Communicating Knowledge: Publishing in the 21st Century. Editor: John Feather. Munich: K. G. Saur, 2003.
Introduction
All publishers need to make a profit in order to stay in business; this is true even of the small number for whom profit is not the primary motive for being in the trade. Similarly, if an author wants his or her work to be read, it has to pass through a series of commercial transactions which will put it into the hands of the reader. There are many channels and outlets for the sales of books, journals, newspapers and other published products, and many routes through which they reach their readers. They all, however, have one common characteristic: there is an exchange of money. In this Chapter, we shall examine some aspects of the selling of books.
In general, publishers do not sell books directly to their end-users. Certainly so far as general trade, or consumer, hardbacks are concerned, publishers assume that sales to the general public will be through bookshops. As we have seen, their own marketing is therefore aimed at the retail side of the trade, the bookshops. Paperbacks are far more widely available than hardbacks, for they are to be found in many outlets which cannot really be called bookshops at all. Much of this trade is handled by wholesalers, so that influencing their buyers is critical to the success of a title. Similarly, consumer magazines are sold in a wide range of outlets from small newsagents to the branches of national chain stores to be found in almost every high street and shopping mall.
Many STM, academic and professional books follow the same route as consumer hardbacks, although there is some advertising and promotion which is directed towards individuals. Sales through bookshops, and direct sales to individuals, are however only one part of the bookselling trade. Libraries of all kinds, but especially public libraries and libraries in schools, colleges and universities, command a major share of the market, and their vagaries of funding can have a significant impact on the trade, as we shall see. There is, of course, some overlap between books bought by individuals and books bought by libraries, although at the more specialized end of the market libraries are the major customers.
This is particularly true of the market for academic journals. Those which are published by societies are of course distributed to members, but library subscriptions are of great importance even to them. For commercial learned journals library subscriptions typically represent virtually the whole of their income. Complex networks of agencies and activities exist to facilitate this side of the trade. Promotion is aimed at generating library subscriptions, although this may mean promoting the product to those who will influence the decision to subscribe rather than those who will actually commit the funds, that is, academics rather than librarians. The importance of institutional sales is even more marked with electronic journals, even though the delivery system to the end-user may bypass the library in the traditional institutional sense. The development of the Internet is already beginning to have a significant impact on retail bookselling. Quite apart from its use as a promotional medium, there are Internet booksellers which sell direct to the general public, and are therefore competing with the retail bookshops. We shall examine this in due course, along with other aspects of more traditional direct sales to readers such as book clubs.
To make sense of this complex set of activities, we shall approach the bookselling side of the industry from various directions. The key issues to be considered are:
- Retail bookselling and bookshops;
- Wholesaling in the book trade;
- The impact of e-commerce on the trade;
- The institutional market.
In considering these in turn, we are tracing the last stage of the commercial context of the communication process from author to reader.
Selling Consumer Books
In both Britain and the United States, consumer books are sold in many different kinds of outlet, not all of which would be primarily described as bookshops. There is no standard classification of these outlets in the British book trade, but something along these lines is commonly accepted:
- Chain bookshops;
- Independent bookshops;
- Confectioners, tobacconists, newsagents (CTN);
- Supermarkets;
- Other shops;
- Book clubs/mail order.
The chain bookshops have become increasingly dominant in the retail book trade in Britain since the mid-1980s, and are indeed argued to have led a revolution in bookselling. Their large and well-stocked shops in prominent locations in high streets and shopping malls, usually staffed by competent and well-educated people, have been a significant factor in increasing the sales of consumer books. This new style of bookselling was pioneered by Waterstone’s, and was followed—with various degrees of enthusiasm and reluctance—by Dillons, Blackwells and others. These chains now command about 25 per cent of the British book market, measured by value of sales. Similar chains in the United States had about the same market share for hardback books in the early 1990s. Because the purchasing power of the chains is so great, they can command excellent terms from the publishers at the upper end of the normal range of 35 to 40 per cent discount on the recommended retail price. The chain bookshops have obvious advantages over their rivals. On the other hand, while they have a strong corporate image, they do not lack individuality. Although the process of buying is typically centralized, shop managers are encouraged to order titles for stock using their knowledge of the local market, and to develop that market as they see fit. Individual branches of the chains thus combine the advantages of size with those of local knowledge. This has made them into very powerful players in the trade.
No-one would deny the importance and influence of the chains, but not everyone takes a favourable view of that influence. They were blamed by some for the alleged collapse of the consumer book market in Britain in the mid-1990s, although in retrospect it is far from clear that there was anything worse than a blip in sales. There was a view that the chains were opening new shops at a time when the problem was not the lack of bookshops but the lack of customers, and that the new shops were therefore damaging the already perilous condition of those that already existed. The response from the chains was only partly by refuting the views of the traditionalists; even more effective was their continuing expansion and manifest success.
