One of things in business is to be careful with those that supply you with what you need, to make what you make, to sell to those that buy.
That’s because, if they (the suppliers) become powerful – they can cut you off lest you give them what they want, which is almost always more margin. Soon, you find that you can’t live with them – yet can’t live without them. This is the uncomfortable truism behind Porter’s Supplier Power.
And from the company that has so much to teach us all about business, by way of an article by David Streitfeld in The NYT, comes another lesson on this topic:
In negotiations with larger publishers, Mr. Stone writes, Amazon kept demanding more as it got bigger: steeper discounts, longer periods to pay and better shipping. Mr. Bezos, Amazon’s chief executive, then turned up the heat on the most vulnerable publishers — those most dependent on Amazon.
The company’s relationship with those publishers was called the Gazelle Project after Mr. Bezos said Amazon “should approach these small publishers the way a cheetah would pursue a sickly gazelle.” A joke, perhaps, but such an aggressive one that Amazon’s lawyers demanded the Gazelle Project be renamed the Small Publishers Negotiation Program.
Mr. Stone writes that Randy Miller, an Amazon executive in charge of a similar program in Europe, “took an almost sadistic delight in pressuring book publishers to give Amazon more favorable financial terms.” Mr. Miller would move their books to full price, take them off the recommendation engine or promote competing titles until he got better terms out of them, the book says.
And that was before Amazon launched its own imprint of course…
[Really looking forward to reading Brad Stone's book on Amazon that this article was based on…should I buy it on Amazon though?]
PS: Yes, Supplier Power typically refers to those that supply you with raw materials…but in retail, I think that distributors are suppliers of sorts because they supply you with the channel to sell what you make to end customers. As such, Amazon’s website becomes yet another thing you are supplied with, to sell your wares. No?