Amazon and The Book Depository

Yesterday’s Twitter updates brought the depressing news that Amazon is to buy up my second favorite online bookstore (the first being my own, naturally), The Book Depository. Reaction to this in my corner of the blogosphere has been pretty much uniformly negative, with many people suggesting that they’ll stop using TBD.

Meanwhile business-oriented news sites are trying to figure out what this is all about. Paid Content suggests that it is a question of expertise. While Amazon has largely followed chain bookstores such as B&N and Waterstones in focusing on the bestseller market, TBD has followed a more diverse business strategy, catering for a wide market and a diversity of tastes. By buying TBD, Amazon may be seeking to cover both bases.

The idea is given some credibility by the news that the two companies will remain independent. So it will be sort of like a hotel company owning several brands, each catering to a different segment of the market. I don’t think this will work. I think the economics of online retailing will inevitably favor a bestseller approach. While TBD might be happy with a less-profitable business model if it means it appears to be a viable alternative to, rather than a pale copy of, Amazon, once the two operations are overseen by the same board of directors it won’t be long before TBD is deemed insufficiently profitable and is wound up.

Consumers, especially those in countries without a local Amazon affiliate, appear to be mainly worried about pricing, in particular TBD’s famous “free shipping” policy. I have seen suggestions elsewhere that this is an illusion — what they do is check which country you are logging in from and adjust book prices accordingly. In any case it seems unlikely that Amazon will want to compete with itself, especially given the lengths it goes to in order to try to prevent publishers from ever offering a book for sale at less than you can buy it for on Amazon. The only thing slowing down price matching will be the time needed to build the IT systems that enforce it.

That brings us to the question of competition law. As The Guardian notes, the deal is not yet done. Regulatory approval is required. I can’t see the Office of Fair Trading doing anything. There wasn’t really any serious competition in the UK anyway as we have a local Amazon affiliate and prices were probably matched already. Besides, Tory government. Other countries may see things differently, but whether the EU has jurisdiction over the matter isn’t clear.

One other thing does spring to mind. Amazon has recently been closing affiliate accounts in various parts of the USA because state governments have been imposing local taxes on internet sales. California was the latest to go. I don’t know what the situation with US residents signing up to affiliate schemes with TBD is. My own TBD affiliate account is in US$, but is linked to the Wizard’s Tower PayPal account which is UK-registered, so it isn’t a good guideline. Does anyone know? Could this be Amazon exploring a loophole in US tax legislation to allow them to continue running affiliate schemes?

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6 Responses to Amazon and The Book Depository

  1. glenda larke says:

    Er, I’ve heard very good arguments that it was businessmen with a lot of money to spare setting up a company that Amazon would find impossible to resist and then sitting back and waiting for the bait to be taken. Which it just has. Eat the competition and you grow fatter. And the competition gets a good return on their “investment”. The new business model in this age of cyber competition and money?

  2. glenda larke says:

    Perhaps not usually conceived quite on this scale, though, with as much money available to back it.

    Oh, and if this goes ahead, we can be sure that free delivery would soon be a thing of the past…sigh.

  3. Bob says:

    This saddens me in many many ways.

    On Thursday, Amazon dropped me as an affiliate because I reside in California, USA. I was looking forward to moving all my “buying” links to Book Depository (of which I am also an affiliate) I’d linked to both wherever I could but gave preference to BD.

    Unfortunately now I will need to find someone else to link to, as because of their dropping of all California affiliates, I will no longer do any business with Amazon.

  4. “Could this be Amazon exploring a loophole in US tax legislation to allow them to continue running affiliate schemes?”

    Depends on how each state fashions legislation redefining nexus. California added subsidiary companies of which Amazon has a few in California. All of which means – more than likely – lawyers collecting lots of billable hours.

    For those outside the US … sales tax is a state by state activity. But only 45 states have a sales tax. Within each state localities may add on, so the sales tax on a book in Los Angeles is not the same in San Francisco.

    Ultimately either the Supreme Court is going to have to revisit “Quill Corp. v. North Dakota” (see: http://en.wikipedia.org/wiki/Quill_Corp._v._North_Dakota) or there will be federal legislation.

    Of course, once there is nationwide sales tax collection on catalog/online sales then Amazon will be free to open warehouses pretty much wherever they want to. I would not be surprised to see in some areas “Order by noon get the same day” delivery service for lots & lots of stuff.

  5. SimonW says:

    A company similar to TBD are aphrohead.com. Not a wide ranging as Amazon, but I got some reasonably priced Steven Brust paperbacks from them.

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