The traditional outlets of the book trade are usually called independent bookshops. The assumption is that they are owned and run by an individual or a family, have a single site and, at least by implication, that they offer a high standard of service to their customers. This is indeed true of some of them, but such an operation has obvious problems in the face of competition from large national chains. The market share of the independents is unclear. One study suggests that in Britain it was around 16 per cent of sales by value in 1999. It is not clear to what extent this can be compared with a figure of 28 per cent of value in 1994 from an earlier study. If they are truly comparable, then the ‘doom merchants’ would seem to be right, and there has been a decline in the independent sector. The definition of the independent sector, however, includes the so-called bargain bookshops which sell cheap editions and publishers’ remainders. Some of these are not truly independent at all, but are part of small chains which operate in a number of towns, often with close relationships to wholesale remainder merchants. There are no data to enable us to determine whether it is the quality end or the cheap end of the independent market which has suffered a decline. There can be little doubt, however, that the chain bookshops are now the predominant players in consumer book retailing. In the United States, in the late 1990s, the chains controlled 54 per cent of all retail bookshops. In Britain, in 1998, four chains were responsible for 42 per cent of retail book sales.
The chains and the quality independents carry very similar stocks; the difference lies in quantity rather than coverage. A typical independent probably carries about 20 000 titles; a branch of a chain bookshop would normally have twice that number. Both, of course, carry hardbacks as well as paperbacks. Mass market paperbacks, however, achieve their circulation through many outlets other than bookshops. One group which has always been treated as a separate category in the British book trade is the so-called CTN sector, shops which are primarily outlets for confectionery, tobacco and newspapers. Shops of this kind exist in almost every part of every town in Britain, and many carry a small stock of mass market paperbacks, often with only one copy of each of 50 or so titles. Commentators have always considered that CTNs were important to the mass market paperback trade. It is not clear to what extent this is still true in the mid-1990s, when it seems to have represented only about 4 per cent of the total value of retail book sales. One thing is certain: for the CTNs, books are a small part of their trade, and the CTN trade is a small part of retail bookselling. Yet there are benefits to both sides, for costs are low and there are profits to be made.
It is certainly true that the depth of market penetration achieved by paperback publishers depends on sales through many outlets which are not recognizable as bookshops. Twenty years ago, this was largely through the CTNs. Now, we have to look beyond them with their small shops serving a limited locality and with a small customer base. First we should consider the supermarkets. Supermarkets, often in out-of-town locations, have been among the leaders of the British retailing revolution since the mid-1980s. They now dominate the retail food industry, and have made significant inroads, both directly and through subsidiaries, into lucrative sectors such as gardening, do-it-yourself, household goods, clothing and furniture. They began selling books in 1985, when a specialist children’s book publisher, Sebastian Walker, signed a deal with Sainsbury’s. The traditionalists in the book trade were shocked, but could do nothing to prevent it. Indeed, it was a shrewd move, for most children’s books are bought by adults not children, but children accompany adults on supermarket shopping expeditions. This, of course, includes many families who do not normally go into bookshops; because of this, the supermarkets were able to bring children’s books to the attention of many who might otherwise not have considered buying them. Moreover, this happened in a shop which families visited regularly. Within a decade it was estimated that 10 per cent of all children’s book sales were through the supermarkets. By 1999, 5 per cent by value of all book sales were going through the same channel. The latter was a growth from virtually nothing in 1990, and a meagre 1 per cent in 1994. The larger supermarkets began to carry a small stock of mass market paperbacks, as well as books on cookery, home improvement and other obvious product-related topics.
The other shops which sell some books cover a great variety of outlets and trades. By far the most important are the chain newsagents, which are not bookshops like Waterstones or Books Etc., but are certainly not CTNs. The market leader is W. H. Smith, which is itself virtually a British institution. From its modest late eighteenth-century origins as a London newsagent, Smith’s expanded with the railway network in the 1840s and 1850s until it came to dominate a large part of the British book trade. By the middle of the twentieth century, it held sway in newspaper and magazine wholesaling, retail bookselling (especially at railway stations, but also in what the company called its ‘town’ shops), and magazines sales. After World War II there was further expansion into book clubs, paperback wholesaling and other activities. All this took place in the context of shops which also sold stationery, fancy goods and gifts, and, increasingly, records and later tapes and compact discs. After difficulties and major reorganizations, Smiths emerged in the early 1990s as a strong omnipresent high street and mall-based chain, selling fast-moving hardbacks and paperbacks. There is nothing else quite like it, not least because it is familiar, safe and—above all—in prime sites. These sites still include most major railway stations, and now, of course airports and some bus stations as well.
H. Smith is unique, but it is by no means the only unclassifiable shop selling books in most towns. Books can be found in petrol stations, food shops, florists, hobby shops of all kinds, and indeed almost any shop which sells goods to affluent people with identifiable interests. How much is all this worth? One estimate is that it may constitute some 10 per cent of the value of the retail book trade, a calculation which excludes W. H. Smith.
