by Pat Holt
Friday, August 18, 2000
Gee, what a deal-with-the-devil THAT was.
I'm referring to the last-gasp effort of Living.com, an online furniture store, to partner with Amazon.com by paying $145 million over the next five years for "prominent placement" on the Amazon website.
By anybody's standards that's a lot of recliners, and on this week, Living.com went bankrupt. The question is whether Amazon.com will succeed by continuing with the same model.
Throughout yesterday, analysts observed that Living.com's demise "is just more evidence that Amazon.com will have a hard time extending its brand beyond the books, CDs and movies its 23 million shoppers associate with the site," as Penelope Patsuris wrote at Forbes.com. "Analysts say there is little evidence these [larger] products are selling well."
So what a dilemma, eh? On the one hand, Amazon.com has succeeded in selling books, CDs and videos, but these are small-margin items that are too costly to sell (and if you don't believe it, can I ask again of those at Amazon.com who say the books and music divisions are profitable, would you please get out the numbers and show us how that profit is made?).
On the other hand, the big-ticket items grow weightier the longer they sit there unsold. "Consumers aren't going to Amazon when they need to buy anything expensive," Patsuris adds, "[and this] creates another problem: that of pulling in the huge marketing deals like the one inked with Living.com."
For example, she says, "[Online jewelry store] Ashford.com, another upscale e-tailer that cut a marketing deal with Amazon, is finding that its tab on Amazon has resulted in similarly disappointing sales, industry sources say."
And look what a burden is placed on the website partner: Amazon's requirement of $145 million from Living.com "was cited by some as one of the financial burdens that helped sink the company," as PW Daily reported.
Now this is the kind of here's-your-hat-what's-your-hurry strategy we expect from a far-sighted company like Amazon.com. Trying so hard to appear on top again, the company is looking worse and worse.
Denials and distractions hardly inspire confidence. "The loss of the expected revenue [from Living.com] has been factored into Amazon.com's plans," according to Amazon spokesperson Patti Smith, "and should not affect the company's expectations of soon posting a profit." As an example, she pointed to a "major new alliance with Toys R Us."
We'll certainly see about the Toys R Us move, another deal with the devil that "calls for Amazon to give the foundering Toysrus.com website logistical support in exchange for a percentage of revenue and the chance to take a 5 percent stake in Toysrus.com," wrote Reuters.
That is, if the toys sell. But how can they? What makes the Toysrus.com toy sales different? If Amazon.com is "the first destination for people who want to buy small items at a discount," as analyst Ken Cassar says, "that's some of the reason Amazon had trouble dominating the toy space, because [toys] are more expensive items."
And how long will Toys R Us have to prove itself? After all, "Amazon's first-ever abandonment of a product line," as Reuters calls it, was pretty ruthless, given that Living.com had been partnered with Amazon.com for only three months. Maybe that was a smart move to cut losses so early, but wouldn't you be a little terrified if you were, say, Drugstore.com, Homegrocer.com, Pets.com or other companies with which Amazon has similar ties?
Well, investors have always been the key to Amazon.com's future, and you can be sure they're pondering what analyst Jeetil Patel told Forbes.com about products other than books, music and videos:
"The sales [of larger products] that enhance Amazon's margins seem to be at risk, and that in turn could ultimately put its entire business at risk."
SAY IT AIN'T TRUE, MIKEY
Well, speaking of bringing that consciousness to the fore, danged if Michael Moore, the hilarious activist and incisive filmmaker and author ("Roger & Me," "Downsize This") who fights for the disenfranchised and decries corporate abuses, doesn't list Amazon.com as his bookseller of choice.
Here I was going to recommend his refreshing and opinionated website http://www.michaelmoore.com on my new links page (more to come soon on this), but every time Moore takes the reader to a website that sells his books, such as www.dogeatdogfilms.com or www.grassroots.com (of all places!), the seller turns out to be Amazon.com.
To reinforce a point made in #174, I think it's important that every publisher and author have the freedom to sell books through all the channels and outlets they can find. But when your whole purpose in public life is to stand up and say how big companies are forcing out the little guy, as is Moore's premise time and again, readers like me - fans like me - expect a little enlightenment, Mikey.
I know it's hard to take the blinders off. As we discovered in #174, a group of nonprofit corporations bought an ad in the New York Times accusing giant Internet corporations of enjoying "billions in tax subsidies" while "small neighborhood and retail businesss that relate people-to-people" are going broke.
It's a good point, an important point. But what a shock it was to find that a number of those nonprofits sold their books through perhaps the biggest and most successful Internet corporation enjoying billions in tax subsidies yet, Amazon.com.
But you, Mikey, you've always had the blinders off. Remember when you showed two photographs under the headline, "What Is Terrorism?"
One showed the bombed-out federal building in Oklahoma City. The other photo showed a post-layoff factory in Flint, Michigan, looking similarly gutted in 1996. The question Moore posed: What's the difference between political terrorists and economic terrorists, both of whom may decide you're expendable?
That was you, Mikey! That was typical of the Michael Moore sledgehammer puncheroo that I must say rated even higher (or lower) than the baseball-bat tactics of Holt Uncensored.
