Amazon and Kindle News

Brick and mortar retailers continue to lose business to Amazon.com, which works to make the buying process easy and seamless. You search for a product, it pops up in the buy box, and you add it to your cart.

But if it is too easy, you may not be getting the best price. At least, that's the conclusion of marketing researchers at Northeastern University.

Keep in mind that not everything you buy comes directly from Amazon. The company works with many third-party sellers to provide products, especially for specialty items.

Algorithmic pricing

When you search for a product, what pops up first might not carry the lowest price. The study, led by Northeastern's Christo Wilson, discovered that Amazon is much more likely to feature sellers in the buy box who adjust prices using an automated system called algorithmic pricing. And a consumer should not assume this seller has the lowest price because Wilson says, more often than not, it doesn't.

"For example, we found that 60% of sellers using algorithmic pricing have prices that are higher than the lowest price for a given product,” Wilson said.

He admits the price will not be much higher. In fact, 70% of the time the price in the buy box was only a dollar higher. The rest of the time, though, other sellers had the same product $20 to $60 cheaper.

To find the lowest price, Wilson says you have to take the extra step of clicking through the “other sellers on Amazon” button under the “add to cart” button.

Anyone can use algorithmic pricing

More companies are using algorithmic pricing than you might think, and they don't have to be all that large and sophisticated. For a relatively small fee, any independent seller can obtain the services of a firm that will adjust its prices in real time.

The Northeastern team found these third party sellers have access to a number of different pricing strategies that include finding the lowest price offered by competitors and going above it by a set dollar amount or percentage.

"Amazon has a relatively low number of algo sellers--from 2% to 10%," Wilson said. "But they cover almost a third of the best-selling products offered by outside merchants, so the impact is large."

Amazon has its own system for selecting companies whose products get featured in the buy box, but Wilson says consumers can't assume the product has the lowest price. The chief take away from the study, he says, is that consumers need to take the time to look through the other seller options and consider them carefully.

Amazon and Walmart are going at it today in a battle of high-profile sales, trying to win over consumers who don't normally go on a shopping spree in the middle of July.

When Amazon announced its Prime Day for July 15, it boasted that its one-day deals for its Prime members would beat those offered on Black Friday, the traditional start to the holiday shopping season.

BestBlackFriday.com, operated by Jones-Dengler Marketing, threw down a challenge of its own, listing some of last year's Black Friday specials and challenging Amazon to beat those prices. After viewing the Prime Day deals at midnight, BestBlackFriday.com's Philip Dengler had to admit, Amazon did what it said it would do.

“To our surprise, they are beating Black Friday 2014 prices on some of the most sought-after items,” Dengler told ComsumerAffairs in an email.

Side-by-side comparison

Dengler and his associates reached that conclusion after doing a side-by-side comparison of last year's Black Friday deals and Amazon's Prime Day prices.

“While Black Friday wins in a few areas, Prime Day is winning where it counts,” Dengler said. “They have the lowest price on the very popular 32" and 40" televisions.”

Dengler said Amazon is also winning on the Kindle Fire 7, Kindle Fire 7 Kids Version, Crucial MX100 Drives, VTech Kidizoom Smartwatch, Bose SoundTrue Headphones On-Ear Style and many other items.

“Judging by the information available to us now, we think Amazon was right in their Prime Day comparison to Black Friday,” Dengler said.

Walmart's response

These prices, of course, are only available to consumers who have paid $99 a year to be Prime members, a point Walmart has made in its none-too-subtle promotion of its own sale. Visitors to Walmart.com are greeted with a bold banner declaring “thousands of new rollbacks, no upfront fees!”

Why would these two retail giants be duking it out in the dead of summer with seemingly little at stake? As we reported yesterday, consumers were sitting on their wallets last month, resulting in disappointing retail sales.

Amazon's motivation probably lies in a desire to boost Prime memberships. Walmart's response may be driven by a determination not to let its rival get out in front on anything. Both are taking the opportunity to try to win over consumers who do most of their shopping online.

Increasing e-service quality

"Increased e-service quality is associated with increased customer satisfaction, which then leads to higher repurchase intentions," said Vikas Mittal, professor of marketing at Rice University. "In other words, increasing e-service quality enhances customer satisfaction and the likelihood of customer repurchase. If Amazon and Wal-Mart want to keep their customers coming back, they must focus on increasing satisfaction via e-service quality."