At the heart of the retail trade in consumer books in Britain are the bookshops, both the chains and the independents. Between them, they probably account for just over half of the total value of the trade, if we include the bookselling activities of W. H. Smith. But the other shops—whether traditional outlets like the CTNs, or relatively new entrants like the supermarkets—provide an invaluable route into parts of the market which the bookshops do not reach. The revolution in British bookselling, paralleled in the United States and indeed elsewhere, has many aspects. The chain bookshops have provided new and stylish outlets for good books in almost every town in the country. The bargain bookshops have provided cheap books which perhaps develop the habit of bookbuying. Supermarkets and other psychologically safe environments offer books to people who may find ‘real’ bookshops intimidating, and have the advantage of attracting many customers who expect to spend large sums of money on each visit. The result is growth. But these developments also explain why the same phenomenon can be seen so differently by different people. What Waterstone sees as success, Norrie sees as the last nail in the coffin of the quality independent bookshop; both are right, and yet both are also wrong, for more people are buying books and there are more and sometimes better places to buy them. For both publishers and bookbuyers, that is what really matters, and is the real benefit of the retail revolution.
Book Clubs and Direct Selling
One aspect of book retailing deserves separate treatment, for it is, by definition, not manifested in shops of any kind: bookselling by direct mail, and in particular through book clubs.
Book clubs have existed for over 50 years in many countries, but have been particularly prominent in Britain and United States. The basic principles on which they operate are simple. Members are committed to buying a minimum number of books each year from a monthly selection. Most clubs have a ‘book of the month’, which is supplied unless the member rejects it. There are also supplementary titles (many of which are previous books of the month) which can be bought at any time. There are variations on these rules between clubs; some, for example, insist on a larger minimum number of purchases during the first six or 12 months of membership. The clubs recruit members through newspaper advertisements, usually in glossy weekend supplements. Most have an introductory offer of a number of books (four to six is typical) at ludicrously low prices. These are loss leaders intended to stimulate business.
The traditional independent booksellers always regarded the clubs with suspicion. For many years, the British clubs had to operate within almost impossibly restrictive rules imposed by the Booksellers Association and the Publishers’ Association. The rules were designed to protect the retail bookshops by not exposing them to price competition. The clubs gradually increased their market share in the 1980s and 1990s, reaching perhaps something close to 15 per cent by 2000, when the largest British book club operation, BCA, had 20 clubs with about two million members. The clubs are successful because of the convenience which they offer to their members. By reducing the range of choice, they overcome one of the deterrents to using a bookshop. They are able to offer books at significantly lower prices than the same titles cost in the shops; hardbacks are typically offered at about the normal price of the equivalent paperback, and trade paperbacks at about half of their normal price. But they also bring benefits to the trade in general. The clubs buy books from publishers in large quantities. They can command high discounts, perhaps up to 70 per cent, but they actually allow publishers to increase the number of copies printed and hence to reduce the unit cost. Some of the savings inherent in this are reflected in the retail price of the trade edition in bookshops. Moreover, in general terms, it seems likely that the clubs have the effect of stimulating the ownership of hardback books among those who might not otherwise buy them, and thus generally promoting book buying and perhaps reading to the benefit of the trade as a whole. Certainly there is little evidence that retail sales of hardbacks were damaged by the clubs; indeed, their growth coincided with a period of increase in book sales across the board.
The titles offered by the book clubs are typical mid-market consumer books, both fiction and non-fiction. Some of the more specialized clubs (such as the History Book Club, for example) venture into the more popular end of academic publishing, and most of the clubs offer some major reference books, often as their loss leaders at greatly reduced prices. In a sense, book clubs are a particular manifestation of a generic phenomenon of direct selling from producer (in this case the publisher) to end-user. Direct mail marketing was not highly regarded in the British book trade until comparatively recently. It tended to be dismissed as being an expensive activity with low returns. At best it was seen as a marginal method of selling luxury books and perhaps a few highly specialized titles. During the 1990s, direct selling became more common in Britain, at least for certain kinds of books.
The development of direct mail selling of books in Britain is, in part, an indirect consequence of the almost universal use of computers to maintain mailing lists. Such lists have become a highly valuable commodity in their own right, especially when they are lists of influential or prosperous people, or people with a common interest. Membership lists of organizations, or a database derived from a reference book like Who’s Who, are obvious examples. These lists are offered for sale by their owners, with publishers among the customers. A list of members of a learned society, for example, can be used to promote a new title in its specialist field. So can lists of members of hobby groups or people with a shared interest in anything from a particular football club to birdwatching. For specialist publishers of hobby-related and leisure interest books, direct mail through relevant organizations’ mailing lists is an invaluable marketing tool. Academic, STM and professional publishers also set a good deal of store by direct mailings. They hope to stimulate both actual sales and recommendations to institutional libraries, and there is some evidence of success. The very low figure of 0.8 per cent response to direct mail advertising almost certainly underestimates its real impact. It has been calculated that in 1999 about 9 per cent by value of British book sales were through mail order. One effect of the growth of direct mail bookselling has been that the bookshops have found themselves competing directly with the publishers for retail customers.
