Tuesday, January 23, 2007

An End to E-tailing at Amazon?

Just a little follow-up to my flip of the Long Tail!

You might remember that I blogged about Long Tail economics back in November. Well there is nothing like practicing what one preaches, so on the strength of my posting, I signed-up for an Amazon seller account and put a few second-hand books up for sale. It seemed appropriate to put Chris Anderson on my sales list and sure enough the book (not the man…this is not E-bay) was sold within a couple of hours (which makes me think that I sold it too cheaply).

All of this happened with the minimum amount of fuss; for as you would expect with Amazon, the system is reasonably safe and reasonably reliable. I found the interface a bit fiddly (long tail…long learning curve). I also found myself struggling to describe, in positive terms, the state of some of my more dogged-eared books, but all told I managed to get rid of ten books in the run up to Christmas. Not exactly a business, more a mental exercise that got me thinking about how this procedure might work more effectively.

My main gripe with Amazon marketplace is philosophical. It seems to be locked into a retail model which might not be the most effective way to create a market in the digital age. Another recent read, the Wisdom of Crowds by James Surowiecki (bought second hand through Amazon marketplace) set me to thinking about this model of e-tailing. There is plenty of information about product (great!), other sellers (prices, reputation etc. also great) but it does not really give you the full market information as one can not get on the other side; that is to say, I could not find a mechanism that would allow me to propose to buy a book at a price other than the one that a seller had proposed. No haggling! The key, therefore, to improving this kind of market is providing information about who wants to buy, and at what price. To get technical for the moment, there does not appear to be a bid-offer spread in the Amazon model. Basically, as a buyer I can not convey to the market that you are willing to buy (but a price that is lower than the current lowest seller).

I can’t help wondering about all those millions of books that are currently sitting on people’s wish lists. To be simplistic for a moment, a wish list is a list of books that one wants to buy but for some reason won’t buy in current market conditions. I guess the question for the smart people at Amazon is - why do books end up on wish lists rather than being bought? For myself, I guess there are three sorts of reasons that a ‘super read’ ends up on their database rather than in an envelope in their warehouse. Reason One is Pot-lessness i.e. I have no money, whatsoever, and can not afford to buy anything at any price (other than zero) at the present time. Reason Two Time-management i.e. these are books that I would quite like to know more about at some point in the future but do not have time or inclination to deal with at the moment ( I use my wish list as a pending tray). Reason Three – Price i.e. the seller (often the publishers in this case) is, imho, asking too much for the book. In this case, I will buy the book when it comes down in price but only if I remember to go back to my list and revisit the price (which to be honest is something that I do about once every blue moon). In effect, this is a market inefficiency as I am unable to convey to the sellers (or the Amazon system for that matter) that I will buy this book but not at the advertised price.

I think that it is a shame the wish list part of the Amazon account is not developed to fulfil this role. I have any number of books on my wish list which I would like to make a bid for at about $3 lower than the retail price. More importantly, I am not alone. I am sure there are literally millions (if not billions of transactions) that do not take place because bids from potential buyers are not made available to the product sellers and the system. Why not record this information and make this data available?

I can see that would be difficulties that would have to be solved (I am, after all, describing a suggestion not coding the back-end). The system would have to ensure that potential buyers could put a time-limit on their bid. Similarly, the system would have to have credit card details, credit limits etc. sorted out to make sure that the buyers actually paid up if a seller hit their bid. E-mails would have to be exchanged. Rules would have to be devised. However, I see a change from the ‘e-tailing’ model as being a win-win-win situation. I will win because I will get to read a book I want to read. The publisher will win because they will increase sales (quite dramatically in many cases) and Amazon will benefit because they will take more money because there will be more transactions.

Problem solved? I am sure it is not that simple!



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