Retail Book Market Perspectives - Research Paper Example

Debra Pilla February - Retail Book Market Strategy In the ever changing publishing market, the retail book industry has finally met it’s demise. Heavily steeped in transition, the nook of brick, stone, and mortar is reaching it’s final days to online competition. What has caused this global reaction from the United States to the United Kingdom, and beyond? More than you know. The economy is partly to blame, with high gas prices and a recession that left all of us squeezing our pennies. The rise of wheat, corn and dairy prices at the grocery store has made all of us think twice before purchasing our love for books at retail stores. We have transcend our thoughts to finding bargains online, and that includes purchasing books at a deeper discount. For all the luxury retail offers, like browsing through the aisles of books neatly showcased for us to admire, and the sheer pleasure of physically opening the pages of a book to see the quality of your purchase, this dinosaur is a sad reality. Welcome to the world of e-books! Many e-book publishers in the states are receptive to lower cost output, without the revenue loss of returned print book inventory. Unfortunately, United Kingdom publishers do not express the same ideals as their American counterpart. They view the digital world of e-books as risky, with higher cost, and less opportunity in the long run. The transformation of e-books in the United Kingdom are slow. This fear is from the potential of revenue loss on hard book and paperback book sales. Yet the European industry needs to take a second look at their nearsightedness. Electronic devices are here to stay, and for good reason. Surely the initial cost for an e-book is worth the price, and the long term value it serves Page -2- is endless. Not only can you install more than one electronic book, you have a choice of font sizes as well. Just think, if you are an avid reader, you won’t have to make countless trips to the bookstore to purchase a hard cover book or a paperback. The e-book tablet is lightweight, smart looking, and cost effective for the long term. If the United Kingdom does not keep up with the future of new technology, there will be consequences down the road, both economically and environmentally. Let’s take a look at the environmental impact that hardcover and paperback books have on our eco-system. Although publishers are conscience of the paper mill effects on our depletion of trees, recycled paper for hardcover books and paperback books have become more popular over the last ten years or so. Waste Management landfills are increasingly having a negative impact, where the consumer is not mindful to recycling the books. We as consumers must think about the long term effects that paper has on our environment. There’s also the negative side to the handling and discarding of electronic systems in our environment as well. Lead and mercury breathes toxins into the air and water. That’s why we need recycled solutions for all electronics instead of shipping them to another country and destroying their home land with our waste. Technology is growing rapidly, and changing every day, so it is imperative for all of us to be responsible for the welfare of that change. The trends of advance technology go beyond the adult reader. Teenagers are getting the full grasp of e-book’s easy access, compared to print books. We will also see in the near future, that hard cover books will become obsolete in the classroom. Technology demands that reading behavior and patterns have to change. The higher margins set in the publishing industry can only stimulate the market. Already the states see an upswing of e-book sales of 4% from 2009, and the percentage of sales continues to grow. Page -3- Price strategy as well as digital distribution, must be a long term goal in order for this new technology to work it’s way into the mass market. Fear of the unknown is hardly a matter of time. Hard cover books will continue to sell despite e-book distribution. But European Book Publishers, including the United Kingdom, need to realize the improvement of market share and lower production and operational savings with e-books. While it’s true that e-books are a trend setting technological advancement, people still purchase hard cover books and paperbacks. Young children have a love for reading, with illustrated pictures, including the older population who still prefer the hard cover book or the lightweight, and easy use of paperback books. Bookstores should embrace e-book sales as the wave of the future, and as a marketing tool to invite customers into the store and browse. While some may hesitate to purchase an e-book, most people don’t leave the store without purchasing one or two books. So to summarize the situation for bookstores, they need to embrace the e-book while hard cover books are still in print until the market gets it’s full share of e-book readers. Industry experts are looking at less than five years for retail bookstores to go out of business. Already Borders chain of bookstores have gone into chapter 11, and more retailers are sure to follow. Blackwell’s privately owned book store chain is regrouping, while WH Smith is selling it’s stores to Waterstone, selling it’s version of the iPad, called the Iriver Story. How’s it selling in the United Kingdom? To be honest, the price is steep in the mainstream market, although e-book readers are cautiously on the rise. Although Borders is restructuring, it closed it’s doors in the United