Competition has always been a thorny subject in the British book trade. Bookshops compete with each other, with other outlets and with book clubs and indeed with direct sales by publishers. But until recently they could do so only by offering better or different services to their customers. Unlike almost every other retailer in Britain, booksellers could not compete on prices. We must consider the whole question of book pricing and price competition before we can consider some other aspects of bookselling, and in particular the wholesale trade and the supply of books to libraries.
Book Prices and the Demise of the Net Book Agreement
For almost the whole of the last century, from 1900 to 1995, the British book trade operated within the self-imposed constraint of the Net Book Agreement (NBA). The details of the NBA need not detain us, but it is necessary to understand in outline how it operated because the aftermath of its demise still seems to be a powerful factor in the minds of some in the book trade in Britain. Under the terms of the Agreement, the minimum retail price of a book could be set by the publisher. The bookseller agreed to abide by this, and in return was offered a discount on the retail (or ‘net’) price which allowed him or her a margin of profit. The discounted (or ‘trade’) price was typically about 30 per cent, although the discounts crept upwards from the mid-1960s onwards. Publishers were not obliged to set a net price, although in practice virtually all British publishers did so, the only significant exceptions being for school textbooks which were normally sold in bulk to schools and education authorities. The sanction against booksellers who infringed the NBA was that publishers would no longer supply on trade terms, that is, with a significant discount.
The legality of the NBA was first challenged in the mid-1960s under the terms of the Resale Price Maintenance Act of 1964. The case against it was heard in the Restrictive Practices Court, which famously found in its favour. The judge accepted the book trade’s arguments almost without question, most notably the central proposition that ‘books are different.’ The gist of the trade’s case was that without the protection of the Agreement, retail bookshops would be financially insecure, and would be unwilling to hold a range of stock. In turn, the publishers would be less willing to publish books likely to have a limited, albeit viable, number of sales. Cultural, literary and scholarly publishing would suffer a serious decline, and there would be a disbenefit to the public. The arguments revolved almost entirely around these points; even the Registrar of Restrictive Practices, who had brought the case, did not choose to question whether or not the trade might be able to change in order to accommodate itself to changed circumstances.
For a further 20 years, the NBA continued almost without question. In the 1980s, as free market economics came to dominate British political and business life, new challenges arose. At the theoretical level, economists questioned the last remaining examples of price controls, of which the NBA was probably the most insidious. The Monopolies and Mergers Commission re-examined the NBA, and the Commission of the European Communities began to take an interest in it as an inhibition to the free trade which was the foundation stone of the Community’s policies. It seemed likely by the mid-1990s that the NBA would crumble under the next set of legal challenges, especially those from Europe. Eventually, however, the end came from within the trade. Terry Maher, Managing Director of the Pentos Group of bookshops, which included Dillons and others, simply announced that his company intended to offer books at a discount. For a while the outcome was in the balance, but when W. H. Smith announced that they too were withdrawing from the Net Book Agreement, it was effectively dead. By the end of 1995, for the first time in almost a century, British retail bookshops were competing on the price of their products.
The consequence was immediately visible in the bookshops. The chain bookshops, in particular, developed a number of promotional ploys which were to become familiar to their customers over the next few years. Publishers continued to recommend a retail price (RRP) (as all producers are allowed to do), but shops were regularly offering books at reduced prices, typically £2.00 less that the recommended price. Another form of offer was that of three books (usually mid-market paperbacks) for the price of two. There was some direct competition between shops. The bestselling title of the first Christmas season after the end of the NBA was a book by the television cook, Delia Smith, which was heavily and competitively discounted, to the point at which copies were allegedly being sold at a loss. In 1996/97, discounting on RRPs was running at an average of between 20 and 25 per cent in the chains, and rather more than that at W. H. Smiths. The supermarkets were discounting up to 35 per cent.
