NORTHERN CALIFORNIA INDEPENDENT BOOKSELLERS ASSOCIATION

HOLT UNCENSORED #91
by Pat Holt

Tuesday, September 14, 1999:

GOING TO COACH CLASS WITH AMAZON

LETTERS

GOING TO COACH CLASS WITH AMAZON

What a pleasure it is to welcome Warren Jenson to Amazon.com, that "customer-centric" company where he'll feel right at home.

Jenson is the former CFO of Delta Air Lines who instituted the "no waivers, no favors" policy at Delta in which passengers seeking changes in their tickets or seats were denied individual treatment.

Because of this policy, Delta became known "as something of a heartless corporate entity," according to the Wall Street Journal. But Warren did not care. Profits rose because he had laid down the law. From then on, everybody knew that when Warren Jenson said "no waivers, no favors," that was it.

Except in one case, when "Mr. Jenson was caught in an embarrassing flap last spring," according to WSJ: "Three of his children, traveling on free company passes, were upgraded to first class on a Delta flight, bumping paying passengers to coach. Mr. Jenson eventually wrote a letter of apology to Delta employees."

So Amazon.com seems the perfect place for Warren, especially now that a huge shift in public perception seems to be taking place about the Seattle company.

I'm not talking about sharp little drops in stock values that take sharp little upswings. I'm talking about a negative groundswell where there used to be nothing but adulation.

Wall Street analysts, for example, used to tell us that it was fine for Amazon to lose millions of dollars every quarter and project not an inkling of profit in the future. Let this great Internet innovator show us the way of the Web, they said; let it excel in books, then music, then video, and let it acquire and diversify. Even if it falls apart one day, which will never happen, you and I can make a bundle in the meantime.

But now it's as though we're all reading "The Emperor's New Clothes," and we've gotten to the day of the Big Parade where everybody in the Kingdom turns out to praise the big guy's wardrobe as usual except one kid who points out that The Emperor hasn't got any new clothes. And wham! The paradegoers are shocked to see he doesn't have a stitch on.

Playing the part of the kid these days is one Wall Street analyst after another saying you know, it's costing Amazon more money to acquire new customers than it ever has, and customers are spending less and less money with the company. That means Amazon isn't growing as fast as founder Jeff Bezos would like us to think. In fact, it's beginning to stagnate.

And you know, they add, those big new distribution centers in Kansas, Georgia and Nevada are so costlier than anticipated that Bezos has had to agree that the warehouses "may squeeze short-term operating margins," which is kind of funny because, friends, there ain't much left there to squeeze.

Now along comes stock analyst Jeff Matthews, who tells The Street.com's Herb Greenberg that Amazon's sequential sales growth in the last quarter has fallen from 33% last year to 7% this year - "the slowest sequential growth ever for the company." Amazon blamed "normal seasonality" for the drop, but even Sears did better during the same period with a 15% growth, says Matthews.

"Amazon's deceleration is not normal, it is not seasonal, and it is worse than it looks because half the growth came from international sales and from new initiatives," he addds. "The core U.S. business approached stagnation." The numbers are even worse when you remove international sales and income from the new auction biz, says Matthew: The growth Amazon can claim for books, music and videos is only 3.4%, which means in the end that "Amazon's business model is broken."

Left unsaid is that little blip of betrayal that startles the eyeballs whenever you call up amazon.com on the screen. I can't believe there is such a thing as nostalgia for the old days with Amazon, but even Holt Uncensored, which uses the data base only for research, registered a distinct sense of loss ever since Amazon turned away from books and made its generic homepage into a characterless piece of real estate.

Sure, the Books homepage is only a click away, but somehow that opener is a yawner with its ads for a camera or video or Britney Spears collectible or "adorable Pokemon treasure" or fad toy (I mean, the Rocket Rider Beanbag Chair? come on! You think maybe it's so affordable and comfortable it deserves front page coverage, like say $39.99? $50? $75 per unit? Well, brace yourself, it's $109.99! And you don't even get IN it - there's no cockpit! You just straddle the thing and go vroom-vroom for 110 bucks!).

