It’s been a day or so since the non-story about Amazon allegedly opening 400 bookstores broke, and there have been more blogosphere reactions. I’ll capitalize on the great work Nate Hoffelder did rounding them up here and here, and take a look at the more interesting pieces to see what we can see.
One particularly useful link he dug up was actually in one of the comments, which is the quote from General Growth CEO Sandeep Mathrani in a more complete context:
And just case in point, you go to Amazon opening bricks and mortar book stores and their goal is to open as I understand 300 to 400 book stores, and it should sit back and say that the last mile is all important, which is why Bonobo’s is opening bricks and mortar stores and Warby Parker is opening bricks and mortar stores and Birchbox is cutting their overhead to open bricks and mortar stores.
Mathrani has subsequently issued a remarkably terse “clarification”—a GGP press release states that Mathrani “has indicated that a statement he made concerning Amazon [during the earnings call] was not intended to represent Amazon’s plans.”
Now, granted that I’m just reading the transcript, not listening aloud with pauses and inflections, but it sounds to me like he was trying to lay out out a hypothetical situation and just tripped over his own tongue. Not everyone is great at extemporaneous speaking. To paraphrase the old expression, there’s often many a slip between brain and lip.
It looks as though Mathrani is trying to say that if Amazon were going to go into the bookstore chain business to the tune of 400 stores, it should say that the last mile is all-important—because that’s how all these other on-line outlets opening bricks-and-mortar chains are approaching it. It may be that he heard a rumor about Amazon planning to open that many stores, or it may be that he pulled the number out of thin air. Either way, it looks as though it was meant as a hypothetical, not as an actual statement of Amazon’s plans. But the part about Amazon planning to open 400 bookstores is so easy to take out of context, that’s just what everyone did.
Smashwords CEO Mark Coker feels the terseness of the denial suggests there is more truth behind it than Amazon would like for people to believe, but it seems far more likely to me that Mathrani is so embarrassed by how badly his one misspoken line blew up that he just doesn’t want to risk saying something else that could be misinterpreted.
Unnamed Amazon sources who spoke to Nate and to Gizmodo apparently held that there was no truth to the rumor (and, if Gizmodo can be believed, were rather annoyed about it), but Shelf Awareness (who first broke the story of Amazon’s plans for a Seattle bookstore) and the New York Times cite unnamed sources of their own who say that Amazon does plan to open additional bookstores in the next year or two, but nowhere near 400 at this early date—more like a dozen or so.
Re/Code has a piece looking at the man behind Amazon’s retail outlet plans—Steve Kessel, whose team launched the original Kindle e-reader, according to unnamed sources. Such sources suggest Amazon is looking at other potential retail outlets in addition to bookstores, possibly utilizing other experimental checkout techniques such as automatically charging people for items they take as they leave the store with them. Re/Code also notes that Amazon has job postings for bookstore staff in an as-yet-unannounced Amazon bookstore in Southern California.
Vox suggests that Amazon doesn’t like making extra money, because its mission is to make itself bigger rather than pay out large dividends—so when it comes into extra cash, it has to figure out some way to get rid of it. As such, additional bookstores could be another money soak for Amazon, using up the extra cash it has sitting around after the unexpected success of Amazon Web Services.
The Vox piece suggests that these stores could also be hubs for Amazon’s Prime Now delivery service, but having worked in retail myself I agree with Nate that this is unlikely. Most retail stores these days run on a just-in-time stocking system—their stockrooms have very little room to keep spare inventory; they put it out on the floor as they get it (often causing them to blow important embargo dates). They certainly wouldn’t have the room to store a bunch of stuff to be one-day-delivered—that’s what warehouses are for.
But on the other hand, it seems that Amazon’s one bookstore so far shares something important in common with Prime Now delivery service—both of them are only possible because Amazon does have big warehouses close by. Amazon is headquartered in Seattle where the bookstore is, and they have warehouses in the areas where they are able to offer Prime Now service. So nothing says that Amazon couldn’t pour that money into buying warehouse space at the same time as it buys local storefront space—then it could use that warehouse space to feed both Prime Now and the brick-and-mortar store.
It also seems obvious that the most likely spots for those dozen or so Amazon retail outlets would also be within those Prime Now service areas—it could stock those stores just as easily as it can already supply Prime Now. Speaking as the inhabitant of one of those Prime Now service areas, I certainly hope that’s the case. I have no hope of getting out to Seattle to check out Amazon’s current bookstore, but if one should pop up in Indianapolis, I’d do my best to be there for the grand opening.
