Wal-Mart: "If There's Going to be a Wal-Mart of the Web, It Can Be Amazon"

"Wal-Mart Stores Inc. launched a brash price war against Amazon.com Inc. on Thursday, saying it would sell 10 new books for just $10 apiece through its online site, Walmart.com. That was just the beginning. Hours later, Amazon matched the $10 price. Wal-Mart soon fired back with a promise to drop its prices to $9. "If there is going to be a 'Wal-Mart of the Web', it is going to be Walmart.com, said Walmart.com CEO Raul Vazquez."
--Wall Street Journal, October 16, 2009

After an escalating price war between Amazon.com and Walmart.com brought hardcover book prices to unprecedented lows, Wal-Mart changed its position today to state that "if there's going to be a Wal-Mart of the web, it's okay for it to be Amazon."

Last week, when Walmart.com cut their preorder prices for new hardcovers, first to $10, then to $9, Amazon followed suit. The retail giant then cut its prices by a penny, to $8.99. Amazon matched the new pricing and also offered free same day delivery in 27 cities; Wal-Mart matched the delivery offer as it lowered its pricing for new hardcovers to $6.99.

Immediately Amazon matched its competitor's deal and threw in an additional hardcover selection for free, thus effectively cutting the price for each book to $3.50. Jeff Bezos, the founder and President of Amazon, issued a statement that read, "It may not seem like good business sense, but we're keeping sight of the forest, not obsessing over a few trees. If there is to be a Wal-Mart of the web, we believe it should be Amazon, because we were there first."

Wal-Mart fired off a press release accusing "the Bozos at Amazon" of being "juvenile in their strategic positioning" and wondered "what kind of name is 'Bezos', anyway'." Wal-Mart not only matched Amazon's 2-for-1, same-day delivery offer, but also added a free music CD of the customer's choice. Customers were delighted, although executives in both the book and music industries began expressing their growing concern more openly.

"This level of discounting will mean that everyone in the supply chain -- authors, publishers, distributors, and retailers -- will lose money with each transaction," said one major Publishing CEO, speaking anonymously for fear of damaging his company's relationship with either retailer. "And in this economy it is more difficult to sustain further financial loss above the normal financial losses we routinely expect."

Yesterday saw several new skirmishes in the book pricing wars. First, representatives from the Ann Arbor-based chain Borders chimed in, stating, "Just because one bookseller decides to jump off the Brooklyn Bridge doesn't mean we have to follow them. Sure, our maturity in this imbroglio belies our already slippery financial standing, but be assured that it has nothing whatsoever to do with either financial interests or our distance from lower Manhattan."

Then later in the day, Steve Riggio of the New York-based retail chain Barnes & Noble, balancing precariously on the railings of the Brooklyn Bridge, issued a statement to curious onlookers that the chain was contemplating actually paying customers to take home new books from their stores' shelves, and that a decision would be announced by someone in their offices shortly. Police were eventually able to talk Mr. Riggio down, but as of press time he had not returned calls.

Last night Amazon, seemingly undaunted by Wal-Mart's recent move, issued its own press statement, consisting entirely of two words: "Oh yeah?" It then offered customers two hardcovers for $5.99, a free music CD, and a free iPod Nano, all delivered the same day of the order by "tuxedoed gentlemen on roller skates." The first 500,000 customers to take advantage of the new package were also offered a $10 gift certificate valid for any future purchases from any of their site's stores, regardless of the purchase's retail value. Customer traffic and orders surged at Amazon in response.

The move prompted this statement from Wal-Mart: "Okay, Amazon, you win this round, in a way. But we'll be back." Wal-Mart then announced that all customers purchasing a shirt from their internet site would be entitled to a free 24-quart jar of pickles and the toll-free customer service phone number at Amazon, long considered one of the most closely-held secrets in America.

Blogger's Note: It's all fun and games until someone loses an industry.

Where will this pricing war end? Is it in anyone's interests besides the consumers? At what price should inexpensive hardcovers reasonably come -- at the expense of the author's income? The Publisher's ability to stay afloat? The retailer's ability to earn a profit on the transaction? We at the Huffington Post invite -- indeed urge -- you to chime in on this pressing issue.

 

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Comments

[GDI]

A couple of years ago, reps from Borders and Barnes & Noble both complained that the discounting strategy was not working. Originally the intent was to offer discounts as a "come hither" to get traffic in the store,believing because customers were saving money on a bestseller they would pick up a few more books that weren't discounted. Trouble is, customers were only buying the discounted books and the discount competition on the popular titles lead to them having to sell books for less than they had to pay the publishers for them at wholesale. Throw in free shipping and the major book retailers are quickly digging their own graves.

Now the publishers are raising prices so that a book that should have cost $20-$25 will now cost $35-$40 because they would rather get 50% of the higher price than 50% of the lower one. Meanwhile smaller independents are being forced out of business because they can't compete with businesses that aren't afraid to lose millions of dollars a year.

This won't end well for anyone.