The dire prophecies of the supporters of the NBA were not realized, but there were significant shifts of emphasis within the trade. The number of independent bookshops in membership of the Booksellers’ Association declined by about 200 (from just under 1900) between October 1995 and August 2001. From the mid-1990s, however, the chains have grown impressively. Since 1998, the three major chain bookshops in Britain have significantly increased their retail selling space, and W. H. Smiths have more than doubled theirs (Table 5.1). The creation of the first book ‘superstores’ in Britain in the late 1990s was another indicator of underlying strength. This is reflected in the annual increases of 3 per cent (in real terms) of the sales of consumer books in the UK between 1995 and 1999. The relative decline of the independent bookshops is, no doubt, a professional and personal misfortune for their owners and employees, but the general public has far better and easier access to bookshops than was the case as recently as the mid-1990s. The trade as a whole is clearly flourishing without the comfort blanket of the Net Book Agreement.
| Table 5.1 Retail space for bookselling 1998–99 | ||
| Category | Space in ft2 1998 | Space in ft2 1999 |
| (Source: see note 44) | ||
| Chain bookshops | 1 559,000 | 1 898 000 |
| W. H. Smith | 1 300,000 | 2 900 000 |
The truth is that the British retail book trade has had to learn new tricks. Successful booksellers (both chains and independents) have developed new promotional methods, and adopted many of the techniques of marketing which have long been familiar other retailers. In the mid-1990s, some of the more far-sighted observers saw that this would be the only way to survive. The retail music trade was seen as one model. Others recommended both specific techniques (many of which have been adopted, such as the 2 for 1 or 3 for 2 offers), as well as more traditional generic promotions of books as products.
Price competition, however, has changed the financial relationship between publishers and booksellers. When the Net Book Agreement was in force, there was a comparatively simple method of calculating discounts and effectively sharing the profits between producer and retailer. Typically, the retailer paid 70 per cent of the net price when buying books from the publisher, a discount of 30 per cent; it was estimated that this yielded a typical profit margin for the retailer of 5 per cent on each book sold. In turn, the publisher’s costs and overheads were typically just over 60 per cent of the net price, yielding a profit margin to the publisher of slightly less than 10 per cent on each copy sold at the trade price. The net price was determined by the publisher by taking the costs of publication and production, and then calculating the net price that would be necessary to yield these profit margins. Without a system of producer-determined retail prices, however, there has been fundamental change. Discounts on recommended prices have crept upwards to 35 to 40 per cent, but they are negotiable. The chains sometimes get as little as 25 per cent for books which they intend to sell at less than the recommended price, in order to generate larger numbers of sales and hence a larger gross income for everyone in the supply chain. The essence of the matter is that the publisher must determine how much revenue a title needs to produce in order the make a profit, and to recommend a retail price and agree discounts on it in a way which facilitates that. It is a more complicated world.
A hypothetical example will illustrate the pricing dilemmas which now face the book trade. If it costs £3.00 per copy to produce 10.000 copies of a book, and the recommended retail price (RRP) is £10.00, the publisher’s maximum profit on sales at a 40 per cent discount (i.e. a trade price of £6.00) is £30 000. At a discount of 25 per cent (a trade price of £7.50), it is £45 000. Why then should the publisher offer the more favourable discount? The answer lies in trying to increase the total number of copies sold. If 50 000 are printed the copy cost will fall to about £1.00, but if the £10.00 RRP is retained, sales at a 25 per cent discount will yield a profit to the publisher of £375 000. At a 20 per cent discount on the RRP of £10.00 (i.e. £8.00), the bookseller will make a profit of £0.50 per copy. Provided that the bookseller sells more than three times as many at £8.00 as would have been sold at £10.00, the profits will be greater (Table 5.2). In practice, of course, the 50 000 will be sold to many different kinds of bookshops, some of which will sell at RRP and some of which will sell at a reduced price. But the principle embodied in this example illustrates how the chains can afford to buy books at less favourable discounts when they sell large numbers of copies which would not otherwise be sold at all. The chains generate significant cash flow, still make a profit on every copy sold and attract additional customers into their shops. Thus both publishers and chain bookshops benefit; it is the smaller retailer who cannot sell large numbers of copies, and therefore has to sell at full price in order to generate adequate cash flow, who suffers. This is the economics which underlies the comparative decline of the independent booksellers.
| Table 5.2 The impact of discounts on profit margins | ||
| 10 000 Copies (£) | 50 000 Copies (£) | |
| Copy cost | 3 | 1 |
| RRP | 10 | 10 |
| RRP minus 20% | 8 | 8 |
| Publisher’s costs | 30 000 | 50 000 |
| Publishers income | ||
| 40% discount on RRP (Trade price = £6.00) | 60 000 | 300 000 |
| 25% discount on RRP (Trade price = £7.50) | 75 000 | 375 000 |
| Publisher’s profit | ||
| 40% discount on RRP | 30 000 | 250 000 |
| 25% discount on RRP | 45 000 | 325 000 |
| Bookseller’s margin | ||
| RRP @ 40% discount | 4 | 4 |
| RRP minus 20% @ 20% discount | 0.5 | 0.5 |
From the publisher’s perspective, the key issue lies is getting the right relationship between costs, RRP and trade discounts. For many mid-market books, publishers will take the risk of assuming that a lower trade price, and hence a smaller income per copy sold, will increases total sales sufficiently to reduce the cost per copy produced. It is this which is ultimately critical, because in one key respect Table 5.2 can be misunderstood. The bookseller apparently sacrifices potential profits by buying at £8.00 (i.e. a 20% discount on RRP) rather than £6.00 (a 40% discount). But this line of argument does not take full account for the impact of the cost per copy to the publisher. In practice, the income from 10 000 copies, even at a 25% discount, will be inadequate to sustain their business despite the paper profit from the title, so that the RRP will have to be increased and this will have an impact on retail sales, especially in the chain bookshops. As in any business, the setting of prices at a level which both generates profit and does not inhibit sales is critical to success.