Update: I got the name of the mall company wrong in the original version. Corrected it now.
Much of this chatter neglects just how bottom-line centered corporations are, particularly one as obsessed with numbers as Amazon.
For such businesses, plans are not just abstractions, decided in advanced and pursued until some target number (here 400 or so stores) is reached. That is particularly true in hard-to-predict areas such as retail.
The success of the Seattle store will go into the planning of additional stores. Their success will determine what other stores get started or not.Talking about these schemes, as if long term plans were determined well in advance, misses how companies make decisions. People who do things understand that. People who write words (i.e. most journalists) don’t.
Some plans do require a long-term commitment. Boeing would have been foolish to spend tens of billions on the 787 and then give up when they hit trouble. That investment had to be carried through to the point where it made a profit. Not so rented space for retail stores. That’s an area that’s easily moved into and just as easily abandoned. Success can be quickly measured, and used to judge whether more stores make sense.
We also need to understand what Amazon means by making sense. Go to Relentless.com if you want to see Amazon’s real driving motivation:
That web address links on the Amazon and hints at the company’s driving motivation for these retail stores. It’s not profits as such. It’s certainly not customer convenience, since only a few will benefit from even 400 stores. What Amazon will be looking at will be the impact these stores have on nearby bookstores.
You’ve already seen the marvelous University Bookstore, about a mile away from this first Seattle Amazon bookstore, note the impact that’s likely to have on their sales and, in the long run, their financial viability. That’s what Amazon’s “relentless” executives will be looking at: How effective are these stores at destroying their brick-and-mortar competitors in upscale locales like that of their Seattle store? Destruction of their competition in profitable markets is Amazon’s long-term goal. Stores are merely one aspect of that war plan.
And notice what market dominance means. Amazon dominates ebook sales, so it can get away with being nasty to authors and publishers, even giant ones. At many price levels, the Kindle store pays half as much per sale as Apple’s iBookstore. The company is also playing nasty games, lowering a ebook’s online visibility if it’s not given an exclusive. In ebooks, Amazon dominates, so you have no choice. You absolutely must use Kindle to get your ebook on Amazon.
On the other hand Createspace has ample competition in Ingram and other book wholesalers along with both traditional and print-on-demand technology. You don’t need anything Amazon controls to get your print book on Amazon. That is a healthy market and Createspace is forced to compete rather than dictate. As a result, it actually pays an little better than Ingram’s Lightning Source and, after earlier making efforts to force POD publishers to use Createspace, has been pretending to be Mr. Nice Guy. Only the fact that it was headed for a bad loss for “bundling” in a Maine federal court led it to back off from using its large share of the print book market to weaken Ingram’s Lighting Books.
WIth these retail stores, Amazon is doing what it is always doing, testing to see if it can get away with destroying competitors. (Under the corrupt, Chicago-machine Obama administration, that has been easy.) For Amazon, the destruction of competitors matters more than anything else. Once they are destroyed, it can then maximize its profits while concealing them by laundering those profits into ever expanding investments in other arenas—i.e. package delivery, if some rumors be true. Even journalists, always the last to know, have begun to figure how what Amazon is doing there.
The Greeks were right that hubris, overweening pride, eventually leads to destruction. That’ll be as true of Amazon as for Rockefeller’s once dominant Standard Oil. It’s just that the time for that has yet to come. In the end, the “relentless” pursuit of power will do Amazon in.
My primary concern as a writer is preventing as much collateral destruction as possible until that occurs, particularly when that harm impacts authors and publishers. Amazon must be forced to pay more and treat authors and publishers better. That is what matters now.
When it comes to ebooks, Amazon has an enormous economy of scale. It should be paying authors and publishers 80% royalties rather than an often measly 35%. And like virtually every other ebook retailer, it shouldn’t be charging download fees or attempting to coerce into giving Amazon an exclusive. As you might have guessed, I don’t like bullies.
And no, I don’t live under any illusion that Amazon will ever be kind and generous, much less give a rip about books themselves rather than as merely a way to make money.. Corporate cultures are as fixed as a leopard’s spots. But I do believe Amazon can be forced to behave better.
[…] you answer, let's revisit the original source. Here's the quote from General Growth Properties CEO Sandeep Mathrani in a more complete context. Note the reference […]