Traditional v/s Online Book Stores

As digital alternatives arise, physical processes seem less efficient. This theory certainly has consequences that extend far beyond the literary community, but these days technology is becoming the defining factor in how books are published, distributed, bought, lent and sold. And as digital publishers become more adept at leveraging these innovations, brick-and-mortar booksellers are nearing a point at which they could have to fight for the very survival of their market segment.

The traditional bookstore is doomed by e-readers and online sales of hard copy books. I use the word “doomed” in the same sense that online digital sales of movies and music have doomed movie rental stores, movie theatres, and stores that sell albums of music. Doomed does not mean that these stores will quickly, or ever fully, disappear, but that they have received deadly blows from Internet competition.

As brick-and-mortar booksellers continue to weather these blows, eBooks have emerged to solve several post-recession problems plaguing the industry. For starters, eBook publishing is more cost-effective over the long term and scales much better than print production. After the initial investment in requisite content conversion and creation tools, books can essentially be printed on-demand.

More and more people now purchase their books on the Internet since they find it more convenient. Sector representatives estimate that the online book-selling industry is expanding by some 30 percent per year in India in line with the ever-increasing number of Internet users, which currently totals around 27 million. At present 10 percent of total book purchases are made on the Internet, and this figure is expected to rise.

I do not expect bookstores to rapidly disappear the way the production of silent movies virtually ceased once talking movies were created. However, I do expect an accelerating decline in the number of bookstores as many close down due to bankruptcy and excessive losses. Some bookstores will continue to exist to cater to men and women who like to browse among physical copies of books, and because some owners of bookstores get great pleasure out of selling and being surrounded by books. Many bookstores that survive are likely to combine selling hard copy books with that of other products. For example, university bookstores usually also sell clothing that have the university logo, computers, greeting cards, snacks and coffee, and other goods that cater to students and faculty. Other surviving bookstores might combine selling of hard copy books in physical facilities with online sales of hard copy books, and online sales of digital books.

I think the number of retail locations selling books, whether physical or online, will increase. Assortments will become more specific, and communities will be built around enthusiast categories. One trend we see in retail is the movement of categories into specific retail verticals, or purchasing communities. Publishers like F+W create direct-to-consumer verticals, and a new business model, because of expertise in a category. But don’t forget that a well planned section in an independent shares characteristics with a vertical.

As the relevance of superstore assortments has declined due to the exit of Borders and the ubiquity of content, the ability to “micro merchandise” a category has increased. Our data shows that our top 700 independent bookstore customers purchased more individual titles in several nonfiction categories in 2011 vs. 2010. Travel books were up 23%; antiques & collectibles up 22%; design up 20%; crafts & hobbies and photography both up 14%; and art increased 12%. Broad general assortments are being trumped by deeply assorted verticals targeted at more specific communities, whether in a physical store or online.

Within nonfiction categories subjects that make the most sense for online exploration, discovery, and use seem to have the most resilience in terms of physical sales. Travel, cooking, art, and other visual or reference categories continue to hold their ground. We think these subjects are expanding the number of locations where they are available, including museum stores, the gift market, smaller independents, and online verticals.

Conventional wisdom suggests that these nonfiction subjects shifted to Internet consumption long ago and that book sales have settled into a new normal—the impact of the Internet is already baked in. Though there is also evidence that books you dip into are more resistant to format shifts than narrative reading. Whatever the reason, the challenge in the long run for these categories is not going to be overall unit sales but sales per title.

I expect some big publishers will condense lists and concentrate more resources on certain titles while at the same time worrying about how to compete with low barriers to entry in content development. The barriers to developing, editing, acquiring, and distributing books have fallen dramatically, which has created a big marketing challenge for traditional publishers. We think that as the consumer gains power over distribution, publishers will have to acquire better content, market to both retail accounts and consumers more specifically, and be prepared to contend with a huge number of competitive titles.

All this leads to a massive change in distribution strategies for publishers. We think many publishers are going to trade their infrastructure and distribution costs for content development money. The most nimble publishers will have great content, marketing, and distribution reach—and no back office or warehouse.

From this perspective, what is happening to bookstores is not unusual. “Books” are still read at “home”, but increasingly they are also purchased at home, and not only in hard copy form. Digital books are a true revolution, but their effects on bookstores are only a small part of a broader technological development that has brought important activities into the home.

For the love of reading,

–Swatii

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