Recently Digital Book World’s Daniel Berkowitz criticized what he believes is Amazon’s “bizarre aura that surrounds the company’s actions.” Though his blog posting was widely panned, it did focus attention on Amazon’s recent efforts in the book arena, especially their decision to open two brick-and-mortar bookstores on the West coast. Transparency isn’t big at Amazon, but neither is it at Microsoft, Apple, or most book publishers. Amazon came into the distribution business at the tip of the internet wave and using the new tools that the internet provided—metrics, generous sales tax exemptions at the start of the ecommerce phase—along with a strong hyper-competitive mantra, has given Amazon a strong position in the 21st century commercial landscape.
Idealog’s Mike Shatzkin sees two clear advantages in Amazon’s move to retail sales. “One is that it gives them access to at least some brick-and-mortar retail locations for their publishing output, which otherwise they can only sell online. And the other is that it capitalizes on their distribution centers, delivering additional sales and margin for investments already made.” Shatzkin explains that the company has “now spanned the book value chain from author to reader in a way that nobody else has or can or will.” So what about their venture into bookstores?
Amazon Dips its Toes in Retail Book Sales
Publishing Perspectives Editor-in Chief Porter Anderson notes that “nowadays, abundance looks good. We’re on to something far tougher. There’s a plethora of books, glutted markets choking in over-production, a readership staggered by myriad titles. It’s what I’ve taken to calling our Wall of Content.” For Amazon, having conquered the virtual wall of books, they are apparently ready to take on physical bookshelves today.
In Fall 2015, Amazon took over operation of the textbook business of the University of Massachusetts, Amherst, with Amazon promising to save “students an average of 31 percent, or $380 annually, compared with prices at the old store.”
Last November, Amazon opened its first brick-and-mortar bookstore in University Village near the University of Washington in Seattle. “Amazon is betting that the troves of data it generates from shopping patterns on its website will give it advantages in its retail location that other bookstores can’t match. It will use data to pick titles that will most appeal to Seattle shoppers,” noted the Seattle Times. The story, originally broken in the Shelf Awareness blog a month earlier, was met with great skepticism in the book industry.
The Amazon Bookstore, in a former sushi restaurant, takes up 5,500 square feet of retail space with 2,000 square feet of storage. Amazon Books’ homepage notes that books are “selected based on Amazon.com customer ratings, pre-orders, sales, popularity on Goodreads, and our curators’ picks. To give you more information, books are face-out with a card under each one showing the Amazon.com customer rating and a review. You can also test drive Amazon’s devices in the store. Prices are the same as prices offered by Amazon.com.” The store also “doubles as a showroom for the ecommerce brand’s expanding hardware lineup, which includes its Kindle, Fire TV, Fire tablets and Echo.”
The research firm Field Agent sent in some ‘agents’ to get a feel for the store. In a PDF report of this research, available at their webpage with registration, the researchers were very positive in their assessments. Two negatives were the inability to use cash to purchase materials (but then, they are into gathering data so this might be expected) and the lack of a coffee shop in the store. Otherwise, their researchers were unanimously interested in returning to the store. Reviews on Google and Yelp were very positive as well.
“I actually visited the Amazon store in Seattle the last time I was out there,” Numerical Gurus consultant Laura Dawson tells ATG. “The experience was remarkably mundane. The only difference is that my receipt was emailed to me. As far as what this means to Amazon, I can’t help but see this as a vanity project, similar to what Bezos did in acquiring The Washington Post. I imagine some data could be gathered from the brick-and-mortar experience, but I don’t know how useful it would be to Amazon’s strategy. It would make more sense for Amazon to create pop-up stores that sell a variety of things.”
Why Brick & Mortar Now?
Industry veteran Mike Shatzkin recently contemplated Amazon’s intentions in opening a brick-and-mortar bookstore in the Seattle area. He noted that “when you think it through, it not only doesn’t seem crazy that Amazon would open stores, it seems like an obviously compelling move.” Shatzkin refers to this dual approach to book sales as “omni-channel,” and stresses Amazon’s “tons of information that nobody else does that would inform their stocking decisions if they harnessed it. They know where searches are coming from for particular book titles or for generic needs, both geographically and psychographically. And they probably can detect early lifts for particular books faster than anybody else, simply because they have more data.”
