Tag Archives: retail

The Filter Bubble Eats the Book World

Last week Amazon purchased Goodreads the online book review site. Since 2007 Goodreads has grown to become home to over 16 million members who share a passion for discovering and sharing great literature. Now, with Amazon’s acquisition many are concerned that this represents another step towards a monolithic and monopolistic enterprise that controls vast swathes of the market. While Amazon’s innovation has upended the bricks-and-mortar worlds of publishing and retailing, its increasingly dominant market power raises serious concerns over access, distribution and choice. This is another worrying example of the so-called filter bubble — where increasingly edited selections and personalized recommendations act to limit and dumb-down content.

From the Guardian:

“Truly devastating” for some authors but “like finding out my mom is marrying that cool dude next door that I’ve been palling around with” for another, Amazon’s announcement late last week that it was buying the hugely popular reader review site Goodreads has sent shockwaves through the book industry.

The acquisition, terms of which Amazon.com did not reveal, will close in the second quarter of this year. Goodreads, founded in 2007, has more than 16m members, who have added more than four books per second to their “want to read” shelves over the past 90 days, according to Amazon. The internet retailer’s vice president of Kindle content, Russ Grandinetti, said the two sites “share a passion for reinventing reading”.

“Goodreads has helped change how we discover and discuss books and, with Kindle, Amazon has helped expand reading around the world. In addition, both Amazon and Goodreads have helped thousands of authors reach a wider audience and make a better living at their craft. Together we intend to build many new ways to delight readers and authors alike,” said Grandinetti, announcing the buy. Goodreads co-founder Otis Chandler said the deal with Amazon meant “we’re now going to be able to move faster in bringing the Goodreads experience to millions of readers around the world”, adding on his blog that “we have no plans to change the Goodreads experience and Goodreads will continue to be the wonderful community we all cherish”.

But despite Chandler’s reassurances, many readers and authors reacted negatively to the news. American writers’ organisation the Authors’ Guild called the acquisition a “truly devastating act of vertical integration” which meant that “Amazon’s control of online bookselling approaches the insurmountable”. Bestselling legal thriller author Scott Turow, president of the Guild, said it was “a textbook example of how modern internet monopolies can be built”.

“The key is to eliminate or absorb competitors before they pose a serious threat,” said Turow. “With its 16 million subscribers, Goodreads could easily have become a competing online bookseller, or played a role in directing buyers to a site other than Amazon. Instead, Amazon has scuttled that potential and also squelched what was fast becoming the go-to venue for online reviews, attracting far more attention than Amazon for those seeking independent assessment and discussion of books. As those in advertising have long known, the key to driving sales is controlling information.”

Turow was joined in his concerns by members of Goodreads, many of whom expressed their fears about what the deal would mean on Chandler’s blog. “I have to admit I’m not entirely thrilled by this development,” wrote one of the more level-headed commenters. “As a general rule I like Amazon, but unless they take an entirely 100% hands-off attitude toward Goodreads I find it hard to believe this will be in the best interest for the readers. There are simply too many ways they can interfere with the neutral Goodreads experience and/or try to profit from the strictly volunteer efforts of Goodreads users.”

But not all authors were against the move. Hugh Howey, author of the smash hit dystopian thriller Wool – which took off after he self-published it via Amazon – said it was “like finding out my mom is marrying that cool dude next door that I’ve been palling around with”. While Howey predicted “a lot of hand-wringing over the acquisition”, he said there were “so many ways this can be good for all involved. I’m still trying to think of a way it could suck.”

Read the entire article following the jump.

Image: Amazon.com screen. Courtesy of New York Times.

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Irrational Exuberance and Holiday Shopping

‘Tis the season to buy, give, receive and “re-gift” mostly useless and unwanted “stuff”. That’s how many economists would characterize these days of retail madness. Matthew Yglesias over a Slate ponders a more efficient way to re-distribute wealth.

From Slate:

Christmas is not the most wonderful time of the year for economists. The holiday spirit is puzzlingly difficult to model: It plays havoc with the notion of rational utility-maximization. There’s so much waste! Price-insensitive travelers pack airports beyond capacity on Dec. 24 only to leave planes empty on Christmas Day. Even worse are the gifts, which represent an abandonment of our efficient system of monetary exchange in favor of a semi-barbaric form of bartering.

Still, even the most rational and Scroogey of economists must concede that gift-giving is clearly here to stay. What’s needed is a bit of advice: What can economics tell us about efficient gifting so that your loved ones get the most bang for your buck?

We need to start with the basic problem of gift-giving and barter in general: preference heterogeneity. Different people, in other words, want different stuff and they value it differently.

