Eight Reasons Indie Bookstores Should Work With Amazon Source

Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.

Co-opetition: Cooperative competition. Practice where competitors work with each other on project-to-project, joint venture, or co-marketing basis.

When Amazon announced its new Source program, giving independent booksellers the opportunity to sell Kindle devices and ebooks in return for a small bounty, the news was not greeted with any great enthusiasm by the booksellers.

Independent bookstores have long viewed Amazon and before that Barnes & Noble not only as direct competitors but as mortal enemies. Such views are understandable, but sometimes have led to irrational economic behavior.

Before Jeff Bezos and Amazon became the big bad wolf, Len Riggio and Barnes & Noble played that role for independent booksellers. Their ire was not altogether misplaced. B&N gets better business terms from publishers than smaller independent stores, is able to publish its own books for greater margin, and, like Amazon, has significant advantages over independent stores in selling both print and ebooks online.

The independents that survived the rise of the chain booksellers learned to operate very good bookstores; they are smart business people who clearly have learned how to compete. But online bookselling took a meaningful percentage of sales away from almost every bricks-and-mortar store, and has been the final straw for a number of hitherto successful bookstores.

For independents, Amazon is indeed a most dangerous competitor — its discounting has always been impossible for any land-based store to match, it doesn’t charge sales tax (in most states), and is open for business 24 hours a day, 365 days a year. And Amazon has encouraged “showrooming,” where customers find books they want at bricks-and-mortar stores, but order them from Amazon, sometimes while standing in the store aisles!

Kindle e-readers more or less established and now dominate the ebook market — likely because of Amazon’s unmatched ability to offer instant gratification, broad selection and low prices integrated with low-priced and reasonably well-designed devices. Not even well-funded Apple has been able to beat Amazon in selling ebooks.

Demonizing competitors is a natural emotional response when one’s livelihood is threatened. But Amazon, Barnes & Noble and, for that matter, Apple are all rational actors on the business stage. It makes good business sense for Barnes & Noble to have created its own branded line of e-readers and tablets, and not to carry Amazon published print books in their stores. Barnes & Noble competes with Amazon head-to-head and can use its national bricks-and-mortar presence to battle with Amazon in both print and digital and on many other products aside from books.

It does not make sense, however, for much smaller and weaker independent bookstores to marginalize their own businesses by boycotting the biggest part of the digital reader business, when their own customers are happily, if in some cases guiltily patronizing their competitors. Independents have taken baby steps into digital reading, at first joining an ill-fated alliance with Google Books and now, through a deal made by their trade association, the American Booksellers Association, many independent stores are selling Kobo readers and Kobo-supplied ebooks.

As it happens, Kobo has the smallest share of the U.S. ebook market of any of the top devices (except the almost invisible Sony eReader). Many independent booksellers report miniscule device and ebook sales. Meanwhile, Kindles especially, Nooks, and sometimes even iPads are increasingly owned by many hard-core readers, who are or should be any bookseller’s best customers. E-readers and tablets are sold in significant numbers by many non-book retailers, including Staples, Best Buy and others, ultimately at the expense of independent booksellers.

Why then should booksellers limit themselves to selling Kobo devices? For the little guy, does making a deal with a virtually unknown brand help you keep your customers? It’s almost certain that many independent bookstore customers already own Kindles or iPads, so why not serve their needs?

Bookstores and their supporters can argue all day that customers “should” support them by not supporting Amazon. Those kinds of moral arguments don’t seem to win very often in the marketplace.

Why shouldn’t independent bookstores make the “Source” deal with Amazon and start selling their devices? Some will argue that they will lose their independence this way and that they will give their own customers away to the giant in Seattle. Amazon certainly has benefited from its associates program, whereby websites get a small percentage of any sale they send to Amazon; through this program Amazon has gained millions of long term customers at a relatively insignificant cost.

On its face, the initial Amazon Source offer does not provide small retailers a big enough bounty to make it worth their while to send business to their competition. Perhaps the American Booksellers Association ought to be negotiating with Amazon for a better deal for its members, not dismissing the Source program out of hand. Booksellers should not allow themselves to be marginalized in the only part of the book business that is growing.

There are solid business reasons for independent booksellers to practice co-opetition and join the device selling market.


Learn more about how Amazon is shaping the publishing industry with nearly a half-day of programming devoted to the topic at Digital Book World 2014. Register today!


