MAY 17 I PERSPECTIVE I BY ZACH PHILLIPS
Up Against Amazon

If you're frustrated by Amazon.com's referral-fee hike, you're in good company. The Internet giant's recent announcement that it will take a larger cut from affiliate sellers — from 12 to 15 percent — has left droves of music retailers feeling used and abused. Many joined the site's referral program as far back as five years ago, only to watch Amazon start selling more musical products directly and become a bigger competitor.

Instrumental Music Center, the cover subject for our June issue, is one of those retailers.

The Tucson, Ariz., dealership uses Amazon to market specific products, especially fast-turners and high-visibility items, as well as to publicize its name. And the company has no plans to alter its Amazon strategy anytime soon, even in light of this news.

Leslie Faltin, who co-owns Instrumental Music Center with her husband, Michael, called the fee increase "annoying" but "not a game-changer" for her business.

"[Using] Amazon is all about turns, profit and found sales," she said. "If I'm clearing 10 percent on a sale after fees, shipping and packaging costs; not sacrificing my local market; and selling a product that I wouldn't normally sell that day, then it's all good."

"The truth is, someone will sell that trumpet on Amazon even if it's not us, and they will be making some money, not us," Michael added. "The monster will be created whether we are part of it or not, so we've decided to make some money and play their game."

For Leslie, the trick now is keeping an even closer eye on the prices and net profits of items she's selling on Amazon, then determining whether they're still worth listing. "We may need to increase the price online, and we may need to stop selling certain items," she said.

But for a long-term solution to this bugaboo, Michael said retailers need to pressure manufacturers that sell direct to Amazon. "This would keep the affiliates valuable and give the customer better recourse if they have issues with the product."

I heard Amazon's news while attending the annual Retail Print Music Dealers Association convention in Los Angeles, where the e-tailer turned out to be the hot-button issue. There, I sat on a panel discussion titled "Future View" and was asked what brick-and-mortar retailers could do to compete against Amazon. I urged them to capitalize on their unique strength: creating a customer experience by hosting in-store events and selling their service.

For the Faltins, who doubled their business last year, this strategy is working. "There's a little bit of a backlash against the Internet going on," Leslie said. "Amazon has gotten a lot of press for treating the brick-and-mortars as its showroom. I have had people come in and say, 'You know, I could buy this a little bit cheaper online, but I'm going to choose you guys.' Lately, I've had probably 10 customers tell me that." MI