Wednesday, September 21, 2011

Why I Don't Shop Amazon

Julie asked me to elaborate on why I don't like Amazon's book business - I totally thought I had done a post on that, but it turns out I haven't!

Before I get started, please keep in mind that I work in publishing and my opinions are coming from the perspective that the book business is big and has a lot of room for many players. It's also a luxury business (in that books are not essential purchases), and every day we compete more and more with other forms of entertainment, and every year we hear that rates of reading for pleasure are plummeting. The recent closing of all Borders stores bodes ill for the industry as a whole, and Amazon's actions over the years I've been working with books concern me both as a professional and as a consumer. Basically, I'm all about saving money, but I also believe in voting with my dollars and supporting businesses that I think act ethically and responsibly, and I don't think that nice customer service and low prices are the only criteria for that. Obviously, I'd love to convince you to agree with me and do as I do, but I realize that these things don't bother anyone. All I ask is that you take a second to think about whether Amazon is doing this to an industry that you work in or really love - and if Amazon sells their products, I am betting that they DO.

One of Amazon's best practices is to use loss-leader pricing - deep-discounting products to develop a loyal following. This is great for customers but not so great for producers, since it can depress the perceived value of a product. This is a whole topic unto itself, which I'll maybe do a post on at a later date, but this is the crux of my problem with them as a professional.

My big problem with them really came about with the Kindle in 2007. Amazon introduced a proprietary format as opposed to using the standard epub file that the rest of the industry had adopted. This required customers to purchase e-book files from them and no one else, one way of creating customer loyalty. Then they began pricing e-books below their own cost - encouraging readers to purchase their $400 device in order to get books for cheaper than $10. Sort of a reverse of the old "Gillette marketing plan" - give the razor away and charge for blades for life.  It seriously depressed the perceived value of e-books, which are not in fact "free" to create for publishers who are also publishing a print book. (I can expound on this in a separate post or series of posts, if anyone's interested - let me know in the comments.)

Since Amazon was poised to become a seriously dominant force in the e-reading industry, publishers were concerned that eventually they would back publishers into a corner on pricing - demanding lower wholesale prices that couldn't be sustained, thus driving publishers out of business. When the publishers fought back with the announcement of the iPad and Apple's "agency pricing" model, Amazon retaliated by turning off the "buy buttons" for a number of publishers at different points during the negotiations (it started in February and went throughout the summer, with various publishers excluded from Amazon at different points in time. I talked about it briefly at that time). This didn't just affect the e-books, since they also turned off the buy buttons for all print books - and really, they were punishing authors, which any decent bookseller would never do.

It seems that now, there's a tenuous peace with publishers and Amazon regarding pricing. "Agency publishers" use the agency pricing model, where they can set a fair price for the books and Amazon gets a cut - it's basically an "authorized dealer" set-up. Some smaller publishers allow Amazon to set prices and remit a percentage back to them. The agency agreement is up in April of 2012, so it's going to be in upheaval again soon.

There are lots of other behind the scenes publishing things, like sales and merchandising opportunities and e-book sales reporting, that rub me the wrong way about Amazon as well, but that would get pretty boring pretty quickly. So I'll move on to why, as a consumer, I don't trust Amazon either.

In 2009, I beta tested a Kindle DX for school, and was unimpressed with the quality of the device and Amazon's capabilities of looking at everything I purchased and read - they can tell how far you've read into any given book. When the class was over, I gave back the Kindle and purchased a Sony Reader for myself, which I still use every day.

In the summer of 2009, Amazon deleted 1984 off of users devices, including all annotations, notes, highlights, etc. (This happened in 2008 as well, with Ayn Rand titles, but wasn't widely publicized.) Aside from the unfortunate choice of title/subject, this act drove home the fact that the terms of service users agreed to meant that they actually are not purchasing the e-book files they bought in droves from Amazon - instead, they are essentially renting the files, which are removable by Amazon at any time and for any reason. I don't know about you, but if I want to borrow a book, I do it at the library or from a friend - I sure don't pay for the privilege. (Amazon is now starting a lending system within the Kindle network but I'm unimpressed; Barnes & Noble's Nook has had this in place for a long time and other e-reader devices work with public library systems using Overdrive or other rental services, since they all use the industry standard epub format.)

One could argue that in the Orwell and Rand cases above, Amazon had the right to delete the material because it shouldn't have been up there in the first place - in both cases, sellers who were not legitimate copyright holders had posted the material for sale. However, I believe Amazon should be policing that BEFOREHAND, rather than reaching in and deleting material (including the original content by the end user)? Both authors were well-known and their copyrights are established. But as it turns out, Amazon doesn't particularly care about the content that gets posted on their site for sale - as long as they get their cut. (More on that in a minute.)

Another case of Amazon's deletion of customer data without explanation is this guy who lost his entire Amazon account, including his wishlist, annotated  Kindle books, sales history, etc. It is true that a company can close your account without warning, but a common and concerning thread that I'm seeing here is the annotations being deleted without warning and without restitution. Those annotations are original content; they don't belong to Amazon and Amazon has no right to remove them from your device. You don't actually have to go through any steps to copyright your writing - so Amazon is destroying copyrighted works without permission. Yikes.

