Amazon Shutters Book Depository

Published April 6, 2023

In the latest of its cost-cutting moves, Amazon has announced the closing of its global on-line bookstore, the Book Depository. effective April 26th. The announcement continues a trend of cost-cutting in the tech sector, seemingly initiated by Elon Musk upon his acquisition of Twitter. During the recent past, we have seen a softening of the tech-heavy NASDAQ index relative to the S&P 500 index; and, the failure of Silicon Valley Bank which catered to tech start-ups. Let’s talk a bit about the evolution of book-selling, and then about the evolution of the sector.

Book-selling could be said to have begun with Gutenberg’s invention of the printing press. Gutenberg’s keen insight was that a relatively small investment in movable type could be used to produce many copies once a page was typeset. A book such as the Bible formerly took a lifetime to hand copy. But, with a printing press, hundreds or even thousands of copies could be printed in a production run.

Books began to be mass produced, and also newspapers and magazines. Book publishers judged whether manuscripts could sell enough copies to justify the overhead costs of a production run. And, book stores sprang up enabling potential buyers to peruse their collections.

Books revolutionized college. Before, students would gather around scholars to hear their lectures, or observe or even participate-in the practice of medicine or of science. Then note-takers reduced lectures to writing, which were sold in bookstores near colleges. Then textbooks written by well-established professors started to accompany the lectures of courses given by them and others.

The invention of moving pictures, both for movie theaters and for broadcast, seemed to threaten books. But, the two things – print and moving pictures – worked well together. It was rather common for viewers of the evening news to also be readers of newspapers. And, just as novels were often adapted for movies, so too movies based on original screenplays were subsequently released in book form.

But the internet promised – or threatened – to change things. During the late 1990s, upon the development of the browser, there was a bubble in the stock market. Applications such as Yahoo, bringing the news and other information to people upon the press of a button, were the rage. eBay offered to connect sellers and buyers all over the world for all kinds of things ranging from unique items to mass-produced items, with prices set by the seller or determined through an on-line auction process. start-ups were often sold simply based on their ideas, without regard to profit or even revenue.

Come 2001 and the bubble burst. Valuation of companies started shifting to revenue and even to profit. Investors focused on the business model of ideas taking advantage of the opportunities offered by the internet. To make a contrast, as long as the cost of copying a book was prohibitive relative to the cost of buying it, publishers of books could make money. But, what happens when the cost of copying a book is reduced to pointing and clicking? How do publishers cover the overhead cost of producing the content of their books, to include compensating the writers and others involved? It turns out that the answer or set of answers is not yet clear.

In some cases, access to books is provided for free, thanks to the generosity of rich individuals or to crowd-funding. In other cases, advertising pays the freight. In yet other cases, paywalls reserve access to subscribers. Some websites are obviously supported in order to influence public opinion. And, since it is relatively easy to self-publish, the role of editors in screening manuscripts cannot be relied upon.

Book Depository was founded in 2005 as a London-based, on-line bookstore. It was recognized early on for its innovative approach, and was acquired by Amazon in 2011. We can surmise that, even with the economies offered by the use of computers in managing a globally-dispersed inventory of books, and shipping the same to customers worldwide, that the business wasn’t meeting its profit goals. I once heard a business person say, “We lose money on every sale, but make it up in volume.” I’ll just say, that doesn’t work in every industry. Every business, even a virtual business, has to cover its overhead, and this requires some amount of volume. Computers may enable a business to greatly reduce overhead, but they don’t completely eliminate the need for volume.

The shuttering of Book Depository doesn’t necessarily mean the end of internet bookstores. It might be part of the rationalization of internet bookstores. The typical life cycle of revolutions in business involves a start-up phase – with wide variety, high cost, and variable quality, followed by a rationalization phase – featuring standardization, low cost and dependable quality. This rationalization phase may be what we are currently seeing internet bookstores and in the tech industry in general.

As for brick and mortar bookstores, we’re seeing a different tack. Increasingly, they are moving to using their collections of books to create a environment conducive to a leisure-oriented experience. Coffee and other items are sold, inviting customers to sit for a while and maybe consider buying a book. Barnes & Nobles, the country’s largest

chain of brick and mortar bookstores, has an agreement with Starbucks for coffee shops within their bookstore. Books-a-Million, which is #2, relies on its own brand for its coffee shops.