February 5, 2014
Why has Amazon’s growth slowed in the UK?
by Zeljka Marosevic
According to accounts filed by Amazon in the US, Amazon UK’s sales growth slowed in 2013. Although UK sales grew by 12.6% to £4.5bn last year, this marked a major decline from the 21% growth that the tax-dodging company enjoyed between 2011 and 2012.
The Bookseller reports that, “taking into account changes to the exchange rate, UK growth is estimated at 14% on a like-for-like basis, down from 22% in 2012 and 31% in 2011.” Such figures show a steady decline since 2011. Although these figures don’t explicitly express the development of its book business, Philip Jones, writing on the Bookseller’s Future Book Blog, notes that Amazon media sales have also slowed. Last year, “growth in its international media business fell from 55% in 2011 to 23%”.
So what’s happening? Are consumers finally reacting to the cold hard facts that Amazon continuously exploits its workers and is out to destroy any business that stands in its way? A blog post by Agent Orange on the Bookseller mentions a great publishing quote from “an unnamed New York publishing executive who said of Jeff Bezos “when you come into work every day with an axe, after a while everything begins to look like a head”.” But are heads finally turning away from Amazon?
It’s interesting to note that in the the Bookseller’s Independent Christmas Trading survey, 77% of independent booksellers reported that customers had become more aware of the need to support their local independent bookshops due to the heavy coverage of Amazon’s borderline illegal employment practices (which we covered here) and their continued tax-dodging, which we’ve mentioned a few times before.
But it would be naïve to believe that negative media and increased consumer-consciousness is the main reason Amazon’s growth has slowed. Retail analyst Nick Bubb told the Bookseller that other retail rivals are finally catching up with Amazon’s online offerings, with “Dixons and John Lewis upping their game and initiating web services like “click and collect’”.”
However, there’s something even bigger lurking behind the figures, which suggests that even Dixons and John Lewis have adapted too late. Because while they grapple with how to sell physical products in a virtual market-place, Amazon’s figures show that it is already leaving the physical behind. As Philip Jones writes, while “last year overall product sales grew 18%, sales from services were up 45%.”
We can already see evidence of this. As we reported on MobyLives in January, Amazon UK has begun charging delivery on smaller items in order to push customers to its Amazon Prime scheme, which offers over 350,000 kindle books to borrow for free. Instead of continuing to entice readers with cheap physical books, it’s now pushing them towards an annual subscription service, through which it can deliver a whole host of digital media.
Jones quotes a frightening recruitment notice issued by Amazon this month: “We are working on a new revolutionary V1 product that will allow us to deliver Digital Media to our customers in new ways and disrupt the current marketplace.” This suggest that Amazon isn’t slowing down, it’s changing direction.
But we might take comfort from something noticed by Nate Hoffelder on The Digital Reader about Amazon’s press release for its year end report:
“There’s no mention of how many tablets and ereaders Amazon sold, and there’s no mention of how many ebooks they sold, either. Those are telling details, IMO, and they could be saying that Amazon’s hardware efforts and ebook efforts have peaked.”
Amazon’s secretive approach to data, sales and profits is frustrating, but we have learnt to glean some information from the known unknowns they leave us with. In Amazon’s end of year report they mention everything that went well, but their failure to mention Kindle data suggests they have something to hide, and that could be, as Hoffelder suggests, because sales have “peaked”. Why wouldn’t Amazon mention sales figures if they were great? This possibility is backed up by reports from the big five that the rate of ebook growth is finally slowing after a few years of accelerated growth. Since Amazon is the biggest retailer of ebooks, this has to mean they’re selling fewer than before.
Jones predicts that this will be a good moment for publishers to get a better grip on what they can do themselves to grow sales, and for new competitors to enter the field. Allowing other players into the ebook market could result in a healthier and more diverse terrain, with a chance for realism to prevail over previous trends of slashing prices and deep discounting. Publishers should also use the opportunity to reflect on what readers actually want, and what would be worthwhile developments for books and reading in a digital landscape. Amazon has shown us one way, but now it is time to try others.
Zeljka Marosevic is the managing director of Melville House UK.