In separate discussions with analysts last month, Barnes & Noble chairman Len Riggio decried publishers' discount policies that favor nonbookseller accounts over traditional booksellers, while Amazon.com chairman Jeff Bezos said he remains committed to lowering prices for books.
Riggio said he was "befuddled" by publishers giving better discounts to nonbooksellers than to booksellers. "Our argument is, if you can give better discounts to Home Depot or whomever than to booksellers, why don't you give us the same discount?" Riggio said. According to Riggio, the publishers' typical response is that they can't give B&N a better discount because then they would have to give "the little guy" a higher discount. Publishers contend that if they gave all booksellers a higher discount "they wouldn't make any money," Riggio reported. Riggio said he was "puzzled" as to why publishers charge higher prices to their biggest market than they do to marginal accounts. He rejected arguments by publishers that nonbookseller accounts are new accounts and are thus entitled to a better discount. "We're owed a fair deal. Small booksellers are owed a fair deal. All booksellers are owed more," Riggio said.
Riggio advised that "at some point, we're going to take decisive action" to remedy the discount situation. "We will try to persuade suppliers to be fair to us," he said. Riggio said B&N is not looking to "wring concessions out of people," but will simply state its case that "we think this discount schedule should apply to us because it applies to others. We're not asking for more."
Bezos, meanwhile, emphasized that Amazon's business plan calls for it to provide products to customers at the lowest price possible. He said Amazon's estimated 7% share of the book business was "about the right amount for the customer value proposition that we offer." Bezos said Amazon intends to improve the customer value proposition by making its technology easier to use and by lowering its own costs so prices can be reduced.
Bezos explained that Amazon divides the book business into two segments: books that are less than $20 and books that cost more than $20. Discounts for books below $20 don't excite customers that much, Bezos maintained, but discounts for more expensive books are a great marketing tool. By driving down its own costs, Amazon plans to "relentlessly reduce prices" on higher-priced books, Bezos promised.
