Independent Bookstores Should Negotiate a Better Offer with Amazon Source

Yesterday, Amazon.com launched Amazon Source, a program that will pay retail outlets for selling Kindle e-reading devices and accessories. Retailers can buy the products at a 6% discount and earn a 10% commission on ebook sales recorded for a given device for the next two years. Amazon also offered booksellers a plan under which they can receive a 9% discount and forego any commission revenue.

Putting aside the gut reaction that many booksellers have toward their arch-disruptor Amazon, the idea of a digital partnership with the company has some appeal. Independent bookstores have few options that would allow them to compete on price or selection. Their better options are likely to be found in focus — a specialty of some kind — and service.

The real problem is this: the offer is flawed.

Although the number of independent bookstores in the United States has stabilized in the last three years, independents are still wary of Amazon. Since its founding in 1994, the company has actively competed on price, selection, and speed of delivery.

Unsurprisingly, then, the American Booksellers Association was not impressed with Amazon’s announcement. Oren Teicher, the ABA’s executive director, told book publishing daily digest Shelf Awareness, “It appears that Amazon.com has again fashioned a program that benefits the retailer it cares about most — that is, Amazon.” Other independent booksellers echoed Teicher’s claim.

This concern is understandable given the magnitude of Amazon’s disruptive force. Few independent booksellers can match Amazon’s discounted book prices. They are also at a disadvantage when it comes to selection; even a larger independent store will stock fewer than 100,000 titles, while online retailers like Amazon offer millions. In some markets Amazon offers same-day delivery, undercutting one of the primary benefits of a nearby physical bookstore. Online bookselling has certainly resonated with consumers. According to Bookstats, a database developed to track revenues, prices and unit sales in the book industry, online retail sales accounted for 48.2% of publisher revenues in 2012. This is almost double the 27.5% share reported only two years earlier.

Although physical books continue to make up the bulk of online sales, sales of what Bookstats calls “non-physical products” (ebooks, audiobook downloads, digital course materials and web-based products and services) represented 19.0% of publisher revenues in 2012. Ebooks alone made up two-thirds of that volume. That growth has been particularly strong in trade books, the titles most often found and bought in physical bookstores. And Kindle captured two-thirds of all ebooks bought last year.

Independent bookstores have responded in part by developing IndieBound, their own online retail store. The American Booksellers Association partnered initially with Google and now with Kobo, an e-reading platform with its own devices, to allow member stores to sell technology and ebooks. Both efforts have met with some success, but they could not be considered game-changing developments.

This leaves independent booksellers in a tough spot. Consumers now buy books online at least half the time, far more than any other retail channel. While “online” is not synonymous with “Amazon,” the company is generally recognized as a standard-bearer for making online shopping convenient and hassle-free. Membership programs like Amazon Prime, which eliminates shipping charges for a set annual fee, make the site a first option for many book buyers. So booksellers are hardly incentivized to bolster the behemoth’s business by now selling Amazon’s e-readers and enabling even more Kindle purchases.

However, given Amazon’s dominance, booksellers interested in serving their communities and gaining from growth in the eBook market should, in fact, consider selling Kindles. In fact, booksellers should want to own the device relationship because giving digital readers a reason to come to a physical store opens up a dialogue and a service opportunity.

Indeed, before the announcement, Amazon Source was piloted at two Seattle-area independent bookstores. When contacted by Shelf Awareness, both booksellers spoke favorably about the program.

So how could booksellers — and Amazon — actually make this program work?

Rather than turn a blind eye to a significant share of the eBook market, these retailers should consider negotiating for better terms.

With the 6% discount on device sales, Amazon Source provides a commission on sales for only two years. The work an independent bookseller does to win a customer over should, and often does, last a lifetime. The affiliate revenue — the commission for having sold the device that created the eBook relationship for Amazon — should last as long as the device does.

This is in Amazon’s interest as well. As the majority of book sales will soon take place online, discovery becomes publishing’s Holy Grail. The Amazon platform is a reasonable option when you know what you want. An independent bookseller can be a much more effective option when a reader doesn’t start with the right book in mind. That’s one of the service advantages that independent bookstores already offer.

This can be a bitter pill for independent bookstores to swallow. Amazon has changed the landscape for bookselling in the United States, and many independent bookstores have suffered as a result. The ABA naturally wants to protect the interests of its members.

However, walking away from a mutually beneficial partnership with Amazon not only guarantees only that booksellers will have no access to any part of the eBook market now served by Amazon, it also hurts their ability to make an impact on the growth of the book market overall by reducing the likelihood that digital readers will gain access to the insight and understanding that a local bookstore can provide. Amazon and independent bookstores both play significant roles in promoting the growth of reading: rather than quibble over how to slice a static or shrinking market, they need to find a way to partner around digital reading in order to grow the entire pie.