People often marvel that you can find books on Amazon listed by third-party sellers going for a single penny. It’s not a new phenomenon, but will the USPS postage hike going into effect on Sunday impact penny books?
The Wall Street Journal marveled at the model in this article from 2005. The financial reporters wrote, “Here’s how the Amazon penny-book business works: Amazon charges customers $3.49 per book for standard shipping, charges sellers a 15% commission on the one-cent sale, then gives sellers a $2.26 shipping credit for each book sold. This means a penny book is really a $3.50 book, but that’s still pretty cheap, and you don’t have to leave the house.”
While the fees have changed since then, penny books remain thanks to the Amazon shipping credit.
But one media seller recently explained the challenge that the new postage rates will have on their business in an online discussion board thread. (They sell mostly CDs and DVDs.) Where the seller now makes between 10 – 30 cents on a penny item, they’ll see a net loss of between 20 – 40 cents per penny item after the postage rate hike (they mostly use First Class Package).
We’ve asked Amazon if it will be raising shipping credits, but interestingly the “penny seller” wasn’t advocating that Amazon raise the cost of shipping for shoppers beyond its current $3.99.
The Wall Street Journal noted in its article from 11 years ago that booksellers may be pricing books at a penny for other reasons beyond profitability – some look to build customer lists (a bit of a no-no on Amazon), others want to clear room in their warehouses for pricier titles.
Whether we’ll see the demise of penny books (or CDs and DVDs), the truth of the matter is that many low-margin sellers are impacted by the increasing cost of shipping. This week, eBay even advocated sellers consider raising prices to deal with the problem.
Update 1/14/16: We’ve got more information in this new post on the EcommerceBytes Blog. Be sure to take a look!