Monday, 27 June 2011

Amazon are not a distributor

I'm still stewing over this Amazon problem (discussed in my previous post). Derek Haines stopped by the comments to that post and brought up something I'd failed to mention. I think I intended to mention it, but it got lost in the rush. Then, while dwelling on the fact that I failed to mention it, I started to realise

What am I talking about? Amazon have a price-matching rule. This is a clause in the contract (or at least, I assume that's where it is) which says they have the right to match any lower price you offer your book at elsewhere. It's entirely understandable from their perspective - after all, other places are offering royalty rates of 70%-plus (Smashwords offers 70% for sales through Apple, Sony etc.), which means a massive saving that writers can pass on to readers, thereby driving custom - and money - away from Amazon to other outlets.

So, Amazon's 35% royalty rate puts them at a distinct competitive disadvantage, which is more than balanced out by far broader market reach and the price-matching rule. With Amazon's market share being as large as it currently is - pray it shrinks - the price-matching rule forces authors to make pricing decisions based on Amazon's royalty rate. Your price is calculated based on what you want to get per sale on Amazon. You get more (or at least no less) on your sales elsewhere, but Amazon forms your bottom line.

The problem here is that Amazon are forcing the prices offered at other retailers artificially high, thus damaging purchasability for readers. I said last time out that I was looking to make £6000 from 'Heaven Can Wait' over 4 years; this would cost readers about £7,300 at Smashwords' 85% rate, compared to over £17,000 at Amazon's 35% - and if I want to get Amazon's 70% special offer (don't bet that it's anything else, long term), I have to price the book at £2.12 across the board, and however good it is, it's pretty short to cost that much given emerging standards.

So, Amazon's pricing and market power create a real problem for me. I want to offer my book somewhere in the £1-£1.50 bracket, but to do so commits me to a much slower return on my time and a much, much bigger cash burden on readers.

Then I started thinking about why Amazon is so important, and I had a bit of a revelation. Amazon is important because of its market share - more people access the ebook market through Amazon than through any other outlet, by far. That means an Amazon presence is important to an author because of its ability to connect the author with readers.

Sidebar: I got taken to task for my last post not being radical or revolutionary enough - I think because I held back from suggesting we all start boycotting Amazon now. As some of my rhetoric was quite fiery, I guess that's justified, but I want to make clear: I don't consider myself a revolutionary and I don't rate revolution as a marketing tool. My interest is in figuring out what the best deal for me (and hopefully authors in general) is; I'll be as ruthless (and cynical - I want to do this for a living) as I think is necessary, but I'm always going to put my interests as an author ahead of radicalistic grandstanding.

Amazon aren't a distributor. They're a marketing tool. I mean, yes, they sell our ebooks, but we don't need them for that - we can use Smashwords, Barnes and Noble, Kobo et al to sell our books and (at least from a purely financial perspective) do a far better job of it. What we need Amazon for is to connect us with readers. As such, paying differently (if not more) for the service is more understandable.

What do I mean by paying differently if not more? Amazon's price-match, as I understand it, allows them to lower your price but not raise it (confirmation, anyone?). So, if I offer the book on Amazon for 70p (which I think is as low as they'll let me go), I should still be able to offer it on Smashwords for £1.30. I'll make about £1 on a Smashwords sale - which is what I'm after - and about 23p on an Amazon sale. The important thing about the Amazon sale is that I'll also have made a Reader.

By which I mean, I'll have got someone to read my book who otherwise wouldn't. People who buy my book on Smashwords are likely to be people who have found me through Twitter or my other marketing activities (you know, the ones I haven't started yet >.>), whereas people buying on Amazon are just as likely to have found me by browsing Amazon and not knowing anything about me besides my Amazon page.

And I'm writing a trilogy. If I get people to buy 'Heaven Can Wait', and the book is any good, they'll want to buy book 2, which I'm outlining at the moment and planning to write soon. I may well not even list book 2 on Amazon, though I'll need to come up with some way of making absolutely sure that readers wanting book 2 look me up online.

Amazon are a separate marketing tool from my main marketing strategy. My main strategy is about networking - through this blog and Twitter at the moment, and via Facebook, Goodreads etc. in the future (I'm waiting on a cover image before starting that side of things). I can control - to a certain extent at least - where people go from there to buy my books, primarily by only posting links to preferred outlets. It'll knock my accessibility a bit, but gain me 75p on every sale - a 300% increase over Amazon.

Amazon works very differently; marketing through Amazon isn't about me, it's about the book. It's about people finding 'Heaven Can Wait' without ever having heard of Rik (or R.J.) Davnall. Lots of people. It's about encouraging people who've never seen my writing before to try it (and yes, I count Twitter followers as people who have seen my writing - there's a real skill to crafting a pithy tweet, but that's a blog topic for a different time).

In effect, in offering the book cheap on Amazon, I'm not making an introductory offer, I'm making an advert - a self-financing advert for the trilogy that reaches the eyes of a huge potential customer base. I don't know what the conversion rate will be like, but I'm confident it'll be acceptable.

Summary: as a distributor, Amazon are grossly overpriced. Construed as a promotional tool, however, it starts to look really appealing. I need to do a lot of checking before I'm sure this strategy will work (as a key issue, I don't know how many of Smashwords' affiliates - Sony, B&N etc. - also use price-matching), but I'll keep you posted as to how it goes. Ultimately, I'm trying to drive as much custom in the direction of Smashwords as I can, because I believe it to be in our best interests as authors to make them the standard by which the rest of the industry gets measured.

Thoughts? Experiences? Is it possible within the various terms of services?


  1. Top post Rik.

    Yes, Amazon is an author's best friend.

    But I have discovered through hard experience, it does depend on WHICH Amazon you are using. Amazon US and UK do not share reviews (a real pain) and seemingly operate individually as far as price matching is concerned. I guess it's the same with DE, JP, FR and CA. So for marketing it sucks somewhat as you have to track each store individually.

    A little trick. You can't see the price being offered in Amazon stores outside your own country, but if you click on 'see all reviews' you can. So it's a good idea to pop a short review on all Amazon stores so you can check. JP is a bit difficult! :)

    With regard to pricing, Amazon will lower the price if the book is priced lower elsewhere, but if you bring your price back up, say on Smashwords, the book price will go back up. Just wait a month or so. Amazon do seem much faster at lowering your price though.

    In the end, it really is more practical to keep your prices the same wherever you list them and accept the various royalty rates.

  2. Thanks for commenting. I'll bear that trick in mind :)