He became inspired by Walmart’s example of delivering low prices to customers and profits to shareholders by wringing every dime possible out of suppliers. By 2004, Amazon had acquired significant market power. It then began to squeeze publishers for more favorable financial terms. If a book publisher did not capitulate to Amazon, it would modify its algorithms to reduce the visibility of the offending publisher’s books; within a month, “the publisher’s sales usually fell by as much as 40 percent,” Stone reports, and the chastened victim typically returned to the negotiating table.
.. “Bezos kept pushing for more” and suggested that Amazon should negotiate with small publishers “the way a cheetah would pursue a sickly gazelle.” This remark—a joke, one of Bezos’s lieutenants insisted—yielded a negotiating program that Amazon executives referred to as “the Gazelle Project,” under which the company pressured the most vulnerable publishers for concessions.
.. Bezos decided to break away from Shaw to start a prototype, but he “concluded that a true everything store would be impractical—at least at the beginning.” He therefore analyzed twenty possible product categories for his new company, including clothes, software, music, and office supplies. According to the principles of mathematics, physics, and finance Bezos applied, books were the best choice. They were “pure commodities” in the sense that a book in one store was exactly the same as a book in another. They were easy to pack and hard to damage. And “there were three million books in print worldwide, far more than a Barnes &Noble or a Borders superstore could ever stock.”
.. In fact, the publishers had been snookered. Amazon had pressured them to convert their inventory to digital forms without telling them what pricing they would have to swallow.
.. Yet according to his friend Nick Hanauer, as quoted by Stone, Bezos exercises every morning because “he absolutely thinks he’s going to space.”
.. Like other Silicon Valley disruptors, Bezos’s impatience with publishers can sound like contempt.
Amazon Escalates Its Battle Against Publishers
The retailer began refusing orders late Thursday for coming Hachette books, including J.K. Rowling’s new novel. The paperback edition of Brad Stone’s “The Everything Store: Jeff Bezos and the Age of Amazon” — a book Amazon disliked so much it denounced it — is suddenly listed as “unavailable.”
.. Amazon, which is under immense pressure from Wall Street to improve its profit margins, is trying to get better terms on e-books out of Hachette, the smallest of the top five New York publishers, as well as Bonnier.
.. For several months, Amazon has been quietly discouraging the sales of Hachette’s physical books by several techniques — cutting the customer’s discount so the book approaches list price; taking weeks to ship the book; suggesting prospective customers buy other books instead; and increasing the discount for the Kindle version.