Amazon’s rise has provoked strong reactions across Europe. This series examines the culture clash caused by the retail giant’s international expansion and how some governments, unions and rivals are fighting the company.
More from the series:
Part 2: In Germany, warehouse workers are fighting for a union contract against staunchly anti-union Amazon.
Part 3: Planting its European headquarters in Luxembourg has afforded Amazon big tax advantages, which does not sit well in Britain.
Funding for the project:
This series was produced in partnership with the McGraw Center for Business Journalism at the CUNY Graduate School of Journalism.
First of three parts
PARIS —Like many of the bouquinistes, the booksellers who line the banks of the Seine in the French capital, Bernard Terrades is a bit brusque.
Terrades specializes in thrillers, and he speaks in the clipped, precise patois of the literature he sells. And he regards the rise of Amazon, currently at the center of a heated French debate over e-retailing, as more than a little sinister.
Terrades fears that online bookselling, which Amazon.com dominates in France, is robbing the country of its culture.
“It’s completely empty,” Terrades said. “There is no connection with customers. People have lost the curiosity to go out and find books.”
All of which makes Terrades’ decision to sell books through Amazon’s marketplace wrenching. When online shoppers happen upon his digital storefront on Amazon.fr, they’ll never hear him wax on about the exploits of Hubert Bonisseur de La Bath, the superspy creation of Terrades’ favorite author, Jean Bruce. Instead, they’ll see the uniform, lifeless Web page where Terrades sells his books alongside thousands of others.
“It really hurts me to do it, but I don’t have a choice,” said Terrades, whose Amazon sales account for about 20,000 euros ($26,477) a year, roughly 20 percent of his revenue. It’s what enables him to employ a part-time staffer to keep his bookstand and bookstore alive.
Like many French, Terrades is torn over Amazon. It has become a fixture in French literary life, a force that can’t be ignored. It’s so powerful that the French government recently passed legislation with no other goal than to thwart the Web giant. Dubbed the “anti-Amazon law” by the French media, it went into effect July 10 to combat what Culture Minister Aurélie Filippetti called Amazon’s “dumping” of low-cost books in France in order to protect independent bookstores. It prohibits online retailers from discounting books or offering free shipping.
Jay Greene / The Seattle Times
The French are not alone in their suspicions. Amazon’s growing dominance of key online markets in Europe — and the relentless tactics it has used to gain its perch — has created a new set of challenges for the Seattle-based company. Even as Amazon offers the sort of price, convenience and selection benefits that Americans have come to know, many Europeans remain wary of the hypercompetitive culture responsible for its exponential growth at home.
And even at home, Amazon is facing fire for its fierce negotiating tactics. The company has been locked in a three-month dispute with Hachette, a centuries-old French publisher owned by the Parisian media giant Lagardère Group, over the pricing of electronic books. The nasty dispute has become public, with each company enlisting authors to paint the opposite company as craven and indifferent.
Amazon is engaged in another battle over similar issues in Germany with the Bonnier Group that’s sparked author protests there earlier this month.
Amazon’s march on Europe has run into headwinds, as everything from legal constraints in France to union battles in Germany to public shaming over tax avoidance in the United Kingdom threaten to slow its growth.
Kelly Shea / The Seattle Times
“They come to Europe and they try to use the same business model,” said Karan Girotra, professor of technology and operations management at INSEAD, a top European business school based in Fontainebleau, just south of Paris. “[It] hasn’t worked as well.”
That is a risky place for Amazon to be, perhaps more so than for most companies. Meteoric growth has always been the fuel that powers Amazon’s financial engine. Wall Street has long been willing to give the company a pass on slim profits, or even losses, as long as revenues continued to soar.
But Amazon’s international operations grew just 14 percent last year, to $29.9 billion. Many companies would be happy with that, but it’s just half the pace of its more mature North American unit, which grew 28 percent, to $44.5 billion. The weaker international performance, which also includes sales from emerging markets such as China and India, dragged Amazon’s overall growth down to 22 percent, a sharp drop from the 27 percent posted in 2012.
