Is Amazon trying to kill off small publishers?

This is based on a post I did a couple of years ago, after Philip Pullman complained about heavy discounting on cover prices.

Virtually all authors have stories of the impact of price cutting at the point of sale. One of the worst offenders is of course Amazon, which is a monster so big that we have to deal with it, like it or not.

Let's take a typical novel from the Angel Mountain series.    I'm a small publisher who also happens to be a self-publisher.  If my print run has been 2,000, the invoice I have to pay is around £4,000 and the printing price per book is about £2.  The cover price will generally be set at £7.99,  giving a 4x markup.  That's smaller than a large mainstream publisher would be satisfied with, because I have low overheads and no author royalty to pay to somebody else.  My profits come from sales, to the book trade at 33.3% discount on the cover price, and to wholesalers at 45% discount.  

When I sell my novels to Amazon, I use a scheme called Amazon Advantage.  The retail monster hardly ever orders more than 6 copies of a title, even for a book which is brand new.  I have to pay the full costs of packaging and postage.  Amazon insists on a 60% discount and insists on taking 3 months to pay following acceptance of the delivery. If I want faster payment, I have to give the monster a 65% discount. So on a £7.99 paperback, it pays me just £3.19, allowing it plenty of room for discounting the book and for selling it for under my RRP. 

The next piece of iniquity is that Amazon pretends, for the sake of its customers, that it has just one copy left of this particular book, and that there are more copies on the way. That's being rather economical with the truth. The real situation (at least, until recently) is that it only ever has two or three copies in stock, and that when one is sold, it orders another copy from me as a replacement. 

The huge Amazon warehouse at Ridgmont in Bedfordshire  (which used to do all the ordering for books) may contain a lot of stuff, but it sure as eggs doesn't hold many copies of my books! Then it gets even worse, since when I get my order for one new copy to be sent off, I have to deal with it immediately (if I don't the monster starts hassling me straight away) and as mentioned above I have to pay the package and postage costs, in this case amounting to £2.40. So to send one copy of the book off to Amazon, it costs me  £2 + £2.40 = £4.40, in exchange for which it pays me £3.19. Not a very good commercial deal? Too right.......

Recently I notice that there have been two changes in the Amazon business model.  For a start, they have now opened up several vast warehouses in different parts of the UK, which operate as independent purchasing centres.  A few months ago I received three orders for the same title -- with each copy to be shipped to a different warehouse.  I complained about this, and got the response that this was a temporary situation, with an assurance that ordering would be centralised once again into the Ridgment warehouse once things had settled down.  That has not happened -- I still get very small orders from different Amazon warehouses all over the UK.

The second change is that they have clearly changed their algorithm so that  for "backlist" titles (which sell in small quantities, and intermittently) they are maybe now not holding any stock at all -- and expect suppliers to ship off single copies to them immediately, as and when orders come in from customers.  They have also started sending back "requested returns and returns of overstock inventory" to suppliers, with no discussion and no advance warning.  Today, without any warning and with no explanation,  I received a parcel containing two copies of one of my most recent and best-selling titles -- and I wouldn't mind betting that before long I will get an order for one copy of the same title from the same warehouse.

The only reason for selling books through Amazon is that I get publicity from it -- the Amazon web-site is where most initial Google searches end up. If you are a new writer and you think it's brilliant if Amazon is "prepared to stock" your paperback or hardback books, think again. You probably won't make a single penny from the deal, and had better budget for considerable losses.