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Helping or Hurting the Little Guy: Big Booksellers Sell Cheap Books
By Brian | December 28, 2009 | Share on Facebook
Building on the book theme from yesterday, we turn to this post from Megan McArdle at Asymmetrical Information. She relates a story about the American Booksellers Association, which is upset at Amazon, Target and Wal-Mart for selling us books too cheaply:
Wal-Mart announced that it would offer Walmart.com customers . . . the chance to buy the books in hardcover editions for just $10. Typically new hardcovers sell for $25 to $35, although some discounting is common. Amazon.com quickly matched Wal-Mart’s pre-order price on the same books.
Wal-Mart then lowered the price to $9, and Amazon followed suit. By late Friday afternoon Wal-Mart had cut another penny off the price. On Monday, Target entered the fray by offering six of the preorder titles on Target.com for $8.99. By Tuesday Wal-Mart had lowered the price on those titles to $8.98.
The association . . . accused the retailers of “devaluing the very concept of the book” and effectively selling the books at a loss in an “attempt to win control of the market for hardcover best sellers.” Retailers typically pay publishers a wholesale price of half the list price of a hardcover book — so on a $35 hardcover, the retailer pays $17.50, meaning that it loses money on a $9 consumer price.
Now, the story of the big chain taking over the Mom & Pop store is so common that Tom Hanks made his movie about it more than a decade ago. But that story usually relates to the big chain undercutting the small store by selling products at razor-thin margins, making its profits on high volume, and reducing overhead by deprioritizing customer service and amortizing its fixed costs (e.g., its employees, its rent) over a much wider customer base.
This time, it’s different. The big chains are offering these discounts on their websites. And they’re selling these books as loss leaders, in hopes that when people click over to buy their $8.98 book, they’ll throw another, more profitable item in their electronic shopping cart as well. The advantage Amazon, Target and Wal-Mart have here is the variety of products they offer and their high-value brand names that drives a lot of traffic to their web sites. Small booksellers could also choose to lose money on certain books by selling them for $8.98, but they’d run a greater risk that people would buy only those books, leaving them with a loss, rather than a profit, on the sale.
My question is this: in the online model, where customer service is mostly self-serve and Google searches, is this a good thing or a bad thing? Yes, the Kathleen Kelly‘s of the world may be forced out of business by these tactics, but then again, isn’t it the Kathleen Kelly’s of the world who would appreciate the chance to pick up the newest hot novel for $8.98, rather than $30? We may be putting the “little guy” bookseller out of business, but are we not providing the “little guy” consumer with equal quality merchandise at a much lower cost? Have we finally jumped off the cliff where the small, specialty shop isn’t so much “under attack” by the big chain, but has become a dying industry because it’s no longer the best way to serve the customer?
That’s your socio-economic question of the day. Discuss…
Topics: Money Talk, Random Acts of Blogging | 3 Comments »
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