 

Eight Reasons for Independents to Become Digital Retailers

1. Profit. Someone is going to sell these devices to their customers. Why shouldn’t it be them?

2. Long term customer value. Sure, once a customer owns the reader, there is a good chance she will buy her books from Amazon. But if a store sells that e-reader to a customer and shows her how to use it, the store can more easily encourage her to buy books for it from its IndieBound portal rather than from B&N or Amazon. And if the store staff provides personalized service, on which its business is based, that loyalty will carry over to long term buying behavior.

3. Again, profit. Become an affiliate of Amazon and Barnes & Noble to profit every time a customer buys an e-book. It’s clear that many customers already shop independent stores or website and then buy their ebooks from Amazon. If it’s in the Source program, a store will capture some revenue that otherwise it would never see. And people who buy e-readers overall buy more print and e-books – why not from “Source” participating independent bookstores, rather than from Amazon?

4. Knowledge is power. If independents are the experts in e-reading technology, as well as in the books they are traditionally known for, they will have more people coming to their stores or website for news and information about this growing universe. E-books are not going away. Why be marginalized?

5. Who cares about how and where people acquire their books? Bookstores are community-based businesses. Amazon can’t bring live writers to communities. B&N stores are still chain store experiences. When a store is essential to its customers, it will always win more of their business. Selling e-readers and ebooks gives customers another reason to buy locally and not from Amazon.

6. Bookstores can take advantage of the millions of dollars that Amazon, Apple and Barnes & Noble invest in devices and advertising. Why not let them pay for sales the independents make?

7. Broadening the business base is protection against change. Indies started selling e-books with Google, which did not last, and are now allied with relatively tiny Kobo. B&N has already shown signs of stress from competing with Amazon and Apple. Will Kobo always be around? Becoming broad based retailers of all available e-reading devices gives booksellers a better chance of participating in the digital reading future.

8. Selling devices and ebooks enables booksellers to offer a unique customer proposition. In fact, selling a wide range of devices, including Kobo, Sony, Kindle, Samsung and even Nook gives customers a range of choices they cannot get from either Amazon or Barnes & Noble. Adding iPads and iPods to their offerings would enable independent booksellers to become digital boutiques in a way no other retailer can. Instead of rejecting ebooks and technology (to “save the book?”) booksellers should embrace digital technology and the benefits it offers, while celebrating the advantages print books sold by hand provide.

If a bookstore is a center for reading, why not carry as many different types of readers as possible? Some may be difficult for small retailers to carry. It’s not easy to become an Apple or Samsung reseller and maybe Barnes & Noble would not allow indies to sell its devices directly, forcing booksellers to buy their products from wholesalers at lower margins. But why not try? Bookstores need to be in the reading business. Print books are one delivery system, ebooks are another, and bookstores should be promoting them on a much larger scale. All reading should be viewed as good reading if you’re in the reading business.

Granted, e-reading devices and ebook delivery platforms require significant investment. Maybe booksellers will need to form a marketing co-op (as hardware stores have done) and use their combined buying power to build and support this new retailing endeavor. That would be a meaningful role for the ABA.

Bookstores need to become more digital friendly, and it’s almost past time for this to happen. Most readers want a healthy book marketplace, with a variety of buying choices. Co-opetition is one way for independent booksellers to secure their future. Embracing a broader view of the retail digital marketplace and contributing to its shape may be the only way for independents to retain a meaningful role as community based bookstores.


Learn more about how Amazon is shaping the publishing industry with nearly a half-day of programming devoted to the topic at Digital Book World 2014. Register today!


11 thoughts on “Eight Reasons Indie Bookstores Should Work With Amazon Source

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  3. Michael W. Perry

    Glittering generalities. You’ll notice this article doesn’t give any specifics about Amazon’s program. The devil is in the details.

    He talks about \selling devices\ but doesn’t mention that stores are only getting a miserly 6% or 8% of that price. He also doesn’t mention that many people will try out the device in a bookstore and then buy it direct from Amazon. Just this week, I’ve gotten TWO offers from Amazon for discounts on the Kindle Fire HD. These bookstores will become uncompensated salesrooms for Amazon.

    The same is true of the books customers buy. Amazon’s only paying a store 10% of that typically low price and then only for two years. Keep in mind that Amazon is getting about a 40-50% wholesale to retail markup for the print books and that it earns 30-65% for its ebooks–and that without the heavy expense of a retail space. Amazon knows that no bookstore can survive with mere 6%, 8%, or 10% markups. That’s why they’re so low. This isn’t an opportunity for a business relationship. It’s a poison pill.

