Amazon, Destroyer of Worlds:

If Amazon does have an evil Part B to its plan where it uses its monopoly status to jack up profit margins, that at least gives competitors a fighting chance. The real risk is that “sell the devices at cost and make it up on ebooks but wait we don’t make profits on those either” is all there is to the plan, and Amazon’s investors have just unleashed a storm of locusts on the world that will ruin everyone else’s profits.

But for consumers it’s great. An Amazon Prime membership is the most outrageously good deal in commerce today. But competitors should be afraid. It’s an amazing deal and you can’t beat it precisely because Amazon can’t make it work either!

He had me at “storm of locusts.”

I’m hoping the argument Charlie Stross made in the blog post quoted in your link gets more attention. http://www.antipope.org/charlie/blog-static/2012/04/understanding-amazons-strategy.html

He argues that the publishers handed Amazon a monopoly by insisting on DRM. DRM is one thing that locks consumers into Amazon’s platform. And that the publishers only hope now is abandoning DRM.

There is no indication whatever that the (optional) availability of DRM on Kindle books has anything to do with publishers’ choice of Amazon for e-books. In fact, many publishers simultaneously sell e-books in other formats in addition to or instead of Kindle. There’s no reason not to. Nobody’s locked into an Amazon format. (Although there are a few promotional programs at Amazon that require the e-book to be available only on Amazon for the days or weeks of the special promotion.)

The vast majority of books sold are still print books, on which there is no DRM. Yet Amazon has made heavy inroads on print bookstores by price cutting and because Amazon sells many other kinds of merchandise (see below). This appeals to customers a great deal, and it enables Amazon to use some items as loss leaders and still make a profit on many other items. Amazon isn’t a bookstore. it’s a huge department store, where you can buy books, electronics, groceries, clothes, sewing machines, and a million other things at any hour in the 24, put them into one virtual cart, and get free shipping for all purchases (or groups of them) that cost over $25. All with the options of two-day shipping, the use of an Amazon Visa card that gives “points” for purchases on Amazon and elsewhere, and other conveniences.

Amazon buying at wholesale and selling at retail is not “disintermediation.” It’s what all standardly do, including but by no means limited to bookstores. This is not a new business model by a long shot. Amazon is not eliminating a middleman—it just set itself up as one (a store). Just as Joe Doe would be setting himself up as a middleman if he started a brick-and-mortar bookstore, ordered his books from Ingram (by far the largest book wholesaler in the US; Amazon is not a wholesaler), and sold them to walk-in customers in his community.

Even special ordering books for customers is not new—the better independents did it for a very long time, and even the big chains did it to some extent.

It might be argued that Amazon Marketplace is a kind of disintermediation, since it enables individuals (as well as numerous businesses, not all small) to sell books and many other things direct to other individuals. Then again, so do eBay, Etsy, Craigslist, and numerous other places on the net.

Stross’s argument doesn’t hold water, because publishers don’t feel tied to Amazon in the first place. And he is ignoring the fact that consumers shop at Amazon because Amazon has made shopping very attractive in terms of price, availability, fast shipping, and general convenience.

Even special ordering books for customers is not new—the better independents did it for a very long time, and even the big chains did it to some extent.