Harry potter was not much help to online retailers

Discussion in 'Trading' started by demoship, Jul 21, 2007.

  1. First off, according to this article:


    Retailers are paying about $17.50 for the book, which seems like a reasonable figure.

    So, based on these figures, and amazon.com's "special" on the potter book ($17.99 + free shipping)

    Revenue from book: $17.99
    Spread on inventory carry cost (they get the $ from customers now, they aren't paying SCHL for at least 3 months): $.22

    Book: Let's say $16.50 (since amzn's big, schl might have given them a discount off the standard wholesale price, but if they did, it won't be by much)
    2% transaction processing fees: $.36
    Shipping: $4 (they offered free saturday delivery, this would cost you at least $10, but amzn has a special agreement w/ fedex or whoever they use)

    Net base PnL per book: -$2.65

    They sold about 2 million books.

    Net PnL: -$5.3 million

    Now, this isn't including the fact that some people will buy other products while they're there, but keep in mind that a LOT of people will be going there JUST for the book.

    The other end of their marketing scheme probably won't be as bad.

    The $5 gift cert included with every book (Only good for a $20+ purchase in august though).

    Last quarter's gross margin for amzn was about 24%.

    Let's say 50% of those certificates are redeemed.

    I would say the average purchase made by those would be around $50.

    At these figures, the gross margin made on the sales would be $12, and minus the $5 gift cert, they'd be making $7 on each of the 1 million orders - $7 million total.

    Of course, this isn't taking into account the other effects of the promotion:
    - People converting to long term customers of amazon (which will probably be few)
    - People who ALREADY buy stuff from amazon will take advantage of this deal too. Which means that the promotion on them will be a HUGE loss, since they're giving the book away, and giving them $5 free off their next order.

    Overall, I'd say this will have a minimal effect on most online retailer's bottom line. Amzn will increase their top line from the book sales by 36 million, but any increase (if any) on the bottom line will be negligible. This also goes for many other online retailers offering the book at cost or below cost.
  2. Another nail in the coffin of art and culture.. it's really getting pathetic.. is everyone 5 years old?
  3. The artist (or writer in this case) made tons of money off this book. The publisher made tons of money off this book. The only losers are the retailers.
  4. It's a childrens book, and a very good one at that.. (the whole series is). When I see my nephews and nieces along with millions of kids from around the world, eschewing MTV cribs and all that bullshit to reading, however temporarily, its got to be good.
  5. So why dont the retilaers refuse to stock them if the book is unprofitable?
  6. And millions of adults too.. we are either bombing each other or reading comics
  7. It was the retailers' choice to sell the book at cost. The LIST PRICE is $35, and they sell it for $18.

    Nobody forced them to carry the book, and nobody forced them to sell it at a loss. All the retailers used it as a chance to do a promotion.