July 26, 2006
Read this article on MSN.Com today:


The real problem with Amazon
The stock is richly valued for a retailer, even after today's big plunge. And the company still needs to trim expenses and focus on selling high-margin items rather than on becoming a Web portal.

By Robert Walberg
There are plenty of reasons to be disappointed by Amazon.com's (AMZN, news, msgs) latest quarter, but missed earnings estimates isn't one of them.

Net income fell to $22 million, or 5 cents per share, compared to $52 million, or 12 cents per share, a year ago. Wall Street was looking for profit of 7 cents per share. It looks like net income not only plunged 58% year-over-year, but that the number fell 2 cents, or 28%, below expectations...

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Lest I annoy some independent bookstore owners or even Borders and B&N, I want to say that I like Amazon and do order books from them from time to time. I also buy books from Borders, which is the nearest bookstore, large or small, from where I live. I'm not aware of any independent bookstores nearby. There used to be, but they were supposedly driven out of business by Borders. Apparently I didn't buy enough books from them.

So, what do I think about Amazon? The gist of this article is that Amazon probably needs to make up their mind what they are. Are they a retailer? Or are they a web portal?

I want to add a caveat to that, actually. Are they a bookstore? Or are they an online version of Wal-Mart?

When they primarily sold books, I thought that was pretty cool. When they branched out into appliances and groceries and anything else, I wondered what they were doing.

I have no great insight about Amazon. It's done an amazing job of branding itself. From an author's point of view I think the fact they always have your backlist available is great, and from an author's point of view, the fact that they sell used books on the same page as the new books, sometimes at dramatic discounts, often just as soon as the new books come out, well, sucks. This isn't helping the industry. I'm not even sure it's helping Amazon. It's probably helping the post office and UPS a lot, just like eBay did.

A while back I read a breakdown of a bestselling author's sales to various outlets. I was stunned that out of the hundreds of thousands of books sold, only about 300 of them were sold by Amazon. Most, sadly enough, were sold by Wal-mart and Sam's Clubs, etc., rather than bookstores.

I say sadly because all you have to do is look at the book section at one of these big box retailers to realize they're only selling 100 or 200 titles or so, the very top sellers in hardcover (probably the top 5 for both fiction and nonfiction, probably not even the top 10) and top 40 or 50 or so of paperback, with a large devotion to mass market bestsellers and romance fiction. Throw in Stephen King, Janet Evanovich's backlist & you'r all set.

I'm pretty much FOR anything that sells books, but there's a skewing of sales trends here that probably doesn't do readers or publishers much good, although who knows, maybe the readers who buy their books at Sam's Club don't really give a shit. They just want the latest paperback reprint of Jeffery Deaver or JK Rowling or Stephen King. They're not interested in somebody they haven't heard of before like, uh, Mark Terry, or Mary Reed & Eric Mayer, or Jeff Cohen.

And although I can't speak for Mary, Eric or Jeff, I'm reasonably sure none of us would MIND having our books sold at Sam's Club, Wal-mart or Meijer. I'd be delighted. Put me in everybody's face, thank you very much. I want to be at airports, grocery stores and drug stores. Preferably right there next to the checkout area where I can be an impulse buy or so that people who don't read books can see my great cover and my name, so when they DO want to buy a book, the name that pops into their head is Mark Terry.

So, any conclusions? Uh, no. Just blathering along here.

Best,
Mark Terry