Opinion Amazon
£2.91m
Amazon.co.uk’s 2011 turnnover
If you go into the website of
Amazon.co.uk, you think you are dealing with a UK company, but in fact, as the Public Accounts Committee found out, you are actually paying money to a Luxembourg company, even though the Amazon Luxembourg office has just over 500 employees and Amazon UK 15,000. Being based in Luxembourg rather than the UK has huge financial advantages, not least because e-books are charged at 3% VAT, rather than the 20% VAT that UK-based booksellers are required by law to impose.
Complex ownership Furthermore, Amazon’s ownership model is amazingly complex. Tis matters because such complex financial webs make it possible— should Amazon ever wish to do so— for transfer pricing structures to take place, whereby one company acquires the rights to do something and then charges another company in the group a fee. I am not sure whether such transfer pricing has actually taken place, but in Amazon’s 2011 accounts there is an intercompany charge of £151m, primarily for intellectual copyright licensed from Amazon Europe. If you then are able to bring your
profit down because of these transfers, hey, your corporation tax bill is reduced and once your cost base is reduced, you have the potential to
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visited the Amazon site”
offer lower prices to consumers. What is undeniable is that Amazon,
a Luxembourg company, pays a tiny amount of corporation tax to HM Treasury considering its enormous UK turnover. Whereas our members who pay their corporation tax to support UK PLC—and lack the means to work out sophisticated ways of reducing their tax charge—are put at a competitive disadvantage when compared to Amazon. No wonder many booksellers promoted these posters in their bookshop windows. Amazon is using its market power
to offer low prices to consumers and then to lock its customers into its own proprietary systems. Most Kindle customers—unless they are very tech savvy—end up buying their e-books from Amazon’s Kindle store. So we have a situation whereby Amazon seemingly can supply e-books to all UK & Irish booksellers’ customers, but our members cannot supply to Amazon’s Kindle customers. EPUB3 has just been approved by
the International Publishers Association as the new standard format for e-books. We believe that steps should be taken to ensure that in the future all e-book
48% of book purchasing decisions on Amazon were made before a customer
retailers—including Amazon— should support EPUB3, so that consumers can read any e-book on any device and are not locked in to any proprietary system. So with all these competitive
advantages that Amazon possess, it is no surprise that bookshops are struggling to compete. What’s more, the phenomenon of “showrooming” has emerged, where consumers are going into bookshops, looking at the books, and then ordering online.
If bookshops disappear Indeed, despite its size and clout, Amazon clearly knows the power of a high street presence. Te Christmas before last they ran a deal in the US which gave customers a 5% discount off
Amazon.com if they used the retailer’s price check app while shopping in physical stores. I hear some people asking, so
what? If bookshops can’t compete then maybe they should go. Enders Analysis found that 48% of book purchasing decisions on Amazon were made before a customer visited the Amazon site. A recent report by Bowker Market Research found that a total of 45% of purchases—where the buyer hadn’t yet decided what to
buy—were made through bricks and mortar bookshops. Bookshops are the best source of
discovery for books. Nothing compares with being able to touch and inspect before purchase. Actually, our bookshops are the only shop window that Amazon has! It needs us. If bookshops close, not only would local communities lose a cultural asset, but the demise of bricks and mortar bookshops would result in a loss of £450m in sales. So if Amazon continues its
relentless expansion, there will be— without question—fewer bookshops. And fewer publishers. And fewer agents. And after eliminating the competition—not only booksellers but publishers as well—Amazon would be in an extremely strong position to dictate terms. In such a dominant position, book prices could well go up, consumers would face less choice in supply, and communities would lose their local bookshops. In the long term, consumers will be harmed if we have a less diverse marketplace. As Douglas McCabe from Enders
Analysis said: “Tere is almost nothing that can be done to sustain the health of the network of bookshops that should be collectively considered too extravagant ”.
Tim Godfray will be speaking today at Te Great Debate: Amazon—Friend or Foe, 11.30, Conference Centre 1 & 2.
24 THE BOOKSELLER DAILY AT LBF | 15 APRIL 2013
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