If Amazon can’t rev up its sales engine again, investors will press to see bigger margins. Indeed, they already have: Wall Street expected higher profit off Amazon’s slowing sales for 2013. When Amazon didn’t deliver, its stock plummeted 25 percent earlier this year, and remains more than 18 percent off its January high.
The battle in Europe is as much cultural as it is financial. In France, the government moved to protect independent bookstores, as it has for years, because books hold a revered spot in a country that’s produced literary giants such as Voltaire and Proust.
In Germany, Amazon warehouse workers are fighting for a union contract because unions are deeply revered as part of the country’s fabric. And in the United Kingdom, lawmakers from across the political spectrum have chastised Amazon’s tax strategy for not paying its fair share.
To some extent, Amazon is battling cultural currents.
“These are uncontroversial issues,” said Girota, co-author of “The Risk-Driven Business Model,” which praises Amazon’s skillful shifting of strategy to adapt to evolving market challenges in the United States. “These are part of the broad social contract.”
Amazon, never averse to conflict, continues to battle its opponents in Europe. Executives say the clashes haven’t curbed sales; instead, they blame the slower growth on Europe’s moribund economic recovery. And they insist customers there want the same things its U.S. customers crave: low price, wide selection and shopping convenience.
“I don’t see people in Europe waking up in the morning saying I’m not going to shop at Amazon because I don’t like them,” Xavier Garambois, vice president of Amazon’s European retail operations, said in an interview at the company’s European headquarters in Luxembourg.
Jay Greene / The Seattle Times
Identity at risk
The challenges Amazon faces are, perhaps, most stark in France, where the government has long defended l’exception culturelle. In order to protect French culture from being overrun by globalization that brings Hollywood movies, British music and more, the government has invoked the concept of cultural exception to justify subsidies and tax breaks to producers of French art and literature.
Many French see bookstores as the heart of that culture. They aren’t just shops to pick up the latest best-seller, but a civic space that helps keep its citizenry engaged and informed. To many, preserving bookstores isn’t merely about saving an industry; it’s about perpetuating ideals integral to being French.
“Several hundred independent bookstores [disappear] every year,” said Christian Kert, a conservative National Assembly member who sponsored the anti-Amazon law. “We consider that independent bookstores are the true authority in regards to reading and literature.”
Small bookstores are so central to French culture that they are protected by law. In 1981, the government barred retailers from discounting books more than 5 percent. The so-called Lang Law, named for then-Minister of Culture Jack Lang, attempted to prevent megaretailers from crushing independent bookstores.
But the Lang Law never anticipated online book sales, which topped 500 million euros in France last year — 18 percent of the overall market, and growing rapidly. That’s why the government adopted the new anti-Amazon law, which passed unanimously through both chambers of the federal legislature.
Such government intervention, including grants and interest-free loans to independent bookstores, has done much to preserve an industry that has withered in the United States and elsewhere. France still has 3,000 independent bookstores, one independent for every 22,000 citizens. By comparison, Washington state has one independent bookstore for every 70,000 residents, according to a 2012 Publishers Weekly survey.
But the French government has grown increasingly worried that l’exception culturelle is wilting under the pressure from the Internet — and, more to the point, from Amazon. The American giant accounts for about 70 percent of online book sales in France, according to TNS Sofres, a market-research firm.
Restricted to list price
Before the new law, Amazon systematically offered free shipping on top of the maximum 5 percent discount on every book. Now, Amazon must sell books at list price, and has begun charging a penny, for shipping. Since brick-and-mortar booksellers can still apply the 5 percent discount, the law allows them to undercut Amazon.
The goal is to preserve what Filippetti, the culture minister in President François Hollande’s socialist government, calls “bibliodiversity,” the idea that French readers have access to the broadest selection of books. The only way to do that, she reasons, is to foster a vibrant independent-bookselling industry.