Kingdom. In the US, they can hardly claim this next round will be a success with heavy online purchasing from consumers. As for Barnes and Noble, their restructuring is too early to make a concrete observation of market strategy. While the larger chain of bookstores are losing their clout, superstores remain intact. Page -4- One reason, food. Not only do they sell music, books, and other consumer items like clothing, but people generally shop at superstores for their value of bulk, not necessarily price. Consumers need to eat, so the market strategy to combine food with other products in the same store is genius! What Walmart, Cosco, and B.J.’s superstores are to the US, Tesco, and Cosco-UK superstores are to the UK. I don’t think Amazon can upend the superstores anytime soon, unless Amazon decides to sell groceries online? Besides, the competition between Amazon and superstores is not well balanced to cause a downturn. Amazon is not an online department store, that’s the bottom line. That leaves Apple as it’s main competitor. The tug-of-war between the six largest publishing companies; Macmillan, Simon & Schuster, Penguin, Hachette, Harper Collins, and sure to follow is the holdout, Random House, have made agreements with Apple to sell their fiction and non-fiction e-book content, giving Apple a 30% fee on every sale. The price break eliminates distribution cost for hard cover and paperback books. While Amazon is setting up a monopoly for the lions share of large publishers, Apple is reaching out to smaller and mid-size publishers, including self published authors as a client base. Apple is smart in this regard. As we see in the publishing world of the “big six”, they pick and choose their client base authors with scrutiny and who’s who in the business and entertainment world. This strategy allows Apple to redefine it’s strength on the “not so famous” and “new face” authors, including the “big six.” Amazon’s wrath came to a head when it openly forced the large publishers into price concessions, and more over the e-books sales. The threat held out by Amazon, brazenly stopped customers from online purchases of hardcover and paperback books. This abuse of control over publishers did not go unnoticed in the media. In 2010, the state of Connecticut’s Attorney General raised questions to Amazon and Page -5- Apple regarding the impact of guaranteed pricing called, “MFN”, (Most favored Nation) clause in the legal world. Amazon and Apple had to come to terms on the price agreements with it’s publishers, because the price restrictions does not allow competitors the same price favor, or it could be said another way; lower their prices for competition against Amazon and Apple. Clearly Amazon has flexed it’s muscle power, offering their own contracts with smaller publishers that have not been signed up with Apple yet. While Amazon retains the wholesale approach model for larger publishers, setting their own pricing model, Apple’s terms is the business “agency model” approach. The problem with Amazon’s continued wholesale pricing mode, limits revenue for the publisher and the author’s royalties. According to Chief Executive, Mike Shatzkin, from Ideal Logic, advisor to publishers on electronic books, Amazon will be looking at long-term strategic marketing damage if Amazon stops selling the two largest publishing houses’ books, in order to get their way on e-book contracts. Amazon stands to isolate itself if that happens. In that case, publishers will go elsewhere for their share of revenue. Amazon’s capability to leverage limited participation, forces Apple to compete globally. Therefore, Apple must encourage growth with small to mid-size publishers, along with self publishers too. The company will likely have more flexibility to partner outside the well known “big six”. Look at it this way, when word gets out of Apple’s interest to expand beyond the norm, (without the threats from Amazon), more publishers will come on board to Apple’s hospitality. Bullying is not the way to increase your client base. Barnes and Noble Retail stores are taking on Amazon, with a hands-on approach to to their sluggish sales. Customer service will be focused on devoting floor space to test out the new lines of e-books, with demonstrations and classes for the consumer. Page -6- This is a commitment to customer care, so the customer can actually see and touch the electronic device before purchasing it. Will the price factor make a difference from online to retail? Price point is only about $10.00, to Amazon’s benefit, but if you include the shipping charges it’s about the same. Because of online purchasing power for all retail items on the market, Amazon has amassed 90% of market on electronic book sales verses the retail book store chains. That’s the kind of monopoly power they control. The success of Amazon’s Kindle 3 has flooded the market in the US. The market in the UK is slowly catching up. Given the new Kindle 3 has the best E ink screen, turns pages faster than the Kindle 2, is smaller than the iPad, lighter in body weight, refined in it’s looks, and more hands-on comfort. The price is lower than it’s rival competitor, Apple, so it won’t be long before Apple pushes the iPad 2 into the marketplace with their version of the conference video camera. Amazon has already figured out how to accommodate the Kindle 3 with an adapter that’s included with the shipment of the Kindle to the UK. The international service has been met with hardware improvements, along with price and portability. There’s also a Pdf, and