Amazon Makes Its Vig with Used Books as Well as New

If you don’t know what “vigorish” means, ask your bookie.  He’ll tell you that whether you bet for or against, win or to lose, he makes money.  His “vig” is a commission levied on both buyer and seller.

To make money coming and going? That’s about as sweet as it gets.  Ask Amazon. Whether it’s a new book or a used one, Amazon makes money, and in the case of used books it makes lots of it.

We know that Amazon makes a profit from the difference between what it pays to the publisher – the wholesale price – and what it gets from the customer – the retail price. Nothing notable there – unless you happen to notice that for many titles there are two kinds of “new.” One is Amazon’s own new book. The other is a new book offered by another dealer. What’s with that?

It turns out that professional dealers buy books wholesale from publishers the same way Amazon does. These dealers then offer them for sale on Amazon, which hosts the dealers, presumably for a fee or commission.  For example, I’m looking at an E-Reads title with a list price of $21.95. Amazon sells it new for $15.80. But several dealers hosted by Amazon are also selling it new for a $15.79,  a penny less than their host.

Doesn’t Amazon mind being undercut?  Obviously not, because it is making money on its competitors’ sales as well as on its own.  But how much?

We don’t know for sure, but we can glean an idea from the fees it makes on the sale of used books. Again by way of example, the same title that dealers are selling new on Amazon is also being sold used on that site for the same $15.79. We happen to have it on the word of a dealer who left an anonymous comment on our website a few months ago that “Amazon charges marketplace pro merchants 15% of sales plus a closing fee of $1.35 per item.”  On that $15.79 book Amazon makes $3.72, not counting the $39.99 monthly fee Amazon charges professional dealers for hosting them.  If you’re not a pro Amazon tacks an additional $.99 on the sale.

And let’s not forget that Amazon owns Abebooks, one of the leading used book merchants in the world. So the used book business is a very good one for indeed for Amazon.

We’re not sure Robert Frost had Amazon in mind when he wrote, “That would be good both going and coming back,” but he certainly would have appreciated the company’s double-edged advantage in the marketplace.

Richard Curtis

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3 Responses to Amazon Makes Its Vig with Used Books as Well as New

  1. Richard,
    You are not saying that Amazon is allowing the sale of Used e-books, are you?

  2. Richard, you are pulling my leg!

    A secondary market in e-books is currently copyright infringement. Nevertheless, it exists.

    Enterprising vendors on various auction sites are selling their “private collections” of e-books that they’ve purchased (or downloaded from pirate sites, or downloaded legally from distributors of public domain books… or from any of the authors/publishers who give away free reads.)

    Often, the e-books are sent via a storage site if emailed, of burned onto CDs and mailed, or else, a collection of e-books are “given away, free” as a bonus along with a vastly overpriced paperback or hardback set.

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