So now be you again! Take Amazon.com off your site and find an independent bookstore you can link up to with pride, a store that represents what independence really means for customers and posteriety alike.
Then go to Seattle with your customary camera and microphone and get an interview about all this with the guys who run Amazon.com. They've been waiting for you, Mikey, or somebody like you, for a long time.
Dear Holt Uncensored:
How did I ever miss a visit to Gualala Bookstore? A special bookstore, operated by special people, caring about special customers. Since I live a quiet and relatively handicapped life (multiple sclerosis has restricted many of my physical moves as my mind travels faster than the speed of light. I keep hoping they will balance each other out), I enjoy traveling to small places that have wonderful entertainment, primarily reading. Now I read that this one has closed. Sad, very sad.
Please let these wonderful people who served the readers so well know that they will be missed even by those of us that have never had the wonderful opportunity to meet them.
Dear Holt Uncensored:
Regarding Andrew Gutterman and his misguided sense of Amazon's importance: Soon you will have to find all these potential book buyers that Amazon "reaches out to" some other way. As the failed business model that is Amazon continues to bleed money, more and more cost-cutting quick-fixes will be trotted out to no avail, until Amazon will go the way of all etailers -- out of business. I'm urging all of my friends to buy as much as they can to hasten the process.
Dear Holt Uncensored:
Re your article on unsold books landing in the dumpster. This is the skeleton in the closet of the book business: thousands of unsold books are thrown away every year. Not "outdated" or "worn-out" books, but brand new mass-market paperbacks. And although it was referred to as "recyling" in the Follett's article, back when I witnessed these atrocities (the early 1990s), there was no way to recycle the paper in the books because of the glue-spine.
I worked in an off-campus used textbook store, which also sold a limited amount of other books, including mass-market paperbacks (best-seller types of books like King and Grisham). If after a while they didn't sell and we wanted to return them, the publisher would only take back the ripped-off front covers. Their reasoning: It's cheaper to process the covers than the entire book.
Then, I left the bookstore to work for a distributor. My job was to keep the shelves of a local department store full of books that were selling. Even if I knew that I was going to sell, say 20 copies of a certain book, I had to order many more copies than that in order to make a decent display. Then, if a book sat around for more than a couple of weeks, or it got dropped and too beat up for someone to want to purchase, away it went, back to the distributor's warehouse and into a huge dumpster with all the other "torn" books.
Employees scavenged some of these but hardly made a dent in the piles. Even worse are the romance novels. There are at least 15 different series going at any one time, and four titles in each series are distributed every other month (or maybe even once per month; I've repressed it/forgotten). Guess what happens to the remainders when the new books come in? That's right, they go into the dumpster.
Also, as far as the "outdated" books: There are so many outdated textbooks acting as doorstops and bracing broken coffee table legs because the used-book business was doing so well. Students sold their textbooks to younger students either via a co-op or a used textbook store like the one in which I worked. In addition, graduate students would supplement their meager income by requesting review copies of expensive textbooks and then selling them as well. Consequently, the publishers noticed their lagging sales. Their solution was to make a "new" edition about every two years. This has effectively slowed the once brisk used-book trade . . .
Dear Holt Uncensored:
I couldn't resist the perverted urge (or should I say Sub-verted?) to send yet another pair of lips....from the spring 2001 Bantam catalogue.....
Holt responds: Egad, the lips continue! This one is the open-mouthed variety with 2.5 teeth showing above a decidedly puffy underlip and the title "Subversion" sticking out like a bar of Pez! Apparently it's a mystery and collagen plays a role in the murder but once again there's only enough face to act as a hotel for the mouth. Surely this fad will end soon?
Dear Holt Uncensored:
Here is George Orwell on the over-rated joys of working in a bookstore:
"When I worked in a second-hand bookshop -- so easily pictured, if you don't work in one, as a kind of paradise where charming old gentlemen browse eternally among calf-bound folios -- the thing that chiefly struck me was the rarity of really bookish people. Our shop had an exceptionally interesting stock, yet I doubt whether ten per cent of our customers knew a good book from a bad one. First edition snobs were much commoner than lovers of literature, but oriental students haggling over cheap textbooks were commoner still, and vague-minded women looking for birthday presents for their nephews were commonest of all."
The whole essay, "Bookshop Memories" (November 1936) is at http://www.k-1.com/Orwell/bookmemo.htm
Holt replies: Egad #II: Great observation, Mr. Orwell, but I wish you had cut the bigotry (and he was so good with animals!). With my eagle eye I suspected Phil Sheehan's letter to be an outright plug for BlueEar.com so clicked over to the site and found . . . a wealth of readings on this intriguing and informative site. For any reader who's missed that sense of being an international citizen now that world news has dropped out of so many newspapers and magazines, BlueEar brings readers "global writing worth reading," excerpted in a lively and robust manner. The site is full of chewy excerpts and thorny books - and links to the independent website at Powell's as its bookstore, bless it. Don't miss the engrossing essays and speeches that make exploring this site so much challenging, or Blue Ear's lively forums.
Holt Uncensored provides this forum for the free and uncensored exchange of thoughts and ideas from writers of all callings. The opinions expressed here are not necessarily those of Pat Holt or the Northern California Independent Booksellers Association.