Wednesday, May 31, 2006

The End of British Bookselling is Nigh

Waterstone's is about to take over Ottakars in a deal which is bound to see the closure of a number of 'doubled up' stores in market towns throughout Britain. Despite the fact that the deal puts Waterstone's in a highly dominant market position the competition authorities have waved the deal through. There are now six main players in the bookselling market - Waterstone's, W H Smith, Borders/Books etc, Amazon, the supermarkets and Independent booksellers. The common thread through the first five is the huge level of discount they demand from suppliers, which is then passed on to the consumer. So all's well then. Well, not quite.

The only way publishers can give this discount is to concentrate their efforts on bestsellers and to put all their marketing resources behind comparatively few books. The publishing sector has reflected its bookselling counterpart and seen many smaller publishing houses gobbled up by the bigger ones, as they struggle to compete. In turn this has meant fewer books being publishing and a contraction in range. So although the consumer wins on cover price, it loses out on choice. Some independent booksellers don't even bother to sell Harry Potter books because Tesco is selling it more cheaply than the bookseller can buy it from the publisher. It's not uncommon to see small independent booksellers piling up their supermarket trollies down at Asda, looking slightly sheepish as they do so. This is because the publisher gives Asda a 60-65% discount, while the small bookseller will get 40% if he's lucky. And on top of that Asda is likely to sell the book as a loss leader.

Amazon offers a standard 30-40% discount on most non-academic titles, so it has been able to establish a dominant market position in online bookselling. It has been so successful that 80% of people who buy anything online, buy from Amazon at some point. So there's the background - now for the prediction. I foresee that within ten years the independent bookshop will have disappeared from our town centres, all bar a few retired individuals who have got money to throw down the drain. Even second hand bookshops are disappearing at a fair old rate, as most people now buy their used books through Abebooks. There's still nothing like rooting round a second hand bookstore and finding that book you've been looking for for years, but the internet has made it so much easier.

The joy of wandering round Waterstone's used to be that each one was different - the local manager was able to decide on buying. Now everything is decided by the centre and the local managers have little power to go their own way. Each store looks at the same and stocks the same books. And as we have read in the weekend press, to get a book displayed in a prominent position throughout their chain can cost a publisher upwards of £20,000. So the bestseller charts are entirely skewed by money changing hands between publisher and bookseller. W H Smith do the same. It is rare indeed for a book to break through that market barrier on its own merits. It can happen - East Shoots and Leaves by Lynn truss is the exception that proves the rule. Profile Books, Truss's publisher, would never have been able to fund a marketing campaign which a bestseller would normally require. But as I say, it's a great rarity for this to happen.

So will the consumer win in the long run? If you're a buyer of trade fiction, sports books or general literature then probably. Prices will remain low and the contraction in range won't affect you. But if you're into more esoteric, specialist books expect to find your choice diminished and the price to rise. And if you're someone who just likes to browse, you're likely to find your browsing range restricted to a choice of Waterstone's, Borders or W H Smith. A truly terrifying thought.

23 comments:

nadders said...

What's happening in the book market is still an adjustment to the distortion created by the old net book agreement, which meant that WH Smugs had even more control than they have today.
The book retailing market (shop part) is still not fit for purpose and still needs to collapse some more before a realistic shape emerges

However the overall book market is massively improved by the changes created by the web and the end of the NBA. You & Guido would have had no chance whatsoever of getting the little red book out in the old days.
Amazon is fantastic; books are cheaper;Smugs are getting all the grief their history of crap retailing & arrogance deserves

Afterall, its a free market and the customer will ultimately win

Paul Linford said...

If you want independent second-hand bookshops, the answer is probably to go and live in Hay-on-Wye.

Apart from there, I think your analysis of the future of the trade is probably spot on.

UK Daily Pundit said...

For specialist books, particularly ones of a political nature, both serious and humerous, can I recommend http://www.politicos.co.uk. I stumbled across it the other day.

Anonymous said...

Iain Dale, warrior against monopoly capitalism. Welcome, comrade.

leon said...

If you're luck enough to live in London there's always foils...besides, isn't this a little ironic? A free market proponent lamenting its effect!?:D

Davide Simonetti said...