“There’s a real danger when only one actor, whomever it may be, is in the position to determine the products you can access,” Filippetti, a novelist herself, said in an email interview. “It’s even worse when this actor works with mathematical algorithms and when the product you’re talking about is books.”
(Filippetti resigned Aug. 25, with two other cabinet members, in protest of Hollande’s economic policies.)
Andreas Solaro / AFP/Getty Images
U.S. fight hurts image
Amazon’s hard-nosed tactics in its current dispute with publisher Hachette over e-book pricing in the United States has further sullied its image. Amazon reportedly wants a bigger piece of electronic-book profits. So it has ratcheted up the pressure on Hachette by eliminating presale options for some of Hachette’s titles and delaying the delivery of others.
Those tactics have raised the hackles of well-known Hachette authors, including Malcolm Gladwell and James Patterson.
Though the dispute doesn’t affect France, where electronic-book sales remain scant, Filippetti warns that it demonstrates the threat of Amazon’s size and power.
“They don’t work for customer benefits, as they would like [it] to appear,” she said, “but rather for their own profits — and to disrupt the cultural sector.”
Amazon has said its disagreement with Hachette is about obtaining the best terms for its customers, and argues that Hachette is clinging to a dated business model.
“Hachette spent three months stonewalling and only grudgingly began to even acknowledge our concerns when we took action to reduce sales of their titles in our store,” the company said in a blog post earlier this month.
And when it comes to serving French readers, Amazon executives note that its vast warehouses offer the country’s widest variety of books. Romain Voog, president and managing director for Amazon.fr, said Amazon has purchased at least one copy of each of the 700,000 French books in print.
What’s more, Voog said, the Lang Law and the new legislation put French consumers who live in rural areas at a disadvantage. Parisians have myriad city bookstores. Not so for readers who live in villages.
“The real bibliodiversity is the Internet,” Voog said.
Etienne Laurent / European Pressphoto Agency
Even though Amazon has been selling books in France for 14 years, Voog acknowledges “culture headwinds.” He recognizes there are still plenty of French who are dubious about its motives.
“There are a lot of concerns and fears that are not really rational,” Voog said. “We keep focusing a lot on improving the customer experience.”
Amazon executives point to its European innovations, including translation technology that makes it easy for French customers to shop on Amazon’s German site, for example. And the company has created a Europe-specific fulfillment network that delivers many items in one day to subscribers of its Prime service (called Premium in France), rather than the two days it typically takes in the U.S.
Those remain formidable advantages. While French booksellers welcome the new law, they are also realistic about Amazon’s relentless competitive threat.
“People in this building order from Amazon when I have the same book at the same price,” said Olivier Michel, who owns L’Humeur Vagabonde, a bookshop just a few blocks north of Sacré-Cœur Basilica. “It’s the Internet culture that wants it.”
Once loyal customers, who looked to bookstore staff for suggestions, now shop online.
“Today’s shopper is l’amant infidel,” an unfaithful lover, said François Maillot, directeur général of La Procure, a small bookstore chain that specializes in Christian books.
Jay Greene / The Seattle Times
Even Kert, the conservative lawmaker who sponsored the anti-Amazon law, is among them. When buying books, he first visits the local bookstores. But if the local bookstore doesn’t have what he wants, he shops at Amazon.
Kert figures the law will buy independent bookstores a bit more time to compete against the online juggernaut, perhaps five or 10 more years. And many are racing to set up Internet operations themselves.
But Kert also acknowledges there are some parallels between this fight and the struggles told in the French literary classic “The Myth of Sisyphus” by Albert Camus. In the essay, Camus introduces his philosophy of the absurd, recounting the Greek myth in which Sisyphus was condemned to repeatedly push a boulder up a mountain, only to see it roll down again.
Kert knows that his bill will protect independent bookstores from the Internet, and Amazon, only for so long.
“We don’t expect but a single thing: that it allows the community of independent bookstores to adapt,” Kert said. “Some will continue disappearing, but we feel the will in some independent bookstores to adapt, to resist.”