Wholesaling and the Distribution of Books
So far, we have assumed that the only parties involved in the transactions which put a book into a bookshop are the publisher and the bookseller. This is never entirely true, since even in the most straightforward publisher-to-bookseller sale there is a third party in the form of a provider of the transportation which physically coveys the book from the one to the other. There is also, however, a number of other possible parties involved in the chain of supply. The most common of these are wholesalers. For much of the second half of the twentieth century, wholesalers were notable by their absence in much of the British book trade. This was partly a matter of historical accident. Since the middle of the nineteenth century, the wholesale book trade had been largely dominated by a single firm, Simpkin Marshall, whose premises and stock were destroyed in the Blitz. Attempts to re-establish the firm after World War II failed, because the capital costs were too great. As a result, the British book trade from the mid-1940s onwards developed a distribution system which assumed a direct chain of supply from publisher to bookseller.
To describe what emerged as a ‘system’ might however have seemed rather optimistic to many of those who participated in it. In practice the supply chain was, at best, of variable quality. By the late 1970s, there were about 35 000 shops selling books, of which rather less than 3000 were ‘real’ bookshops with a reasonable stock of books and reasonably competent staff. The elite of the book trade were the 500 or so members of the Charter Group of the Booksellers’ Association, who undertook to maintain certain standards of stock, display and service. At the same time there were some 2000 British publishers, although even then there was concentration of trade publishing in about 20 houses. The result of this was often chaotic. Publishers received orders from hundreds of booksellers every day. Booksellers were sending orders to scores of publishers. Some orders were for a single copy of a title from the backlist. Others were for dozens of copies of a newly published book. There was a certain complacency about this in the trade, and the few external analysts sometimes seemed so amazed by what they found that they glossed over the consequences. There were a few exceptions, notably Philip Unwin, who admitted that there was sometimes up to a month’s delay by publishers in filling booksellers’ orders. Yet the whole issue was so contentious that The Bookseller conducted regular surveys, highlighted offenders and continually campaigned for greater efficiency. The truth was that inefficiency of supply was intrinsic to the very structure of the post-war British book trade. Once again, the protective shield of the NBA worked against the interests of customers and the more adventurous booksellers.
By the 1970s, there were a few wholesalers, but they dealt almost entirely in paperbacks and were generally no more efficient than the trade publishers in meeting orders. Gradually, there was an improvement, as technology developed which allowed faster communications and better documentation of orders. The development of the Standard Book Number system from 1967 onwards (the now familiar ISBN) provided a unique identifier for each book which could facilitate the use of computers to generate, record and transmit orders and to produce invoices. A system called Teleordering, which now seems crude but which was advanced for its time, was launched in 1979, and there was a period of improvement in the 1980s. Bar codes began to appear on book jackets and paperback covers, so that Electronic Point of Sale (EPOS) equipment could be used to monitor sales and stock levels. With the greater efficiency facilitated by technology, the wholesalers began to develop a new role for themselves in the trade.
This new role is primarily in relation to the smaller, typically independent, bookshops, for which well-managed wholesalers can actually provide a very efficient source of supply. They have the capital to invest in systems as well as stock, and can offer very efficient services with a turnaround time of one working day for any order over a modest minimum (typically £100). For smaller bookshops, the use of wholesalers has now become not only an economic option, but also a means of ensuring that they can compete with the chains on service even if they cannot always do so on price. At the same time, small publishers (who have to deal with the chains as well as with independents) can also save on costs by buying in their warehousing and distribution services from wholesalers and others. Specialist academic publishers have tended the follow the same pattern on both sides of the Atlantic. Some of the large trade publishers still have their own warehousing and distribution arrangements, but many of them are now either using wholesalers or distributors, or indeed offering wholesaling and distribution services to others. Many different pressures have forced the trade in this direction. They include the need for investment in complex and expensive information systems; the desire of the major publishers to sell in bulk to recoup their costs as quickly as possible and hence to be able to offer more competitive prices; the need for the chain bookshops to keep down their costs for the same reason; and the particular dilemma of the independent bookshops and small and specialist publishers in competing against the chains and the conglomerates. Whatever the reasons, the distribution of books in Britain at the beginning of the twenty-first century is probably both more efficient and more economical than it has ever been. In theory, a 24-hour turnaround time is possible, and a working week is normal. Nevertheless, there is still some resistance to radical change. Recommendations made by external consultants as long ago as 1998 have still not been implemented. Wholesaling and distribution have been transformed by the end of the Net Book Agreement just as much as retail bookselling, but they are yet to reap the full benefits.