Mittal and an international team of colleagues have completed a study of what makes up e-service quality. Price is only one part of it.

Their analysis identified four core dimensions of e-service quality: website design, fulfilment, customer service and security/privacy. Together, these four dimensions strongly impact overall e-service quality, the authors conclude. And they should be there 365 days a years – even when the sale prices aren't.

iPad's images 'stunning' but device is a 'compromise'

New e-book readers keep hitting the market, yet a veteran model, the Amazon Kindle e-book reader tops Consumer Reports first full ratings of these devices.

Despite improvement to the rival Barnes & Noble Nook e-book reader and the arrival of Apples iPad tablet computer, which offers e-reader capability, Amazons Kindle is still the best choice for most consumers. The report and Ratings of e-book readers is featured in the July issue of Consumer Reports and on www.ConsumerReports.org.

Consumer Reports testers recently put nine e-book readers through comprehensive lab tests. Amazons Kindle, $260, and its super-sized sibling, the Kindle DX, $490, had crisper, more readable type than any other model in the Ratings and slightly better than the Apple iPad, whose e-reading capabilities were assessed but excluded from the ratings (see below).

The Kindles were among the fastest at refreshing and turning pages. For most users, the lower-priced Kindle is a better choice than the DX because of its lighter weight and smaller size, unless extra real estate is needed for reading content such as e-textbooks.

Two e-readers from Sony the Daily Edition PRS900BC, $400, and the Touch Edition PRS600SC, $280, were solid performers in Consumer Reports lab tests and noted for their versatility including their ability to be used as digital notepads for text or drawings. However, the Daily Edition is expensive and heavy and the Touch Edition is among the rated models that do not feature unlimited, free, 3G wireless data network access which means consumers cannot download books whenever and wherever they want.

Consumer Reports found that Barnes & Nobles Nook is among the faster models at turning pages, but its type was not quite as crisp as the Kindles and it weighs more even though both models have the same 6-inch screen size. Navigating content on the Nook was more complicated and touch controls were nonintuitive.

Consumer Reports also tested e-readers from three lesser-known brands the Aluratek Libre eBook Reader Pro, $170, the BeBook Neo, $300, and the iRex DR 800SG, $400 and found that all were undistinguished at best.

The Apple iPad as an E-Book Reader

Consumer Reports did not include the Apple iPad in its e-reader Ratings because it is a computer with e-book capabilities, not a dedicated e-book reader. The iPads iBook app, one of at least three available for the device, offers fast page turns, with a dazzling virtual image one page curling back to reveal another, and the full-color screen is more eye-catching than the monochrome displays on the e-book readers.

Type on its LCD touch screen is fine, though it is slightly less crisp than that of the best e-book readers. Compared to the most expensive e-book reader tested, Amazons Kindle DX, $490, Apples iPad is more expensive costing $500 and up and substantially heavier at 24 ounces versus the Kindle DXs weight of 19 ounces. Consumer Reports recommends buying the iPad for e-books only if consumers are willing to compromise to get a multifunction device.

Amazon may have underestimated the negative blowback from its decision to raise the price of its Prime memebership to $99, according to a survey conducted over the last few days by Brand Keys, a leading retail research consultancy.

"Consumer expectations are always on the increase, and when it comes to online retail, they operate in a 'what-have-you-done-for-me-recently?' paradigm. Price increases weren't what Prime Members were expecting," said Robert Passikoff, found and president of Brand Keys.

Amazon announced the 25% price increase a week ago following rumors that it would raise the rate by as much as 50%.

In a survey conducted by Brand Keys March 14-16 among 1,050 Amazon Prime members, metrics– showed that the Amazon brand took a blow to its normally high overall brand engagement and loyalty evaluations.

Loyalty evaluations among Prime members were down 10%, from 93% to 83%. Customers also took to the web and social media to vent their frustrations.

"I've been a Prime member for a couple of years but I am reconsidering it now," said Karen Hesse, a California notary public in a Facebook posting. "Now that Prime membership is taxed as well, I have to see if Prime saves me more than $110 a year. I like the free videos and the lending library that come with the membership but I don't think my use is that great."

