What would make an Amazon competitor competitive?

Those are all some great ideas. The problem is, a bookstore could open with all of that tomorrow…and 99% of Kindle owners would still go right on buying from Amazon because it’s so convenient. Anyone who wants to compete with Amazon is going to have to build their platform from the ground up, and in a world where it’s just so dang easy to keep buying from Amazon, that’s a nearly-impossible task.

@Chris — That’s an argument for Amazon having monopsony power, which, according to Nate at the Digital Reader and other fanazons, Amazon supposedly does not have.

@Juli — Your argument also supports the idea that Amazon is a monopsony. If it can continue to convince authors to be exclusive to Amazon, it is exercising tremendous power in the marketplace.

As for your question, Juli, about what it would take, as a reader I would like Amazon’s customer service at B&N. I happen to like B&N over Amazon for book shopping, but I admit that B&N sorely needs a revamping of its customer service.

It’s crazy to think about the problem this way. A wise man once said “you don’t tug on Superman’s cape”. Everybody knows that if you want to beat Superman, you go find your Kryptonite first, then you sneak up on him.

Jeff Bezos didn’t frame his problem as “how can I create a better chain bookstore than B&N”. Apple didn’t set out to build a better laptop when they came up with the iPad. Likewise, no one is going to beat Amazon by trying to build a better ebookstore and ereader hardware.

If you want to beat Amazon, you have to start by building a business that they cannot duplicate. I think the best (but not the only) way to do that is to focus on the reader experience. That means giving readers something they can’t get from Amazon. That could be exclusive content or personalized content or more effective matching with new content. Whatever it is, it has to be something that Amazon cannot easily achieve because it goes against their low-margin, high volume approach.

Add these to your list:
1. Locate your shipping centers in areas where unemployment is high and people are desperate for any sort of work.
2. Use a third-party agency, so technically those working in your huge warehouses are not your employees. When those conditions are exposed, that adds deniability, aka as lying.
3. Build computerized tracking systems that force those employees to be constantly on the move double-time. Hire many people only for rush seasons and lay them off quickly afterward.
4. Pay poorly and don’t pay for the time employees must wait to be inspected for possible theft when leaving work
That’s precisely what Amazon does as detailed in an article called “How Amazon Solved the Problem of Work” at:
http://www.theawl.com/2014/10/how-amazon-solved-the-problem-of-work
In short, Amazon’s behavior through one of its contractors in that last category has reached the U.S. Supreme Court:
“On Wednesday, October 8th, the Supreme Court heard oral arguments in the case of Integrity Staffing Solutions v. Busk. The case pits warehouse workers Jesse Busk and Laurie Castro against their former employer. The issue at hand is time: Should minutes spent waiting to be screened at the end of the workday—Integrity manages warehouses that fulfill online shopping orders—be counted as work? If so, then shouldn’t workers be paid?”
Obviously the Court should rule against the practice. It was a classic part of working in the sweatshops of a century ago to do these employee checks after workers had clocked out.
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Notice that this sort of behavior isn’t a passing accident, a mere mistake that’ll be corrected as soon as it it revealed. Remember, this case is being fought all the way to the U.S. Supreme Court. That’s an enormous legal expense. The company involved, Integrity Staffing Solutions, wouldn’t be spending that money if Amazon hadn’t agreed to cover the costs.
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One of Amazon’s core business principles is the devaluation of its low tier employees. I saw precisely that in my first actual contact with the company shortly after it went public (sold stock) in 1997.
I was living in Seattle then and stopped by a garage sale. The woman hosting the sale told me her story. She’d been an early Amazon employee and supported it enthusiastically, giving up her Christmas holidays to work long hours fulfilling orders. The pay wasn’t great, but she consoled herself with a belief that, when Amazon went public, she’d get some of its stock and become at least modestly well off for all her hard work for the fledgling company.
That didn’t happen. Shortly before Amazon went public, she was one of several hundred employees laid off precisely so Amazon wouldn’t have to give her those stock options. Federal law makes it illegal to offer stock options to corporate executives but not to rank-and-file employees.
She was so bitter and angry, she told me, that she couldn’t stand to live in Seattle any more and was moving to California—hence her garage sale.
If you’re looking for why I’m such a Amazon skeptic, that’s a major reason why. Those firings weren’t accidental. Jeff Bezos and his corporate cronies—there’s no other apt word—fired that woman and others precisely so that, when they got enormously rich when the company went public, they’d get a tiny bit richer at the expense of their early and much exploited employees.
Think of independent writers sending in their books to Amazon as even beneath those dedicated low-level employees, and you’ll understand why I consider any writer who trusts Amazon to do the right thing by them as a fool. You don’t get water from bricks. You don’t get kindness, compassion or even basic decency from Amazon if you’re a low-level employee or, still worse, an independent author. That’s simply a fact of life. Amazon only behaves otherwise when forced to do so by bad press, laws or legal action, as in the dispute I mentioned above.
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So to deal with your basic question about creating a “competitor” to Amazon, to be successful, at least under the current administration, you’d have to place an utter jerk as CEO and staff the executive offices with similar people. In short, if you want an effective Amazon competitor, you’ll need to take lessons from the long ago robber barons and sweatshop owners have it run by people who’re absolutely heartless.
Of course, when you create this Evil Inc., take every care to make sure the public who buy from you don’t become aware of and upset about this behavior. That’s where Amazon blundered with their Hachette dispute. Rather than stick to bullying little people with no voice, Amazon took on a large corporation with strong connections to the country’s Manhattan-based news media.
That was a bad move in the sense of foolish rather than evil.

