The danger of the “easy route”

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When I first began selling ebooks, there was no Kindle store; Sony hadn’t yet begun to sell ebooks, and Smashwords was not yet heard of.  So there weren’t a lot of examples for a newbie like me to follow in setting up my site.  Fortunately, I knew HTML, so I was able to design my own site.  But when it came to collecting money and sending products, I didn’t have the programming savvy (or money) to figure it out on my own.

After some research, I turned to PayPal to handle my transactions.  PayPal had already positioned itself to be able to handle online financial transactions, and to do so with a minimum of fuss at my end.  Like so many other people, I went with the PayPal solution, and later I added a third-party product that would automatically deliver my ebooks when purchased.  Money came in, books went out, and everyone was happy.

A few years later, a change in the PayPal system made my third-party software ineffective, and the system broke down.  This could have been a problem… but fortunately, other companies sold similar software, and I soon found another that would fit the bill.  In a few days, I was able to transition from one software vendor to the other with minimal fuss, and continue to use PayPal to do my transactions.

Later, when the likes of Smashwords, Amazon and Barnes & Noble made it easy to add books to their store, I hesitated in joining any of them: As I examined them, I realized that although they were indeed easy to use, there were things about their terms or services that did not thrill me; and as I had my own selling site, I had no need to rush into the arms of those whom I determined wouldn’t benefit me very much.

Other publishers, on the other hand, actually abandoned their online selling portals in favor of Amazon and others, deciding that it was less trouble for them to go with another vendor that would handle the complex IT tasks of online transactions.  They took the easy route, even as they realized it would cost them part of their profits to do so.

In recent years, ebook authors and publishers have watched as Amazon has altered contract terms, manipulated prices and forced sellers to accept changes which clearly benefited Amazon, not them.  And as authors and publishers railed against the demands of the Amazon machine, along came PayPal to dictate to sellers what kind of content was acceptable in order to use their online transaction system.  Many of them had similarly sunk so much of their systems into using these third parties that there was no easy way to simply shift to another vendor.  In these cases, “the easy route” turned out to be detrimental to their businesses, possibly to the extent of driving them out of business.

The use of third parties to provide services is not a new idea; but it has always held the same threats to those who put too many of their eggs into one basket.  All it takes is the third party’s making a major change to its operations, losing a primary capability, or even going out of business, to cripple or ruin those companies that were too closely tied to them.

And somehow, despite how often this has happened in other IT areas, the lesson rarely sticks.  In an ebook industry that has seen sellers of particular ebook formats go under, and take everything in that format with them, you would think sellers would have learned the value of diversifying their pot.  Yet right now, authors and publishers are horrified at the idea of having to find another online selling company to replace PayPal, whose ease of use has lulled many sellers into thinking they were the only game in town.  It is in PayPal and Amazon’s interests to make the customer believe that there is no place to turn; but in fact, there are other vendors, and it’s time to look them up.

It is in precisely moments like this that other companies step up to fill the gaps left by the major companies’ changes and flaws.  These companies, many of whom have been working in the shadow of the big guys, but waiting for a break that they can exploit, will be ready to grab up customers ready to switch from the bad habits of the other vendors.  Others will follow the surge and try to get a piece of the action for themselves.  And the more potential customers go with the smaller guys, the more the big vendors will be forced to look at the way they do business, and make friendlier changes designed to win their customers back.  This is the way of business, and how monopolies are often kept in check.  The result is usually a healthier market overall, and customers with more and better choices and higher satisfaction.

So, although the likes of Amazon and PayPal are presently exercising their control of the market, it is a reason to look forward to the next step: The further and healthier diversification of the market, and the benefits that should provide to sellers and consumers.  And it should be taken as a cautionary tale, a reminder to take a second thought before going the easy route, lest it come back to bite you.

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4 thoughts on “The danger of the “easy route”

  1. Excellent post, Steven.

    You’re right; people prefer the easy route, and they get lulled into a sense of comfort because of it. But it’s always important to remind ourselves that other options exist, and that relying on one system alone probably isn’t a good idea.

    Granted, I doubt Amazon and Barnes & Nobles are going anywhere anytime soon, and the percentage they take from each book sale doesn’t seem worse than what a publisher would take.

    But, that doesn’t mean we can’t keep an open mind and send our feelers out in search of other potential ecommerce solutions.

    Thanks for sharing. 🙂

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  2. Mike,
    In this case, the risk that Amazon or Barnes & Noble will “go somewhere” isn’t the issue. It’s that they may decide to enact some new rule, for instance, “All indie books must sell at a higher price than a corresponding major publisher’s book,” and authors feeling they have no choice but to comply. Being able to go to another ecommerce solution is vital, and every so often, using that ability will help keep vendors like Amazon in line.

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  3. Another good post, and I know you’ve been on the cutting edge about direct sales to consumers (and gosh, darn it, I need to read your ebooks sometime!).

    Amazon just doesn’t play into my world of publishing and writing anymore. My big beef is the price floor they set for ebooks at 2.99. Indie authors need more flexibility than that.

    Paypal’s digital sales solution of 5% + 5 cents is hard to beat in the current marketplace. The countervailing force to the “we need new payment solutions” is that consumers don’t trust unknown commerce sites all that much; at least paypal has reached that threshold of trust. Out of the current batch of payment solutions , I don’t see one or two competitors which are amenable to indie sellers, have reasonably low rates and are developing a good reputation as dependable.

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  4. Good point about PayPal’s “trust value.” It’s obviously in PayPal’s best interest that they keep themselves prominent and positive in consumer’s eyes, so they don’t become “invisible” in the payment system… otherwise, it will be easier for vendors and customers to switch to another system. Therefore, I expect other vendors to mimic PayPal’s overall “look,” and to make the payment process so seamless that the customer doesn’t think about who the money handler is. (Trust of the money-handlers is also less important, the more trusted the vendors themselves are.)

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