The New York Times recently reported on international backlash from AbeBooks vendors as the company sought to limit its operations by jettisoning sellers in a range of countries including South Korea, Hungary, the Czech Republic and Russia. AbeBooks provided justification that the closure of a third-party payment provider would limit the ability of the company to provide service to a number of countries. The impact on such booksellers cannot be understated, with small businesses frequently relying on AbeBooks as their only online presence. The impact on such dealers could be fatal to businesses, however this decision may shed light on the operating environment of the world’s largest online marketplace devoted to scarce printed matter.
The Impact on Amazon
Acquired in 2008 by Amazon, AbeBooks has filled a much needed void in the rare book industry: an online marketplace connecting buyers with sellers at a cost significantly undercutting the creation and maintenance of standalone online stores. AbeBooks has capitalised on the fractured, diverse nature of the rare book trade and has brought together dealers and customers with the sole focus of trade in secondhand and rare books. In pursuit of offering the widest possible selection of book purchasing avenues, the site was acquired by behemoth Amazon. The acquisition by Amazon left AbeBooks as an independent subsidiary, with minimal impact on the structure of AbeBooks itself. At the time of the acquisition some outlets speculated on the prospect of growth in AbeBooks as part of Amazon’s extended online offerings, with concern over the level of integration that would be achieved by Amazon. The impact on the share price of Amazon, however is largely unremarkable. Chart 1 shows the announcement of the AbeBooks purchase, highlighted in red, and the minimal impact on share price. In context of the broader year, the share price change is essentially negligible when considering returns. This proves expected, given the comparative sizes of the companies at takeover, in addition to the high level of similarity between the business offerings of the two companies.
Gaining a picture of the impact of the AbeBooks decision on Amazon, however, proves untenable. In the midst of criticism regarding free delivery over the Christmas period, breakdowns in Saudi relations, and potential anti-trust investigations, recent declines in Amazon share price can hardly be analysed for the exclusive impact of the AbeBooks announcement on the company overall. It should, however, be said that in light of these concurrent events few investors would be particularly interested in the loss of revenue of small subsidiary. Ultimately, the impact of AbeBooks’ decision hardly impacts on Amazon: loss of revenue would be negligible, and reputational damage insignificant. In conjunction with the stated operational independence of AbeBooks, it can be surmised that decision making hinges more so on financial performance than integration.
The suggestion that the closure of a third-party payment service necessitates shuttering business operations in numerous countries presents a curious justification. The proliferation of online payment services would suggest transition to an alternative would be viable, and given the impact on customers and dealers, vital. With much of AbeBooks service infrastructure aging rapidly, capital expenditure on such operational services is becoming less a luxury and more a necessity. Public information regarding AbeBooks position within the Amazon conglomerate are scarce, as the site operates as a non-core outlet of the book division, an area which is becoming less essential to the firm’s profits. In light of the acknowledged (and treasured) network benefits that pervade the book trade the decision to unilaterally discontinue business relationships in potentially profitable developing markets proves peculiar, unless significant capital expenditure limitations are assumed.
But will Amazon listen?
The impact of over 450 rare book dealers publicly denouncing AbeBooks, whilst monumental in the site’s history, is unlikely to be keeping Jeff Bezos awake at night. In assistance of the booksellers cause, however, is the distance between Amazon and AbeBooks. Such independence can see pressure directed towards AbeBooks to affect change, rather than the vast corporate machinery of Amazon. Such an operational difficulty would cut to the core of AbeBooks infrastructure, however for a corporation such as Amazon, this may only represent an annoyance. The significant hindrance, however, is the cost associated with transition in line with AbeBooks existing terms and conditions. The continuation of the marketplace will rely on a sympathetic transition to alternative payment providers, an area which dealers may have influence.
The niche trade of the rare book world survives in significant measure to collegiality and cooperation between dealers in order to achieve economies of scale reducing costs, and drawing attention. Investing to continue vendor relationships is necessary for any online marketplace, particularly in such an interconnected sector. It should be conceded that any business in a seeming contraction must make difficult decisions at the expense of its customer base, however as the leading online marketplace for rare books with an increasing pool of payment service providers the decision remains puzzling. With dealers protesting in droves via #bannedbooksellersweek, pulling books from AbeBooks and competitor Biblio leaping upon the opportunity, AbeBooks may seen this decision as a series misstep in a tight knot community. Such a decision provides a significant mark against AbeBooks commitment to the rare book trade, and one which is unlikely to be immediately forgotten.