Thats very depressing. I love wondering around bookshops. For all it's convenience Amazon just doesn't have the same buzz.

So what will replace the old bookshops in our towns (often the only individual entities left) More bloody fast food joints and Starbucks. Yuk!

Matthew Hewitt said...

I agree entirely - this is very depressing news. The only independent bookshops which will survive will efectively be kept in business by a loyal clientele which is willing to pay more simply to use them. There won't be too many of those around in a few years. One can only hope that pressure from customers in local stores manages to ensure that the chains still stock a wide range, but there is not much chance of that, particularly when Amazon has a wide range also. Perhaps niche specialist sellers are the way forward and you were just a few years ahead of the trend! Buying on the internet is far less satisfying, however, and the joy of collecting second hand rare books is completely eliminated when it is simply a question of sitting at home and being able to get whatever you want, provided you can afford it, rather than having to hunt around.

Tabman said...

Interesting - though I thought you'd be appluding the power of the market, Iain.

What this tells me is that the good Liberal principle about being suspicious of allowing power to concentrate in too few hands continues to hold true!

PatrickF said...

It is, alas, an unfortunate consequence of a free market arising from the end of the net book price agreement (forget the exact term) what - 10? years ago.

Interesting article on Grauniad on the same topic last week, albeit more positive - claiming that the good independents can survive by being what the best Waterstones outlets used to be: serving their communities with intelligently selected titles (cf Daunt Books - although there is something slightly smug about the place). http://books.guardian.co.uk/shoptalk/story/0,,1780436,00.html

On the other hand, I have a mixed view of the evils of Amazon, abebooks etc. - surely the fact that a second hand bookseller can reach a global market via Amazon z-shops or abebooks is a good thing? True, there is masochistic pleasure in finding a long-sought for book in a dusty old shop in an out of the way market town, but we only have so much time these days... As for amazon, the range of left-field, off-the-beaten track stuff on the site is still phenomenal - long may it continue, and the reviews section does begin to hint at the notion of a real online book-loving community. I do feel for authors, though - after all, its still just as hard to write a book as it always was, but now the economic value of a book has declined in retail terms by at least 25% over the last 10 years. Whether there will still be the wonderful range of books being written and produced in 10 years' time as a result of the current marketplace is a moot point, I admit - an independent bookseller may be able to survive on 200 regular customers and a cheap lease, but doubt an author could, given the rise in living costs. Maybe the government should do as my countrymen in Ireland have done, make artists tax-free?

A rambling comment but one that I wanted to make...

Russell said...

Iain - there was a good piece on independent bookshops in the G2 section of the Guardian last week.

I think your article throws up a tension that exists in the Conservative Party. i.e. the competing desire to give the market free reign but at the same time support the small businessman.

I think there is some cause for optimism. Consider the case of food. Big supermarkets packing the shelves with cheap food, crushing local butchers etc. But at the same time there is a growing movement and market for high quality food and farmers markets. In that market segment price isn't everything. Might it not be the case that two separate markets develop. One for those who want to buy Louise Bagshawe novels (for example) in Waterstones and another who wants to buy "Great Speeches in Parliament, 1989-99: 10 Years of MPTV" in a local indpenedent bookseller?

Clive Davis said...

I never, ever, thought I'd give up going to bookshops, but you're right, Iain, the amount of choice is diminishing fast. Waterstone's is creepy, Borders and most of the others feel more and more like supermarkets. I buy 90 per cent of my books on-line now, often secondhand. Sad, because I miss the serendipity of browsing in a good independent shop. But I'd have to drive miles to find one...

skipper said...

Very interesting post; of course you know a lot about the online scene through Politicos. I just hope there will be a consumer's revolt a la CAMRA but do suspect (and hope) there will always be a niche for at least a small number of second hand bookshops.

jm said...

So, what should be done Iain?

david kendrick said...

Good asessment, Iain.

The problem with not allowing the free market to operate freely is that power is given to the dead hand of govt.

When does govt involvement make anything better? There is (was?) an excellent LD policy of abolishing the dti, and all its associated costs/support/intereference. Is DC sharp enough to copy it...