    In a sense, we can count ourselves fortunate. A cleverer Amazon would have made the offer so generous, many bookstores would have been seduced and become eager promoters of Kindles, showing Amazon’s store display to all their regulars and toting the advantages of ebooks. Then after a year or so, Amazon would kill the program, having stolen most of those regulars.

    Keep in mind that the one real, tangible advantage that bookstores have are regular customers who come in to browse, to buy a book they’ve heard about, or to pick up a present for a nephew’s birthday. Selling those customers a Kindle makes about as much sense as arranging for Bill Clinton to ‘tutor’ your teenage daughter.

    I don’t have any easy answers for the problems that bookstores face because there are none. But there are paths that are clearly not in the interest of independent bookstores and this is one of them. Personally, I’m surprised that Amazon had the chutzpah to offer it. But then Amazon regularly surprises me. Whatever else they are, they’re not afraid to break new ground.

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  4. David Skarjune

    As Michael says, the devil is in the details, not the PR gloss given here. Reason number three is a joke, as Wilk seems ignorant of the facts. Amazon has cancelled affiliate programs in states that passed online sales tax bills like Arkansas, California, Colorado, Connecticut, Illinois, Minnesota, North Carolina, Rhode Island, with more to come. Amazon is not offering a golden olive branch to bookstores—it’s basically our way or no way, and they can change the rules at any time. Wilk’s disdain for Kobo is hardly different from Amazon’s disdain for bookstores, and indies would be wise to read the terms, talk to a lawyer, and avoid the hype.

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  5. David Wilk

    David: I hold no disdain for Kobo at all – in fact I like their devices and software (better than Kindle in many respects) and very much want them to remain in the market and even for them to become a stronger player. I just don’t think it is wise for independent booksellers to put all their digital eggs in one basket. And you’re right – for bookstores, doing business with Amazon is no different than making a deal with any other vendor or supplier. If the deal Amazon is offering is not good enough, negotiate for better terms. My suggestion is for ABA to take on that role as other trade organizations have done for their members. Whether bookstores end up selling Kindles or not, they should be carrying a selection of devices and becoming trusted experts in digital books for their customers. That role has value and can provide bookstores with a stronger future.

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  7. Theresa M. Moore

    No, sorry. The arguments presented in this article are as specious as those of any Amazon sock puppet. There is no advantage to favoring one device seller over another, and Amazon has already captured a majority of market share by cheating. I have unpublished my ebooks from their KDP, and if I could remove my titles from Amazon’s print book section I would, because Amazon is notorious for NOT selling the books, just stuffing its enormous catalog with them to make itself look big. It also sheds affiliates whenever there is any political trouble with its need to keep its profit share (or lack thereof; it has posted a loss the last 3 quarters). Amazon’s bid to attain favored nation status in the book stores is typical of a company which does not have those bookstores’ welfare at heart. Remember the story of the scorpion and the frog? I rest my case.

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  8. Christine Onorati

    David, I am surprised that you are being so short-sighted with many of these points. First and foremost, no one can say what a bookstore owner SHOULD and SHOULDN’T do until you are in the shoes of a bookstore owner. We are not the whiny children that so much internet chatter makes us out to be. We don’t throw darts at Jeff Bezos’ photo each night, \demonizing\ him as the ruination of our livelihood. Many of us are thriving and adapting to the changing world of bookselling, happily offering digital content through Kobo or other sites like Zola.com and happily encouraging our customers who want digital books to read them and if possible, buy them from us.

    One huge misstep in your article is that you are looking at the Kobo program solely as a hardware issue and it’s not: my store sells many ebooks every month to customers who read on their iPads or phones or even on their Nooks. It’s quite easy to link to our store the first time and then purchase through Kobo and read on tablets. We still get the commission, small as it may be, and our customers are happy they can keep their digital business with us. Yes, we sell Kobos too, though most ebooks we sell are being read on other devices. But the majority of our customers, who are the young, tech-savvy kids you’d think would be all about digital content, are still reading and buying books. For themselves, for their kids, for gifts. They might buy the occasional ebook to read on the subway, but the story of that customer is much bigger than that occasional ebook sale.