I sell two formats of ebooks: PDF and ePub, DRM free. I take PayPal. The only snag is immediate delivery which I have yet to work out. I ship them via the buyer’s email. I am only one person in my company, which I have been operating for about 7 years. I have gone through the Amazon wringer — thrice. Once from CreateSpace, and twice with KDP (it was DTP when I signed up). Even if you click on “no DRM” your file gets attached to DRM immediately once it is uploaded and converted. Also, the “keywords” and “category” tags are frequently altered, quietly and without notice. This is clearly spelled out in the contract. I noticed the exclusivity clause in the KDP Select contract and said, no thanks. After that, I noticed that Amazon started losing sales reports, retagging my titles and in other ways making it difficult to be seen in its overbloated catalog, which contains a great many titles which are long out of print or taken offline. After a while I decided that it would be better to stick to my original business plan, which works to a degree. Even when I was with Amazon I still could not get readers to notice, and the reader forums were choked with trolls. If anyone can prove to my satisfaction that Amazon is playing fairly try. I’ve already been there, and I don’t like the way it looks.

The other day I had a really good discussion/argument with a friend over this in Internet chat. His position is that Amazon’s huge market share in online book and e-book sales and ability to dictate terms to suppliers is troubling regardless of whether they earned it or not, because it could be used to stifle innovation down the road. Whether it meets the dictionary definition of monopoly or monopsony is beside the point, and so is whether or not the Big Five deserve what they’re getting; he’s concerned about what Amazon could do to small publishers and others in the future. But he also admits that there may not be a good solution, because government intervention might just make an even bigger mess.

I can see where he’s coming from with the concern, but I believe that if Amazon ever actually does cross that line, someone will push back and the courts will sort it out. It’s already happened at least once, when Amazon tried to force all small publishers to use its own POD service. BookLocker (a company that the Big Five could probably buy just from the change they find between cushions in their boardrooms) sued; Amazon saw which way the wind was blowing and backed down and settled.

Meanwhile, I’m going to savor the schadenfreude of watching the Big Five publishers get what’s coming to them. I’m still ticked off at them for not dropping the prices on e-books to match print editions after the print edition had gone to paperback in the ’90s and ’00s.

Create an Amazon competitor at all levels and you’d also be pushing into these sorts of business practices with warehouses:

http://www.buzzfeed.com/jessicagarrison/how-our-shopping-harms-the-lungs-of-california-children#12muj1r

Although what the discusses isn’t just Amazon. It’s an intense concentration of warehouses to feed an entire industry of stores:

“It either passes through or stops off at distribution centers serving Amazon, Wal-Mart Stores, Target, Costco, Home Depot, Restoration Hardware, Baskin-Robbins, Nike, Nordstrom, Kraft Foods, Toys ‘R’ Us, Ford, BMW… the list goes on and on.”

If there’s a word for what’s happening, it’s the pursuit of efficiency at the expense of other factors. This small area is the most efficient way to store and move goods made in Asia to the western U.S., so it is where all those warehouses go. It doesn’t hurt in these calculating that a depressed economy also means wages can be low.