So somehow all the dazzle and hot stuff of the Books page went out the window when Amazon pulled away from books as its central sales item and turned into a sterile money-gouging product center like every other general vendor on the World Wide Web. Going, going and almost gone, too, is its leadership role on the Internet, its hip entrepreneurialism, its much lauded (by Bezos, anyway) "customercentric" commitment.

So let's welcome this new era at Amazon.com in which Warren Jenson seems to be so much at home. After all, Warren, says Amazon president Joe Galli, "has extensive merger-and-acquisition experience," which means his savvy doesn't lie in serving customers, whom he's never cared about anyway.

In fact, it was Warren who made Delta the first big airline to do business with the upstart Internet ticket-slasher, Priceline.com, in exchange for buying up 18.6 million shares of Priceline stock at 93 cents each. Cashing in 1.5 million shares of Priceline in August, the Wall Street Journal reports, Delta made a profit of $99.1 million, and it still has $1.1 billion worth of shares left.

You can imagine Delta's response to that - hey, Warren Jenson wants his kids to travel free? Let 'em bump a hunnert paying customers! Give 'em the whole frigging First Class! And at Amazon.com you can hear the echoes: Give those Jenson kids a buncha Rocket Rider Beanbag Chairs! To heck with being customer-centric! With Warren on hand, we can be as "heartless a corporate entity" as anybody - we can get rid of those whining, needy, literary, stingy, time-consuming book readers and send 'em all to Coach!

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LETTERS

Dear Holt Uncensored:

Re your thoughts about Faludi, Newsweek, Mother Jones and Viacom . . . The veritable muckraking tradition of American journalism -- and here I think of Jack London ("People of the Abyss") and Stephen Crane ("When a Man Falls, A Crowd Gathers"), neither of whom (sadly) is widely remembered for their journalism -- has always been willing to ask, Who holds power and by what right? In our time, it's crucial to identify ways in which the trend toward bigness is not politically, esthetically, psychologically, morally, or spiritually neutral.

Keith Thompson

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Dear Holt Uncensored:

Your piece on Susan Faludi and her criticism of "a consumer culture that [is] focused on money, on winning, and on dominating everything and everyone" was most welcome, and I hope the book will be widely read. The criticism is not a new one, of course. Among others, Charlene Spretnak examines the roots of the domination model in "The Resurgence of the Real" (Routledge, paper, 1999). It's a brilliant analysis of modernism and post-modernism . . . Spretnak also shows how education and disregard for the environment feed into the global corporate mentality and offers some suggestions on resistance.

Sophie Annan Jensen

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Dear Holt Uncensored:

When my friend, Ellis Cose, who is [like Faludi] also a contributing editor at Newsweek, and other African American writers wrote the same thing about black men in his book, "The Rage of a Privileged Class" - that the various systems of American society have failed them and made them feel as though they don't belong anywhere - they were accused of being overly sensitive, and black men were basically told to get a life. I'll be interested to see if Faludi gets the same reaction. As I tell my students in the American government class when they complain about affirmative action: be consistent. If blacks shouldn't be beneficiaries of affirmative action, then neither should dumb football players, Uncle Ed's nephew who got a summer job with a construction crew while other kids are dipping ice cream at Graeter's, legacies at Harvard U, etc. etc. . .

Marilyn Howard

Holt note: Here's an historic event coming up for Northern Californians: Susan Faludi and Anita Hill will appear together at the Herbst Theater in San Francisco on October 18 for an onstage interview sponsored by City Arts & Lectures. For tickets call City Box Office, (415) 392-4400.

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Dear Holt Uncensored:

Just a quick comment on the saga of the "covers-torn-off." We have owned our store about a year, and specialize mostly in used books while maintaining a few new books in stock, and ordering dozens more new books weekly for customers. We recently had to ship some books back that had been ordered and not picked up and my husband and I mourned for a full week before we could bring ourselves to do the physical horror of detatching the cover from the body of the book! It felt like murder. THEN a friend mentioned that when she worked for a big chain, they not only dumped the coverless books into huge bins, but then they covered them with MOLASSES to prevent the temptation to steal!