    And selling ebooks doesn’t pay my bills, selling physical books does. And that’s what my business is about. And that’s what a good indie bookstore is, a business that creates and inspires a reading community, not just a portal to sell electronic media. If we reduce ourselves to that, just to try to be competitive to what Amazon sells, we are going against what we fundamentally are. It’s too simple to say that indies don’t embrace the digital future by not embracing Amazon. I do know that sending my customers to Amazon to purchase ebooks so I can make a few bucks seems antithetical to what I’m about. And sending my customer info to Amazon so they can email them about sales on tools and diapers is not what I’m about either. It’s not so black and white. And smart indies are trying to find our gray area and still be able to make a living. The book-buying world may be a smaller one than it once was, but it’s still a thriving and vocal one, and I know that I’m selling more physical books than ever. And if the day comes when all my customers want to read their books solely on a Kindle and not participate in what I offer at my stores, then I can leave this business feeling like I did all I could to encourage reading and foster a community around reading and that I didn’t compromise my integrity to try to stay afloat. The end.

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  10. Ken White

    Responses by the number:
    1) Well, that would be delightful. Where can we get them on terms of sale that we can live with? Where we can make a decent margin on the devices or purchase with reasonable risk and without tying up a dangerous percentage of our cash? Show me the numbers.
    2) That’s the theory with Kobo, too. It would require serious and very costly integration with Indiecommerce.com; re-training our front line staff; and re-training our customers (again) on how to purchase a digital book. Which is possible, but there are two more drawbacks. One, in this scenario the business is spending just as much, or more, on staff time to sell a customer an e-book from which the store will make almost no margin. Two, there’s every reason to think that Amazon will compete directly and vigorously with us for the loyalty of the customer that we, de facto, just handed them by providing exactly that expert customer service in our store.
    3) This is true as far as it goes. But let’s think about it. When Borders closed, their email list sold for millions of dollars. You’re suggesting we give that same information, (no, in fact it’s more than just their email addresses, it’s buying habits and cc numbers, and all kinds of data) for much less than that per customer given the likely margin on an Amazon ebook. So it’s a bargain for Amazon, but we give up a customer for a handful of sales with a margin that’s next to nothing.
    What might be more powerful is if Amazon figured out a way to bundle our print book sales with their ebook sales (and for us to still get the affiliate fee for the ebook sale). Then we keep the customer and the sale of the print book. That could be worth it, if the terms of sale for the ebook could be worked out sufficiently in our favor.
    4) If we’re the experts on anything, and people are coming to us for that expertise, that doesn’t sound “marginal” that sounds more like “essential”. In any case, why would an expert send a customer to a less expert service? Money would be the reason, but that case needs to be more convincing. And, giving up our market share to a competitor makes us more marginal by the only definition that matters.
    5) Bookstores can’t bring live writers to communities either if the people at the event bought the book somewhere else before they came. The event sales are meant to pay for the time and resources devoted to marketing and hosting an event.
    6) Our business is not co-branded in their advertising, so in what way can indies take advantage of the money they’re spending? By selling devices with under 5% margin?
    7) That’s a fair point. Diversifying product is protection against the ebbs and flows of retail. But it does need to be on terms of sale that are sufficiently favorable.
    8) I’d be TOTALLY willing to do this; particularly anything that’s an Apple product. Tell me how, when the distribution model of electronics seems to rule out the possibility. A typical indie store can’t do an order for dozens of each of those devices at a time; and not at a margin of 5% or under (Apple is typically 3-4%); and not non-returnable. The devices alone would tie up their cash flow. And, Apple (just as one example) has any number of requirements for an outside business to become a reseller of any of their product; and most indie bookstores would be unable to meet those requirements although some large college stores can. Smaller stores just don’t operate on a sufficient scale for electronics distribution. Witness the clumsiness of the distribution chain that gets Kobos into our stores.

    BONUS PT: (in response to article’s post-script) Actually, I agree with the sentiment of this. Indies still lag behind on the digital reading front. But it’s not for lack of trying and we’ve been paying tons of attention to it. I don’t think it’s a matter of expanding our view as finding partners in the realm of electronics and digital content who are willing *and able* to deal with 1,500 small stores with small budgets where each is its own business with its own infrastructure and way of doing things. In other words, I’d embrace a world of devices but who will hug me back?

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  11. Felix Leitner

    What a weak article!

    Booksellers that sell the kindle bury their own business. How stupid one can be to send the own customers to a competitor? For a short term profit share for 2 years? Hellloooooo? Amazon is all about domination of their markets. It´s not about real partnership. They suck the blood out of the indie retailers and then move on.

    Selling kindles would marginalize them even faster. Their job is actually to make the business more personal. Play out that maybe human beings can give a better recommendation than a recommendation engine. That a book in your hand is actually still a nicer way to read.

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