A full-scale war is brewing between Amazon and Wal-Mart and it’s not completely obvious that consumers will be the winners. Prices are not the only thing that matters; we will all be poorer if we have less variety available as a side effect of the war.
Wal-Mart started the war last month by marking down ten best-sellers to ten dollars if they were ordered online from Wal-Mart. Amazon responded quickly by matching the price, Wal-Mart went down another dollar, Target jumped in to lower things a few more cents, and the result is that I got Stephen King’s massive new book Under The Dome for nine dollars. Which is absurd, of course.
Since then, the war has heated up as Amazon and Wal-Mart have extended the price battles to movies, toys, and electronics. At the moment Wal-Mart’s overall sales vastly outweigh Amazon’s sales, but Amazon has all the momentum as the proportion of shopping done online grows in the next few years. Wal-Mart does not intend to go quietly and the price wars may just be a precursor for a protracted battle; according to the New York Times, Wal-Mart’s president and CEO promised that it is “only a matter of time” before Wal-Mart dominates Web shopping.
One of the unexpected joys of the online age was the emergence of the “long tail.” Until recently the market for books, music, movies and other products was defined by the inventory that could be stocked by local retailers. The cost of inventory and the limitations of shelf space meant that only a relatively small number of products were likely to be produced and distributed. Our mentality was based on hits and best-sellers; if something wasn’t a hit, we didn’t expect to find it in a local store.
When online retailers can reach everyone, though, the geographic barriers and inventory problems disappear and it becomes profitable to distribute niche products that only appeal to a relatively small number of people. The “long tail” is the idea that the cumulative effect of those small sales can outweigh the hits, creating an economy that encourages creativity and diversity. In the original article outlining the concept of the long tail, the author said:
What’s really amazing about the Long Tail is the sheer size of it. Combine enough non-hits on the Long Tail and you’ve got a market bigger than the hits. Take books: The average Barnes & Noble carries 130,000 titles. Yet more than half of Amazon’s book sales come from outside its top 130,000 titles. Consider the implication: If the Amazon statistics are any guide, the market for books that are not even sold in the average bookstore is larger than the market for those that are. In other words, the potential book market may be twice as big as it appears to be, if only we can get over the economics of scarcity.
Amazon has helped grow the long tail; it has a huge selection, with every item just as available as any other, whether it’s a best-seller or an obscure treatise. Even better, through its deals with bookstores worldwide, Amazon makes out-of-print books available just as easily as new books.
Like the music and movie industry, publishers have a business model that depends on everyone’s shared belief that a book is worth a certain amount. The industry feels threatened by new developments that might cause consumers to expect new books to cost less than they have in the past. Publishers are spooked by the new e-book industry and they were appalled by the Amazon/Wal-Mart price war.
The question is: will all of these changes cause the publishing industry to reduce the number of books published that only appeal to niche audiences? If Wal-Mart becomes a dominant online bookseller by massively discounting a relatively small selection of books, will it shrink the long tail?
Wal-Mart is aggressively uninterested in choices. We have good reason to fear a future in which Wal-Mart’s sales affect publishers’ decisions. Recently a New York Times columnist addressed that:
Just what would a future look like if, say, Wal-Mart became the last bookstore standing?
A visit to Wal-Mart stores in Oakland and Mountain View revealed a remarkably limited selection, a narrow worldview and a political bent that can be summed up best with two words: Glenn Beck. The Oakland Wal-Mart carried only 21 hardcover titles: Mr. Beck’s “Arguing With Idiots” (plus the audio book) and his holiday offering, “The Christmas Sweater”; “Going Rogue” by Sarah Palin; the book of Carrie Prejean, the dethroned Miss California, “Still Standing”; and titles from the Rev. Rick Warren and the television minister Joel Osteen.
The Mountain View store in the heart of Silicon Valley had 36 hardcover titles, but they were dominated by the same conservative writers. Both stores also had shelves devoted to “inspirational” titles, almost entirely Christian, and the complete works of Stephanie Meyer, the “Twilight” author. . . .
“The Wal-Mart customer is a mom,” said a company spokeswoman, Linda Blakely. Books selected cater to that customer, she said, adding, “You’re trying to pick the ones that will be her bestsellers.”
That is what worries critics: If Wal-Mart becomes the nation’s dominant bookstore, only books that pass this “mom” litmus test will be printed. “Other books won’t get published,” said Bill Petrocelli, co-owner of Book Passage in Corte Madera.
Wal-Mart sells products very cheaply and frequently forces competitors to follow suit – if they are able to stay in business at all. Manufacturers in many fields already tailor their product lines to the items likely to sell in Wal-Mart. If Wal-Mart increases its influence on book sales, publishers may well decide that they should only focus on the Wal-Mart mom and give up publishing books with very narrow appeal. The long tail will shrink and our world will be less interesting.