Amazon's Ebook Returns Policy Is A GOOD Thing. Here's Why.

Recently some indie author friends have become so outraged by ebook returns that they're trying to organize and bring pressure to bear against Amazon to eliminate its 7-day return policy on Kindle books. There are other vendors who allow returns as well, and I'm sure this same group will be targeting those vendors in due time.

The main reason why this group of authors is so upset is that they're watching their online, real-time royalty reports very closely, and making financial decisions for themselves and their households based on the "sales" they see reported there.

However, as any mainstream-published author already knows all too well, until net royalties for book sales are actually paid they are subject to change, and a large quantity of returns can easily bring your royalty statement for a given 6-month period into the red. The same is true of returnable self-published books, but these authors don't seem to get that, or if they do get it, seem to think it's unfair.

And so they've taken to social media to try and raise the visibility of this issue, to nudge their fellow authors into taking action intended to eliminate legitimate, vendor-sanctioned ebook returns. In my opinion, what they're doing is a big mistake and if they succeed in getting vendors to eliminate ebook returns, it will be bad for all authors who have ebooks on the market.

Amazon's 7-day return policy seems to be the biggest target here, so I'll address my remarks to that specific vendor. But I think the points I'm about to make here are equally applicable to any ebook return policy.

I am *in favor* of Amazon's 7-day return policy on Kindle books. Here's why:

1. Hard copy books can generally be returned up to 30 days after purchase---longer, if you bought them someplace like Target. Therefore, as a consumer and reader, I don't see why ebooks shouldn't be returnable as well. Why aren't all of these same authors up in arms about return policies on hard copy books? I'm all for removing barriers to ebook adoption, and one major barrier is consumers' perception of value, that an ebook is somehow inherently inferior to, and less valuable than, a hard copy book. Elimination of ebook return policies makes ebooks economically inferior to hard copy books, from the consumer perspective.

2. Returnability removes the risk for buyers who might not otherwise take a chance on a new author.

3. People who want to game the system will always find a way, and it doesn't make sense to take these first two benefits away from readers (and authors) for the sake of trying to do battle with the scammers. Take returns away, and the scammers who are abusing the returns system will just go back to outright piracy. Meanwhile, you've given paying customers some good reasons not to take a chance on your ebook.

4. I don't believe most people DO read a book within 7 days of purchase, nor do I think most readers WANT to be put under that kind of time pressure. Those who are willing to read EVERY Kindle book they buy within 7 days are already paying a significantly higher cost than the price of the book in terms of convenience.

Classic case of penny-wise, pound-foolish. True, the dishonest buyers' inconvenience does not put money into authors' pockets. But this just underscores my point about people who are looking to game the system. People who are willing to put themselves out like that to save three bucks or less are not a desirable target demo. I don't want them to be my fans because they're not truly invested in my work in any sense of the term, and never will be.

5. Regarding the "missing" or "stolen" royalties issue, I know this will sound harsh, but authors shouldn't be counting their chickens before they hatch, anyway. Until I actually get a royalty transfer into my bank account, I know those figures I see in the KDP reports are fluid and subject to change. KDP authors still have it better than mainstream-pubbed authors, who must wait a year or longer for the first royalty check and only get them every six months thereafter.

My Indie Author Guide STILL hasn't 'earned out' (the collapse of Borders meant thousands of returns), and it was published in November of 2010.

6. Contrary to what these agitating authors seem to think, those ebook returns do NOT represent lost sales. The people who are motivated to steal books or anything else never intended to pay for those things, and never would have paid for them. This argument from the authors is like a bank manager thinking that if only the bank robbers could've been talked out of their heist, they would've opened accounts at the bank and become customers.

Pirates and thieves are pirates and thieves, period. It's just a question of how they get the books for free: illegal download, or return policy abuse.

7. Some of the authors who are speaking out about this are suspicious that there are actual, organized groups promoting the practice of return abuse as a means to get free ebooks. But even if there ARE groups of people who've organized to promote theft, well...so are pretty much all piracy groups. There's no way to stop all piracy, and if people are abusing Amazon's returns policy, it's just another form of piracy.

8. Again, I know I'm about to sound really harsh, but the realities of business ARE sometimes harsh and that doesn't make them any less real: Ignorance is not a defense here. Anyone who's self-publishing for profit has a duty to read, and ensure they not only understand but agree with, any contracts they're signing, and that includes KDP terms of use and Amazon's ebook listing and sales policies.

