Amazon Pricing and Selling

Yesterday I talked about sales numbers versus royalty rates. It was educational for me writing it, because in researching it I realized that I absorbed good info from various authors over the past five years.

But then I started thinking more about the sales of Amazon and the pricing of it, mainly due to a blog post here making the point of how Amazon holds publishers (and distributors) hostage to maintain lower prices. I thought about that for about five minutes and realized that this is a good thing. Why, you may ask? Because it generates new ideas about how to make publishing cheaper, that’s why. Lemme ‘splain.

Self-published novels and print-on-demand is a rapidly growing industry. Ebook sales are skyrocketing, with sales numbers growing each quarter. Plus, cheaper costs of running an ebook publishing company make more start up companies look at ePublishing. These new companies need a venue and Amazon, with their easy distribution, makes this possible. However, Amazon also is out to make a buck as well. Everyone is trying to make money off of a product, right? That’s why people do this.

So the publisher sets the wholesale cost, then the distributor (Amazon or someone else) sets the retail price. Let’s use Corruptor as a fictional example here, since I did it yesterday.

Corruptor is distributed wholesale for, oh, $10 a copy. The retail price is set at $19.95. That’s a hell of a jump, you may say. That’s expensive. But then Amazon swoops in and offers the book for $15.50. Sweet deal, one can say, and they will pick up a copy from Amazon and not think anything about it. This may seem unfair to the publisher, because they “lost” $4.50 or so. But they didn’t. They sold their $10 copy already, right? So how much did the book cost them to print for themselves? $7.00? So because Amazon sold a copy of the book, the publisher made $3.00, while Amazon made $5.50. So where’s the problem here?

The problem can be when Amazon offers more than 33% off of a book on their site. It’s when they lower the price so much that it seems that the publisher isn’t making a big enough profit on the book to print any more. This can hurt everyone from Amazon to the author of the book. So Amazon must tread a very fine line between making a profit and killing the businesses which support it. They look at the long term costs, and considering Amazon keeps very few of the actual product in their warehouses leads me to believe that Amazon, despite the appearance of being a small business destroyer, is out to ensure that these small businesses and publishers stay healthy.

So in situations like the one that Amazon is in, is there a line between cutthroat operations and traditional business practices that can lead to success for everyone involved? I believe the answer is: Yes.

It leads to innovative approaches for the publishers and businesses in question, to figure out how they can lower costs without costing their quality. This in turn leads to an expansion of business finesse and an increase of production skill level. Keeping costs down is primary for any business, be it a publisher or anyone else. Technological advancement and production quality shapes the identity and reputation of the company, which leads to… a better product. It’s how publishers like Baen Books and Pyr Books have developed such a great product, and how others have tanked.

Okay, that was a bit of rambling but… what do you think? Should companies and distributors like Amazon have a massive discount for a product and set the price, or should the publisher be the price-setter?


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