Engagement takes a hit

Brand diagnostics showed that the price increase resulted in significantly negative effects to two important emotional engagement drivers for the Online Retail category: 'Brand Reputation' and 'Brand Value.'

"When a brand misses the mark when it comes to consumers' expectations, 'expectation' quickly becomes 'disenchantment,' and based on these assessments. Prime members seem really disenchanted with the Amazon brand right now," said Passikoff.

"Hard as it is to believe, there was time when consumers ordered a product, they paid for shipping and if they weren't happy, they paid to return it. It worked exactly like consumers expected it would," noted Passikoff, "but today that seems like a distant era?"

Zapposification

In 2003 Brand Keys called it the 'Zappos-ification of America,' brand differentiation and consumer engagement à la free shipping and returns and speed of delivery. Zappos, the innovative online shoe retailer, told consumers they'd receive their order in five days, but delivered in two. Consumers were pretty happy.

"'Delighted' you might say," said Passikoff. "And in order for other brands not to look as though they were lagging, they too offered free shipping and returns. This took various forms and offers, but in short order, consumers came to expect it, which is precisely the nature of delight, expectations, and brand engagement."

Amazon has been the No. 1 brand in Brand Keys' Customer Loyalty Engagement Index for as long as the category has existed.

For $79 a year members received free two-day shipping and access to a raft of free streaming videos, exclusive content, and added values like free e-book borrowing.

Tolerably happy

"If people weren't precisely delighted to pay, they were tolerably happy to get things fast and not pay extra. Estimates vary from category-to-category, but membership programs like these tend to attract consumers who spend more, sometimes significantly so. So it should work out for everyone, right?" said Passikoff.

Passikoff said there appear to be business justifications for Amazon's decision -- chiefly higher shipping costs -- but he said that consumer decision-making is more emotional than rational and explanations about higher costs don't placate customers anymore.

He noted that an online rival, ShopRunner.com, a site that guarantees two
-day delivery from many of the retailers on their site, has already offered to waive its $79 annual fee to anyone "disgruntled" by the Amazon price hike.

"Amazon should have expected that," said Passikoff.

Do you remember when the term “Do it yourself” pretty much applied to home repairs and fixing things?

It became the advertising slogan for many hardware stores, which told people to release their inner Bob Villa, even if they didn’t possess a thick beard and a flannel shirt.

Today, the do it yourself slogan means much more, thanks to the infinite reach of the Internet, and for practically little or no money, one can move a good product idea or business plan from their head, to the drawing board and out to the masses fairly quickly.

These days, doing it yourself can either mean you’re reaching for a hammer or you’re hammering down on your keyboard trying to perfect an idea, and this new type of digitized self-containment has made it easier for the dreamer to become the doer, further blurring the once very visible line between buyer and seller.

In addition, the Internet gave folks new avenues to release their self-made products and most of those avenues didn’t lead to some office building with a closed-minded decision maker inside, because those guys love telling you that your idea isn’t any good and they won’t financially back it.

Anybody can write, right?

Consumers using the Internet to fuel their ideas is surely happening in music, it’s happening in fashion and in the small business world too, but arguably one of the biggest places the Internet has empowered the person who says, “Maybe I’ll do it one day,” is in the world of authors and people who choose to self-publish their book.

Sure the Internet will allow everyone who wants to write a book the chance to publish it, but there’s a slight problem with that, and that is -- well, the Internet allows everyone who wants to write a book the chance to publish it, which means your book can easily get lost and go completely unnoticed in a sea of other self-published titles.

Not to mention having to compete with those authors who have book deals and a PR team that can market their books around the clock.

So the question is, is publishing your own book even worth it these days?

Shawn Welch who, along with his partner Guy Kawasaki, wrote "APE: How to Publish a Book," says yes. APE is an acronym for author, publisher, entrepreneur.

Welch says that a person has to be realistic about the recognition and financial rewards one might be looking for.

“The average indie author sells less than 150 copies of their book, which means on average, indie authors make between $500-$1,000 on a self-published book (if they sold it for $4.99), said Welch in an interview with ConsumerAffairs.

“The reason you hear about self-published millionaires in the news is because they’re rare, not because they are commonplace," he said. "If you want to write a book, that’s great. In fact, Guy and I think everyone who wants to write a book, should write a book. It is truly one of life’s great accomplishments.”