If you don't like Amazon's ebook returns policy, you shouldn't publish there or list your ebooks for sale there.

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Personally, I share Neil Gaiman's view on piracy: I don't care how people initially discover me, because once they're fans and are able to pay, they will. And in the meantime, they'll be spreading the word about me and my books. You may disagree with this stance, or even feel it's naïve. But the bottom line is the same, regardless of anyone's opinion about it: thieves will ALWAYS find a way. Hassling your paying customers and fans in an effort to discourage thieves will NEVER stop the thieves, but it is LIKELY to annoy customers and fans, resulting in TRUE losses in sales and new fans.

Has consumer hatred of DRM taught us nothing?

Amazon vs. Apple And The Agency 5: Let's Get The Facts Straight

Given that anyone who reads my blog is an author, publisher, or otherwise involved in the book business, I don't think I need to trouble myself with recounting every detail of how the U.S. Department of Justice came to charge Apple, Inc. and publishers Macmillan, Penguin, Hachette Group, Simon and Schuster and HarperCollins with collusion to fix ebook prices. But judging by the many hysterical, righteous articles and editorials I'm reading in the wake of antitrust charges being filed and three of the five named publishers promptly settling out of court, there's plenty of inaccuracy and flawed logic out there that needs to be addressed.

1. Before Apple and the Agency 5 publishers established their Agency Pricing plan, Amazon was hurting publishers' bottom lines by offering their Kindle-format bestsellers at a discount price. Publishers had to do something to stop Amazon from doing this, so they could earn enough money to cover their expenses and still earn a modest profit.

FALSE

Prior to Agency pricing, publishers sold their Kindle-format books to Amazon under the same basic wholesale terms they used to sell their hard-copy books to Amazon. Publishers set a suggested retail price for the public, but sold each copy to Amazon at a lower, wholesale price that generally constituted 60% of the suggested retail price. That percentage is standard across the industry for all booksellers, and is fixed regardless of the price at which a given book, digital or hardcopy, actually sells.

This means that if the publisher set a suggested retail price of $20 for a given Kindle book, Amazon had to pay the publisher $12 per copy sold. Even if Amazon elected to sell those books at a discounted retail price of say, $9.99, it still had to pay the publisher $12 per copy sold. Most of the mainstream Kindle bestsellers Amazon was selling at $9.99 were being sold at a loss to Amazon, but publishers still earned the same cut as they would if Amazon hadn't discounted.

2. If Amazon is allowed to offer mainstream bestsellers as a "loss leader" product, it will soon have a monopoly over ebook sales in general and will then demand that publishers accept a lower cut on each copy sold---and in fact, they are already starting to do this with their 2012 vendor contracts with publishers.

FALSE

While it's true that Amazon's 2012 vendor contracts do charge higher prices for on-site promotion than in prior years (though specific details of the new contracts have not been publicly disclosed), no one is claiming Amazon is demanding any decrease in the publishers' usual 60% cut. It's unclear whether publishers can opt out of the on-site promotion, but still offer their books for sale on the site.

3. Amazon has already driven most of its competition out of business through predatory pricing tactics.

FALSE

While it's true that Amazon operated at an annual, multimillion dollar loss for its first five years in business (as detailed in the documentary film series, Nerds 2.01: A Brief History of the Internet, 1998), during which time it was primarily a bookseller, the primary reason for its losses had to do with the usual business startup expenses, plus Jeff Bezos' very ambitious growth and expansion plans for the burgeoning e-tailer. Amazon spent immense quantities of cash on advertising and setting up a nationwide network of fulfillment centers in those early years.

Amazon also invested heavily in making its customers' buying experience the best it could be. Recall that Amazon launched at a time when online shopping was far from typical, and most consumers viewed online stores with suspicion, fearful that their credit card and other personal information couldn't possibly be kept secure online. A second obstacle to overcome was consumers' habit of instant gratification: why buy online, which is essentially no different from mail-ordering, a product one could buy in any local store? Amazon had an answer to both issues.

First, it could afford to offer products at a lower retail price because its overhead costs were much lower than those of a brick-and-mortar store. Warehouse space is cheaper to buy or rent than retail space, and fewer workers are needed to run a fulfillment center than to staff a retail store; much of its processes could be automated.

Of course, a lower retail price is meaningless if the difference is made up in shipping expense, and the customer has to wait for his purchase to arrive in the mail to boot. Amazon's answer to these two problems was to frequently offer free shipping, and (for its first couple of years in business) to ship every domestic order out via Federal Express, regardless of whether or not the customer opted to pay for expedited shipping, as a standard practice. Remember that?