Adam Smith's 'invisible hand' is not perfect. But its 10 times better than any modification from govt, even a much more competent govt than we have now.

phone cam foolery said...

David Beckham has his third autobiography out, nuff said.

Anonymous said...

"The End of British *Bookshops* is Nigh", perhaps. British publishing has never been healthier. Anything, however recondite, can be published, for however small a niche. Indeed, the second-hand trade has suffered because of the quantity of previously rare stuff that can easily be brought back into print.
For those of us who love books but not bookshops, who thought them book mausoleums staffed by some of the most autistic sociophopes ever to slip the attention of their carers, this is the golden age.

Orwell, of course, got there before me in his essay, Bookshop memories: http://www.online-literature.com/orwell/892/

SERO

Brent Parris said...

The tragedy about this is that every time I go in to Smiths I look in vain for anything by PG Wodehouse or Anthony Powell but I can find any old crap by Eamonn Holmes, Alan Titchmarsh or Jordan. Against these celebrities, chick lit is positively high brow.

Ted said...

Iain,
Its a shame but can't see what else they can do stuck between the supermarkets and online. The problem is that for choice the online shops are streets ahead and if you can't find the book you want in say Amazon UK then Amazon.com might have it. Recognise you lose the serendipity of finding a book you didn't know about while perusing the stock but tracking a rare out of print book through Abebooks or the other online rare / used book dealers can be just as challenging.

Ross said...

Oh Iain.

The free market is a great thing except when it doesn't suit you. In law the objectors had no case, all they did by getting it referred to the MMC was make it cheaper for Waterstone's to buy.

With the honourable exception of specialist independents such as yours, there is no doubt that the High Street has a better offer for books since the advent of the chains than was offered by the independents before. Independents never went near Bolton, Barnsley etc - as now they focused on Surrey and Sussex etc. In Leamington (to pick an example) there was once a 500 sq ft indie, there is now a 5000 sq ft Waterstone's. I know which I prefer, and is more likely to have the book I want.

Ottakars was (is) a loss making chain with an MD in denial about the impact of the internet. It would not have survived. It was either Waterstone's or WHS who would buy it in order to survive.

Retailers are rightly demanding bigger discounts from publishers on titles, because publishers have had major improvements in production costs on their side, which should be passed to the retailer who is bearing the risk of holding the stock.

Amazon and other internet shops are passing these cost savings to the consumer in order to acquire customers and grow their business. Whats the problem with that?

The TaxCutter said...

People will read blogs not books in the future.

ian said...

"Second hand bookshops are disappearing because of Abebooks"

Que? Isn't Abebooks a marketplace for the said second hand bookseller, allowing them to sell their product to a wider audience, and thus supporting their existence?

And I look forward to your response to Ross' exposure of you as anti-market.

Anonymous said...

Is it true that “in turn this has meant fewer books being publishing and a contraction in range”?

I thought that one of the peculiarities of the book industry was that the number of books published has grown faster than the number of books sold in both the UK and US.

Does one of your readers have an authoritative source for this - apart from a Conservative politician railing against market forces (always a joy to watch)?

Anonymous said...

I think you are getting muddled in your thinking due to your obvious passion for the publishing business, Iain.

It is not the merger of two large book sellers which has caused or is likely to exacerbate the problems you identify. Indeed, it is lack of market power rather than its presence which is the real "culprit" (if that's the right word) from an economic perspective.

Competition between the large multiples (and now supermarkets and online) is cut-throat in terms of price. Smaller booksellers can no longer support a deep range of titles using good margins from bestsellers because if competition has reduced the big boys' margins on bestsellers to practically zero it has made life impossible for independent retailers with higher wholesale prices. And they are also squeezed by internet retailers at the other end as such retailers can have very deep ranges because it is all kept deep in a warehouse in Slough or somewhere.

Large multiple booksellers like Waterstones/Ottakars long for the sort of market power to allow them to push up prices and margins. This would have the unintended side effect of saving niche independents. But it is crucial that you realise that it is competition rather than lack of competition which has got us here.