I saw the contrast years ago when I read a biography of Ronald Reagan. In the 1950s, he was the celebrity representative of General Electric and the host of the second most popular show on TV, General Electric Theater. GE then was huge and diverse. Part of his job was traveling around to the company’s hundreds of factories, warehouses, repair centers and the like. They were scattered all across the country, in small towns as well as big cities. Business necessity meant each needed to be profitable, but there was no obsession with perfect efficiency. A factory might not be in the best possible location, but it served well enough and provided local jobs.

Today, that’s not so. Amazon, Walmart and a host of others pursue low cost to the exclusion of all else. And low cost, as I keep trying to warn authors, isn’t just a low selling price. It’s squeezing the cost of supply as much as possible.

I read of one case where Walmart encouraged a town in Mexico to start a factory making Christmas decorations. It did, anticipating hundreds of jobs. Then Walmart canceled their contract. It had found cheaper labor in China.

If you’re looking for the whys behind what’s happening in America, with the rich getting richer, the poor getting poorer, and the middle-class sliding backward, that’s it. And if you look to the Democratic party to save you, you’re a fool. Obama and his party are owned, lock-stock and barrel by the nation’s superrich. Obama can hardly find the time to cater to all the $20,000 a plate dinners his party could use to fundraise. The Democrats bash the Koch brothers because they’re almost alone among the super-rich in supporting the Democrats.

And it is at the top, among the super-rich that the pursuit of efficiency, including low wages, stops. One of the very wealthy man of the early 20th century decree than neither he nor any of his executives would earn more than 20 times the salary of their lowest paid employee. Today than ratio can be thousands to one. When it comes to executive compensation, there’s no pursuit of efficiency. It’s grab all you can and look around for more.

Back in the 1990s, I was part of a student group that interviewed some high-tech investors who had an idea that they hoped would make them rich. It was still in startup mode, so they were raising funds. But they were being very careful, they explained, to only share that investment opportunity with their equally rich cronies. They’d be the ones making the 10000% rate of return. When the stock went public and the return dropped to modest levels, they said, would be early enough to let ordinary people in on the investing. Those ordinary people would, in fact, be providing those 1000% returns with their hard-earned savings.

I was tempted to adopt a far-left stance with those investors, telling them that “when the revolution came” and they were “marched to the wall,” not to look to me to hide them.

The revolution isn’t going to come, but those growing disparities are going to lead to something. As I wrote in Lily’s Ride, since the 1960s, the Democratic party has been trying to spread its long successful Southern political model to the rest of the country. In the Old South, both under slavery and segregation, the party eagerly served the interests of the South’s only wealthy, cotton planters and timber barons. (Where I grew up it was the timber barons.) It also used race and the poverty of poor whites to create a reliable, if extremely stupid, voting base to retain power.

Flip white to other impoverished racial groups and you have today. Racial hatred and envy are used in the same way to blind those at the bottom to just how badly they are being treated. That’s why, despite the dearth of low-end jobs for poor blacks, the Democratic party is eager to flood the country with waves of impoverished immigrants who’ll be taking those jobs away. In the town where I live, it’s all to obvious that Hispanics are doing just that to the blacks who’ve lived here for many generations. But keep in mind that what the Democrats are doing is a dangerous game. Why treating the nation’s black underclass rotten, they have to convince them that the cause of their ills are the whites and the Republicans.

That, in a nutshell and where Amazon and companies like them fit into our economic matrix. In the 1950s, you could, like GE, build factories and warehouses across America, knowing that your competitors were doing the same. Today, if you aren’t utterly ruthless in your pursuit of efficiency, manufacturing overseas wherever the labor is cheapest, and distributing in this country with efficiency as your only factor, you’ll be left in the dust.

The closest historical parallel I know of was Britain’s coal-fired industrial revolution and the horrors in created. There, a religious reform (Methodists and others) altered the nation and even reached industry leaders. By one account I read, some of the leading coal companies and factory owners helped fund the exposes that led to changes in laws about working conditions and child labor. They knew that without those changes in the laws, they would go under, unable to compete with their more ruthless competitors.

With only a few exceptions, you don’t see that kindly attitude among today’s superrich. They want a large welfare system to cover the ills they create or do nothing about, but use every trick imaginable to avoid the corporate taxes (Apple and Google) or sales taxes (Amazon) that would fund those services. Even more revealing, when they select a community for a huge server farm or warehouse, based on raw efficiency criteria, they also want all sorts of tax breaks for coming there. Apple, one of the wealthiest companies on the planet, wants tax breaks when it puts a server farm in a small town that’s having trouble funding its schools. Think about that for a moment.