These were strategic moves aimed at establishing the internet as a safe place to shop, and Amazon as a trusted retailer in the minds of consumers. Of course Amazon also wanted to become a preferred retailer in the minds of consumers, but that's true of any retailer. If its mail-order business model is simply more financially efficient and convenient for customers than brick-and-mortar shopping, that's more the natural outcome of a major technological and cultural shift than the result of any targeted, purposeful attempt to drive all competitors out of the marketplace. As plenty of others have observed, I'm sure the buggy whip manufacturers were pretty angry when automobiles became the standard mode of transportation, too.

4. Amazon is now in a position where it can strong-arm publishers into whatever pricing and sales terms it wants, slowly bleeding those publishers to the point where they can no longer survive.

FALSE

Publishers are no more dependent on Amazon for their survival than computer manufacturers are dependent on Best Buy for theirs. Publishers are free to enter into direct competition with Amazon by pulling all their titles from the site and selling them exclusively through their own online stores and selected brick and mortar outlets, such as Barnes and Noble, Target and airport stores. Computer and other manufacturers have long offered direct sales to consumers through their websites, and there's nothing stopping publishers from following suit, other than a reluctance to alter their failing, bricks-and-mortar-centric business model.

Certainly, a considerable amount of effort and capital investment would be required to set up an online sales outlet where none exists today for most publishers, but the realities of remaining competitive in a changing marketplace are what they are. The fact that publishers dragged their feet and dug in their heels rather than adapt to changing market forces can hardly be blamed on Amazon. The internet moved their cheese, not Amazon.

As to slowly killing off publishers, it behooves Amazon NOT to bleed its primary suppliers dry. Amazon has been launching its own publishing initiatives, but unless it succeeds in luring most major authors away from every major publisher, unless it starts buying up competing presses (a mistake the major publishers have made in spades and have probably now come to regret), it will always be one among numerous publishers.

Finally, consider the digital music example set by Apple with its iPod and iTunes. Apple undoubtedly dominates the digital music market, but it has not bled any labels dry or begun gouging the music-loving public. Tower Records, Licorice Pizza and The Wherehouse have disappeared from the music retail landscape, but I don't recall anyone accusing Apple of any kind of orchestrated campaign to cause their demise. Again, it's a simple case of consumers voting with their wallets.

5. Publishers have to play ball with Amazon if they want to offer their books in digital form, because the Kindle is the dominant e-reader platform.

FALSE

The Kindle is the dominant e-reader platform, but it can read formats other than Amazon's own proprietary .azw file type. It can read .mobi files natively, for example. Publishers are free to sell non-.azw format ebooks directly through their own websites, and Kindle owners would still be able to read those books on their Kindle devices. It wouldn't be as convenient for customers as downloading books directly to their Kindles from Amazon, but this is the same situation as loading digital music files that weren't purchased from iTunes onto an iPod: it can be done pretty easily, though it does require transferring files to the device.

Furthermore, if publishers really wanted to ensure the Kindle couldn't dominate the e-reader landscape they could do so, by offering customers the one thing the ebook reading public has most wanted from the beginning that they aren't already getting from Amazon: a cross-platform, DRM-free ebook format that can be read across multiple devices. They could invest in the development of cross-platform e-reader software users could run on devices they already own rather than having to buy a Kindle, Kobo Reader, Sony Reader or Nook, but here again, there's a reluctance on the part of publishers to take risks, expand their business model, innovate and compete.

BOTTOM LINE: Amazon has achieved a dominant position in bookselling and e-tailing through aggressive, risky and costly startup efforts. Unlike most CEOs who hold the title today, Jeff Bezos took and held the long view through some very lean and nerve-wracking years. If his ultimate goal for Amazon is to become and remain the #1 company in its sector, then all he's guilty of is the same thing that can be said of ALL CEOs.

Perhaps if publishers and competing retailers had been a little more forward-thinking, and willing to take the same risks, they would now be reaping similar rewards. Since they weren't, they are reaping a bitter harvest of resentment and fading market share instead. It's still not too late for publishers to turn the situation around, but their time, money and effort would be better spent on R&D than M&C*.

*(moaning and complaining)

The 70 Per Cent Solution

By now you've probably heard all about Amazon's new 70% royalty option for authors and publishers who release Kindle books through the Amazon Digital Text Platform (DTP), and many of you who have Kindle books in release may have already opted in for the higher royalty. But there's a major gotcha here no one seems to be talking about.