docs to upload, and it has a built-in dictionary. You have the option to hook up the Kindle to your PC as well. Other tweak changes include clarity of the display, and changes of the finish from white to sleek graphite. One of the best changes is the iOS apps, a switch devise, allowing you to read from your iPhone when traveling, and the ability to switch to your laptop at lunch, then to the Kindle at home. For it’s competitor, the Apple’s iPad, you can multi-task with music, emails, and download iTunes. Of all the electronic products that Amazon has launched in the marketplace, no DVD, hardcover book, or video game has been widely accepted and popular as the Kindle e-book. Why is that? The app devise is a cross medium for other electronic products, Page -7- like iPod, yes, iPad, Blackberry, laptop, and the personal computer. Amazon credits it’s base for selling more e-books than hardcover books, and the numbers tell the story from data reports. According to AAP, (Association of American Publishers’, sales grew 207% from year-to-date). Just to site an example, the author, James Patterson’s sales through e-book was an impressive 1.14 million, with Hachette Book Group. Amazon benefits largely to volume and price of Kindle e-book. Look at it this way, since Amazon dropped the price from $259.00 to a modest $189.00, unit sales tripled in growth. Amazon won’t publish actual revenue from sales, which keeps their top competitor like Apple frustrated and guessing. The fact is, some customers have been using other devises to read the Kindle content books. Did you know that Amazon and Apple are neighbors? Both sites are less than one mile apart. I just wonder if Apple or Amazon make their engineers and designers sign a disclosure contract if they resign or get fired, then move on to the competitor down the street? Well, one thing is certain, electronic engineers are lucrative in the field, and designers of product are no less impressive. It is not to say that the packaging department is less important, it is. We the customer rely on those who package the product and ship it out on time, so their role in the marketing world is equally critical. I mentioned earlier that teenagers are embracing the Kindle and iPad. But there’s still a market group that Steve Jobs of Apple, and Jeff Bezos of Amazon, have not tapped into. Children, or at least not yet. Their world is turning faster than you or I will ever comprehend. The engineers of both companies need to fast track children’s storybooks with pictorials in electronic products sooner, rather than later. I’m surprised there hasn’t been an outcry from parents regarding this speculation. My guess is both Apple and Amazon are working on it. Here’s another subject both competitors are working on, but trying to get the kinks out. Page -8- Color imaging is a unique concept from the personal computer age, but has yet to find it’s way to the e-books. Time will tell if both companies can manage to deliver on the future Kindle of 4 or 5, or maybe the iPad 3 or 4? Wouldn’t it be nice to read fonts in color with a white background, or black font against a color background? Either way, I’m looking forward to the new technology. United Kingdom Kindle e-book sales have increased in revenue since 2009, with over 150 million pounds. That’s less than the United States sales. However, in December of 2010, sales increased in the UK with the sale of Kindle 3 electronic book. The addition of adding blogs, and 25 European newspapers and magazines to the electronic book was a plus. There is another market that nobody is seriously having a discussion about. Other online outlets like ebay. The market is wide open with sales and auction too. The iPad and the Kindle have been sold online through ebay with great success, along with other brand name electronic books. E-bay is not going anywhere. People sell their items there instead of putting an ad in the newspaper. It’s faster, saves time, and there are different outlets like paypal to send and receive money, from buyer to seller and seller to buyer. Look out Amazon, your competition is gaining traction! Page -9- References Yarow, J., (2010), Apple iPad Won’t Kill The Amazon Kindle Business Insider, www.businessinsider.com, Web. Park, D., (2010), ebook Sales Soar For Amazon & Apple As Competitor Groups, Legally Informed Strategy, DYP Advisors, www.dypadvisors.com, Web. Auletta, K., (2010), Annals of Communication, Publish or Perish, Can the iPad topple the Kindle, and save the book business? The New Yorker, Print. Rich, M. & Stone, B., (2010), Amazon Threatens Publishers as Apple Looms, The New York Times, Print. Esposito, J., (2010), The Journal of electronic publishing, Stage Five Book Publishing, Vol. 13, issue 2, Print. Roychoudhuri, O., (2010), Books After Amazon, Boston Review Magazine, Print. Teather, D., (2010), Borders losses underline pressures on book trade, The Guardian, Print. Goodin, D., (2010), Conn. Lawman grills Apple and Amazon over e-book pricing, Most Favored Nation Status Scrutinized, The Register, Print., www.theregister.co.uk, Web. Kunhardt, J., (2010), eBook Pricing Deals May Violate Antitrust Laws; Ct. Attorney General Launches Investigation, The Huffington Post, Print. Page -10- Anderson, M., (2010), The Effects of E-books on Traditional Book Stores, ehow contributer, www.ehow.com, Web. Bilton, N., (2010), With a Kindle Hiring Spree, Amazon Gears Up for Battle With Apple, New York Times, Print. Cristi, (2010), Amazon Sells More E-books than Hardcover Books, Pad Gadget, www.padgadget.com Read More