In this article, "Reading Between the Lines of Used Book Sales", Hal Varian at Berkeley's Haas School comments on recent research showing how used book sales are not just a significant boon to Amazon, but to society as a whole when Amazon's and consumers' gains are netted against publishers' losses.
The Internet has allowed the book market to become larger and more efficient, and that has upset a number of publishers and authors.
This prompted me to think: why must publishers -- or for that matter, any other manufacturer of a re-saleable product -- lose? and, what can they do to recapture some of those losses by extending the customer experience into the aftermarket? When does it make sense to try?
There are obvious cases where firms already do this, like automakers selling parts into the aftermarket. But in cases like books where products don't necessarily degrade functionally (especially when students never open them), and where the cross-elasticity of demand is as low as the researchers suggest, what are the limitations?
Missing capabilities and channel conflicts typically prevent this. But there are special cases that allow more creative approaches. For example, six years ago, in an embarrassingly breathless whitepaper, I knocked Mattel for missing the opportunity to exploit the aftermarket for collectible Barbie dolls. Fast-forward to 2005: with Barbie Collector, the folks at Mattel have gone one better than getting into the previously-owned Barbie business -- they now sell new copies of vintage dolls. We are prohibited by the terms of agreement on their website by linking to anything other than the home page (!), but if you click on "start shopping" and then "vintage repros" you'll find them. I'd be curious to know more about how the revenues and profits here compare with the revenues and profits in, say, eBay's analogous ecosystem. (There are similar automotive examples to consider as well, like the VW Beetle, BMW's Mini, and the Plymouth Prowler.)
Closer to home, I drove by a little store yesterday selling re-filled printer ink cartridges at 80% off. I'm sure that using them violates the warranty on my printer, but ink-jet printers are sold today at price points that make them virtually disposable (if not easily recyclable). Even if the quality's not great, I'm not using it for important stuff 95% of the time anyway. This must be a big threat to the profits of printer manufacturers. Maybe if you can't beat 'em, join 'em somehow?
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