Is Amazon a new chapter for the Russia book trade?

July 3, 2013
Is Amazon a new chapter for the Russia book trade?

Book industry experts comment on Amazon’s alleged entrance into the Russian market

This event has been long expected by experts in the field and at the end of April it became known that Amazon, the largest online retailer in terms of sales volume, was ready to officially launch on to the Russian market, registering its trademark Amazon Technologies Inc. in Russia. The Russian division of Amazon will be run by Arkadii Vitruk, the former general director of the publishing house “Azbuka –Atticus” who left his post there in the middle of 2012.

At the moment it is known that the global online retailer is not planning to open its entire shop platform and logistics operation. Amazon is only offering Russian customers digital content and e-readers: books, videos and their Kindle tablets. The company operates a similar business model in Brazil.

In the absence of official information from the company themselves, various experts in the field were asked to comment on the appearance of this new player on the digital landscape of Russian book publishing.

Vladimir Kharitonov, Executive Director of the Association of Russian Internet Publishers

Amazon’s arrival in Russia really has been expected for some time. And I’m afraid it may have come a bit late. The market in digital content in Russia is far from empty and quite competitive, the same holds true for the market in e-readers. Amazon gained ascendancy in the electronic book market in the USA because it was the first to offer a convenient package (e-reader plus shop with a wide selection of content) and still maintains an enormous share of the market, which it has to be said, is slowly dwindling, thanks to the efforts of competitors, particularly Apple. In Russia there already are large shops such as “LitRes” and OZON.ru and new models of book distribution are developing, for example Bookmate, and the market is saturated with inexpensive reading devices. Amazon will have to start from scratch, gather a selection of books (thereby confronting the same problem that all electronic book sellers face in Russia – the limited supply of published digital content) and launch their own e-readers on to the market, which will be in competition with the similarly priced devices of their rivals (Sony Reader, Pocket Book, WEXLER and many others). Here Amazon’s brand will not help them, many people in Russia have only heard about Amazon by hearsay.

Amazon’s strength, of course, lies in its money, which it can spend on an ideal launch onto the Russian market. This would include advertising and bringing out decent (not necessarily the most recent) models of Kindle and the tablet Kindle Fire at give-away prices, and assistance to publishers in digitizing content. The pricing policy of Amazon, in all likelihood, will not pose a threat to Russian publishers. Here electronic books are not that expensive and they fall with relative ease into the Procrustean bed of 2,99 -9,99 dollars which creates trouble for publishers in the USA and Europe.

On the whole, the influence of Amazon will probably simulate growth in the Russian electronic book market rather than create a loss of independence, which some experts fear.

Mikhail Osin, Digital Sales Manager OZON.ru

The events of this year confirm that the digital book market in Russia is ready for growth and development. However at the same time it is important to keep in mind that digital book distribution in Russia finds itself in a complex situation; the illegal market is dominant, the legal market is partly monopolized and the greater part of content does not have digital rights. Consequently changes in the landscape need to occur. It is difficult to say what role Amazon will play in all this. The Russian online retail market is markedly different from the Western market. Of course Amazon’s brilliant internet sales experience and their powerful ecosystem is a terrific advantage. What’s more, to limit themselves at the moment to only digital sales is simpler and more sensible than to open a fully operational internet shop. The time and money that such a project would demand in terms of operational and logistic requirements are colossal.

In the final analysis, sooner or later the domestic market will become more civillised. Users will pay for content and quality of service, therefore the passivity of the publishers and the problems of the adequacy of content will disappear. The main thing is that people continue to read.

Sattar Giulmamedov, Deputy General Director “Avirsa Proekty”, manager of the innovation centre PO WEXLER

In my view, in the short term this event will not bring about any substantial shifts in terms of the spread of electronic materials. However, in the medium term and long term it will cause significant changes, and not only in the field of book publishing.

First of all let’s separate the facts from the speculation. Various sources have announced that Amazon are opening a filial in Russia, the head of which will be Arkady Vitruk who has been in discussion with the company since the end of 2012. Furthermore experts speculate that Amazon will operate according to the stripped down business model that they have adopted in Brazil. According to the experts Amazon’s launch on to the Russian market will take place between September and December of 2013. There are rumours that the internet giant has been in contact with representatives of “Eksmo” and various other publishers. All this is speculation.

The facts, which can be verified, are as follows:

  • Arkadi Vitruk’s LinkedIn profile indicates that since February 2013 he has been the director of Kindle Content in Amazon EU Sarl.
  • Amazon have published details of three vacancies related to the spread of Kindle content in Russia.
  • Amazon’s trademark has been registered with Rospatent. The application is for the holding and delivery of goods, electronic texts, audiovisual works, files etc.
  • Russian residents may already acquire media content from Amazon’s website.
  • Some Russian publishers and authors have already put their works in Amazon’s catalogue.

