The Supermarket Model: how Amazon messed up the publishing industry

I know, I keep banging on about buying your books from independent bookshops, and I’m as big a culprit as anyone else when it comes to Amazon, but now I’ve really looked into it.

With Amazon holding 65% of the American e-book market and 90% of the British one, as well as goodness knows how much of the paperback market, finding independent books, especially DRM-free ones, is much harder work than it should be.

This could be seen as a result of the crazy success of the Supermarket Model employed by Amazon to maintain its trajectory. But, if you look at it from a different angle, it appears the entire publishing industry has been disrupted with the misuse of buying power by a single large player.

I compared the symptoms of different types of buying power misuse/abuse listed in this research document (page 12), with what I know to be true in the book industry, and found several instances of comparable problems that suggest Amazon is misusing its immense buying power and readers are beginning to suffer.

If we want to save books from what seems like an inevitable decline, and their accessibility and ownership, we really will have to start buying more indie books. We, as readers, are going to suffer soon.

Here’s why.

Why the Supermarket Model is great

No matter how you look at it, the Supermarket Model is the pinnacle of retailing and consumerism. It provides low prices, convenience, and a staggeringly wide range of products, and its ever-continuing opposite forces of supply and demand keep it self-sustaining. And with online markets in the highest echelons of retail, the supermarket model is still king.

The Supermarket Model is a perfect, self-sustaining retail and distribution system. Its product is its supply chain, a service connecting millions of suppliers with scattered customers. It’s a globalisation dream.

But there’s a big BUT.

How the Supermarket Model is the devil in disguise

Say you’ve got an online supermarket–let’s call it Atozed–that you go to for everything you can’t get at your local Walmart or Sainsbury’s. The great thing is, you can also get books from Atozed. Any book you can think of is available to you.

You’re really into books, so you’ve got an Atozed e-reader, and you’ve been able to buy hundreds of e-books at often very good prices.

Books any time, any place, with delivery, customer service, great prices, and you can even choose the quality you want in many cases. Second hand is often cheaper.

But there’s a problem. Despite all the choice you’ve accessed, the industry seems very transient. You’re halfway through a nicely written self-pubbed Sci-fi series when the author apparently stops writing and goes back to their old life, leaving their series hanging at book four. Then you realise you can’t find a local bookshop in town any more, since Borders closed. And you can’t buy ebooks from a physical store anyway.

You decide you want to read a ‘big hitter’, but to your surprise (you’ve been reading a lot of self-published work lately) to read [insert famous author’s name here]’s latest tome, you’ll have to pay £8.99 or more for your e-book. The big publishers aren’t interested in tiny profits, they need to pay people (like authors, editors, artists and printers), but because Atozed applies numerous fees and costs on each book, very little is left if the book is to be a reasonable price.

Then you notice all the big hitters are quite staid, with beautiful prose, but often questionable politics, or even totally misguided (video). Actual innovation could result in failure. When only pence can be gained in profit, thousands of units must be sold. Publishers choose authors and writers with a ready-made following, who are already proven to be popular, and match that guarantor with a subject matter that will appeal to the well-heeled, educated, lib-con middle classes.

Then, one birthday, a relative gives you a new e-reader, and it’s a way better model than your old one. But it isn’t a proprietary Atozed e-reader, it’s an independent one. It can read mobl files but it can’t read azd3. So you transfer all four of your independently bought mobl e-books and sit, quietly going through the menu on your old e-reader. 400 azd3 e-books you bought and mostly read in the past three years.

You’ve got three choices. You can dump them forever, replace them one-by-one, or sell the gift on eBay.

You idly check the competitor sites where you can now buy books. The choice and range seems shallow by comparison, and you can’t find most of your favourite authors.

You’re trapped. But all of that occurred because that one retailer became so big and employed so many dodgy practices that it destroyed the competition.

Hang on a minute. Just a few paragraphs ago we were proclaiming the Supermarket Model as the pinnacle of consumerism and retail. So how, when it dines out on low prices and a good range, does it result in reduced choice, reduced innovation, and increased prices?

 

Image credit to Tania Hurt-Newton via Consumers International report The relationship between supermarkets and suppliers: What are the implications for customers?