[Andy Laties]

The "publishers suggested list prices" pre-printed onto books are set very high because chainstores like Barnes & Noble and Borders tend to over-order and then return as unsaleable a lot of the books they originally ordered. The publishers lose money on these books returned by bookstores to publishers. So, thus, the high price of a hardcover book is because when one copy sells, in fact the buyer is in some ways paying for TWO books -- the one they bought, and the extra one that was sent back to the publisher by the bookseller as unsaleable.

This "returns" system has been going since the 1930s and many people in the industry have been complaining about how its driving prices up. But now, I wonder if maybe things are actually going through a shift, and the time is coming where publishers simply can't keep raising their "suggested list prices" as a way of covering returns-related losses. Maybe it's finally the time when the whole returns thing will be eliminated so that "list prices" can be lowered. The public doesn't need to stand for these crazy high "list prices" anymore with the new digital competition options and the new online battles over price.

[centsable]

Walmart is a big bully!!

[Davyhulme]

It's really tough for writers already! They are mostly starving artists', working for peanuts. If you have a name, you can make money if you don't it's an uphill battle. The money is made by everyone but the writer. This sort of reminds me of farmers, they take the time, money, all the risk and benefit the least!!

[scottarino]

That how it is for nearly everyone in this country today. Writers are no different.

[Steve Ross - Huffpost Blogger]

I absolutely agree with you--such sudden and precipitous decline in retail prces for hardcover books may benefit the consumer but can be irretrievably damaging to the financial life of authors and the the already precarious revenue stream for the publishers.

[econ1]

It seems like most of the book sales are best sellers or nearly so. I don't think it has much impact on the vast majority of writers.

[luckybear]

The consumer wins hands down. That is why competition is good. I assume if books were cheaper I'd buy more of them. Oh wait they are cheaper @ amazon so I do buy more books. Everyone wins. I get to add to my collection of hardcover books and amazon makes some money and the author makes some money.

People with high salaries can go to a brick and mortar store and pay $35.00 for a book; I'll buy from Amazon any day for $15.00. If walmart wants to join in fine by me.

The author's article above is funny but judging by his comments of the poor author then he must be against public libraries too, right? Wilson library @ the U of M stocks practically every book every written and stocks multiple copies of best sellers. I'm all for cheap books online or from walmart and i'm for public libraries and the publishers and best selling authors will find a way to make it. More reading is a good thing.

[Steve Ross - Huffpost Blogger]

I just want to comment on luckybear's final paragraph, suggesting I must be against public libraries. Being against libraries is like being against teddy bears or apple pie or low-humidity summer days: what's not to love? I visit my local library for a variety of purposes two or three times a week, it's a sanctuary that provides an essential cultural service. However, in the interests of helping our struggling authors get fair remuneration for their intellectual property I do wish we could adapt a similar program as the libraries in the UK use, which pay a (nominal) royalty to the author every time his or her book is checked out. That strikes me as a fair means of rewarding authors for their work.

[PoliticalBlogger]

Do libraries get the books for free? If not, that type of system would be quite unfair.

Imagine how much libraries would have to pay to carry a Dan Brown book. They might have to close down. They would have to stop carrying bestsellers altogether.

[StoutHouse]

luckybear --

More reading is good, true. But more comprehension of what you read is even better. For instance, read CHEAP: THE HIGH COST OF DISCOUNT CULTURE by Ellen Ruppel Shell and learn why everything you've said is wrong -- bad for authors, readers, and booksellers alike.

http://www.indiebound.org/book/9781594202155

Then investigate Amazon's vigorous policy of tax evasion and e-fairness opposition:

http://news.bookweb.org/news/6957.html

Perhaps your mind will change, followed by your actions.

[zorak1704]

I'm not sure when it comes to the books Wal-Mart sells, but the music they sell is all censored. You can still buy music in its original form from Amazon. And I seriously doubt that Wal-Mart will shelf a single copy of books like Republican Gomorrah, God is Not Great, and Crazy for God. So I will keep buying books and music from Amazon.

[PoliticalBlogger]

I'd have more sympathy for the publishing company if they didn't seem to get too greedy.

Even back in the 80's, reading was a lot more affordable. You could get the "mass market paperbacks" for under $5. I still remember the days where you could find paperbacks in drugstores for just $2 or $3.

Then, publishers decided to switch to "trade paperbacks", the oversized and overpriced "new" paperbacks. They cost what hardcovers used to cost (in the $15 range). While some titles were still available in mass market versions, most were only available this way.

I still prefer reading a book than using a Kindle. I have a Kindle, but it mostly gathers dust. If there is a book I want, I'll often buy it used.

But with the book prices going out of control, this price war is one of the few good things about the publishing industry today. It may mean that people start reading again. I mean, I'm more likely to buy Stephen King's book for $9 than $35.

[dunedin]

I'm still waiting for the paperback.

[StAndrew]

You had be going until the roller-skating delivery boys. Everyone knows that real Amazonians would use Segways.

[JustThisGuy]

Drat, I was hoping for actual Greek Amazons doing the deliveries.