No, I'm not talking about the 'delivery price' factor, which dictates the fee Amazon will hold back on your 70% royalty Kindle book based on the book's file size. Despite all the panic-mongering on that point, and all the worry about whether Amazon may choose to increase that fee at some point in the future, I think it's really no big deal. What I'm talking about is this little nugget from the terms of the 70% offer:

"Under this royalty option, books must be offered at or below price parity with competition, including physical book prices."

What this means is that if your book is being offered anywhere else, in any format, at a lower price than the price you've listed for your Kindle book on Amazon, Amazon will reduce your Kindle book's list price on Amazon to match the lowest price at which your book is being sold elsewhere. You'll still get your 70% royalty, but it will be on that lowest price. It's kind of hard to extrapolate all that from this one-liner in their terms, but I've learned it the hard way.

When I opted in for the 70% royalty and raised my Kindle book prices to $2.99 on Amazon to qualify for the program, I didn't remember my ebooks were being offered on Smashwords and Scribd in non-Kindle formats for $.99. I didn't realize my error until I was reviewing a sales report a couple of weeks later. So I immediately changed the prices on my Smashwords and Scribd editions to $2.99, and waited for Amazon to catch up. And waited. And waited some more, as every single day, I lost royalty money on every copy sold.

After a week I contacted DTP support, and it took another week to get their conclusive response: that my ebooks were still listed on Barnes and Noble's website at a price of $.99. See, B&N is among the expanded distribution resellers which carry Smashwords books when the author of the book in question has opted in for expanded distribution on the Smashwords site---which I had. Even though I changed the prices of my books on Smashwords, it can take weeks, many weeks, for those changes to propagate out to all the expanded distribution resellers. This isn't Smashwords' fault or doing, it's just the reality of waiting for outside companies to make database changes according to whatever processes they have in place. And like most things in mainstream publishing and bookselling, it's a very, very slow process.

So it actually would've been wiser for me to stay out of the 70% royalty option until after I'd raised my book prices outside Amazon and waited for those changes to propagate across all distribution channels. Since I didn't, all I can do is either stay with the 70% on a $.99 pricetag while I wait however long it takes for B&N to catch up, or change back to the 35% royalty option so Amazon will only base my royalties on my Amazon prices.

I chose the latter, but it's still going to cost me. You see, every time you change the price on your DTP Kindle book, or your royalty option, or pretty much anything else about it, you are forced to "re-publish" that book before your changes will be applied. Re-publishing makes the book unavailable for purchase for a minimum of two business days, and sometimes when you re-publish, the book gets stuck in a 'pending' status. When that happens you have to contact DTP support to resolve the issue, all of which means more days your book is not available for sale. When I re-published to opt in for the 70% royalty, my books all got stuck in the 'pending' status; one of them was unavailable for purchase on Amazon for seven calendar days.

Today I started that clock all over again, and I am again running the risk of my Kindle books getting stuck in 'pending' status---all just so I can get back to the 35% royalty option.

Now, don't misunderstand me. I am not saying this is all Amazon's fault, nor that any of it is Smashwords' or B&N's fault. All of my lost royalties in this are ultimately the result of my original oversight.

However, I DO think Amazon should be a little clearer about the full implications of their "price parity" policy, and the importance of matching your Kindle book's price across all resellers---including expanded distribution partners---before opting in for the 70% royalty. I also think the DTP should not require re-publication of a Kindle book when the author/publisher wants to make changes only to its price or royalty option. Why is it necessary to take the book off the virtual sales shelf for these things?

Here's hoping I don't get stuck in 'pending' again.

Why Amazon And Indie Are Not Mutually Exclusive

I received an email today from someone who says:

I am wondering why you call yourself an "inide" (sic) author when you have not one, but 2 links to Amazon on your site with no mention of Indiebound.org. Amazon is the anti-indie.

As the manager of an indie book shop we seek the support of authors by asking them to post Indiebound.org as a purchase option.

I cannot believe that you profess to be indie all over [your author] site when you are blatently (sic) promoting Amazon, an entity that has been responsible for destroying the spirit of indie across this country. You will have a very difficult time getting indie book shops to support your book with a page that has Amazon all over it.

Here's my response:

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My books are only available through Amazon, they cannot be ordered through any brick-and-mortar store. I did not elect to list with Ingrams or Lightning Source because the expense is not worthwhile when compared to how many books I think I can reasonably sell through brick-and-mortar outlets, whether corporate or independent.

