Mary Sisson's Blog, page 127

Progress report

I just read over four chapters today--I had to finish off a home-improvement project (an old project, not a new one), so time was limited.

Progress report

I read over eight chapters today--for the most part, I'm very happy with it. There's one part I want to condense, but other than that it was just minor corrections. The early chapters bothered me much less this pass.

Notice how as I return my attention to the book, the impulse to write long blog posts returns? I was feeling like they were kind of a waste of time, and I'm not really arguing that they aren't, but I guess they're a symptom that my brain is back in Book Mode.

The part of retail you don't see

I mentioned that one of the fun things about the retail business is that you can see for yourself how it works. But that is not entirely true.

Let's travel back in time to the year 2000 (remember when that was in the future? You don't? Oh, shut up), when I was a business reporter working for a newspaper in New Jersey. There was a bagel chain called Einstein Bros. Bagels, and everyone loved them. They executed marvellously: beautiful shops, yummy products, reasonable prices, pleasant customer service. Every Einstein Bros. Bagels in the region had a line out the door and halfway around the block every morning.

And they went into bankruptcy.

WHAT HAPPENED!?! people shrieked.

The answer was something that no retail customer could see: They were paying too much rent. Competition for high-traffic retail spaces is fierce, and Einstein Bros. had decided it was worth paying an arm and a leg for desirable spaces.

It wasn't, but that's not the point. The point is, from a customer perspective, Einstein Bros. did everything right--everything. To the customer, they looked like a thriving business. And they went into bankruptcy anyway (although they did come out of it eventually, so there are some benefits to having customers who love you).

Another vitally-important aspect of retail is inventory management. It's one of those things that customers notice only if it isn't happening: You go to the store for milk, and there's no friggin' milk. God damn it, the kids are screaming for milk, and you just wasted a trip--do these people realize how much gas costs nowadays? Screw it, you're never going back there--you'll go to Other Supermarket instead. Sure, they [cost more, are further away, are less child friendly, have surly staff, don't look as nice], but at least they have milk when you need it!

Inventory management isn't just about getting goods into a customer's hot little hands (although that's vitally important: If your business is exchanging goods for money, you'd better have some goods to exchange). It's about doing so cheaply.

Really super-duper, state-of-the-art inventory management makes it cheaper to get your goods to your customers. Wal-Mart is what it is today because they decided, hey, let's have our suppliers deliver goods to our stores. That way, we don't have to pay for gas or hire drivers! (You think I'm kidding, but I am perfectly serious.)

Do you know who else has fabulous, super-duper, state-of-the-art inventory management? AMAZON.

Why? Because Amazon started out selling books. Can you think of a class of goods that's a bigger pain in the ass from an inventory perspective than books? There's millions of titles! Even a single title can have multiple editions! People get really upset when you give them the wrong book! No one knows what books are going to become best-sellers!

Amazon is what it is today because it was able to leverage that inventory expertise into other goods. They're spending $90 million on a single warehouse, for Christ's sake, and it's not because they're building it out of gold--it's because their inventory systems are automated and computerized and very, very fancy. They are so good at getting random goods to the random people who want them that other retailers let Amazon fill their orders, knowing that Amazon does it better.

If you are trying to open up an on-line store that ships physical goods to people, you are going to have to compete with a company that has spent years learning how to ship goods to people, as well as billions of dollars on computer systems to help them manage inventory. You have to compete with a company that builds $90 million warehouses. This is no small task.

If you are trying to open an on-line store that sells e-books to people, that $90 million warehouse that Amazon is building does not matter. Their long years of experience in inventory management does not matter. When it comes to e-books, there is no inventory to manage.

This is why I hold what is apparently a shocking opinion that e-books do not really play to Amazon's strengths. They play to some of Amazon's strengths: Amazon is the dominant on-line retailer of physical books, so when people think "books" they think "Amazon." In addition, Amazon enables book discovery. If you are an author, uploading your book to Amazon is easy, and they offer a good royalty.

All good things. Amazon is executing its e-book strategy very well. Yay them.

But if they fail to keep executing well? Other brands (like, yes, Barnes & Noble, or let's pretend that some Web entrepreneur buys the Borders name) are associated with books, so if they executed their e-book businesses more-competently, they could be more-serious competition. Web sites like Goodreads and Library Thing exist for no other reason but to enable book discovery--that is all they do at the moment, but that could change. Making it easy for authors to upload books to a Web site does not cost $90 million, even if Google can't do it with $19 billion.

