Amazon: discounts, desire and dissent

There’s been an explosion of righteous anger directed at Amazon in the United States over the past week, following the launch of its one-day Price Check programme:

The gist of this – as you will already know – is that the Amazon customer pops into their local bricks-and-mortar retailer, chain or indie, scans the barcode and price of their desired product into their smartphone, pings this free sample of market research over to Amazon, and enjoys a discount on the product as a result.

From sea to shining sea, there has been an explosion of disgust from competing US retailers and commentators  – although Amazon is only formalising and rewarding a long-entrenched consumer behaviour.  The practice of “showrooming” – online consumers using brick shops as unpaid research and product testing facilities – is well established.  As Jonathan Main of Crystal Palace’s Crow on the Hill bookshop tweeted last weekend:

Jonathan Main

ooh look, a pair of showrooming hipsters.It’s not a good look walking all the way around the shop with yr phone set to camera, book in hand.

However, Amazon has crossed a line by encouraging and rewarding this behaviour, and is suddenly under fire from US Senators, noted authors and others.  Here’s a digest of opprobrium from the MobyLives blog, complete with a splendid suggestion that Amazon should pay an “affiliate fee” to the brick retailers from whose knowledge and curacy they’re benefitting.  And here’s Richard Russo in the New York Times, reporting reactions from well-known authors – Stephen King, Scott Turow etc – to Amazon’s move, with less hysteria, and a more considered appreciation of what’s at stake.

Scott [Turow] reminds me what happened the last time someone stood up to Amazon. Nearly two years ago, the Macmillan publishing group adopted a new sales model that would cost Macmillan in the short run, but allow other companies to enter or remain in the e-book market without having to take a loss on every sale. Amazon’s response to more competition? They refused to sell not merely Macmillan’s e-books, but nearly every physical book Macmillan published. Amazon eventually backed down, but its initial response helped shape a widespread sense that it envisions a world in which there will be no other booksellers or publishers, a world where, history suggests, Amazon may not use its power benignly or for the benefit of literary culture.

And yet, and yet…

Amazon’s positioning is consistent – like Wal-Mart, their constant focus is on reducing prices and adding value for their customers, and all of their actions are directed at this goal.  As Jeff Bezos pithily sums up:  “There are two kinds of companies, those that work to try to charge more and those that work to charge less.  We will be the second”.

Amazon discounts heavily, but doesn’t appear to its millions of customers to be an asset-stripping, cost-shredding retailer – its website and apps work like a dream, its web content is compendious, its eReader has defined the market, and its logistics are impeccable.  Unless the customer has a vested interest in the status quo (in itself a suspect motivation), what’s not to like?

The Word magazine (tag line: “Intelligent Life on Planet Rock”) operates a busy blogging site, with hundreds of regular contributors who are literate, informed and witty.  It’s been running a thread titled:  How is the Kindle working out for everyone?, and the answer – almost unanimously – is, it’s working out brilliantly, thanks, and I’ll never buy another paperback as long as I live.

Amazon delivers what customers want, but for some profound psychological reason, this doesn’t appear to be enough for Amazon – a win somehow isn’t a real WIN unless the competition is left coughing up blood in the gutter.  It holds its retail competitors, its suppliers, and the jurisdictions in which it trades, in barely disguised contempt.  Because they don’t share Amazon’s absolute commitment to value for the customer, they are, ipso facto, incomprehensibly selfish and feeble.

So, for Jeff Bezos, there are two types of company.  However, there is only one type of world. One in which we need to cooperate as well as compete, one in which our actions have a social cost as well as a fiscal value.

There’s a sense in which Amazon’s mantra is Tea Party Commerce – the only thing that matters is what’s good for the individual; on balance, the customer’s low price is worth any number of negative outcomes elsewhere in the value and quality chain.  As author Tom Perrota puts it in Russo’s NYT piece:

People have to understand that their short-term decision to save a couple bucks undermines their long-term interest in their community and vital, real-life literary culture.

This is about much more than poor, lovely bookshops, and the whole “Bookstores–those holy, papery pockets of goodness and light” argument.  Indeed, while book people will always be vocal and often small-c conservative/big-L liberal, books weren’t formally included in the Amazon Price-Check promotion at all.

