

Case One: A customer comes into a Barnes & Noble store, browses for 20-30 minutes, then buys a book. Later, a friend tells the customer that Barnes & Noble is selling the same book online at a discount.

Case Two: A customer comes into a Barnes & Noble store, browses for 20-30 minutes, then someone else comes over to the same book section and the two briefly discuss a book. The second customer pulls out a smartphone and consults it for a couple of minutes. “I think Amazon is harming bookstores and other local retailers,” the second customer says, “but I can get this book online from Barnes & Noble for a lower price and I’m still supporting real bookstores.”

Case Three: A customer comes into a Barnes & Noble store, browses for 20-30 minutes, then another browser comes in and the two talk about one of their favorite authors who has just released a new book. The second customer pulls out the smartphone, consults it, then informs the first that Amazon has a better price, so the second customer is going to buy the new book and an earlier book by the same author and spend the same amount of money Barnes & Noble is charging for the new book alone.

PG suggests that all three of these scenarios (and many others) make the first customer feel like a sucker for paying in-store prices for a book at Barnes & Noble. Barnes & Noble is financially punishing her/him for not checking the price of a book online before purchasing it in the shop.

It seems a little sneaky, like Barnes & Noble is trying to exploit its less-knowledgeable customers. The store is selling the same product for two different prices without giving the in-store customer any extra value for coming to the store to make the purchase.

Instead of encouraging customers to come into the store, Barnes & Noble is encouraging at least some of them to go online, where Amazon and its prices are only a click away.

In PG’s ostentatiously humble opinion, these people don’t understand how to run a bookstore in 2017.

Five Years is Forever in Indie Publishing

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From Dean Wesley Smith:

Well, I spent the last two nights going back and trying to update and then even fisk my own post from five years ago about pricing. What a fool’s errand.

The post was so out of date, I just kept shaking my head in amazement and wondering who wrote it.

I was looking at it through 2017 glasses and a ton of new knowledge. Stunning, just stunning how many changes in this business have happened.

. . . .

Electronic Pricing… Novels

Genre matters. Range from $3.99 to $6.99, with romance being on the lower side, mystery on the upper side.

Length does not seem to matter at all.

All the studies have shown that you get above $6.99 and you start hitting price resistance for electronic books unless the book is something really special.

You go below $3.99 and you leave yourself no room for discounting or short-term sales.

You get down into the 99 cent area and you are in a trash ghetto.

And yes, I do know about the stupidity of ever-free. Just say no. However, doing a deep discount on a first novel of a series will get you readers. But make sure those readers pay something otherwise you attract the wrong kinds of readers. And secondly, you have to have the rest of the series priced decently for genre to make the first book discount look worthwhile.

. . . .

Paper Pricing… Novels

The old general rule of $2.00 profit in extended distribution in CreateSpace has become meaningless. Get your price down as much as you can. Under $10 is the best for trade paper. $12.99 is fine as well. Above that you hit resistance unless the book is longer.

Length not only matters, it causes the price to go up. You have no choice, but try to keep the cost down as low as possible.

If you want to try to do some bookstore distribution (a folly in 2017 because as Author Earnings have reported, almost 80% of paper books are sold online these days. But if you want to try, go to IngramSpark to get into the Ingram Catalog. (Yes, you can do two editions, one on CreateSpace just for Amazon and the other at Ingram for larger distribution.

Link to the rest at Dean Wesley Smith

Here’s a link to Dean Smith’s books. If you like an author’s post, you can show your appreciation by checking out their books.

The Visibility Gambit

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From David Gaughran at Let’s Get Digital:

Kindle Unlimited has received a fair bit of bad press over the last couple of years – some of it from me – but I want to balance that by looking at the positives.

Most pertinent is KU’s popularity with readers, meaning there can be huge opportunity for authors. Especially so if you make full use of the tools Amazon gives you, and understand that it’s all about visibility.

Enrolling in KU comes at a well-documented cost: exclusivity. But it’s the potential benefits I want to focus on today because some of that might be getting lost in the (well justified) complaints about scammers, transparency, and falling pay rates. Even though those rates have dropped by around 20% this year alone, KU is still paying out more dollars to indie authors than all non-Amazon retailers combined. And I think indies need to be selfish and do what’s best for them – whatever they decide that may be.

The other price of staying out of KU is arguably the bigger one: visibility. Each borrow is counted as a sale for rank purposes, and borrows can make up 50%-80% (or more) of a KU book’s rank – unless you are down in the telephone number rankings and invisible to everyone.

Borrows Cannibalizing Sales

When KU first launched the big debate among self-publishers was whether borrows would cannibalize sales – an important consideration when sales are more lucrative and puny humans tend to need food several times a day.

And it turns out they do, but of the books not enrolled in KU.

Think about it from the reader’s perspective, where the experience really is frictionless. Let’s say you have already shelled out for the KU subscription. You go scooting around the charts on Amazon looking for a new read and spot a few books that look interesting. One is $2.99, the next is $7.99, and the other is in KU. Which do you download?

The answer is obvious.

Link to the rest at Let’s Get Digital