From which I quote, as this letter is not copy written or confidential:
*Publishers sell these books to retailers at 45%-50% off the suggested list price. For example, a $35 book, such as Mr. King’s Under the Dome, costs a retailer $17.50 or more. News reports suggest that publishers are not offering special terms to these big box retailers, and that the retailers are, in fact, taking orders for these books at prices far below cost. (In the case of Mr. King’s book, these retailers are losing as much as $8.50 on each unit sold.) We believe that Amazon.com, Wal-Mart, and Target are using these predatory pricing practices to attempt to win control of the market for hardcover bestsellers. *
I had always thought that having 3 large competitors wasn’t an anti-trust situation.
I’d envisioned anti-trust as something where there was one monster company in the process of squeezing out all of the competition… that is, the actions of one company might trigger anti-trust concerns, but a number of retailers fighting one another on price is just the free market.
It seems like Amazon, Wal-Mart and Target whipping up on one another… I mean, they’re grown-ups, they can take care of themselves.
They are maintaining that the big boxes are selling large quantities of product far below cost in an effort to drive competitors out of the business. (presumably after which they could charge much more than cost and recoup their losses without worrying about pesky competitors).
This practice is called “dumping” and is indeed illegal.
Whether this is actually happening here is a different question.
From what I’ve heard, the cost to the sellers is 50% of list, if they are high volume like the companies involved here. That’s why they normally sell bestsellers at 40%, to make a small margin, and will go down to 50% on something like Harry Potter.
That Stephen King book has a list price of $35 for some reason, so $9 is 74% off. If they are paying 50%, they are losing $6 for every copy they sell.
They are indeed offering “special terms” but special terms anyone can qualify if your order is big enough.
For example, on one order, the jobber offers 50/10/2/5, which means 50%, plus the other discounts depending on when paid- if the order was by the pallet full. Net can easily be around 60% off if you pay “cash”. (This is for the gaming industry for things like D&D books, but I expect the figures are about right for books)
Amazon orders by the boxcar load, direct from the publisher. They get bigger discounts than Bob’s Books, which orders 4 copies from a wholesaler. This is as it should be.
This is nuts. The publishers complain that they had to cut the cost of hardbacks to compete with ebooks - yet the ebook business is multiplying and they get a cut of every ebook sold. Seems to me like they would want to encourage that trend, as it lowers the cost of entry to authorship and could bring them lots of money in volume sales.
It looks like they will be as shortsighted here as the RIAA or the MPAA.