Amazon provides individual consumers with a great-value, highly reliable solution to many of its shopping needs, and books are just a minority part of its commercial mix; there is every indication that it aspires to become the largest retailer in the world.  However, Amazon is so pointedly committed to YOU, the Always Right, Always First, Individual Customer, YOU, that they create impoverishment elsewhere which perhaps YOU (the customer) haven’t considered, or might not be wholly comfortable with.

Now, we are on very shaky ground here, because I don’t want to imply that giving the customer a good deal is depriving manufacturers of their Bentleys, publishers of their corner offices, or brick retailers of an extra slice of toast for breakfast.  And lecturing consumers on how to spend their limited personal budgets is at best sanctimonious, at worst just crass.  There is, however, a broader cost to pursuing lowest prices and disregarding everything else, when the value to the consumer starts to deprive the broader community.

Mary Portas’s report High Street Review, commissioned by David Cameron, has been published today.  You can read it here, and I’m going to withhold comment until I’ve digested both the report and the reaction over the next couple of days.  In introducing the report, Portas has stated:

I don’t want to live in a Britain that doesn’t care about community. And I believe that our high streets are a really important part of pulling people together in a way that a supermarket or shopping mall, however convenient, however entertaining and however slick, just never can.

Our high streets can be lively, dynamic, exciting and social places that give a sense of belonging and trust to a community.  I fundamentally believe that once we invest in and create social capital in the heart of our communities, the economic capital will follow.

Her argument is being framed as anti-out of town, but it is also implicitly anti-online.

Out-of-town shopping can certainly suck the life out of a town centre, if that centre isn’t pro-actively managed and repurposed.  But local retail jobs will still exist (albeit fewer of them), and the retailers will still be paying their business rates to the local council, and their taxes to central government.  The consumer is getting better value and convenience, but at the expense of a vibrant town centre.  These things can be fixed.  And most brick retailers, wherever they’re situated, will raise funds for charities, support local schools and sports clubs, and add something back into the community they serve.

The very best value for the individual consumer, however, comes from online retailers who eschew these niceties; who avoid paying sales taxes and corporation taxes by every legal means (typically relying on laws that pre-date the creation of the online channel), and whose contribution to charity, education, the arts or recreation, is negligible.  Local retail employment vanishes, and both high street and retail park will in due course be tinned-up.

It isn’t the job of consumers to seek anything other than the best deal for themselves and their families; and constant change has been a factor for retailers since the first recognisably modern shops opened in the 18th century.  But we are running the risk that, by saving ourselves money in the short term, we will become more impoverished, both financially and spiritually.  Interesting times indeed.

Lord Kitchener: University of Bolton, data.bolton.ac.uk

Advertisements

3 Comments on “Amazon: discounts, desire and dissent”

  1. A really insightful and well written article Philip, thank you. There’s clear and direct link between the stratospheric success of companies like Amazon and the rate of shop closures on our high streets. A local toy shop owner told me recently how it deeply infuriates her when people come into her shop to browse, note down details of items and then go and buy them online. It’s that blantant! She’s effectively paying to provide a showroom and the online retailer takes the profit.

    The problem is that consumers will naturally opt for low prices and convenience. One can only try to prick their consciences in the hope of encouraging them to support their local independent retailers, but that alone won’t solve it. High street shops need to niche into non-commodity products, provide the highest possible level of personal customer service, stay open late and where possible embrace technology and online marketing.

    But it’s a hard task for them – and a huge challenge for our traditional retailers to compete with the aggressive tactics of the likes of Amazon and Tesco.

  2. Brilliant article, sums things up nicely

  3. Andy Adamson says:

    Excellent piece Philip. Good to see the arguments about the position of retail in the broader community given a good airing. It is the natural tendency of businesses to strive to attain monopoly status and hiding behind the argument that “we are just doing what our customers want” has been the common stance adopted.
    I use Amazon and like a lot of the service, but their use of legal loopholes to avoid paying the taxes that other retailers have to pay gives them an unfair advantage. This isn’t a “free” market and Amazon’s pose as the white knight of consumer choice is a fraud. However, regulation will always lag behind the times, so the only alternative retailers have is to get better at their job as Amazon’s initial success was based on providing a better service than the rest of the market.