UK Supermarkets Pile On The Pressure As they Square Up To Amazon

Go Global In 2014

Tesco Blinkbox Books has only been live a couple of months and already its turning the screws on the mighty Zon here in the UK.

Amazon UK have been  offering Martin’s Game of Thrones for just £2 for the Kindle ebook. So have Tesco Blinkbox Books. All seven, at £2 each. But here’s the thing –  they all come with 100 ClubCard points, which in real terms means they are just £1 each – half the Amazon UK price.

You can also download the video Box Set from Blinkbox TV and get another 1000 ClubCard points – and get a free pizza thrown in for good measure.

And over on the Blinkbox blog you can read autobiographies of no less than eleven Thrones characters “in their own words”.

Not long ago Sainsbury were running contests to win tea at the real Downton Abbey, and you can download free ebooks straight from the back of their home-brand cereal packets.

This week they are running a great little comp – with 20,000 Nectar loyalty points up for grabs – called Agatha Christie’s Murder On the National Express. A bit of fun (if you know that National Express is the UK equivalent of Greyhound coaches in the US it will make more sense) and a great way to promote the ebook store.

Sainsbury are also running an Author Spotlight in their newsletter, this week featuring two books by Amanda Prowse, Prowse is a British writer who sets her novels in the seaside resort of Salcombe in Devon. Until July 16th you can win a free weekend for two in Salcombe, courtesy of Sainsbury ebooks.

No, this is not an ad for the Sainsbury store, just getting across how the UK supermarkets are far more than just online ebooks stores. They are going out of their way to interact with readers using all the resources at their disposal.

The UK supermarkets are leading the way with innovative marketing, not just by doing what Amazon could have done – linking its video service to its ebooks, for example – but also by going where Amazon cannot, as with the cereal packet selling and the Downton Abbey comp.

In fact it’s a telling point that when Amazon does run competitions in the UK – as it does with Audible, the audio-book arm – it has to give away APPLE devices as the enticement to participate! You couldn’t make it up…

But back to the supermarket ebook stores.

The Bookseller has a story hidden behind a pay-wall that says Tesco Blinkbox has seen “unprecedented” sales surges since it began its cross-media promo.

And it’s worth taking a close look at what’s behind the promo to understand why Tesco Blinkbox is not just a challenger but a threat to Amazon.

As the Zon-centric blogs delighted in telling us, Amazon Prime paid out a fortune for an exclusive deal with HBO to try boost the appeal of the Prime service and justify the price increase.

But this side of the pond it was Tesco Blinkbox that was long-since dealing with HBO. Tesco Blinkbox is bigger than Netflix UK and Amazon Prime Video UK combined, and one reason is that Tesco play to win.

For example, within 48 hours of Game of Thrones Season 4 finishing its broadcast run in the US Tesco had it live and available for download in the UK on Blinkbox, while still not available from retailers in the US – and yes that includes Amazon Prime, despite the much-hyped HBO deal.

How can a provincial supermarket in an economic backwater like the UK be getting better deals than the mighty Zon, which as we all know is the largest e-commerce retailer in the world?

Well, it’s funny how these misconceptions arise.

First off, Amazon isn’t the biggest e-commerce company in the world. In revenue terms it’s less than half the size of the company that wears that crown – Alibaba.

Never heard of them? Don’t worry. You will.

Alibaba are set for the IPO on the US stock markets this summer and its widely expected to be the biggest IPO in US history.

More significantly Alibaba is just in the process of going live with its US e-commerce site (11Main.com if you must know). No, it doesn’t look much now, but don’t be fooled by appearances. Alibaba is bigger than Amazon and eBay combined. It has a payment arm which is bigger than Paypal and Square combined. And it makes more profit in a year than Amazon has made in most of its twenty-year existence.

More on Alibaba in another post. For now, back to those silly little British supermarkets snapping at Amazon’s ankles.

But hold that thought one second. Because Tesco is no bantamweight up against the Amazon Tyson. Tesco is regularly the second / third largest retailer in the world, and consistently the second most profitable retailer in the world. It’s UK revenue alone is bigger than Amazon’s total global revenue.

As Netflix UK has found to its cost, Tesco Blinkbox is no pushover, and as Amazon are finding now, Blinkbox Books mean business.