For us, after this one horrendous experience (and mind you, the retail value of the books we returned was about $400, of which we were credited 1/2 - so we are not talking mega-bucks here!) we decided that we would eat the loss, donate the books whole to the local prisons, rest homes, hospitals and schools. After all, one of our purposes in life as a bookstore is the creation of community, and how better to do that than "donating" a tiny fraction of the total books that flow through our doors? And, by doing that we also keep the money going out to the authors, whom I suspect aren't all rolling in the glory and big money.

Laura
Twice Told Tales
Waverly, TN 37185

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Dear Holt Uncensored:

Your column and letters to it frequently address the issue of whether Internet sales should be subject to state and local taxes, but it is not clear to me whether this is meant to imply "all mail-order sales" or merely "mail-order sales placed over the Internet."

Do the advocates of expanded Internet taxation, in particular Andy Ross [of Cody's Books] and the ABA, really support taxing all mail-order transactions in this way? If not, what justification do they propose for treating these differently? Why should the means by which an order is placed -- phone, letter, e-mail, or Web site -- make any difference to the way the order is taxed, since the essential transaction is identical?

John Velonis
jvelonis@usa.net

Holt Uncensored has asked Hut Landon of the Northern California Independent Booksellers Association to respond: While Andy Ross is focusing on the Internet because of the enormous drain it has had on sales tax revenue in this country, the bookselling associations pushing this issue would certainly agree that all mail-order transactions should be included. In our view, retail is retail is retail, and if one collects and pays sales tax, so should all. The amounts of money have never been huge when mail-order catalogs ruled the day, but the Internet's enormous siphoning of business away from tax-collecting retailers has made the issue more urgent at this point.

Hut Landon, NCIBA
Executive Director

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Dear Holt Uncensored:

I find it necessary to write about J. L. Bell's letter to you, which was included in your letter #90.

Apparently, the point that J. L. Bell (and most of the rest of America) is failing to understand is that this is NOT just about bookshops. It IS about auto parts stores, hardware stores, video stores, shoe stores, etc. We are fast becoming a nation of towns that all look exactly the same. Small, unique towns are becoming a thing of the past.

Even the little, tiny, historic town my shop is in has gladly brought in Border's, Home Depot, Big K Mart, Gateway Computers, Talbot's, Einstein Bros., PetCare, PetCo., Office Depot, etc. This lovely, little town is fast becoming like the giant city (Chicago) that lies east of here 45 miles. People used to want to come out to a town such as ours to get away from the franchises. While we still have our share of unique shops, they tend to get lost in the middle of this urban "growth."

It is a very sad time in our society when everyone wants things to look the same. I will see people at various school or church functions and tell them about our bookshop. Because they are new to town, they tend to gravitate to Border's because they are familiar with Border's. Never mind the fact that we've been here since 1927.

Hopefully, we will continue to keep our heads above water, but the fight is getting more and more difficult as each week goes by.

Al Brown, robinsbook@aol.com
Robin's Bookshop
Geneva IL

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Dear Holt Uncensored:

I would like to reply to the letter by J. H. Bell who sought to portray Neal Coonerty as a lobbyist for auto parts. I will not address Mr. Bell's supercilious tone. It speaks for itself.

However he does make a good point. We ought to consider the principles that underlie this problem and not get caught up with a cartoon version of the events.

The overriding issue in Santa Cruz is whether communities have a right to control their destiny and determine the character of their shopping districts. Whether communities can encourage diversity and multiplicity in their commerce or whether they must yield to monopoly power, these are the principles which are at stake in Santa Cruz.

The chains and their advocates would like say that they support the principle of free enterprise and competition. Nothing could be further from the truth. The entire history of the expansion of Borders, Barnes & Noble and all of the so-called "big box stores" has been a history of corporate giantism eliminating competition in order to gain monopoly power.

The overriding trend of retail development in the 80's has been defined by the "Walmartization of America." Wherever these big box stores have opened, they have crushed competition and decimated main streets, which have been the venues of small business.

The investment community has given a name to big box stores such as Borders Books & Music. They have called them "category killers." This is a very descriptive name. The ethos of these stores has never been to be a part of a vibrant and diverse retail community. Their ethos has been to crush anyone who seeks to compete with them. And they have succeeded in doing so with great efficiency.

