Seattle Mystery Bookshop: Pearls Before Swine? The Joker in the Game

We've covered the economics of Amazon in the past but it seems worth repeating. The general public does not realize how it works. So this is how it works:

Throughout the publishing industry, the standard discount is 40%. That means that we order a book and we pay 60% of the cover price to the vendor (publisher or wholesaler). Usually we get a higher discount ordering from the publisher. From the wholesalers there is normally a sliding scale - you get a slightly higher discount if you order more copies. But you can take the 40% as the norm.

Out of the 40% that we make when we sell the book, we pay the rent, payroll, pay for the actual books, and all of the other bills that any business has. That 40% is the 'profit'. The higher the discount, the more you make because you keep more of the sale. In bookselling, that does not mean 3 martini lunches, an account at Tiffany's or a new interior for the DeLorean, it means you can be a little less in debt to the vendors because that 60% we have to pay them can add up quickly.

For the last 20 years or so, the book world has been ruled by discounts to buyers, to customers, not to booksellers. When the Big Box stores began, they'd offer, for example, the books on The New York Times' bestseller list at 30% off the cover price. They were not making much money on the sale of the book but they could afford that for a variety of reason (they had corporate money behind them, they relied on volume sales to make up the 'loss leaders' that brought people into the joint, and they were paid by the publishers to display books in prominent locations to encourage sales, etc.). Independents couldn't match those reduced prices because, well, you have to have that 40% 'profit' to pay. Those who tried to do the same price cutting often ended up cutting their own throats.

OK, so now Amazon is begining to publish books and people (and authors who want to have signings with us) want to know if we'll stock the Amazon-published books. The answer is no. It would be financial suicide to do so.

For an example, let's take Nancy Pearl. She's published a number of books about books. We used to stock them to support her and to support a local author and because they were fun and different and popular.

Her first book, Book Lust, has a retain price of $16.95. If we order it at a 40% discount, we pay $10.17 for it and make $6.78 if it sells. Once again, that 'profit' of $6.78 (hardly what Bain Capital makes, but we're not in the "1%") goes toward the rent, a new belt for the vacuum cleaner, bubblewrap for mail orders, pencils for the bookkeepers and M&Ms for the machine on the front counter. However, if you order Book Lust from Amazon, you pay only $10.29 - a 39% savings. That means that you can buy a copy of the book from them for nearly what we pay for it. How can we compete with that? We can't and won't try.

The announcement on Jan 11th, 2012, that the former librarian has joined forces with Amazon to launch a publishing line of her favorite books that, up to now, have been out of print will no doubt cause much headscratching. We don't know yet if any of her favorites will be mysteries so this may not come into play with us, but it will bedevil other independents as Amazon's mystery imprints have bedeviled us. We will not stock their mystery books. Will general independents stock her new line of reissues?

Here's the math:

One of the first books to be released is Merle Miller's A Gay and Meloncholy Sound (we know nothing about this book and have just picked it as an example). Amazon notes that it will be available on April 2nd at a list price of $14.95. However, they're selling it for $8.97, a 40% savings. You save $5.98. If you buy the e-book version for Kindle (something you cannot do through us), you pay only $5.99. You see, they're not only undercutting any other bookseller, they're also undercutting themselves their own publications. [The other title announced as part of Pearl's new gig is Rhian Ellis' After Life and the math - discount, retail price/Kindle price, etc - are identical, so this is Amazon's standard, similar to their other publishing lines.]

Thus, it is uneconomical for us to stock and sell printed books published by Amazon and we believe it would be financially pointless for any independent to do so. (And, again, while we can sell e-books through our new website, no one but Amazon can sell the versions for Kindle - that is proprietary) If you can't realistically make money selling something, why stock it? You can't and expect to keep your business healthy. "Pointless" really doesn't capture it, though. It would be financially destructive to stock Amazon's books. They've already stacked the deck against us. It isn't just that the odds always favor the house. It is more that, when playing with Amazon, there is no deck, the dice are so loaded they're heavy, the house has no doorknobs on the inside and the joker is shuffling the cards.

There is no way to win so we don't sit down at the table.

If it is uneconomical for independents to sell books published by Amazon, and no one but Amazon can sell e-books for Kindle, and if those two facts mean that the audience for Amazon's books is automatically limited, what is the attraction of working with Amazon for someone like Nancy Pearl? She has more to lose from this alliance than gain.

She can no longer continue to be accepted as an objective and impartial promoter of books for by joining forces with a single and controversial player in the book world - one that is both a major retailer and now a publisher - her stance is now tainted.

She's no longer going to be simply a librarian; she's now a publisher and, as such, cannot be viewed as objective. No publisher is. And, by being affiliated with Amazon, she's lending her 'brand' to them and can no longer be viewed as free agent. No matter what she recommends from now on, the appearance, suspicion or assumption will always be, fair or not, that Amazon is calling -- or at least influencing -- her shots.

Very sad. It's like hearing a favorite old song used on a car commercial. You can never listen to it the same again. It's no longer just a great song - it's been reduced to a jingle.

Comments

Don Munsil is spot on. But such common sense will not be impressive to buggy whip and whale oil shops, er, small independent book shops.

Let's face it: the cute book shop like in "You've Got Mail" is long gone. Small book shops provide nothing for the extra $ they charge. So if I can get that book from Amazon for less why wouldn't I?

Some will still go to book shops as Carl notes (and good for them) but it is clear the marketplace does not feel the need to rent movies at Blockbuster (hello Redbox and Netflix) or frequent book shops to get reading material.

Posted by: Mark | January 27, 2012 at 09:28 AM

I'd just point out that according to your web site, you carry Max Allan Collins's book Chicago Confidential, which is also published by Amazon. You charge $14.95, or list price for it, and Amazon charges $8.97, or 40% off. The Kindle price is $4.99! How is this different?

One would think (and I am not a bookseller, so forgive me if I'm out of my depth) that the Nancy Pearl books will sell better because they'll be associated with Nancy Pearl, a well-known local book maven.

All of this is JMHO, obviously. I have no stake in this other than as a book lover and mystery fan. I hope that somehow we can find an equilibrium where brick & mortar book shops can survive, and I do buy books in bookshops when I'm in them. But if I was in a bookshop looking for something, and they told me "we don't carry that because Amazon publishes it" I'd find that astonishing.

Posted by: Don Munsil | January 13, 2012 at 04:36 PM

I really don't understand the point you're making. Amazon sells *every* book for about what you can buy it for. So by your logic you shouldn't sell *any* book because you can't compete on price with Amazon.

But here's the thing: some number of people do like going to bookstores, and will pay a higher price for books in order to get the expertise of the staff, the ambience, the ability to browse, etc.

So if one of those people actually wants one of the books that Amazon publishes, and you don't have it, you've lost a sale. You could have sold it to them for full price ($14.95), thus making a profit, just like all the other books in your store, but by taking this stand you're limiting your customers selection.

To me, that seems like cutting off your nose to spite your face. Or in this case, losing sales just to spite Amazon.

I understand that Amazon is really hurting independent bookshops, and I could understand not stocking their books because you don't want to send any money to your competition, but to be honest, Amazon isn't going away, and your existence is dependent on your ability to provide the things that Amazon doesn't have: readings, ambience, personal service, and a hand-curated selection of great books instead of a massive virtual barnload of every book in existence.

So as you say, unless Amazon decides to publish a book that you would like to carry, this is all moot. But if they decide to bring a formerly out-of-print mystery back into print, it seems to me that it's in your interest to stock it. And you should price it the way you do every one of your other books.

Posted by: Don Munsil | January 13, 2012 at 03:47 PM