E-commerce and the Book Trade
The demise of the Net Book Agreement is not, of course, the only factor which has driven the changes in the British book trade at the beginning of the twenty-first century. Indeed, the NBA was essentially a parochial matter of concern to trade publishers and retail booksellers in Britain. At the global level at which the British book industry is a major player, the impact of information technology was far more important. We have touched on aspects of this at various points throughout this and previous chapters. For example, the use of word processing by authors has made fundamental changes in the relationship between them and their editors in publishing houses. Some aspects of reference book publishing and scholarly journal publishing have been changed radically by publication in digital formats rather than on paper. Printing—the most basic technical process of book production—has been similarly transformed.
In some respects, information technology has simply made things easier or more efficient rather than fundamentally different. The author, for example, still keyboards his or her work; life is easier because corrections and revisions are easier with a word processor than they were with a mechanical typewriter, and more efficient because time is saved in typesetting and (from the author’s point of view) proof-reading. Similarly, books are, as objects, what they were 10 years ago or indeed 500 years ago; it is merely the production processes and some of the materials which have been altered, not the product. But in some respects the changes have been more fundamental. In Chapter Six, we shall pursue in more detail such matters as the development of electronic books and journals and the economic and cultural implications for authors, publishers and readers. In retail bookselling, the impact of information technology, and in particular the development of e-commerce, has been at several levels: it has facilitated existing activities and created new activities, and much which lies in between.
We have already seen that information technology has helped to make book distribution more efficient. We now need to examine more closely whether the nature of the retail trade has been changed in more fundamental ways. Perhaps the most visible manifestation of e-commerce in the book trade has been the development of online bookselling companies, of which the first and most prominent was Amazon.com. This is an American company which started in July 1995, and claims to have had some 29 million customers in 160 countries since then. It sells a wide range of products, including music CDs, DVDs, and computer software as well as books, and has even begun to move into household goods and other things far removed from the book trade. Separate operations have been established under the Amazon umbrella in the United Kingdom, France, Germany and Japan. The British arm began as an independent company, Bookpages, in 1996, but was taken over by Amazon in 1998. By March 2001, it had attracted three million customers, and was able to offer 1.2 million British titles and 250 000 from the United States. The company had its own distribution depot in central England, and claimed to be the third largest bookseller in the UK, a claim which was almost certainly fully justified. A German subsidiary was established in 1998, and by mid-2001 was offering one million titles, 650 000 of them in English, of which 500 000 were US publications. The French site was a later development, but in its first year of operation (2000–2001) it was able to offer 200 000 books in French and 700 000 in English.
Amazon exemplifies the globalization and diversification of the book trade, and re-enforces the conclusions reached in our discussion of English as an international publishing language. It is, of course, not the only online bookseller. Some well-established bookshops have also developed online selling as an alternative to traditional in-store or mail order trading. These include the British Blackwells group, long established as a major player in academic bookselling, and the American chain Barnes and Noble. Even the book clubs are beginning to develop an Internet presence to protect their market share.
Booksellers and publishers, like most other companies, have established a presence on the World Wide Web. In a survey conducted in 1998, it was found that 36 per cent of publishers with Websites provided online ordering facilities, often at quite a high level of sophistication, and that 80 per cent of booksellers did so. It is argued that some publishers have held back from developing online ordering systems for individual customers because they do not want to alienate the bookshops. This may be so. On the other hand, it seems at least as likely that this is actually an extension of their traditional reluctance to deal with individuals because their systems are geared to dealing with retail and wholesale booksellers. Whatever the reason, it is clear that a Web presence has now become essential to achieving direct sales of books to consumers, and it seems likely that such sales are increasing.
Whether the development of online bookselling will damage the traditional retail methods and outlets is still a question for the future. Already, however, evidence is emerging that it may already be doing so in some places. In Australia, for example, where mail order bookselling has always been important and there are few good bookshops outside three or four major cities, the global online bookshops are having a deleterious impact on such stockholding bookshops as do exist. As we have suggested, direct selling has traditionally been seen as a fringe activity in the British domestic book trade, but against the competition of the online booksellers this attitude is no longer a viable option even in the UK. Certainly no bookshop can offer the range of stock offered by Amazon, which effectively is able to supply, within a matter of days, any British or American title in print, and many books from other countries as well. Conventional booksellers who develop an online outlet can only compete with this if they establish a similar scale of operations. At least for the time being, it seems that Amazon as first in field is the dominant player, and that the conventional booksellers can only regard their Internet operations as a supplement to their shop-based and traditional mail-order sales. In May 2000, a speaker at the Booksellers’ Association conference estimated that between 3 and 5 per cent of sales at that time were through the Internet, but suggested that this could rise to 12 to 14 per cent by 2004. There were those who disagreed with the forecast, and indeed its very precision makes it suspect! All past experience suggests that the use of the Internet increases very quickly in any field once it becomes established. The electronic transformation of the global retail book trade is only just beginning, and it is unlikely to be favourable to small independent bookshops.