Those lovely low prices literally risk authors’ and small publishers’ very existence…

Authors who self-publish through the leading online supermarket/POD service can expect profits per unit sold to be as low as a quid or less, as they attempt to keep the price reasonable for readers. All the rest of the money goes to Amazon in one form or another, for both paperbacks and e-books. This makes it impossible for the majority of authors to give up their day jobs. Their writing is squashed into the hours between 5-7am, or 9-11:30pm, a little bit here and there, and if they’re selling anything at all, it’s because they’re doing at least the minimum of marketing. More time. It may hardly feel worth it for some, and many do give up their dream and go back to living a ‘normal’ life’. If you’ve enjoyed an author’s writing, make sure to review it and let them know on Twitter that you loved it.

Small presses find it ever harder to make money or to offer good royalties to attract new authors, and if they go bust, the authors usually get nothing. Crowd-funding for anthologies, and group publishing has happened, and will yet again. Alternative formats have been tried, with varying successes, but innovation is generally rare. Magazines and comics can be downloaded and read easily on an e-reader, and Wattpad has a large portion of the younger market, reading on-screen, rather than through an e-reading app/e-reader.

It’s also noticeable that there’s been a rise in new publishing houses who use Print On Demand (POD) services for their paperbacks, literally offering authors pennies per book (artfully disguised as a whacking great 25% royalty), and heavily pressing authors to buy huge quantities of their own physical books. The industry is apparently toxic at many levels.

…And somehow result in higher prices

Bigger publishers are approached by Amazon for ‘marketing development funds’ on top of the usual fees and discounts. Random House gives Amazon a 53% discount, all fees and funds combined. An unbelievable way to do business. With their understandable need for profit, the Big Five publishing houses appear to have dumped the low profits of their paperbacks and all the ‘additional costs’ on to almost exorbitant prices for e-books, and have been hiding behind sales of colouring books in the past couple of years.

Many smaller presses and self-published authors also take the high-priced-e-book route, for their own survival. (The rules are not the same for non-fiction books, which are priced very differently). E-books cost almost nothing to create and replicate. They aren’t saddled with the high costs of paper and printing of physical books, yet the newest novels and diaries of the most popular writers and celebrities, or the latest bright spark in a smaller press, are inevitably available at a considerably higher price than independently published e-books.

As readers, we want low and reasonable prices, but not to the detriment of the creators. More of the low and reasonable price should be going to suppliers.

Independent bookshops lose out, so they could die too

Exclusivity arrangements between authors or publishers and Amazon mean that books cannot be sold elsewhere.

The existence of independent bookstores is threatened by the reduced choice, and healthy competition is thrown to the winds. Readers continue to flock to Amazon because they can’t find the titles they want elsewhere. Amazon’s massive market share remains, and as it continues to screw down on prices, overcharge publishers, and shut out competition, it is hard to see how to escape the downward spiral of bookselling.

What’s more, those books are only available in paperback and Kindle (AZW3). That doesn’t matter if you’ve got a Kindle (Amazon’s proprietary e-reader), but you can’t even read a Kindle file on a new Kobo (those read Mobi, not AZW3). Readers who use an e-reader other than a Kindle are denied the opportunity to read certain titles, even if they were happy to buy them on Amazon. Technically, you can download the Kindle app on your mobile device, but that’s a bit of a p*sser when you’ve got a swanky new Kobo Aura H20 or Nook Glowlight Plus.

So, what’s to be done?

The answer will be found in readers.

Using independent book shops is good for readers

If you’ve got a Kindle, you can still buy independent, DRM-free books and read them on your device.

Buying your books from independent bookshops, on- and offline, means:

  • Fairer distribution of your cash: authors and creators get a much larger percentage–as much as 80% on some platforms.
  • Your favourite authors are better able to stay afloat and write books for their living. It’s win-win.
  • You buy an independent, DRM-free e-book, it’s yours. You can easily transfer a DRM-free independent e-book to any device to read. However, you license an Amazon Kindle e-book or anything with DRM. Change your e-reader, and you might not be able to read your books any more.
  • You encourage a busier, more diverse publishing industry, where all kinds of voices can be heard.

Longer term, however, that’s where the real benefits are. If we nurture the struggling indie book industry and pay into it now, purchasing books through other channels away from Amazon, we fund a self-sustaining future for the wider industry. Amazon keeps its suppliers–authors and publishers–poor so that its power over them remains strong. If those publishers begin to push other channels, it will become weaker and terms to suppliers will become fairer. But publishers will only begin to fully use all the options available to them when readers show them what they want.

Amazon is not the book industry. The world is much bigger than that, and we need it to stay that way.

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