But Welch says if you want to be a self-published author, your motivation has to come from a different place other than a place of wanting to get rich.

“If you’re writing a book because you want to make money or pay off your mortgage, you’re probably doomed from the beginning,” he says.

“Very few people can turn out a good book when the motivation is money. Money should be a side-effect not a goal. Before you write a book you should ask yourself, ‘Will this book add value to people’s lives?’ Because that is the number one reason to write a book. If you have a book that adds to people’s lives, it will probably sell.”

“Writing and publishing a book is an end in itself, it is not a means to an end," adds Welch. 

"If the reality that you probably won’t make a lot of money self-publishing discourages you from writing, ask yourself why you were writing in the first place and why that reason would cause someone to pick up your book out of the thousands available.”

Furthermore, he says self-publishing really isn’t a decision, as much as it is the only avenue for most authors, because an extremely small portion of writers actually get book deals.

Deciding between self-publishing and shopping for a book deal is a “superficial choice,” he says and if you do happen to be among the 0.1% of authors who get a book deal, you’ll still have to endure long wait times and a bunch of industry battles.

“Most authors don’t have the option of choosing between self-publishing or signing a traditionally published deal,” says Welch. “If you’re lucky enough to have a deal on the table, and you don’t want to deal with the hard work involved with self-publishing, then absolutely sign a traditionally published deal, take the advance and smile.”

“But, if you’re like the other 99.99% of authors today, you don’t have a choice. It will take you 6-18 months to get a traditional publisher to respond to your proposal, so why not self-publish in the meantime? The reality is traditional publishers sign authors that already have a platform to sell books. In today’s market, an author name sells a book more than the publishing company imprint. So many traditional publishers look for authors that are already well known.”

“So if you are shopping your book around, one of the best ways to prove you’re worth signing on is to show that people want to buy your books. What better way than that to point at the sales of your self-published books? It doesn’t have to be one or the other.”

Stranger than fiction

For those of you who write fiction, writing an ebook is the best route to go, and by using Kindle, you’ll have immediate access to Amazon’s incredibly large clientele, which certainly doesn’t hurt, says Welch.

“For fiction, ebooks make up a large percentage of the market cap,” he explains.

“This isn’t necessarily true for non-fiction books, so print isn’t completely dead. But for fiction, you can do very well with just ebooks. Kindle is great because for fiction authors it makes up 80% or more of the market.”

“Print isn’t dead, but ebooks are much easier to self-publish," he says. "And to simplify matters, with one platform, and one format, you can reach a very large market. In today’s world, Amazon owns the ebook market. So a self-publishers would be foolish to ignore it.”

And how much will self-publishing actually run you?

Although using the Internet to self-publish is less expensive, it’ll surely cost you more than just a few bucks, so if you’re expecting to spend a tiny amount to get your book off the ground, you might be disappointed.

“$4,000 is a very realistic number,” says Welch.

“In general, you should budget $1,000 for content editing, $1,000 for copyediting, $1,000 for a cover, and $1,000 for book production. If you know someone who is willing and able to do one of these tasks for free, you can certainly save some money, and it’s possible to find these services for less and more. But just because you self-publish does not mean these tasks go away.”

Nothing is worse than a debut book filled with typos, misspellings, factual errors and other amateurish blunders. Such mishaps are marginally acceptable in daily news publications and amateur blogs but not in book and magazine publishing.

And if you’re a busy parent who loves writing and you always thought about publishing your own book, Welch says that you should start writing now; if you wait for the perfect time to start typing those pages, you might be waiting forever.

In addition, he advises that parents and busy adults should make a conscious decision to carve out writing time on a daily basis, as opposed to trying to find the right time when things aren't hectic.

“There’s never a good time to write a book,” says Welch.

“If you wait until the house is clean, the kids are doing well in school, or that one project is finally finished, you’ll never start. History is full of people who bootstrapped their efforts in the middle of the night to achieve something they really want.”

“If you really want to write a book, you have to make the time. Time won’t just appear out of nowhere,” he says.