Wherever these stores have gone, they have destroyed competition. Walmarts have destroyed whole town centers in small-town America. Toys R Us has extinguished the neighborhood toy store. Home Depot has eliminated the family-owned hardware store. The chains always claim to be defending the principles of competition. This is self-serving, even Orwellian rhetoric. They have nothing but contempt for competition.

Small and community-based businesses do much more than sell goods to consumers. They are the basis of the cultural and civic life of the community. They sit on committees and non-profit boards, they sponsor little league teams, (like Neal Coonerty) they run for political office. They also contribute to the local economy. They buy supplies from local merchants, they hire local lawyers, accountants, craftsmen, and plumbers. They put their money in the local banks.

Chain stores do none of this. Their managers are discouraged from participating in local politics. They make minimal charitable contributions locally. They do not engage in the life of the community. They do not purchase goods and services from local merchants either. They behave like colonial powers seeking to exploit markets without giving anything back.

It is significant thing to remember is that when the Loma Prieta earthquake destroyed Santa Cruz, the chain stores deserted the community. Bookshop Santa Cruz rebuilt their store in a tent and stayed open at great personal cost to the Coonertys through all the bad times. When Santa Cruz desperately needed reinvestment in their ruined downtown, where was Borders Books and Music?

And if Neal Coonerty was selling auto parts instead of books, everything I've said above would still apply.

Andy Ross,
aross@codysbooks.com
Cody's Books

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Dear Holt Uncensored:

As a former longtime employee at Waldenbooks, I read Daniel Biel's rosy picture of Longmeadow Books [Walden's in-house book publishing arm] with great interest and some skepticism.

Perhaps because of tripping over the piles of the unsellable and unreturnable titles that were mandatory parts of every store's inventory, I find it hard to accept the portrait of a vigorous Longmeadow Press without question . . . I also find it hard to believe, based on my experience with Waldenbook's torturous bureaucracy and its grimly determined attempts to impose a monolithic cultural perspective on its employees and its customers, that the press was taking on risky projects. I don't recall seeing any.

Travel guides and blank books have a built-in market and are notoriously easy to make margin on. Of course the view expressed by many of the people that monitored the stores to ensure [the home office's] standards were being kept up was often shockingly anti-book. True, there were many devoted readers among the middle management, but for everyone who cherished his or her job as an opportunity to share those books that had struck a responsive chord within, there were those who complained to us that we didn't carry enough non-book product - where the real money was.

(Usually a visit from one of the representatives of the books-don't-make-real-money faction would be followed by a huge shipment of rubber heart-shaped figures holding pencils and open notebooks spouting embarrasing platitudes, tassled bookmarks, unicorn keychains, etc, all tried and true "moneymaking" goods, unlike books! New employees, not yet wise to the mysteries of Stamford, would sometimes naively ask these people, if books are the marketing equivalent of the kiss of death then why not change the company name to something more appropriate like Waldenknickknacks. This would invariably draw the classic rebuttal that the good Walden employee never asked "why?" The good Walden employee only asked "What is the best way I can do my job and carry out company policy.")

All that aside, however, I think that the "non-descript genre lines you referred to were the books that appeared under the Pageant imprint. This line consisted of fantasy, romance, young-adult, and possibly mystery books (my memory has mercifully grown dim concerning this subject) that one could charitably characterize as uninspired. The public didn't go for the books. I also think there was a printing arrangement with a larger publishing house that was bought out shortly thereafter, and the Pageant books were quickly relegated to the dustbins of history and the remainder tables of Waldenbooks.

A former employee

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Dear Holt Uncensored:

When you speak about Walden's generic books, are you refering to Pageant Books co-produced by Crown Publishers in the 1980s? If you are, you are right that the line failed, mainly because Random House bought the Crown Publishing Group in 1988 and killed the line of mass market titles. Like a mythical "phoenix," several outstanding writers came from that line, notably Kat Martin and Joan Overfield. Not only that, but Pageant also unleashed FABIO on the unsuspecting book world. Book prices have also escalated in part because of the huge signing bonuses that bestselling authors are demanding & receiving, just like their counterparts in sports and other entertainment fields. The paper pricing is cyclical and for many years in the 1980's was extremely depressed. The paper manufacturers used the 90's to catch up.

Jim Harris