Consequently we can confirm that Amazon already has a presence in the Russian market and is a subject of economic relations. This means that in the future we can expect a broadening of this presence. Again we enter the realm of speculation. It’s likely that Amazon in the initial phases will really limit their activity to the sale of devices and Kindle content. That is to say, to the already existing sale of content they will add the official sale of devices. If this proves successful, then in all probability, the internet giant will wish to apply this success to other categories of goods.

What needs to be done to make the spread of devices and Kindle content successful? In my view it is necessary to do the following:

  • Create a Russified version of the site.
  • Rework the catalogue into a more traditional structure for the Russian consumer.
  • Ensure the quick and precise delivery of devices.
  • Increase the list of titles that are available to the Russian consumer.
  • Supply devices via the main electronics chain stores.
  • Russify the software on the Kindle.
  • Widely promote their brand.
  • Provide Russian consumers with a more convenient method of payment.

Without doubt the most important instrument Amazon possesses to fulfill these tasks is its economic success. In addition, its other strengths are a good reputation (or more correctly, its lack of a bad one), the high quality of its devices and a subsidized approach to sales.

It is possible that such a sales model will allow Amazon to keep prices at an American level or close to it.

In my opinion, aside from completing the aforementioned tasks we can expect Amazon to establish partnerships with a major operator of intellectual property rights and federal retail chains. Perhaps there will be a partnership between Amazon and the Russian Post, which seems to be facing a serious reorganization. In the short term, the increased presence of Amazon, in my view, will cause more activity in the field of electronic content from publishers and authors. Many of them are waiting for the official opening of representative offices, as well as connecting the wide distribution of their works with the DRM (Digital Rights Management) formats supported by Amazon. Probably in the near future, the official emergence of Amazon devices will oust a number of players out of the Russian market or significantly reduce their share.

In the medium and long term we may see the appearance of a new operator of intellectual property rights capable of competing with the largest of the existing ones. We cannot rule out counter action on the part of Russian market players, for example, a major retailer joining forces with a major operator of rights. However for a stronger foundation it would be better, in my opinion, if a device manufacturer also took part in this merger. On the other hand, for a speedier entry into Russian retailing Amazon could find a Russian partner.

In summary, I would like to stress that I would not expect major changes in the near future. But in the longer term, I think there may be significant changes, most of which will have positive effects for consumers.

Sergei Anuriev, General Director of e-book platform “LitRes”

Amazon is a key player in the "digital landscape" across the globe, equal to Google and Apple. Their arrival in Russia is a landmark event. But how their appearance will affect the domestic market of paper and e-books is not easy to assess since a lot depends on what exactly Amazon plans to do in Russia. As it stands they have various options- go out in full array and start building warehouses and develop their internet commerce in Russia or just acquire Russian-language e-books for sale around the world.

As for their advantages, the strengths are obvious - the experience of one of the pioneers of global e-commerce. In the field of internet commerce Amazon is adept and has no weak spots. Their weaknesses lie elsewhere, and they are also obvious: the lack of focus on Russia and a poor understanding of the specifics of the domestic market (however, specificity is present in every market). Accordingly, the quality of service will depend on investments in warehouses and inventories across the country. Whether Amazon will want to invest so much depends on the first weak point - a potential lack of priority given to Russia.

It is most likely that Amazon will develop here without making any "life or death" stakes, but simply scale up the operation that they have brought into being “across the ocean." In any case, the Internet giant has every chance of being successful in Russia, it depends entirely on them.

Konstantin Kostiuk, CEO of online library "University Library-online"

The language barrier offers reliable protection to Russian publishers from the winds of global publishing trends. It allows the avoidance of direct competition and the creation of a distinctive market. It is hard to imagine that it will help Amazon to repeat its success in the West - they have no content, and its purchase does not fit into the usual behavior of the Internet giant. They will not release self-publishing technology because they do not have the customer base, which they do have in those places where they have a language presence. This lack of book retail will not allow them to act even on a par with the Russian players. The only thing that they can get a hold on is selling Kindles. However, the Russian-language Kindle cannot be tightly bound to the resource-poor Amazon. What Jeff Bezos’s staff come up with, we can only guess. However, the brand itself will certainly allow them to cast themselves as leaders of the electronic market from the very beginning. After a few years of work they will be able to compete with "LitRes" and it will be good for all involved. We really miss the presence of a strong Western brand - because up to now the Russian electronic book ecosystem has been ignored by everybody. The fact that Sony are selling here, Google is now doing something, and finally the Kindle has arrived, raises the self-esteem and mood of the Russian readership.

By Simon Knapper based on the article in “Universitetskaya Kniga” magazine