Back to Amazon policing content: A self-published author uploaded a nonsense book to Amazon to see if she could figure out how their royalty scheme works, and discovered that even after supposedly being reviewed by an Amazon editor her nonsensical book was published and available for sale. To me, this indicates that Amazon is not remotely concerned with content and only cares about the almighty dollar -- which, okay fine, they're a business, but then why bother trying to assure readers that they review the files when they obviously don't?

Then there are the things about Amazon that are actually making public news, like their sales tax fights with California and Tennessee, wherein they argue that they should not have to pay sales tax because they sell on the internet, which is this giant thing that doesn't exist in the real world. Except why should such a huge, mega-profitable company be exempt from sales tax? How on earth is that fair? And their response to various states' attempts to collect that tax results with Amazon punishing the little guy, by ending their affiliate program in any state that dares try to make them comply with tax law. Those individuals aren't even the problem, but Amazon would rather disallow affiliate relationships than to pay the taxes they owe.

This week, reports leaked out about the terrible conditions at one of Amazon's warehouses. I know warehouse work is awful (I've done it myself) but with all the money they're pulling in, can't they treat their workers a little better?

Publishing insiders have been concerned about Amazon's status in the industry for some time - this 2010 post from An American Editor asks whether Amazon has too much power. I say definitely yes, both over the publishing industry and over their own consumers, and I don't think they're wielding it in a friendly manner. I'll say this - for the future of the publishing business, I am more scared of Amazon than I am of digital piracy.

So that's why I don't shop at Amazon. Any questions?


  1. As far as Amazon and sales tax goes, the problem is that state and local sales tax is generally imposed on transactions of businesses who have a physical presence or "nexus" in their state. There is significant case law supporting Amazon's position, however, that is contrasted by states who are badly in need of sales tax dollars and are trying to recover their eroding sales tax bases.

    Also, it's not sales tax that Amazon owes - it is sales taxes that they collect from consumers and remit to state and local taxing authorities.

  2. Thank you so much for posting all of this. I've always felt a little uncomfortable using Amazon because I knew it tried to undercut other companies on pricing, but all of this background is enough to keep me from ever shopping there. A fabulous locally owned shop just opened nearby, so I'll happily go speak with my dollars there.

    Walnut, I live in Tennessee, and in a way you're both right. Amazon plans to open distribution centers here. The company had never collected sales tax from Tennesseans because it's been web-only, but opening the distribution centers that means it has a physical presence in Tennessee and must start collecting state sales tax. Amazon wanted to be exempt from that rule, arguing that a distribution center is not akin to a retail center and implying they might not open the distribution centers (and bring much needed jobs to Tennessee) if they didn't get the exemption. The deal was done, but lawmakers are considering reversing it or striking a compromise like California has done.

  3. Thank you for sharing your perspective. It isn't Amazon, but it's customers, that should be forced to pay sales tax. Right? In California, it is an unavertised discount of nearly 10%, but I agree it is unfair.

  4. This is interesting. Gives me a lot to think about.

  5. Consumers who don't pay sales tax on their Amazon (and other internet retailers) are technically required to self-report the purchases and pay a use tax.

    The reality is that most consumer don't do this, many states don't make it easy to even register to pay your use taxes, and an audit would cost more to conduct than the revenue it would bring in on the consumer level. Most companies, however, do remit their use tax and face an audit risk if they do not.

  6. Ouch. I knew a lot of this stuff (especially the Kindle ridiculousness and ownership issues), but seeing all of it in one place is just...well. It definitely makes me rethink spending my dollars at Amazon. It's just difficult because they ARE so big now that for many things (especially specialty items), it's not only the cheapest place to buy them, but one of the ONLY places to buy them. Sigh.

  7. Amazon as a company doesn't owe sales tax, so you can't say that it's not fair that they don't pay the taxes that they owe. They don't owe them. What they are trying to avoid doing is "collecting" sales tax. As it's already been stated in the comments, it's up to the consumer to pay the tax. I don't understand why any business should be required to collect a tax for the government. It costs them money to do so, and they receive no benefit.

    Like you said it's your dollar and you can "vote" with it how you want. And I totally respect your right to do that, but I also think that a private business can run it's self how ever it pleases, you don't have to agree and you don't have to shop there. I think that is the perfect system.

    I am interested in hearing more about the e-book prices because it frustrates me that e-books are more expensive than regular books. That makes no sense to me. So I'm curious to know the behind the scenes aspect of this.

  8. Meh.

    The only issue I see in this post is that Amazon didn't issue refunds for removing the books from the e-readers.

    As for the warehouse working conditions... don't work there. Let's face it, these jobs only require a high school diploma, so what did they expect? I read through the article and it sounds like the job sucks big time and I would never want to work in those conditions. If you hate it, quit. Plus these are temp. positions, they can let you go whenever they want for whatever reason, fair or not.

    Sales tax fights are for the benefit of the consumer and for Amazon. They are fighting on our behalf, I see no issue with this.

    The publishing power is a cost of doing business. Amazon is one of the biggest e-book distributors. If you don't like their policies, sell your books elsewhere.

    Deletion of customer data just sounds like a highly publicized SNAFU. Sucks for that guy, but it happens.

    That all said, I would never begrudge you the choice of where to spend your money and applaud you for voicing your opinion and reasoning.


Thanks for commenting!