Skip to main content

Amazon's monopsony

In an interesting blog post by Paul Krugman this week, he lays into Amazon and the power that it wields in the books marketplace today. Amongst many other points he makes, he mentions that while Amazon is not a monopoly in trying to use its power as a dominant seller to increase prices but instead, is a monopsony - using its power to keep prices low for its customers. In the particular example of Amazon v/s the book publisher Hachette, Amazon was able to squeeze the publisher into giving a larger share of the book sales to Amazon by disrupting the sales of their books on its website. Books from Hachette would take longer to be delivered when compared to books from other publishers and such. Amazon used its power to influence the market place to benefit itself and also its customers.

In the Indian landscape, Amazon has not yet achieved the kind of power that it ostensibly wields in the American market place. E-commerce websites such as Flipkart, Snapdeal and even Junglee were already present before Amazon made its entry. Flipkart, in fact, started off much like Amazon did. At its inception, it was exclusively an online books e-store offering fabulous discounts and speedy delivery. Today, Flipkart offers a range of items such as household goods, accessories, computers, etc. Where earlier Flipkart would source the books directly for its customers, it has now evolved into a model very similar to Amazon and Snapdeal - it provides a portal for sellers to reach their customers. 

At least thus far, in India, I have not seen a situation such as the one described by Krugman, emerge. The likelihood of that happening, of course, does remain. Book publishers here would do well to pay attention to the Hachette case and learn from it. The power that Amazon and Flipkart wield in the Indian book market place must not be discounted. In cities such as Bangalore and Hyderabad, the number of brick and mortar book stores has declined. Stores such as Reliance Timeout have gone out of business. While I am not privy to the reasons for their closure, the online book sales must have affected their sales in malls and the RoI for a store in a busy locality with high rentals. If the two companies so wish, they could squeeze Indian publishers in a very similar way that Amazon did with Hachette. 

A corollary to the books is with Mobile phones. Recently, Moto phones have been launched exclusively with Flipkart. How the sales of other phones would have been impacted due to the promotion given to the Motorola phones on Flipkart is worthy of a case study. If Flipkart were the sole dominant player in the e-commerce space in India, we would be hitting the same Amazon-like scenario seen in the US, in India. More the reason to cheer for Competition!
Labels:

Comments

Post a Comment

Popular posts from this blog

Leadership - Trump style

One of the latest tirades from Donald Trump was against Lebron James.  I have been thinking of his style of functioning and that of the "traditional" style of leadership. All the books that I have read on leaders, all the leaders that I have seen, are more or less, role models. At the very least, they offer words of wisdom and speak what I like to call, "The Universal Truth". Take Barack Obama - I am no expert on his policies or the impact that he had on the economy of the United States or that of the world. I was always impressed with the way he carried himself and the way that he spoke. His handling of particularly volatile situations seemed to always be in a calm and measured method. Mr. Trump, on the other hand, comes across as very petty, impetuous and pusillanimous. Trump is the President of the United States of America. Arguably, one of the most prominent jobs in the world and definitely a job that is not easy. There, we have a person who is cheap enough ...
Post a Comment
Read more

The Great Debaters

I watched the movie - The Great Debaters (released in 2007), directed by and starring Denzel Washington. In my opinion, he is one of the best actors in the world at the moment. The movie is inspired by  a true story that took place in the year 1935 when a small school in Marshall, Texas broke new ground in debating against the top white colleges of the time and won. Like most Denzel Washington movies, the movie was excellent. The actors and the depiction of the time - 1935, is supreme. In the movie, the character Melvin Tolson  narrates a story about the origin of the word "lynching". He says, " Anybody know who Willie Lynch was? Anybody? Raise your hand. No one? He was a vicious slave owner in the West Indies. The slave-masters in the colony of Virginia were having trouble controlling their slaves, so they sent for Mr. Lynch to teach them his methods. The word "lynching" came from his last name. His methods were very simple, but they were diabolical.  Keep ...
Post a Comment
Read more

Honor "No"

As a child, the Amar Chitra Katha was a major source of Hindu mythological stories. The stories often dealt with the kings and queens of the years gone by, part mythological and part historical. Now, the kings, being kings, would order things done and voila! there it would be. One such story narrated the happenings - the king would only have to shout, "Who is there?!" and there would be a few courtiers, soldiers that would come running to receive his orders. Nowadays, if I were to shout "Who is there?!" at home, I would hear back: "What is wrong with you? Who else will be here?" Indication enough that I am best off doing what ever task there was to be done, by myself. Move to the office, shouting "Who is there?!" whenever a task needs to be done urgently will return inquisitive looks from all within ear shot. Of course, the source of enormous levity at dinner table conversations at all the employees' homes would be an appreciable side ef...
1 comment
Read more