It's all about barriers to entry--is it hard for new players to enter a business, or is it easy? If you are talking about selling physical goods on-line, I would say that Amazon has some great barriers to entry--it would be very hard and very expensive to match their ability to manage inventory. If you're talking about selling digital goods...not so much. Amazon isn't without advantages, to be sure, but it's going to be a constant struggle for them--they can't just throw down $90 million and say, "Beat this."

(By the way, if you're wondering why Goodreads and Amazon can't seem to get along any more, I hope that makes more sense to you now.)

No, not everyone is stupid except for you

I keep reading things that seem to fall into one of two categories: Either it's the smug expectation that authors will surely continue to overpay massively for publishing services, because authors are entirely incapable of making good decisions, or it's hand-wringing that self-publishing will lead authors to their destruction, because authors are entirely incapable of making good decisions.

Notice a trend there?

Now, we all know people who are idiots about money. We all, at various points in time, have been idiots about money. Behavioral economics seeks to answer the question, Why are people such idiots about money?

In the face of all that idiocy, it's easy to loose sight of the fact that certain concepts from classical economics, such as the supply and demand curves, actually have held up quite well over the ages. There are definitely individuals who buck that trend (RANDOM JOKE SEGUE: Two New Russians who haven't seen each other in a while are catching up. One says, "That's a nice shirt!" The other says, "Do you like it? It cost $400!" The first says, "Sergei, you fool! I know where you can get that shirt for $600!"), but when you are talking about most people in most situations, the supply curve and the demand curve do hold up. That is why price and wage controls went out with Richard Nixon.

People are economically irrational. People are more often economically rational.

Here's an example of what I'm talking about: Mercedes resurrected the Maybach line nine years ago. In that time, 3,000 people bought Maybachs, which I think we can take as evidence that people are economically irrational--we're talking about a $450,000 car that apparently wasn't even as good as the other $450,000 car out there. But in the month of July 2010 alone, Toyota sold 27,345 Corollas, an economy car generally lauded for its value. In a single month, Toyota found nine times as many people willing to buy a Corolla than Mercedes found willing to buy a Maybach in nine years.

Bear in mind that despite the fact that the Maybach sold far below expectations, it kept going as a business for nine years. I have seen any number of companies with business plans that are positively offensive in their disregard for the intelligence of consumers. And they creep along. What they don't do is flourish--they don't fulfill early expectations, they just sort of eke it out quarter after quarter.

Modern self-publishing is a very new industry--just a little over two years old. There are scams, of course, but there is also a lot of learning and communication happening among writers. Writers, even traditionally-published writers, are getting more experienced and more knowledgeable about self-publishing every day.

That's a problem if your business is run on the expectation that everyone is going to fork money over to you forever, for no particular reason. Eventually, as people learn more about what they're doing, they're have a better notion of what constitutes value in this new industry. If you don't provide value, some people will certainly pay you anyway, at least for a little while, but before long you're going to start having problems with customer retention and a lack of recommendations. You may eke along, living off old contracts or whatnot, but flourish you will not.

As for the expectation that writers will destroy the market for books with freebies or whatever, I feel like some people have taken too much to heart the idea that writers are really bad at business. I mean, sure, some are and always will be, but remember the choice used to be, get published and get screwed, or don't get published. So of course authors lined up and clamored for a good reaming. That was actually writers being Homo economicus--if you wanted a career as a writer, being published, however horrible the terms, was better than not being published.

Now there's been a sudden transition in the industry, and writers who made their bones decades ago have been slow to catch up. That's to be expected. It doesn't mean they're necessarily stupid (although it is frustrating to watch), and it certainly doesn't mean that, as far as looking after their own financial self-interest is concerned, all authors are dangerous lunatics armed with a straight razor and an itchy throat.

If free doesn't work for people, I'm telling you, the vast majority will stop doing it. If KDP Select doesn't work for people, I'm telling you, the vast majority will stop doing it. If the 99-cent price point doesn't work for people, I'm telling you, the vast majority will stop doing it.

If they're still doing it five years from now, I'm telling you, it probably worked for them.

