February 4, 2015

Gaudeamus igitur, Amazon’s going to college


Welcome, Amazon! Image via Wikipedia.

Welcome, Amazon! Image via Wikipedia.

When I was a college student, I thought as a college student. I spake as a college student, using the term “Derridean” and “albeit” like they were my sponsors. I also spent as a college student, which meant lots of bad sandwiches, flavored rum, and assigned books often purchased on Amazon Marketplace.

I was an English major so I avoided buying many (if any) real textbooks, and I was also going to school in New York (go Violets) where my spending options were myriad. But not all college students enjoy the same locational or scholarly advantage. So where do you buy your essentials when you don’t live in the Big Apple and you want a degree that’s not in the humanities? Why, head to the Everything Store!

The Wall Street Journal reports that Amazon’s latest power grab is taking place at three major universities: Purdue, UMass Amherst, and UC Davis. Amazon has entered into partnerships with all three schools in which the schools integrate their website with Amazon links, and the retail giant provides discounted Amazon Prime memberships for students, as well as other perks including unlimited next-day delivery. The Amazon Campus program also plans to build an automat-style package pickup, where students can visit an on-campus distribution center, open a coded locker, and retrieve their delivery.

“College campuses are an opportunity for us,” said Ripley MacDonald, director of Amazon student programs. “We hope students like it and continue being Amazon customers.”

All course materials will be eligible for one-day shipping, regardless of whether students have a Prime account. Other merchandise requires the membership, available to students for $49, half the regular Prime price.

Okay, there’s plenty to unpack here, not the least of which being that Amazon’s director of student programs has name of a ’80s movie rich guy villain who wants to demolish the town’s rec center. (Not entirely a joke; at Purdue, Amazon is actually taking over a room that was designed to be a multipurpose meeting space for student groups.) But let’s start with the money.

The WSJ puts annual college bookstore revenue at $10.3 billion. Right now, the lion’s share of that money is spent in stores run by Barnes & Noble College Division and Follett Corp. Most of that $10.3 billion is spent in outright purchase; though many stores offer textbook rental services, they see very little use. Plenty of universities provide various vouchers and such to students who receive financial aid so they can spend it on textbooks.

The National Association of College Stores (NACS) provides a decade’s worth of data showing that while enrollment rates have steadily climbed, revenues have wobbled between the $10.5-ish and 9.5 billion mark for about six years. But that’s only data through fiscal ’12. Barnes & Noble actually reported small but notable growth in college bookstore revenue for the second quarter of fiscal 2015. B&N’s college division is of course shackled to the floundering Nook division under the umbrella of Nook Media, the proposed spinning-off of which has been the subject of plenty of speculation following Microsoft’s divestment of their stake last year.

So college bookstore sales aren’t cratering, which is why the college book business has been facing digital competition for years. You may recall that in 2012 the NACS lodged a complaint with the Better Business Bureau that Amazon’s textbook savings maybe weren’t as generous as advertised, and Amazon responded by literally making a federal case out of it. (Both parties later settled.) And as textbook prices and demand have continued to rise, universities have attempted to address the growing tension. In 2012, the Purdue Student Government unsuccessfully tried to push a tax holiday for student textbook purchases, and in 2013 the UC Davis Bookstore created a fund for a select group of financial aid-receiving applicants. A fund sponsored by…you guessed it, their new best friend, Amazon.

But these are stopgaps, so it’s no surprise that the Amazon Campus program is being heavily marketed as a way for students to save money long-term. They won’t even have to use Chrome to Occupy The Bookstore! Purdue’s president, former Indiana governor Mitch Daniels, can continue his campaign to lower student costs, espouse a greater spirit of competition amongst local bookstores, which in turn will drive down prices for students, so everybody wins! (Unless that student wants to buy some Howard Zinn, which I’m guessing Daniels wouldn’t be totally for.)
Amazon’s textbook business is, in fact, quite successful, so the distribution center partnership appears to be a logical next step. But the blithe, solitary mention in the WSJ piece that “The traditional school bookstores at these universities won’t be going away” doesn’t ring true. After all, the universities stand to make money off these deals.

For the privilege of tapping into the schools’ course-selection software, Amazon will pay the schools 0.5% to 2.5% for purchases made through its college website, according to contracts obtained by The Wall Street Journal under open-records laws. Amazon will pay at least $1.45 million to UMass over three years and $1.7 million to Purdue over four years, according to the contracts.
Furthermore, by slashing the price of admission to Prime, Amazon ensures plenty of good longterm members, who on average spend way more on Amazon than non-Prime users—and who have the added advantage of youth and discretionary income. By insinuating themselves into these universities’ revenue stream, campus community, and supply chain, Amazon stands to gain the loyalty of customers whom local independents, Follett and B&N won’t be able to retain after graduation.

As a former student, the argument for better bargains for students is not lost on me. Textbooks do cost a ridiculous amount, in part because the demand for a course text is much less elastic than a book bought for personal reading. Textbook publishers’ profit margins now stand in direct opposition to the commercial reality that information, and marketplaces, no longer function solely on publisher’s terms.

But by providing Amazon the physical foothold of Amazon Campus, these schools stand to make millions while steering thousands of customers toward Amazon, students who live at the nexus of technological savvy, the consumptive frenzy of early adulthood, and/or a lack of sufficient income needed to take advantage of alternative retailers. To me, this looks less like schools acting in their students’ best interest, and more like the farmer cutting henhouse keys for the fox.

Liam O’Brien is the Senior Sales & Marketing Manager at Melville House, and a former bookseller.