This type of “sophisticated but automated stocking and restocking decisions,” Shatzkin reminds his readers is “not part of the toolkit at B&N or of any other retailer or wholesaler we know.” The book business, heavily dependent on best-sellers and mercurial reading trends, has yet to embrace metrics over gut-feelings for making key decisions.
Does this make sense for the ecommerce giant? “Well it’s pretty smart for several reasons,” Ohio State University Press Director Tony Sanfilippo explained to ATG. “It collects even more data, not only about readers’ tastes, but also about customer behavior in physical spaces and product interaction. It leverages a recently expanded distribution and logistics infrastructure which can now service both online and brick and mortar. And it will provides spaces in highly populated communities for product pick-up, I suspect eventually serving the entire Amazon.com catalog. It’s worth thinking about what Amazon has already done in the college bookstore space. They currently have a handful of the bookstore franchises at major universities, and at some they’ve reduced the bookstore to a pick-up desk and a few kiosks. That sounds like a pretty high margin, low overhead operation. The more functionality and data collection they can accomplish in a brick and mortar, the more efficient and presumably profitable they become. These kinds of operations don’t do much for serendipitous discovery, though. So for the price of cheaper books and distribution, the reading community will have to make a pretty unfortunate sacrifice.”
In February, Sandeep Mathrani, the CEO of General Growth Properties, in a meeting with media on his company, was asked about Amazon’s bookstore. He responded that Amazon intended to open 300 to 400 physical bookstores. However, after reported pressure and consternation by Amazon officials, Mathrani retracted his comments, noting that his comments were “not intended to represent Amazon’s plans. Whether or not this represents Amazon’s long-term plans, the company did announce another store for San Diego. This store, already hiring and well-into renovation, is expected to open this Summer at the Westfield UTC is an upscale, outdoor shopping mall that matches the style and retailers of University Village, the Seattle-area mall where Amazon opened its first bookstore.”
As the saying goes: Location, location, location. For Amazon’s San Diego location, the local newspaper notes that “the future Amazon Books store at UTC is situated adjacent to the Tesla store and across from the Apple store. Notably, the company is taking up residence at the same mall where other ecommerce companies such as menswear retailer Bonobos and trendy eyeglass company Warby Parker have also put down physical roots.” This up-scale market segment is clearly being targeted by the ecommerce giant.
Paul St John Mackintosh, in a TeleRead blog post, notes that “Amazon’s unrivaled insights into what actually sells through its own network might also enable it to make smarter judgment calls on what’s worth commissioning than traditional publishers seem able to do. And that their own logistics excellence might enable them to tackle and warehouse returns far more profitably than the Big Five can.”
Mackintosh believes it’s time bookstores end their boycott of Amazon Publishing titles. The problem, he argues, isn’t Amazon, but the entrenched publishing system that has become the antithesis of the Amazon model. “I do suspect Amazon already knows how ridiculous the whole returns or remaindered books system is, and what an incubus, and an environmental burden, it is on the whole publishing industry. Amazon’s own logistics smarts are probably an unacknowledged gift to the book trade in saving warehousing costs and overstocks of over-promoted drivel in hard-pressed bookstores. If Amazon’s challenge to traditional publishing and bookselling helps curtail book remaindering, so much the better. Pulp mill operators and bargain book chains may complain. But tree-huggers and book lovers everywhere shouldn’t.”
“As barriers to entry have fallen,” Magellan Media Partners Brian O’Leary blogged recently, “I’ve started to think more about how traditional book, magazine, and newspaper publishers can survive in a digital era. There are both new and non-traditional established entrants across most publishing segments. Their successes have pushed traditional publishers to look at ways to change business models and organize around customers. It is time to see our publishing brethren—newspapers and magazines—as part of a disrupted continuum that affects us all. Digital makes convergence not only possible; digital has made convergence inevitable. Marketers have become publishers; publishers are marketing arms; new entrants are a bit of both. Customers have become alternately competitors, partners and suppliers.”