The latest development in the Amazon vs. Hachette Book Group saga has Amazon openly admitting that contract disputes are behind the recent inability of customers to buy certain Hachette-published titles on Amazon.com. As Amazon announced on its Kindle forum May 27:

“At Amazon, we do business with more than 70,000 suppliers, including thousands of publishers. One of our important suppliers is Hachette, which is part of a $10 billion media conglomerate. Unfortunately, despite much work from both sides, we have been unable to reach mutually-acceptable agreement on terms.”

The Amazon v. Hachette battle started slowly. Earlier this month, we first reported that Amazon was delaying shipments of certain Hachette titles: a book that would normally ship within a day or two of the order being placed instead had shipping dates listed several weeks in the future.

The New York Times had first noticed this Hachette-specific shipping delay on May 8, when it reported:

A Hachette spokeswoman said on Thursday that the publisher was striving to keep Amazon supplied but that the Internet giant was delaying shipments “for reasons of their own.” Hachette is one of the largest New York houses, publishing under the Little, Brown and Grand Central imprints, among many others.

The affected books are a mixture of new and old. A just-published memoir, “Everybody’s Got Something,” by the “Good Morning America” anchor Robin Roberts, is taking as long as three weeks to ship, customers were told. So is Stephen Colbert’s “America Again: Re-becoming the Greatness We Never Weren’t.” …. Generally, most popular books are available from Amazon within two days. An Amazon spokesman declined to comment.

No comment

One particular bit of that quote, where Amazon “declined to comment,” was repeated in pretty much every succeeding media story about the officially mysterious dispute between the bookseller and book publisher. Just this week, for example, on May 26, the Associated Press reported “Amazon escalates standoff with publisher Hachette Book Group,” summarizing the previous two weeks' events before providing the latest official responses from the two parties involved:

"We are doing everything in our power to find a solution to this difficult situation, one that best serves our authors and their work, and that preserves our ability to survive and thrive as a strong and author-centric publishing company," Hachette said in a statement Friday issued through spokeswoman Sophie Cottrell. Later Friday, Hachette released a more strongly worded statement, saying it was "sparing no effort and exploring all options."

Amazon declined to comment.

Two days earlier, a reporter for Bloomberg news put out a quick update story that “Hachette apologizes to authors caught in Amazon dispute,” and gave readers a quick summary of the situation:

Disagreements between Seattle-based Amazon and publishers have centered on digital-book prices and a reluctance by some houses to replace physical copies of older books with online versions.

Megan Fitzpatrick, a Hachette spokeswoman, didn’t immediately respond to voice-mail and e-mail messages left after business hours. Craig Berman, an Amazon spokesman, declined to comment.

So after several weeks of Amazon declining to comment, its May 27 comment in the Kindle forum was newsworthy indeed.

A cynic might suggest Amazon chose to break its comment-silence because public opinion seemed to be against it in this dispute; typical headlines included “Amazon has gone too far/ the e-book monopolist, having strong-armed Hachette, may finally get its day in court” (Fortune/CNN), and “In the standoff between Amazon and Hachette, the customer comes last” (ditto).

Vintage Bezos

On the other hand, Time's business opinion page wrote “Amazon's war on Hachette is vintage Jeff Bezos — controlling, ruthless, vicious … and probably good for consumers.”

How's that? 'The battle boils down to this: What is the optimal price for e-books? If it’s too high, fewer will be sold. Too low, profit margins will narrow even further. Bezos, head of the world’s biggest book retailer, thinks he has a better view than book publishers of what e-books should cost. He’s probably right.”

But the anonymous headline-writer at the link-aggregation blog Fark.com took a less optimistic view of the situation, linking to Slate's coverage of the story with the sardonic headline: “Amazon encourages readers of Hachette books to purchase them from one of their competitors. The online retail giant then added, 'Good luck finding one. Mwahahahahahahahahahahahaha (inhale) hahahahahahahahahahaha'”

But on the other other hand (the possibilities here represented by a being with far more hands than your typical human gets), one of the first commenters in that Fark discussion thread pointed out that Hachette is not exactly a poor innocent little put-upon bookseller either: in early 2013, Hachette was one of five publishers to agree to a settlement in a federal lawsuit that eventually found Apple and those five publishers guilty of price-fixing e-books.

So the Amazon v. Hachette battle isn't David and Goliath so much as Goliath and Goliath, and which giant you root for probably depends on which side you find more sympathetic.