However, if you visit Publetariat, an online news hub and community for indie authors and small imprints I founded recently, you'll find the Indiebound link right there on the front page of the site:
http://www.publetariat.com/

I have a different perspective on Amazon, and one I hope you'll hear me out on if you're really as indie-minded as you say you are.

In order to survive, a business must excel in at least one of three areas: price, selection or service. Amazon competes on selection, and to a lesser extent, price. But they can't hold a candle in terms of service to the local, independent, brick-and-mortar bookstore in my town that specializes in children's and teachers' books. The staff there has an encyclopedic knowledge of kids' books and authors, as well as a finger on the pulse of the local schools' required reading lists. So when I want children's or teachers' books I go to that store, and if the book I want is not on-hand in the store I order it from the store instead of from Amazon, even if Amazon has it priced lower, because I want to compensate the store's staff for their great customer service. Likewise, there's an indie bookseller in Santa Monica that specializes in art and architecture books, and it's always worth a visit when I'm in that area.

Like it or not, people go where they can get what they want according to their specific priorities. If they want selection and don't care about personalized service, they'll go to Amazon. If they want a current bestseller in their hands today and don't care about personalized service, they'll go to a Borders or Barnes and Noble. If they want personalized service and in-depth knowledge about the books they're buying, they'll go to a local, independent bookshop.

Businesses have to earn their customers, and as the co-owner of the pond maintenance business my husband operates, I know this all too well. He can't talk people into using his service with an argument against the evils of big, corporate pond services, and indie bookstores can't talk me into shopping their stores with a similar argument.

Let Amazon dominate the impersonal, warehouse approach to bookselling. No brick-and-mortar store, indie or otherwise, can compete with Amazon on selection, so why try? But also recognize, Amazon is handing small, indie booksellers a huge opportunity to provide the things Amazon cannot: personalized service tailored to a local community or demographic, and knowledgeable, friendly staff. Those are things customers are willing to pay for and drive out of their way for. But if a given shop can't offer me better service, better prices, or better selection, they simply haven't earned my business---or anyone else's.

****************************************************************************

That local, indie bookshop in my town is doing just fine, thanks to an owner smart enough to turn her shop into a true community center by offering a full calendar of both free and fee-based kids' activities, early education speakers, store appearances and signings from authors of children's books, and of course, that helpful and knowledgeable staff. Everyone in town knows about Judy's shop, and we're very happy to repay her efforts by remaining her loyal customers---even if we must pay a little more for the books in her shop, and special-order a book from her every now and then when we can't find it on the store shelves. Any indie bookshop that fulfills a need in the marketplace can achieve the same level of success and customer loyalty. But any business that must be subsidized through 'pity purchases' in order to survive is a business that simply isn't viable in the long run, because it's not meeting customer needs in at least one of the three key areas: price, selection or service.

Sometimes the business landscape changes, and that's not always a bad thing. Big, chain bookstores will continue to lose ground to Amazon because they can't beat Amazon in any of the three key areas. But in such an environment specialty booksellers can flourish and thrive if they're willing to capitalize on strengths they have which Amazon lacks, and adapt to the new landscape instead of lamenting it.

And one more thing - There's nothing anti-indie at all in my position that indie booksellers need to earn my business. I don't expect anybody to buy my books merely on the basis that I'm an indie author. I must earn each and every purchase through the quality of my work, and that's as it should be.

My First Lukewarm Review

Bottom Line It For Me, Baby Version (200 Words Or Less):

I received my first lukewarm review on Adelaide Einstein a couple of days ago, 3 out of 5 stars on Amazon, followed by a second 3-starrer today. It’s disappointing, particularly since I went out of my way to post lengthy, free, online excerpts of both my novels specifically to avoid this situation. I figured the excerpts would weed out any potential buyers whose tastes don’t mesh with my work, thereby preventing bad reviews. Apparently these two didn’t avail themselves of the excerpts before buying. Even so, in both cases the reviewers praised my abilities as a writer overall and their criticisms weren’t condescending or attacking, so I have no complaints. Books are a matter of taste after all, and there have been plenty of times I’ve picked up a book on the rave recommendation of a friend only to end up wondering what my friend could possibly have found so appealing between those covers. No writer, no matter how skilled or talented, can expect his work to be universally adored or even enjoyed. So long as no one can fairly say I’m a bad writer, I figure I’m doing about as well as can be expected of any author.

(No Run Yo' Mouth version again...too busy keeping that promo train for The IndieAuthor Guide on track.)