Throw in the second, smaller supermarket Sainsbury, also selling ebooks in the UK, and Kindle UK is finding its long honeymoon in the UK ebook market is drawing to a close.

Like Amazon, both Sainsbury and Tesco Blinkbox deal directly with the big publishers, using their financial muscle to get great content at great prices. But here’s the thing. While Amazon and the Big 5 are worn enemies, dealing with one another without trust, the Big 5 and Tesco Blinkbox and Sainsbury are, if not quite best buddies, aligned with the booksellers needs. because they have a problem in common: Amazon.

Phil Jones reported on The Bookseller that the UK publishers were “unfeasibly excited” by the (then imminent) launch of Blinkbox Books, and as Sainsbury and Tesco (remember Tesco only launched Blinkbox Books a few months ago) get into their swing we can expect a lot more innovation and a lot more action.

And another problem is looming for Amazon UK.

At the moment Tesco, Sainsbury and the other domestic ebook retailers like Waterstone’s and Hive, etc, are all obliged to charge VAT at 20%, while Amazon exploits a legal loophole and charges just 3%. In real terms that means Tesco and Sainsbury have to legally charge VAT at a rate 667% higher than Amazon does.

Is it any wonder Amazon has reigned supreme in the UK ebook market?

In January that loophole closes. Amazon will have to charge the full 20% and raise prices or, like Tesco and Sainsbury do now for their promotions, absorb the cost.

Obviously Amazon is big enough to do so, and will do so, on big name titles where volume of sales means the margins will cover the cost. Even so its gonna hurt. And for most books they simple won’t bother.

The consequence is obvious: Amazon UK prices will rise, while the domestic retailers will stay steady (because they are already charging the full rate). It will make the market fairer, true, but indies will feel the pinch.

A 99p ebook will be listed at £1.20. A £2.99 ebook will be listed at £ 3.60.

Meantime deep-pocket players like Tesco will be dishing out big-name author titles at indie prices and throwing in extras like ClubCard points and pizza and who knows what else.

By January 2015 Tesco Blinkbox and Sainsbury ebooks are going to be well on their way to mounting a serious challenge to Kindle UK, and the new VAT rates will boost them further,

Our guess is Tesco will have another device out in time for Christmas (Tesco’s first tablet, the Hudl, was released to rave reviews and had done remarkably well since), and every chance Sainsbury will get in on the act too.

Unlike the Amazon KindleFire, Tesco do not fork their Android tablets to prevent Google apps being run. And of course Tesco’s Hudl comes complete with Blinkbox TV, Blinkbox Music and Blinkbox Books pre-installed.

No, indies can’t get into Tesco Blinkbox or Sainsbury right now. That’s life.

But all indies should all be supporting this major challenge to Amazon’s dominance in the UK (while waiting patiently for Wal-Mart to step up and take on Amazon in the USA).

Not because we’re anti-Amazon but because we’re pro a vibrant, competitive and expanding market. The UK supermarkets are bringing ebook awareness to a whole new sector of the British public, and many of them may go on to buy our books from other UK retailers, including Amazon UK.

A rising tide lifts all boats.

So spare a cheer or two for Britain’s supermarkets as they lead the way, and then sit back and watch the fireworks as they step up their game. Just one more problem Amazon could be doing without right now.

Competition from Blinkbox and Sainsbury, along with increased VAT on our Zon ebooks and the ever growing struggle for visibility means, bottom line, that  things are going to get more and more difficult for indie authors as market saturation increases, and all the more so for those indies who rely on just a handful of big retailers.

But there is a way forward.

Diversification. At home and abroad.

The good news is, it’s never been easier to diversify, and there have never been more options.

Yet still many indies are partying like its 2009, locked into the faux mindset that only two or three retailers (or often just one) matter.

As above, Tesco and Sainsbury aren’t open to indies right now. But a host of other outlets are, both in the UK, in the USA, and in that big wide world beyond.

How many are you in?

 

Ebook Bargains UK

Far more than just an ebook promo newsletter.

Far more than just the UK.

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One response to “UK Supermarkets Pile On The Pressure As they Square Up To Amazon

  1. I love these posts. I wish every writer around the globe read ’em! 🙂

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