In perhaps its most definitive statement to date that it has bigger plans than to be merely Earth's Biggest Bookstore, Amazon.com has thrown open its virtual doors to merchants of all types and sizes.
At a press conference in New York City, company founder and CEO Jeff Bezos unveiled zShops, a program that allows anyone to host a retail site on the heavily branded and trafficked Amazon.com Web page. Through the use of Amazon Payments, credit-card transactions can then take place between vendor and buyer. And the "All Product Search" feature will allow customers to find goods that meet their exact specifications with a simple keyword search. Amazon.com will collect a flat monthly fee for each posting, as well as a percentage of each credit-card transaction it handles.
The move will accelerate exponentially Amazon's shift to a broader product mix, which began with music and videos and has continued with the sale of electronic devices and toys as well as links to drugstore and flower sites.
"We've sounded like a broken record for a year, saying that we'd like to become the one place on the Web where people can go to get anything," spokesman Bill Curry told PW. " 'Anything' is a big category. You're never going to be able to do it all yourself. You may need tens of thousands of other people who are offering a universal product selection." There are currently 500,000 different products available on zShops, said Curry, "running the gamut from Buffalo steaks to time-share apartments." Despite the relative small size of Amazon's book business compared to the rest of its commerce now, there is no reason to believe that the book aspect will be reduced.
Although bookstores can also participate in zShops, Curry said that only one, a used bookseller, had signed up thus far. It is unlikely that too many booksellers would wish to get involved with the overwhelming selection that Amazon's Mall of America-like atmosphere provides.
Though it has some similarities to a program it began years ago for small publishers and authors, Amazon Advantage, zShops runs against the grain of Amazon's recent strategy to build a distribution infrastructure, and in doing so brings Amazon closer to its roots as a traditional Internet business with little overhead. It could also undermine the company's own attempts to sell a diverse array of products, as well as its ambitious initiative to take on eBay and the Internet auction world.
All these questions were overshadowed on Wall Street by a euphoria over the retail possibilities -- when zShops was announced on Wednesday, investors sent the stock soaring to more than $80 per share, a gain of nearly 25%. -- Steven M. Zeitchik
4 New Perseus Sales Structure Sets Stage for More Growth
Jim Milliot
In what its president and CEO, Jack McKeown, termed a watershed event, the Perseus Books Group has revamped its sales operations, the highlight being the creation of its own national accounts sales force. The new sales group will call on eight national retail and wholesale accounts that represent well over 50% of Perseus's total revenues. HarperCollins reps will continue to call on the rest of the wholesale and retail universe and perform all warehousing, fulfillment and distribution services. The new agreement took effect October 1 and will last a minimum of three years.
McKeown told PW that Perseus had been waiting until it had achieved a "critical sales mass" before establishing its own in-house sales force. "This move signals that we are ready to go to the next level of growth," McKeown said. Since its formation two years ago, the number of Perseus employees has increased from eight to 160. The company is currently publishing 350 titles annually, with a backlist of 3500 that "contains no deadwood," according to McKeown. Sales increased 40% in 1998, and McKeown predicted that revenues will grow by a similar amount this year. PW estimates that Perseus's total sales are now approximately $60 million, with backlist titles accounting for more than 55% of revenues.
According to McKeown, Perseus's business model, which focuses on individual publishing operations while centralizing certain services, has worked very well. "What other publisher has editorial operations in New York, Cambridge, Washington and Boulder?" McKeown asked. Each location serves as the site for specific services; Cambridge houses all promotion and sub rights activity, while all MIS and production are done in Boulder. New York houses editorial as well as corporate functions. "We now have a platform to build on through organic growth, and we will continue to aggressively acquire companies for the next several years," McKeown told PW.
It is McKeown's contention that the consolidation among the large publishers has created many niche opportunities for companies such as Perseus: "With the mergers, a number of imprints have become undervalued in a corporate setting. We offer a fresh alternative." While the majority of Perseus's list is nonfiction, McKeown said he "would love to acquire a quality fiction house," noting that Perseus already has its own plans to expand its fiction output through Counterpoint. Another internal initiative for 2000 is to use Da Capo Press to do more original trade paperback publishing. With such a strong backlist, Perseus is also exploring the possibility of creating its own on-demand publishing program. Currently, Perseus has about 200 books in Lightning Print's program.
Two firm believers in the Perseus business model are Peter Osnos, publisher of Public Affairs, and John Donatich, publishing director of Basic Books. Osnos asserted that Perseus's success "has shown that it's possible to publish high-profile major nonfiction books without being a huge multinational publisher." Furthermore, Perseus has proven that so-called midlist titles can be published profitably. "The books were not the problem; it was the system that was broken. The system created an environment where [midlist] titles were doomed to be buried by high overhead costs," Osnos explained. Perseus's publishing units have lean management, tight market focus and don't invest in "lavishness," Osnos said, adding that Public Affairs treats each title "as an entrepreneurial opportunity. About half of the titles on Public Affairs' spring list were done in cooperation with a partner."
Both Osnos and Donatich attribute Perseus's success in part to its partnership with HarperCollins. "We're benefiting from the reinvigoration of Harper," Osnos said. "Harper is a good bag to be in," agreed Matty Goldberg, v-p of marketing for Perseus.
Although Perseus has had six bestsellers over the last two years, Donatich said he is more encouraged by the number of titles for which print runs have increased over time. Why Are All the Black Kids Sitting Together in the Cafeteria? went from a first printing of 2500 copies to 28,000 copies, while Uncommon Grounds sold more copies in August than it did in April, when it was released, Donatich noted. "We'll put money behind a title that has momentum," Goldberg said. Donatich considers Basic's current hot book, The Sword and the Shield, to be a perfect Basic book. "Its foundation is in academia, but it appeals to a broader audience," he explained. Donatich is also a fan of the Internet as both a medium to spur book sales and as a marketing opportunity. The Public Affairs bestseller Blind Man's Bluff got its start on the Internet, and between 10% and 12% of its sales were made through Amazon.com.
In addition to Sword, another major title for Perseus this fall is Africana: The Encyclopedia of the African and African American Experience, with a first printing of 85,000 copies. A CD-ROM already exists, and other spin-offs are planned.
According to McKeown, Perseus is both "cash positive and profitable." Osnos added that by keeping operations in line with real expectations, "Perseus can flourish without praying for rain."