But in the meanwhile, if you're an Amazon customer hoping to buy certain books published by Hachette, Amazon advises you to look elsewhere if you want to buy them online: “If you do need one of the affected titles quickly, we regret the inconvenience and encourage you to purchase a new or used version from one of our third-party sellers or from one of our competitors.”

The hot-selling Kindle Fire tablet has been taking a lot of heat from users about software glitches but Amazon says it will be fixing many of those problems with a software upgrade within the next few weeks.

"In less than two weeks, we're rolling out an over-the-air update to Kindle Fire," an Amazon spokesman told The New York Times, in a story published Sunday.

Amazon wasn't specific about the update but said it would improve overall performance and navigation and would also add a feature that will let users delete their browsing histories, a concern that has been raised by privacy advocates.

Users have also complained the Fire's audio volume is somewhat anemic and have said the device is prone to unpredictable lock-ups that require a full restart.

The initial problems aren't hurting sales of the new tablet.  Amazon says it expects to sell nearly 4 million by year's end, which would give it nearly 14 percent of the global tablet market, second only to Apple's iPad, with nearly 66 percent.  Samsung is expected to end up around 4.5 percent with its Android-based Galaxy Tab.

The Fire's low price -- $199 -- makes it highly competitive with the iPad, which starts at $499.  The Fire includes many high-end features including an LCD screen that displays 16 million colors in high resolution.

Penguin is the latest publisher to settle price-fixing allegations. The company has agreed to pay $75 million to resolve complaints by 33 states accusing it of price-fixing and collusion in the market for electronic books, or e-books, a conspiracy allegedly orchestrated by Apple.

It's the fifth settlement growing out of investigations conducted by Connecticut and Texas that so far have paved the way for recovery of approximately $164 million for consumers nationwide. The settlement also applies to private class-action lawsuits filed by consumers alleging that the company’s behavior violated unfair competition laws, causing consumers to overpay for e-books.

Apple is the only remaining defendant and is currently scheduled to go to trial in the Southern District of New York on June 3, 2013.

“Consumers are entitled to a fair, open and competitive marketplace,” said Connecticut Attorney General George Jepsen. “This agreement is yet another step toward providing restitution to those consumers who were harmed by alleged price-fixing within the e-book market and will further ensure that, going forward, consumers benefit from fair competition in the sale of e-books.”

If approved by the court, the settlement with Penguin will provide significant consumer restitution and should result in greater competition in e-book sales in the future. The agreement grants e-book retailers greater freedom to reduce the prices of e-book titles and provides $75 million to compensate affected consumers nationwide.

Apple's day in court

Jepsen said he is looking forward to seeing Apple in court.

"Connecticut, along with Texas, is leading the upcoming trial effort against the remaining defendant, Apple, on behalf of our partner states, and we will aggressively seek to obtain additional compensation for consumers in our respective states who have been injured by the illegal conspiracy we allege in our complaint,” he said.

Hagens Berman Sobol Shapiro, a consumer-rights law firm in Seattle, has represented consumers in the class action cases that are being litigated in conjunction with the case brought by the states.

“This proposed settlement is a powerful demonstration of what is possible when federal, state and private class antitrust enforcement lawyers work together,” said Steve W. Berman, managing partner of Hagens Berman. “In this case, the level of cooperation was unprecedented, and the results that we were able to deliver to the states and consumers demonstrate that.”

Late last year, Penguin settled similar claims with the Department of Justice. Under that settlement, Penguin agreed to end its allegedly anticompetitive agreements with Apple and other retailers for a period of two years.

Agency model

In December, Berman was appointed lead counsel to represent the rights of consumers in the consolidated class-action lawsuit first filed on Aug. 9, 2011.

It alleges that the defendants coordinated a switch to an agency model, where publishers would set the price, rather than retailers. The result, the lawsuit claims, was a dramatic increase in the price of many e-books as retailers were contractually forbidden from competing on price. The suit sought to compensate consumers for overpayment as a result of the pricing agreement.  

“Penguin's senior management deserves credit for working with us and the attorneys general to reach a comprehensive agreement in such a hotly contested case,” said Jeff D. Friedman, Hagens Berman partner. “They’ve agreed to a settlement that will go a long way toward making e-book consumers whole and restoring a thriving, again-competitive e-book marketplace.”