“When content scarcity was the norm, we could live with a minimum of context,” O’Leary continues. “In a limited market, our editors became skilled in making decisions about what would be published. Now, in an era of abundance, editors have inherited a new and fundamentally different role: figuring out how ‘what is published’ will be discovered.”
When it comes to innovation based on careful analytics, Amazon has provided a model for the industry. Amazon is digital-born, not having to adjust deeply entrenched legacy systems and assumptions to a new, evolving marketplace. Amazon’s success across product categories, and their huge financial assets provide the company with a huge advantage. As Shatzkin explains, “they don’t depend on the store for their existence and their competitors do. They have now spanned the book value chain from author to reader in a way that nobody else has or can or will. Not every problem has an answer. Amazon will continue to get bigger and they will continue to do so at the expense of everybody else in the publishing value chain EXCEPT those who were shut out of it before. Those would be the indie authors who never got agents or deals.”
Bookstores in General Seem to be in a Revival
Bookstores in general seem to be in a state of revival today. “Though the media described the rise of ebooks as a death knell for independent bookstores, in reality, the lower cost of technology on all ends has enhanced the efficiency and reach of stores, notes Erin Cox in a recent Publishing Perspectives blog post. Stating that “not all stores have weathered the digital storm, the ones that have are finding creative and interesting ways to be a part of their customers’ lives and share that information with their colleagues around the country.” Fortune magazine reported that while there were 1,410 independent bookstores in 1,660 locations in 2010, by 2015 the number of indie stores had risen to 1,712 in 2,227 locations.
Even used bookstores are seeing a resurgence as studies are finding that ebooks themselves have slowed down in sales. “Used bookstores are not just a simple store that offers its customers books at cheap prices,” writes Amanda Lane in a recent Midday Daily blog post. “In our present day, they have become more akin to a cultural hub instead of a run-of-the-mill store. This somewhat interesting aspect has helped some of them resist through the years, in some cases remaining the only paper book outlets in a city. If that is the case, it is to no surprise that along with the printed media’s slow increase in popularity, their sale numbers and income have increased as well.”
The Washington Post stated that used bookstores are “widening their customer base by listing their inventories on Amazon’s third-party marketplace, an idea many new-book retailers despise.” This article noted that perhaps the major strength of these stores is “the experience of browsing—getting lost in the stacks, making serendipitous finds, having chance conversations with interesting people. And with information so easy to find these days, used bookstores offer the thrill of the hunt.”
Ease of access, higher profit margins for used books and the ability to “easily browse through each and every book on display, not just some random pages selected by the retailer. In some cases, you can even read the book right there, if the store in question has a reading area,” are additional positives noted by Amanda Lane.
Today, even Barnes & Noble is experiencing a type of revival, with The Motley Fool reporting stock prices up 27% in March. “With the company finding modest growth in its retail business and Amazon.com opening flagship bookstores in Seattle and San Diego, it’s becoming clear that the bookstore is not disappearing as many thought it would just a few years ago.” B&N is also moving into academic markets, taking over bookstore operations at such prestigious universities as the University of North Carolina, Chapel Hill and Georgetown University. The company also saw increased sales in vinyl records, toys and games, balancing modest losses in book categories.
Will We Be Learning More About Discovery in an Omni-Channel World?
Publishers aren’t the only ones dealing with discovery issues today. Libraries and individuals are having increasing problems working to discover the increasing wealth of Open Access and primary source materials being created today. Google and Google Scholar are hopelessly inadequate. Rather than seeing Amazon’s efforts at studying the brick-and-mortar bookstore as an act of lunacy or further market disruption, perhaps we all need to settle back and allow this giant the opportunity to fail or succeed, to innovate or reinvent. The very idea of a resurgence in brick-and-mortar in this increasingly digital world would provide more options and potential for everyone. No one really has anything to lose in this experiment.
Nancy K. Herther is Librarian for Anthropology & Sociology at the University of Minnesota, Twin Cities campus. [email protected]