Amazon policy chief says physical bookshops are 'natural growth’

Amazon will see how customers respond to its Seattle bricks and mortar store before considering opening any in the UK, its vice president of global public policy has said.

Paul Misener gave evidence at the department of Business, Innovation and Skills’ (BS) Digital Economy enquiry on 8th March, in which he was called to speak on a wide variety of topics including Amazon’s approach towards UK publishers and whether its low rate burdens were fair in comparison to those incurred by physical retailers. He also defended the use of the Most Favoured Nation clause in publisher e-book contracts (currently under investigation by the European Commission) as a way of preventing "collective action" by publishers.

When the committee asked about whether the company had any plans to open a brick and mortar store in the UK as it did in Seattle in November, Misener said he had “nothing to announce” but added: “Let us see what happens.  Let us see if our customers like it.  Hopefully they will like the experience in our physical store there in Seattle.  After all, innovation is about something you hope your customers will like.”

UK indie booksellers have previously reacted with “horror” to the idea of Amazon opening a physical bookshop in the UK, while James Daunt, m.d of Waterstones, has told The Bookseller if the company was to open shops in the UK selling books at its website prices then “the only sensible answer for me would be to send them my CV.”

However, when Edinburgh MP Michelle Thomson asked Misener whether Amazon's rumoured plan to open between 300-400 stores in the US was part of Amazon's "future plans for world domination?” Misener said: “No, it is not part of those plans.  The opening of a physical bookstore took some people by surprise.  It is just a natural growth of wanting to serve our customers…We did not view that as such a big deal.”

The Amazon global policy chief went on to say that the company was not responsible for the downfall of independent bookshop numbers – which have fallen by more than half in the past five years and now stand at less than 900 – saying Amazon employees “loved” books.

“We are bookish people: we love our books; we love bookshops,” he said. “We have done what we can to help them (independent bookshops) sell through us to reach markets well beyond where they could reach currently." 

He went onto say: "Much of the demise of the small bookshop occurred before Amazon was a factor; it occurred largely because of big box retailing.  Since then we have endeavoured to help bookshops in a way the big boxes have not... Many of the tens of thousands of third party sellers who sell through our website that are based in the UK are bookshops.  We are giving them a reach that they did not have before and a reach that others have not given them.”

Misener also faced questions about the fairness of the rates Amazon has to pay in comparison to rival brick and mortar bookseller Waterstones.

Bedford MP Richard Fuller said: “We are lucky enough to have a distribution centre for Amazon quite near my constituency, Marston Gate Distribution Centre, which is 67,000 square metres and pays £52.50 per square metre in business rates. In Bedford we are also fortunate to have a Waterstones bookshop. Its adjusted business rates are £850 per square metre.  That is 16 times what you pay per square metre at Marston Gate.  Is that disparity sustainable?”

In response, Misener said that the disparity was “a challenge and choice for policymakers to make” but when pressed to give his “advice”, he said: “…take a long hard look at it. You have a very hard job. The policy choices that face you are very difficult. We will pay whatever you come up with in these business rates.”  He added: “The challenge that you face is not binary; it is not one kind of business model versus another. There is a real challenge: what about the companies that are bricks and clicks.  What about those that have some facilities in downtown Seattle and other distribution centres elsewhere? It is a real challenge; I acknowledge that. I confess I do not have the answer. We will pay whatever you end up requiring.”

The BIS committee also challenged the Amazon policy VP on the company’s approach to UK publishers, referring to a survey conducted by the Booksellers Association which revealed 42% of publishers said Amazon had prevented them from offering a better deal to another retailer in the last two years.

Sheffield MP Paul Blomfield challenged: “You present a very benign impression of your operations: encouraging competition, happy to see people undercutting you… How does (this statistic) fit in with the impression you have tried to give us of your business?”

Misener said he wasn’t “sure exactly about the statistics that you cite”.  But said: “We work with publishers.” When pressed, he added: “We have MFN (most favoured nation) clauses with respect to e-books and e-books alone. Those MFN clauses cover pricing and other characteristics—release dates and those sorts of things…E-books are different from physical books.”

Misener said the MFN clauses were about keeping publishers from acting in concert: "It is largely because of the opportunities for, frankly, collective action on their part. You may have seen yesterday the US Supreme Court refused to hear the Apple appeal.  This is an appeal of a settlement that was reached a couple of years ago with the American Department of Justice in which Apple agreed to pay $450 million because of the accusation that they had colluded with major publishers to keep e-book prices high. E-books are different from physical books."

And he added: "In the context we recognise, like our customers do, an electronic book simply ought to cost less than a physical book. There is not the paper, ink, storage or shipping—all those things that go into a physical book. It ought just to cost less. We really have had some fairly high-profile negotiations with some publishers over the last few years with respect to e-books."

However, Blomfield continued to press Misener on the company’s approach to independent publishers, citing a comment Amazon c.e.o Jeff Bezos is understood to have made when he said: "Amazon should approach these small publishers the way a cheetah would pursue a sickly gazelle". Blomfield asked Misener: “What does that say about your business? What did he mean by that?”

However, Misener responded by saying he was “not even sure that quote is real”, but added, “but let me tell you how we think about working with our publishers.  The publishers are going to be around for a long time.  They provide a great service.  We work with them, and for the foreseeable future they will be partners in business with us”.

He added: “We have also started self-publishing options for authors to be able to avert the gatekeeping function that publishers of necessity have… We have started self-publishing options for authors just to avoid that very necessary gatekeeping function.  We see these as symbiotic relationships where we are continuing to work with the publishers but also allowing authors to have self-publishing options available.”

Chair of the BIS Committee, Hartlepool MP Iain Wright, meanwhile, said he had read Brad Stone’s The Everything Store (Little, Brown), an insider’s guide to how Amazon operates, and quoted a review of the title by the London Review of Books, which said: “With lower prices you’ll get more customers; with more customers you can push suppliers to lower their prices, which will let you lower your prices even further, thereby attracting more customers; repeat until your competitors are dust”.  

Wright asked: “Is that a fair summary?”

But Misener was adamant it was not, saying: “No.  No.  It is an interesting viewpoint of things, but it is simply not the way we operate.”

Misener also pointed out that ONS statistics say that around 13%-15% of the UK population shop online, which indicated that around 85% or 87% of retail sales in the UK are offline.

“This very much contrasts with some of the predictions that I have seen over the years,” Misener said. “When I joined Amazon in late 1999/early 2000, there were predictions at the time that within five years online commerce was going to be something of the order of 30%, even as high as 50%, of retail.  Here we are; it is not five years later and we are not saying it is a third or a fifth, but 15 years later it is a seventh.  That in itself is remarkable.”

He also said that the UK was taking a “leading role” in online shopping. “I am not sure it is clear, but that 13% is the highest in the world,” he said. “The United States is aspiring to double digits; in the US we are somewhere of the order of 9% or 10%; Germany is around 8% I believe, and the EU average is lower than that.  The UK is to be congratulated for policies that do encourage e-commerce.  You are doing very well.”

C.e.o of the British retail Consortium, Helen Dickinson, also gave evidence to the committee. She said: “…It is not a case of bricks versus clicks.  When we think of retail now, it is absolutely that the channels are completely blurred, certainly from a customer point of view.  If you think about how any of us as shoppers shop these days, we are as likely to go into a store and buy something as we are to do some research online and then go into a store, or to buy something online and either have it delivered or click and collect..There absolutely will continue to be physical stores and high streets that include stores on them, but they will be different from what we have seen in the past.”

Picture: Office of Chris Christie/Tim Larsen