NEW YORK – It is no secret that Amazon (NASDAQ:AMZN) has disrupted the distribution model for books; however, very few companies have been able to copy Amazon’s success. So how do they do it? For one thing, Amazon offers publishers a large and often times lucrative marketplace for their content and the success include ensure that traffic is flowing to Amazon’s bookstore and that publisher’s receive a commission for traffic they send to the online marketplace.
By paying publishers a commission, sometimes up to 8.5 percent, for referring a paying customer, Amazon is ensuring that publishers will actively promote their books through Amazon. This form of affiliate marketing is immensely popular and actually encourages publishers to continually invest in online marketing campaigns.
Furthermore, this diffusion of advertising spending allows Amazon to leverage the creative talent of the publishers for what they do best – marketing books.
Another advantage is Amazon’s sure size. According to research, once a customer joins the internet giant, they are more likely to buy something than when you take a customer to a highly specialized store. This includes preference algorithms that help to manage the customer experience; Amazon’s engine is extremely effective at remembering a customer’s interests and predicting their desires.
Lastly, the Amazon brand has built up the trust of millions of consumers. Therefore, while a specialized retailer might pay a higher commission, the brand does not garner the same recognition and reputation from consumers.
Combined, these three factors help to distinguish Amazon from the competition, and it is not even close. Then there is the knockout punch, Amazon pays commissions to publishers for book sales based on volume, so commission income has the potential to increase exponentially – another reason that publishers will drive their traffic to Amazon’s site. Today, Amazon controls more than 30 percent of the eBook marketplace, and Apple’s (NASDAQ:AAPL) regarding price fixing is sure to give Amazon even more market share – this in turn will give the company the volume it needs to grow revenues and maintain profitability. The only risk is that someone else will copy their model, but at this point competitors from Apple to Google (NASDAQ:GOOG) have failed to make a dent.