The Economics Of Online Book Sales

from the not-what-you-might-expect dept

When e-commerce was first getting big, economists started insisting that it would commoditize everything. The fact that it hasn’t doesn’t mean that the economics are wrong – but just that the economists didn’t think all the factors through completely. For example, with all the choices you have in buying online books, you would think that it would become a market with perfect competition and price would determine everything. A new study suggests that didn’t happen. The study looks at online book sales between Amazon and and compares differences in sales when prices were changed. As you would expect, when prices go up, sales drop. However, here was the surprising part: the sales would drop by a much bigger margin at In other words, the folks there were much more price sensitive, while Amazon was able to hold onto more customers, even though the prices went up, and they were no longer the cheapest option. This is fairly easy to explain through economics, too, though. It’s just that Amazon has built up a brand and a system that add perceived value to the transaction. It’s worth more to do a transaction through Amazon because (a) shoppers trust the brand and (b) the “costs” of setting up an account elsewhere aren’t worth it. Amazon makes the transaction as frictionless as possible. Even if the price goes up a bit, it’s not so much that it overcomes the issue of going through the hassle of signing up with another site and worrying as to how trustworthy they are.

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Comments on “The Economics Of Online Book Sales”

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Alex (user link) says:

Buying eBooks on Amazon

It seems that both Amazon and are powered by the same third-party software, i.e. you download in Microsoft Reader format off some other company, which is the same for both Amazon, BN and a bunch of publishers.

I attempted to buy an eBook on Amazon once, figured out the fastest delivery possible would outweigh the high price, charged for the eBook (the same amount they charged for paper copy). Amazon managed to screw that up by not allowing me to download for some “technical reason” that was cleared off by a sales rep, when I called the customer service that evening.

The book would still not download even after it appeared in my Digital Library, as the 3rd-party server seems to push the .LIT file onto you, and the URL is embedded deeply in the page so you cannot do a “Save Link As…”. My IE simply denied having downloaded a file, searching the HDD did not show it either.

TO make a long story short, Amazon issued me a refund, and I went a got a paper copy of the same book from them.

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