Small book retailers were buying in bulk from major online booksellers because they could really save some money. One was buying up to 70 copies of a particular title -- it was $5 less a pop from the big guys than it would have been from the publisher. Finally, however, the big retailers have become wise to the trend and taken action, according to the Wall Street Journal (subscription required).
Wal-Mart (NYSE: WMT), Amazon (NASDAQ: AMZN), and Target (NYSE: TGT) have decided to cap the number of books customers can buy online, a measure intended to prevent smaller competitors from treating them as partners. Walmart is limiting customers to two copies of a particular book, with Amazon placing the border at three and Target at five.
All three were competing on a few major new releases -- by authors such as Stephen King, John Grisham, Dean Koontz, and James Patterson -- offering preorder pricing of less than $10, compared to cover prices ranging from $22 to $35. Since publishers tend to charge retailers half the cover price, these retailers are losing money on the transaction, but the promotional value is solid, both from an advertising perspective and to stimulate cross-selling opportunities.
This is the key to the tactic -- get people to buy who could become profitable customers later. The smaller booksellers, who claim they would sell any volume to anyone, are unlikely to become moneymakers for Amazon, Target, and Walmart later, which is why they aren't being allowed to play.
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