Why are you surprised by Amazon's pricing fluctuations?

There were a couple of articles in the NY Times last week that made me scratch my head. You'll find them here and here. If you haven't already read them, they can be summarized as follows:

Authors and publishers can't understand why Amazon sometimes increases book prices.

Really? This surprises you?

Amazon is the original data-driven retailer. When their consumer prices go up or down you can bet there's data to support the change. So what sort of data leads to price changes?

First, even though they generally don't take on very much inventory, Amazon sometimes finds themselves with too many copies of a title. I saw this a number of times when I was a book publisher. When they have too much they'll typically offer a discount to see how many copies they can dispose of. They don't do this with a lot of fanfare; you might see that book go from 34% off to 50% off, then back to 34% off a few days later.

The complaint noted in the Times articles was about prices going up though, not down. That, my friends, is something we can expect to see much more of from Amazon going forward. After all, Borders is gone and B&N is struggling. The simple truth is that Amazon's slice of the sales pie for most titles has probably never been larger. So if they've got such a significant share, why not take the prices up? As their most recent quarterly SEC filing showed, Amazon's net sales continue rising but their profit declined significantly. At some point they'll have to stop selling so many items at a loss or at such deep discounts.

Given my earlier point about Amazon being so data-driven, think about how important a tool like Bookscan is for them. If they're looking at total industry sales and they determine 95% of the sales of a particular book are through their own channel why would they feel compelled to continue offering it at a deep discount?

Comments

[Richard Billings]

If only there was a marketplace connected pricing directly to customoer response. :)

[Joe Wikert]

Hi Richard. Yes, this certainly highlights the more transparent pricing model used by Screwpulp, doesn't it? :-)

[38enso]

Joe - I agree with you. I wasn't surprised at all with Amazon's price changes. They have been doing this with titles since the onset. I found the NY Times article mis-leading and one-sided. This is nothing new and will continue. Amazon has always stated that the backlist is less discounted and the titles mentioned in the article were deep backlist.

Amazon is a business and will continue to price books as they see fit - as a business - not to satisfy individual author desire.

Jack

[Grey Wolf]

Presumably all discounts are against the list price and are at Amazon's discretion aimed at price matching. If an author wants a permanent discount then they should reduce the list price - of course that reduces their share, whereas Amazon's discounts keep the royalties intact.