Two stories linked by artsjournal.com today about Amazon: gigaom.com (?) on how Amazon is further cutting prices on hardbacks, and the American Booksellers Association upset that President Obama held a major speech on jobs at an Amazon warehouse.
Observations:
First, while I possess no special insights into what goes on behind closed doors at Amazon, the evidence is certainly that their pricing strategy is all about market share. And I have always had trouble understanding what motivates this goal. Maximizing profits, I can understand, and that’s how I teach pricing. Relentless price-cutting to gain market share makes less sense to me. I am skeptical of the strategy of ‘we will drive all of our competitors out of business, and then, as a monopoly, drastically raise prices again!’ because I don’t see how that goal can ever be accomplished. There will always be other booksellers, or potential booksellers, waiting to jump into the market should the opportunity arise. Maybe one day I will be proven wrong, but when is that day supposed to come?
Second, I have to question the critique by the American Booksellers Association, who make it all about jobs:
All told, according to the Institute for Local Self-Reliance, every $10 million in spending that shifts from Main Street retailers to Amazon results in a net loss of 33 retail jobs. That would mean for 2012 alone — using Amazon’s own numbers about its increase in sales — Amazon cost the U.S. economy more than 42,000 jobs just last year!
This is not the way to mount an attack on Amazon. If they can deliver books to consumers using less labor to do so, that’s a good thing! Economies do not flourish by looking for mechanisms to deliver services that require more labor than necessary.
Have any of these booksellers ever used an ATM? I’ll bet they have. I was a bank teller when ATM’s were first introduced, and the chatter at our bank was about how this would reduce the need for so many tellers. Maybe it did (or maybe teller jobs shifted into other, personal-finance jobs in the bank, instead of handling basic $200 withdrawals from checking accounts). But who today would say that the jobs policy we need is to eliminate ATMs?
The booksellers are correct that sales taxes ought to be equally applied to Amazon purchases as to those made in brick-and-mortar stores.
But otherwise, they need to think about how to ensure their stores are valuable to customers. It’s not about preserving jobs for people who work in independent stores, it’s about making the case that these stores are good for consumers too. Like most people, I buy books both ways – Amazon, and my local corner book store, each have their strengths. But don’t knock Amazon for getting books to consumers quickly and cheaply.
The goal of non-profits in the arts, of course, is to minimize profits for the sake of expanding participation by the public. This is in some ways analogous to maximizing “market share” by minimizing profit. To the extent financially possible, ticket prices are reduced so more people can attend. Or profits are put into educational activities that will help increase participation.
Profits are also sometimes used to coddle wealthy donors with the hope they will continue giving or give more. Most often a cycle evolves that becomes static. The wealthy give and the wealthy are serviced without the organization ever finding the financial basis to offer good seats that common people can afford. Especially in our major orchestras and opera houses, the good seats can only be afforded by the wealthy on a regular basis. A system of cultural plutocracy evolves that defines a closed, strongly circumscribed market. It also defines our concert rituals where the wealthy go to see and be seen.
This stands in stark contrast to Europe where the arts are publically funded. Most people can afford good seats. The arts are not associated with a class system. And the demographic of participation is much wider.
I wonder if the idea of “cornering markets” might help explain why the USA is the only developed country without comprehensive systems of public funding on the Federal, State, and Municipal levels. Hollywood and the music industry would not want to see the government supporting alternatives to their products. Without public funding for the arts, they can continue to corner the market. This also helps explain why Hollywood continually opposes Europe’s subsidies for the arts. (Er…nice pic of Meg Ryan.)