In a system of monetary exchange, everything has more or less one price. In that sense, we can say that a Lexus or a pile of coconuts is “worth” a certain amount: its market price. But I, personally, would have little use for a Lexus. I live in an apartment building near a Metro station and above a supermarket; I walk to work; and driving up to New York to visit my family is much less practical than taking a bus or a train. So while of course I won’t complain if you buy me a Lexus, its value to me will be low relative to its market price. Similarly, I don’t like coconuts and I’m not on the verge of starvation. If you dump a pile of coconuts in my living room, all you’re doing is creating a hassle for me. The market price of coconuts is low, but the utility I would derive from a gift of coconuts is actually negative.

In the case of the Lexus, the sensible thing for me to do would be to sell the car. But this would be a bit of a hassle and would doubtless leave me with less money in my pocket than you spent.

This gap between what something is worth to me and what it actually costs is “deadweight loss.” The deadweight loss can be thought of in monetary terms, or you might think of it as the hassle involved in returning something for store credit. It’s the gap in usefulness between a $20 gift certificate to the Olive Garden and a $20 bill that could, among other things, be used to buy $20 worth of food at Olive Garden. Research suggests that there’s quite a lot of deadweight loss during the holiday season. Joel Waldfogel’s classic paper (later expanded into a short book) suggests that gift exchange carries with it an average deadweight loss of 10 percent to a third of the value of the gifts. The National Retail Federation is projecting total holiday spending of more than $460 billion, implying $46-$152 billion worth of holiday wastage, potentially equivalent to an entire year’s worth of output from Iowa.

Partially rescuing Christmas is the reality that a lot of gift-giving isn’t exchange at all. Rather, it’s a kind of Robin Hood transfer in which we take resources from (relatively) rich parents and grandparents and give them to kids with little or no income. This is welfare enhancing for the same reason that redistributive taxation is welfare enhancing: People with less money need the stuff more.

Read the entire article here.

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The Ascent of Scent

Scents are deeply evokative. A faint whiff of a distinct and rare scent can bring back a long forgotten memory and make it vivid, and do so like no other sense. Smells can make our stomachs churn and make us swoon.

The scent-making industry has been with us for thousands of years. In 2005, archeologists discovered the remains of a perfume factory on the island of Cyprus dating back over 4,000 years. So, it’s no surprise that makers of fragrances, from artificial aromas for foods to complex nasal “notes” for perfumes and deodorants, now comprise a multi-billion dollar global industry. Krystal D’Costa over at Anthropology in Practice takes us on a fine aromatic tour, and concludes her article with a view to which most can surely relate:

My perfume definitely makes me feel better. It wraps me in a protective cocoon that prepares me to face just about any situation. Hopefully, when others encounter a trace of it, they think of me in my most confident and warmest form.

A related article in the Independent describes how an increasing number of retailers are experimenting with scents to entice shoppers to linger and spend more time and money in their stores. We learn that

. . . a study run by Nike showed that adding scents to their stores increased intent to purchase by 80 per cent, while in another experiment at a petrol station with a mini-mart attached to it, pumping around the smell of coffee saw purchases of the drink increase by 300 per cent.

More from Anthropology in Practice:

At seventeen I discovered the perfume that would become my signature scent. It’s a warm, rich, inviting fragrance that reminds me (and hopefully others) of a rose garden in full bloom. Despite this fullness, it’s light enough to wear all day and it’s been in the background of many of my life experiences. It announces me: the trace that lingers in my wake leaves a subtle reminder of my presence. And I can’t deny that it makes me feel a certain way: as though I could conquer the world. (Perhaps one day, when I do conquer the world, that will be the quirk my biographers note: that I had a bottle of X in my bag at all times.)

Our world is awash in smells—everything has an odor. Some are pleasant, like flowers or baked goods, and some are unpleasant, like exhaust fumes or sweaty socks—and they’re all a subjective experience: The odors that one person finds intoxicating may not have the same effect on another. (Hermione Granger’s fondness for toothpaste is fantastic example of the personal relationship we can have with the smells that permeate our world.)  Nonetheless, they constitute a very important part of our experiences. We use them to make judgments about our environments (and each other), they can trigger memories, and even influence behaviors.

No odors seem to concern us more than our own, however. But you don’t have to take my word for it—the numbers speak for themselves: In 2010, people around the world spent the equivalent of $2.2 billion USD on fragrances, making the sale of essential oils and aroma chemicals a booming business. The history of aromatics sketches our attempts to control and manipulate scents— socially and chemically—illustrating how we’ve carefully constructed the smells in our lives.

More from theSource here.

Image: The Perfume Maker by Ernst, Rodolphe, courtesy of Wikipedia / Creative Commons.

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