Amazon: No more discounts on books
Amazon.com is getting a big push of publicity today from the new view TOC, covers, and flaps feature. But what I just noticed, and I haven’t seen mentioned yet, is that Amazon is no longer discounting mass market paperback books! Random checks of some of the other Amazon stores (music, DVD, cameras, outdoor living) shows those items still being discounted. How come I am not seeing this reported by the business press or the Wall St. analysts? Of course, I could have just missed the stories but somehow I doubt it. A check of CBS Marketwatch, Motley Fool (including the Amazon discussion board) and Salomon Smith Barney research (sorry, you need to be a customer so no link) shows absolutely no mention of it. Books are the biggest moneymaker for Mr. Bezos and Company, right?
Having thought this through a little bit, there seem to be two possible sides to this. One is that Amazon so dominates the online book market, especially for mass market paperbacks, that they have pricing power, the ability to unilaterally raise prices and people will still shop there and make more or less the same purchases. Since the underlying cost structure is the same, one would expect the (generally 10%) price difference to flow fairly directly to the bottom line. There might be some reduction in unit volume but the increase in gross margin would make up for quite a bit. The second possibility is that sales are dropping through the floor and this attempt to raise gross margins is necessary to prevent a meltdown. Amazon has lost money every month it’s been in business and some commentators on the Motley Fool discussion board pointed out that they appear to be draining their cash reserves. Fewer, but more profitable, sales would be one good solution here. Certainly most Wall St. analysts are citing a significant reduction in online shopping since the attack on America. Difficult to say which one of these sides is the correct one yet, but it will be interesting to follow the situation.
Woohoo! BillSaysThis has it’s first scoop as an investigative journalist! I have sent an email to Amazon’s investor relations email contact, so we’ll see if there is more information available. I wonder if Steven will swoop in and burst my bubble.
