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Amazon Books, Amazon Prime

Jf17techreview(Photo source: technologyreview.com.) The January/February issue of MIT Technology Review has an article by Nicholas Carr about Amazon's foray into brick-and-mortar bookstores, called Amazon Books. The plan for such bookstores was first announced in late 2015, for instance in this New York Times article (the NYT also has a video about it here) as well in that one. It isn't apparently viewed as a return to traditional bookselling but rather as a "physical extension of Amazon.com", where physical bookstores play the role of showrooms for the books. The journalist adds that "The retailer, which is spending billions to refine and speed up home delivery, suggested that some people would come to the store to look at the books and then go home and order them online."

According to Carr in his MIT TR article, though, "[Amazon.com CEO Jeff] Bezos underestimated the allure of bricks and paper." We learn that "in the mainstream trade-book market, e-book revenues dropped 11 percent in 2015 alone" while "sales in bookstores grew 2.5 percent in 2015." He also wonders whether the launch of Amazon Books is "the vanguard of a much broader push into brick-and-mortar retailing by the company," that will include convenience stores to boost its grocery business (his source is this WSJ article). Such a move would be well-aligned with current retailing trends toward omnichannel strategies, "which blend physical stores, Web stores and mobile apps in a way that makes the most of the convenience of smartphones and overcomes their limitations." Could Amazon.com be a future multichannel behemoth? 

In the retail location in Seattle, as described by Carr, "all the books are displayed with their covers facing outward" and "beneath each volume is a small placard that displays the book's Amazon star rating - only books that have earned at least four stars from Web buyers are stocked - and that also includes a brief excerpt from a customer review." 

First, there are obvious issues in selecting books based on the Amazon star rating. I'll get the issue of fake reviews out of the way by saying that only the reviews of Amazon customers with verified purchase (meaning they purchased the product on Amazon) should be included in the computation of the star rating displayed at Amazon Books. (I also think that Amazon.com should offer two ratings online, the one based on verified purchases only and the one including all purchases, because the fact that you didn't buy the product on Amazon.com doesn't mean you didn't really buy it.)

Further, the reason bookstores employ book buyers is that those people have a deep understanding of their store's customers, what sells and what doesn't in their market, and books those customers might not have heard from on national media but would love reading. And of course the book buyers at chains like Barnes & Noble or the defunct Borders may not all have upheld this ideal vision of the local professional with his ear on the ground, finely attuned to the interests of his store's frequent customers, but you get the idea. Should the books in the Amazon Books retail space be selected only based on the ratings of the Amazon customers in that area? Should the books on display be of the "popular but not very popular" kind, no matter the star rating, to raise awareness of certain books? Isn't the point to discover new books?

Amazon.com currently displays in one long row books that other people who purchased this book have also bought, sometimes with comical results when someone buys together books for very different purposes, such as a business book for work and a book of, say, vegetarian recipes. The fact is, we often don't need to scroll through 20 pages of other people's purchases to find books we like. Often those books can be clustered according to themes or authors, and of course Amazon.com should distinguish between books very often bought with this one and books bought once out of one thousand times with this one. What is curious is that Amazon.com bought Goodreads back in 2013 (read more about this here and there) and Goodreads's recommendations system -- based on the ratings users give to books they've read -- is massively more sophisticated than Amazon.com.

Why doesn't Amazon try to provide better-quality suggestions? It is almost as if it didn't know what to do with the troves of data it has so went ahead with the simplest way to use the data, to do something. But the Goodreads system, right in their backyard, actually seems very good. The Amazon and Goodreads systems don't seem to be "talking" to each other since Goodreads is recommending books I've actually already bought on Amazon but haven't put into Goodreads yet. If that's not data going to waste, I don't know what is. (On the other hand, it's an easy argument in favor of the Goodreads recommendation system, since it recommends books I was indeed interested in enough to buy.)

Finally, Amazon Books's differentiated pricing is worth pointing out: Amazon Prime members pay Amazon's discounted online price for a book, while non-members pay the list price. Unless non-Prime members struggle with delayed gratification (and since they willingly choose not to have the free 2-day shipping that comes with the paid membership and instead wait 3-4 days for their online purchases to arrive, they probably don't), it therefore seems like a strategic move by Amazon.com to push more customers into the Amazon Prime membership. Over recent weeks, I've noticed that some items I was once able to buy, for instance Green Mountain Coffee Half-Caff Keurig K-Cups, 72 count, are now reserved for Prime members only. If Amazon.com one day foregoes online discounts for non-Prime members, it might not be completely unthinkable that book lovers would order online elsewhere. I think Amazon's advantage at the moment is that their online payment and delivery system seems more robust, but if publishers developed their own payment systems, then direct purchasing from publishers could emerge as a serious alternative to Amazon.com's growing hegemony. (I wish there were a buzz of excitement surrounding B&N's strategy, talk of an innovative approach etc, but really B&N seems to just be plodding along, except in redesigned stores that focus on games and K-12 education, in a push to reposition itself as a "lifestyle brand". You can read about that here.)

In summary, what I got from this article is that the Amazon Books retail locations come across as glorified airport bookstores and that Amazon is finding new ways to push for Prime membership. 

PS: According to MIT Technology Review, Amazon.com has opened two more bookstores in San Diego and Portland, OR, and has plans for Chicago and Boston. One can only hope Barnes & Noble mounts a massive campaign of top-notch analytics, high-quality book-buying and stellar community events to defend its turf (because it is naive to expect Amazon.com's online discounts to continue, especially to non-Prime members, on the same scale as before if Barnes & Noble goes out of business and customers have few other choices to get their books). I was surprised to read that Amazon.com would venture into the Boston area, which has thriving indie bookstores in Brookline (Brookline Booksmith) and Cambridge (Harvard Bookstore), but it turns out Amazon Books's retail location is in Dedham, about 20 miles and half an hour away. 

PPS: If you're getting really bored and are reading this on a laptop or tablet, flip it upside down and see a different cover image appear for the January/February issue of MIT Technology Review

PPPS: Two unrelated articles I liked in the same issue of MIT Technology Review are The Frontline Reporter: Dickey Chapelle '39 blazed a trail for combat photojournalists and Obama's Stand-up Economist (For Austan Goolsbee, PhD'95, doing his bit for the country meant helping tackle the recession - and performing a little comedy on the side).


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