Maybe this is my humanist side coming through, but I really marvel at the assumption that everyone must be stupid--bone stupid, dumb as dirt. One of the things I like about economics is that it doesn't assume everyone--everyone!--is just an idiot. Here's a lesson from journalism: If someone is doing something you don't understand, it means you don't understand. You need more information; you need to talk to people. Assuming instead that you are the only intelligent person in all the land just reveals how limited you truly are.

I didn't really mean to take a week off...

...but apparently I did. I've got a kid today, and thanks to President's Day, I've got multiple kids and larger family members with days off who will require my attention coming up. So I guess I better get back in action tomorrow, no?

Part of the problem with me is that I have that whole one-thing-at-time focus. So I say, I'll take a couple of days off and work on the house! But the house is a HUGE freakin' mess (I am always simultaneously happy and distraught that I bought a fixer-upper), so one project leads very naturally to the next. I found myself yesterday starting a brand new project, and that's when I got very severe with myself and decided that I must switch gears back and finish Trust before I start anything new. The timing is a little unfortunate because in my brain spring = big garden plans, but I'll just have the garden on maintenance until Trust is out.

Real-world book retailing

This is an instructive post (via PV) about why foreign books don't sell well in Japan. Have a look at the pictures--basically the books are shelved so that they are impossible to find. It's a real-world example of the importance of floor placement, and it's had this huge, longstanding impact on the Japanese book market--foreign books are not easy to buy, so voila, no one buys them.

Another good link

This one from Dean Wesley Smith is worth a read. It's about not getting ripped off, which obviously is a topic close to my heart.

My favorite quote?

"...electronic publishing is scary simple.

Does it take a learning curve? Yes. But so does Angry Birds. Actually, I think Angry Birds is harder to learn than electronic publishing."

I think he's probably right.

There's also a good comparison of the costs of e-publishing and traditional publishing. I know some people believe it when publishers tell them that e-books cost just as much to make as paper books. I assume they also believe it when guys tell them that ejaculate prevents wrinkles and is really good for the skin of the face.

Fortune favors the bold

So, there was this post on Passive Voice about how Amazon's exclusivity program might not work for everybody. Because if it's not 100% guaranteed to work for everybody, forever, well, then there's no point in even trying, is there?

And it kind of got on my nerves, because (neurosis alert!) it sounded like something my mother would say. My mother's one of these women who make a virtue out of never being an adult--"If you can't be it, marry it" is the kind of advice she used to give me. Of course she can't possibly be anything, what with her having two X chromosomes and all. So when people actually start doing things, she's first in line to pour on the cold water, because if you manage to accomplish something, and if she has to admit that that something was in fact worth accomplishing, then that implies that she could accomplish things were she willing to try, and she can't have that.

So I posted a comment there, and I'm going to repost it here, with links:

I think the thing that troubles me about this is the extreme tentativeness about trying something that, in the worst case scenario, won't work for you so you pull your book after three months.

I mean, no one is asking you to sign away rights, and we're not talking about playing Russian roulette. The risks of something like KDP Select aren't big, crazy risks; they are small, manageable risks.

Certainly you can make a rational decision that KDP Select is not for you, and I don't advocate replacing blind faith in tradpub with blind faith in Amazon. But there's so much out there about what might happen 10 or 20 years from now if events line up in a very particular way. And I think it makes people more afraid to experiment.

The opportunity cost of not trying stuff can be very high--think where Joe Konrath would be today if he hadn't been willing to experiment and throw some titles up on-line. You don't know what's going to pay off unless you try different things--some of those things most definitely will not work out, but that's how you learn and gain experience.

Think like a businessperson

Kristine Kathryn Rusch has a great post on the importance of containing costs, especially early on. Remember, you are an entrepreneur running a business. If you want to pretend you're not, that won't change reality, it will just make it more likely you'll get ripped off.

And Lindsay Buroker has a great post on pricing. She takes a very useful perspective on it, which is to look at the possibilities of revenue-per-customer. So, if you only have one book out, and it's 99 cents, you can only possibly make 35 cents off each customer, whereas if you have a freebie followed by three books that are $5 a piece, you can make up to $10.50 off each customer. It's a very worthwhile way of evaluating your potential market, and of course it underscores the need to keep writing!

Progress report

I finished this pass! Yay! Now it's printed out, and I'm going to let it sit for a few days while I work on really fun stuff, like taxes. Then I'll read over the hard copy, input corrections, and start the layout.