Inefficiency is not a quality usually associated with Amazon but Jeff Bezos’s company is behaving as if it is a small, disorganised bookstore that cannot quite control its stock. “You want that book, do you? Very sorry but we have run out. We can order you another copy but they are taking a long time to arrive at the moment. How about buying another title instead?”
Free business school case study in every box (Dreamstime)
Altering prices is a delicate art. When Pixar was a hardware maker in the 1980s, for instance, it realised it was charging too much for its computers. Yet a price cut failed to dispel its reputation for hawking excessively pricey kit. “The first impression stuck,” recalls Pixar co-founder Ed Catmull in his informative new book, Creativity, Inc.
But this does not mean that it is impossible to raise or lower prices successfully. The decision by Amazon to increase the price of its Prime delivery service in the US last month could be a case in point.
Pricing strategy consultant Rafi Mohammed has praised the way Amazon went about increasing the annual Prime charge from $79 to $99. Read more
You would be quite happy to allow someone else to open the boot of your car and drop off your groceries while you are absent. You would trust random strangers to deliver your new shoes on their way past your home. You would gladly accept a prescription-drug order from an unidentified flying object hovering outside your door. All to avoid going the extra mile to pick up cheap goods ordered online in person.
The possibility that a senior Amazon executive may find his name on a range of “non-medicated toilet preparations” has considerably brightened my week. Not that I have anything against Amazon. But Lush, the British handmade cosmetics company, does.
Inside Britain's 'everything store'. Photo: Bloomberg
A no-frills retailer offering a keenly priced range from AA batteries to Z-frame suitcases launches its own tablet device and prepares to expand its same-day click-and-collect service. Amazon? No, Argos, which was Britain’s “everything store” before Jeff Bezos reached high school. Read more
No one will ever find themselves in precisely the position Jeff Bezos found himself in when he launched Amazon.com in 1994, with the ambition to create an online “everything store”. Instead, most competitors will – at least for now – have to learn from Bezos’s success.
On Monday, The Everything Store, which traces Amazon’s rise, was named FT/Goldman Sachs Business Book of the Year for 2013, partly, in the words of one judge, because of its management lessons.
I talked to Brad Stone, the book’s author, about what those lessons might be, and he outlined four. Read more
If a destination’s desirability is measured by the number of maps that claim to lead you to it, innovation is the corporate world’s Taj Mahal. Among the manuals on sale is an Innovator’s Guide, a Cookbook, a Toolkit, a Path, a Way, a Handbook and a Manifesto.
About a year ago I was in San Francisco’s Pacific Heights, gazing down at the Golden Gate Bridge from one of Larry Ellison’s many spectacular homes. The Oracle chief executive wasn’t there – he had lent the house out for a reception. In any case, he would be the last person to apologise for enjoying the fruits of his success. But the view from technology executives’ balconies is getting stormier. After banks and bankers, could they be next to feel the sting of a populist backlash?
I can’t remember a declaration of war as emphatic as the one made by Neil Ashe of Walmart on Wednesday. The chief executive of the US retailer’s ecommerce arm told the FT:
We own what we own, and we’re going after what we don’t. We can get to every customer in the world via ecommerce. It doesn’t matter where they live or how much they earn.
In Walmart’s sights: Amazon, the online jungle’s biggest beast. Read more
Jeff Bezos is famously smart but I wonder whether he has thought through all the political implications of Amazon’s strategy of becoming back-office ecommerce infrastructure provider to the world.
The first part of FT colleague Barney Jopson’s series on the etailer was full of insight, but it was the comparison between Amazon and investment banks that struck me most forcefully. As Barney writes:
One investment banker says Amazon’s position is reminiscent of Goldman Sachs’ dual role as a broker and trader at the centre of capital markets. “People complain about conflicts of interest. But you still have to do business with them.”
Like Goldman and others, Amazon has set out to simplify the life of its clients, so they can concentrate on what they do best. One business identified by the FT investigation – RJF Books and More – has delegated the “selling, shipping, customer service, payments and complaints” functions to Amazon, which left me wondering what else was left for RJF to do. Simplification was a strong theme of my recent trip to Silicon Valley, where countless start-ups, and a few larger businesses like NetSuite and Salesforce.com, are offering businesses the opportunity to “plug in” their operations to outsourced back-office services and payment systems. Read more
There were some interesting foretastes of Monday’s deal between Amazon and the big UK bookstore chain Waterstones in comments made by the latter’s managing director, James Daunt, at the FT a few weeks ago.
Mr Daunt – who had previously called the etailer a “ruthless, moneymaking devil” – spoke at a roundtable in early May to launch the Financial Times and Goldman Sachs Business Book of the Year Award. You can listen to a podcast of his initial interview in which he pointed out that all bookshops had to find ways to make the environment for book-buying attractive again. He added:
The largest of us face the additional challenge of how do we become a relevant part of this new digital world, in which, clearly, a substantial part of the reading that our customers engage in is going to take place.
Visitors try out various ebook readers at a book fair in Frankfurt. Image by Getty
So the US Department of Justice has struck, pushing three of the major book publishers into a settlement that will allow Amazon to resume discounting of electronic books, with three others left outside the settlement.
I’ve argued before against the anti-trust actions in the US and Europe to limit “agency pricing” by publishers and hand power back to Amazon, so I won’t rehearse that here. Instead, I’ll consider briefly what the effect of the settlement is likely to be.
In short, although it is clearly good news for Amazon and bad news for the big publishers, the outcome may not be as clear-cut as the headlines suggest. Read more
Perhaps there is good news for book publishers in the talks with anti-trust authorities in the US and Europe on how electronic books are priced. Admittedly, the good news is well hidden.
On the face of it, publishers are in trouble from the threat by the US Department of Justice and the European Commission to strike down their preferred “agency model” for pricing, under which they set their retail prices for ebooks, rather than leaving it to distributors such as Amazon and Apple.
I’ve covered this saga before, and take the view that the anti-trust regulators should not facilitate Amazon’s efforts to control the ebook market with the Kindle by insisting on it being able to discount books as it wishes after obtaining them at wholesale prices from publishers. Read more
I fear that the US Department of Justice is heading firmly into the territory of unintended consequences by threatening to sue Apple and five of the biggest US book publishers for colluding to raise the price of electronic books.
The Wall Street Journal reports that the Department of Justice is unconvinced by the arguments of book publishers, including Penguin, which is owned along with the Financial Times by Pearson. It is threatening to take action over their “agency” pricing model for ebooks.
I should note that I have an interest in all this since, as well as being a Pearson employee, I wrote an ebook last year which was published by Penguin and sold, among other places, on Amazon’s Kindle store.
I wrote about this issue in a column in December and concluded that eliminating agency pricing, under which publishers rather than ebook distributors, set the prices for their books, would reinforce Amazon’s dominance:
“If some publishers want to set ebook prices above the level Amazon prefers, that is fine providing they do not collude to fix prices and there are alternatives. There is little danger on the latter front – anyone can now become a publisher and new ones are springing up all the time. Amazon has itself become a publisher and displays its titles generously in the Kindle store.
“Minimum prices deals helped to erode Amazon’s initial dominance in ereaders by encouraging competition from B&N and others. Even so, the Kindle still accounts for 60 per cent of ebook sales. It is not the job of antitrust officials to hand Amazon back its monopoly.”