How Amazon's Pricing Affects Author and Publisher Profits

Authors and independent publishers are sometimes upset to find that online bookstores like Amazon.com are selling their book at a discount from the list price (the price printed on the book).

For books sold and shipped by Amazon, the fact that Amazon has chosen to sell at a discount to list price has no effect on the amount of money that the author or publisher earns – they still receive their standard payment from their publisher, distributor or wholesaler.

For example, if Amazon purchases your independently published book at a 55% discount through their Advantage program, it doesn’t matter what price they offer to the consumer – you will still be paid 45% of the list price. Amazon is reducing their own profit margin (to undercut their competitors) when they choose to sell a product below the list price. Of course if you are selling books on your own website, then you are competing with Amazon.
 
The books listed for sale on Amazon by other resellers (the "new" and "used" listings you see below Amazon’s selling price) are being sold through the Amazon Marketplace. Most of the vendors who are selling new books on Amazon don’t even have the book in stock – they will order it from Ingram when they get an order. Again, the fact that the vendor is selling below list price doesn’t affect the author’s profit. You can even list your own book for sale in the Marketplace.
 
Many book dealers and individuals sell used books on Amazon.com. When used books are sold anywhere (in online or physical bookstores or at garage sales or used book sales) authors and publishers receive no payment. The practice of selling used books has been around for decades, but large online booksellers like Amazon make the process much more efficient and widespread. There is nothing authors and publishers can do to stop used books from being resold.

One positive effect of used book sales is that it gets your book into the hands of a wider readership – these readers may tell others about your book, buy new copies of your other books, or purchase other products and services from you.

See this article for a explanation of how the Amazon Marketplace works and how you can list products for sale there.
For an explanation of reseller discounts and the role of distributors, wholesalers and retailers in the book trade, see this article.
 

This is a cross-posting from Dana Lynn Smith‘s The Savvy Book Marketer.

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