And when they feel a need to posture virtue, they’ll paint themselves green, covering those warehouses with solar cells, whose cost is subsidized by taxes on others.

I could go on, but I think I’ve made my point. In 1810, if you wanted to compete in coal mining in Britain, replacing cruelty with exploitation, you’d have trouble competing with coal minds who had cruelty as a major part of their business model. In the same way, if you wanted to compete with Amazon and their counterparts, you’d find yourself stymied by their ruthless efficiencies.

This is why I regard one of the best measures of a person’s character isn’t their success or, in entertainment, how famous they are. It lies in what they refuse to do to be successful or famous.

I can’t let this remark by Chris pass without comment: “I can see where he’s coming from with the concern, but I believe that if Amazon ever actually does cross that line, someone will push back and the courts will sort it out. It’s already happened at least once, when Amazon tried to force all small publishers to use its own POD service.”

I happen to know the POD publisher who fought that Amazon policy—THE publisher. She was very much the exception. Every other publisher in her field buckled under Amazon’s dictate. Most had to do so because, as she told me, they’d been lying to the author/clients. They’d been charging an extra fee for placement in Amazon, when that was automatic. Print with Lightning Source, as they were doing, and release to Ingram, automatically meant placement on Amazon.

It was yet another illustration of just how stupid many small-time authors are and how, as I stress over and over again, they need to pay attention to authors who are successful. But having made that deceptive commitment to Amazon placement, those POD service companies had to obey that bully. They’d promised Amazon placement. They had to deliver. She hadn’t promised, so she didn’t have to deliver.

She sent me the court documents as they were filed and I could see that she benefited from having some quite talented lawyers working on contingency while Amazon’s lawyers, perhaps too used to bullying authors and small publishers, didn’t see how weak their case was based on some anti-bundling laws. I wasn’t surprised when Amazon settled out of court, but remember that what happened wasn’t a had-to-happen. One POD publisher out of hundreds made it happen. Absent her, Amazon would have won.

Chris is a great guy, but I suspect he’s one of those I call “bump car people.” The name comes from toy cars that travel in one direction until they hit an obstacle, then turn and go in another direction. Often they get trapped in a situation where bump and turn doesn’t let them escape.

I consider that most foolish. You don’t keep running from conflicts simply because there is still a way of escape. Eventually, a situation may arise where all means of escape have been sealed off. Then, it’s obviously turn and fight time but, having bump-turned so many times, such people find they simply don’t know how to fight.

That’s why Eastern Europe is falling under Putin’s sway. Previous post-Cold War presidents, two Bushes and Clinton, didn’t use bump-car foreign policy. They countered Russian attempts at regional aggression. Over loud Russian protests, NATO was extended east to prevent ground attacks.. Anti-missile systems were to be installed to prevent nuclear blackmail. No bump and turn.

Calling it a reset, Obama, Hillary and Kerry have practiced bump-car diplomacy. Each Putin move has been met by bouncing off in another direction to avoid conflict. We’ve now reached the point where bump-and-turn doesn’t work. Russia has occupied part of a neighboring country. Sanctions don’t just hurt Russia, they hurt the nations around Russia, pushing them toward the Russian orbit.

Amazon is the same. If Amazon doesn’t find it’s every effort to gain more power over publishing and authors met with a push-back, it’ll eventually grow so powerful that not only can it not be countered, many of those who are being mistreated will find that they can’t afford to stand up to it.

In short, the old adage about penny wise, pound foolish applies to time as well as money. A little effort restraining Amazon now will be better than a great deal of effort off far in the future, as Chris seems to claim. And that little effort now can happen. That great effort in the future may never happen.

And I might add that I don’t see some sort of nasty federal action like that against Microsoft as a healthy response. A Microsoft that reformed itself would have been a better Microsoft today than the one that resulted from that federal action. The same is true of Amazon. I don’t want to see the company kicked around by government lawyers as clueless as those who went after Microsoft. I want Amazon to acquire some decency and business ethics of its own. Yes, that may be most unlikely given the corporate culture, but it is a better solution.

Self-motivation is always better than external motivation. That’s why I keep blasting Amazon with words. I want it to change. It’s why I think Amazon’s fanboys are self-deluded—that is when they’re not driven by nasty little hatreds of big publishers, as if Simon & Schuster or any of the others could really do them any harm. One measure of a fool is that they’re unable to see who their real opponents are.

–Michael W. Perry