Sunday, July 24, 2011

Close The Borders!

A lot of attention has been focused on the closing of the big box book retailer Borders lately. It is a shame, of course; I always hate to see book stores close, even if they are huge corporations. But just like with any business, they failed to adapt at all to market conditions. The question remains, however: can the other large book retailers survive? And how will smaller shops adapt?

There have been plenty of reasons given for the fall of Borders, most of which are a mixture of truth and assumptions. First on the list is the rise of e-readers. Devices such as the Kindle, the Nook, and countless others have been purchased in droves for the past two years. Borders was the only large store to not have their own dedicated reader, so whatever devices sold garnered them much less in sales than their competitors. Still, I think the volume of e-books sold is overstated. I know a lot of press was made when Amazon sold more e-books than dead tree versions, but I also think a vast majority of those e-books were free or low-cost or independent books that most people would not have otherwise read (and probably still haven't). It's a factor, to be sure, but it is comparing apples and oranges.

Another reason, of course, is online book retailers. For most people they assume this means Amazon, but the Barnes and Noble web site has been remarkably aggressive in their pricing, so that is also a factor. Borders, again, did not really keep up. Marketers have always wondered whether Amazon's deep discounts equaled the instant gratification of going to the store, and it appears that the answer is increasingly yes. Borders was left for those people who desires a book immediately, or just wanted to browse, and those people have become less and less of the consumer market for books. Features such as Amazon's recommendation list has made browsing online more efficient, and the publishing world has become so niche-driven that an increasing number of books are desired by word of mouth.

The good thing for book stores is that this has thankfully been a slow, gradual process; this usually means the old dinosaurs have the means and the time to adapt appropriately. B&N appears to have done so; Borders didn't. Still, one wonders if the days of the massive bookstore are over.

Obviously, I don't know, but I think B&N and the other, more regional large chains can stick around for a while yet. But the entirety of the market shift in books may have an odd side effect, and that is to boost the sales of small independent book stores. Maybe.

Not ten years ago, it was all about volume. If you wanted a book, you could go to a small book store with a small selection or you could go to a large book store with a large selection. Obviously, most people opted for a large selection, since prices across the board all tended to be the list price. Now, however, the demographic has changed. You now have people who want to browse a large book store and buy a book there; people who just want the latest summer read; people who don't mind waiting a week to have books shipped to them; people who are price sensitive and shop around; casual book readers who don't need a large recommendation list beyond one or two books; and so on. Before, the only differentiation was size; now, selection, price, format, and convenience are all factors. A small bookstore can easily carve out a specialization where they couldn't before.

Still, all book stores--big and small, dead tree and electronic--have to change with the new publishing rules. Self-publishing, especially on e-readers, has boomed, and many small-time authors can easily make spending money for their work, and there appears to be at least a modest audience for such things. Agents and publishers have lost control of the market. Like any other creative industry, it's easier to bank on proven things than experiment with likely failures, so agents tend to stick to the familiar. It takes one book that pops through to satisfy an insatiable need--see the current vampire/supernatural craze--for the industry to shift. With everyone producing a product, however, it's much easier for that one new idea to come through--and harder for publishers to count on stability.

So what can book retailers do? I have two ideas, neither of which is revolutionary:
1) Start getting aggressive for price. One of the most baffling things I have noticed is that book retailers have never--never!--changed their pricing. No matter what, all of the books on the shelf are full retail. That's insane and no other retailed really does that. Sure, they'll have the NY Times Bestsellers at 20% off, and they may have a book rack with a BOGO or something on it, but by and large there aren't any discounts. When you have online retailers delving into the 30-40% discount range, you're gong to lose each time. That's insane. Pricing models need to change and they need to change now. And, no, small booksellers aren't exempt from this. (Thankfully, it appears some are catching on; loyalty cards that give 10% discounts are frequently offered, and B&N's online store appears to be recognizing this. But there is still a long way to go.)
2) Integrate e-readers into the sales system. A person browses the store, finds a book. They can bring it to a station (that does not need to be manned) and scanned the book. They then plug their e-reader into a machine, which downloads that book. They swipe their credit card and pay for the e-book and then throws the actual book in a bin, which will get placed back on the shelf. The retailer is out nothing except the time and labor to re-sort books, but still made pure profit. For customers who still like to browse but also like e-readers, this seems to be a reasonably cheap solution and a good way to adapt.

The future of the book market will most likely end up like most things are when hit with an industry-changing innovation: a mixture of old and new. There will always be a market for paper books, and e-readers will probably drive a lot of the growth. How corporations handle this change remains to be seen.

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