Selling to Libraries
Retail sales to consumers represent only one aspect of bookselling. To the general trade publisher it is crucial. For the publisher of mass market paperbacks, it is the consumer market which is predominant. For some other publishers, however, and for the publishers of certain kinds of books and journals, the institutional market is in the forefront of their thinking. There is not, of course, a clear distinction between consumer books on the one hand and institutional books on the other, as we have already suggested. Indeed, the already blurred dividing lines are arguably becoming even less distinct. In both Britain and the United States, for example, there is some evidence of a shift from library buying to individual buying of children’s books both for leisure and for learning. At the same time, academic library purchasing is shifting from books and other printed materials to electronic products. Even among printed products there is evidence of a shift from books to journals, perhaps because the continuing above-inflation increases in journal prices continue to outstrip the inflation-related growth in library budgets.
Selling books and journals to libraries has always been important to the book trade. It is estimated that about 7 per cent of UK publishers’ domestic sales are to public libraries, but for some categories of books this can rise to almost 100 per cent. In 1998/99 the total value of public library book purchasing in the UK was £91.9 million. Higher education libraries spent a further £47.4 million. There are some categories of books for which libraries are the only significant market; this is true of the public library market for popular fiction in hardback, and the academic library market for monographs and many STM titles. For most scholarly journals, libraries are the only significant customer. One analyst claimed that this market was worth US$40 million in the UK alone in 1998/99, representing some 80 per cent of academic library budgets. Other data suggests an even higher figure of some £63 million spent on periodicals by all higher education libraries. In a sense, librarians are a part of the same professional world as publishers and booksellers; recent developments, and especially the development of electronic journals, has made this more explicit and more widely recognized than ever before.
In the middle decades of the twentieth century, a new branch of the British book trade developed specifically to satisfy the needs of libraries, and especially public libraries. These firms bought in bulk from publishers, and offered special facilities to help public librarians to buy books. This was possible because there was partial exemption from the terms of the Net Book Agreement for participants in a scheme called the Library Licence, developed jointly by the Publishers’ Association and the Library Association in 1929. This allowed a bookseller to give a discount of 10 per cent on the net price of books sold to libraries. Although such licences were held by many bookshops, it was increasingly the case from about 1960 onwards that the trade was dominated by a handful of specialist companies, the library suppliers. The suppliers offered much more than books at discounted prices. They also provided a wide range of other services which sometimes included binding to the library’s specification, the insertion in the book of labels, marks of ownership and the other paraphernalia of library books, and so on. They offered approval and inspection services for new books, either at their own premises or in the library itself. Although the library supply branch of the trade in Britain developed because of the Net Book Agreement, it seems to have outlasted it. Indeed, the library suppliers seem to be as dominant now as they were a decade ago, and possibly to have expanded their businesses given their new ability to compete with each other on price. The services which they can offer continue to be attractive to librarians; they are a cost-effective way of undertaking essential routine tasks.
The Library Licence scheme was for public libraries (defined as libraries which gave access to the public free of charge), but many other libraries actually made use of the service of the library supply companies. In effect they used them as agents; for the university libraries, with their comparatively high level of demand for foreign, and sometimes obscure, titles this was an important element in their ability to meet the needs of their users. Despite this, however, the specialist library suppliers never entirely dominated the institutional library market even at the height of their activities in the last quarter of the twentieth century. Some public libraries made it a point of principle to support local bookshops by buying some of their stock from them. This apparent altruism of this had the added advantage of giving relatively easy access to locally published material which the suppliers typically would not carry. Most independent bookshops had some library business, and some of the leading academic booksellers in London, Oxford, Cambridge and Edinburgh dealt with university and college libraries all over the country, and indeed internationally.
As in so many other aspects of bookselling, the development of the chains has had an impact on all of this. The decline of the medium-sized independent bookshop has, in effect, driven the libraries further into the hands of the suppliers. At the same time, the chains themselves, especially those which include academic bookshops, have developed slick and efficient library supply operations which can cater to the special needs of the libraries. Even comparatively esoteric titles can be carried if there is a UK market for a few dozen copies as opposed to the one or two which an independent might supply to its local university. Nevertheless, there is a problem. The decline in the real value of library budgets at a time of rising book prices has had a direct and negative impact on this branch of the trade.
The supply of journals to libraries is another specialized business. Of course, when libraries subscribe to consumer magazines or to newspapers (as most do to some extent) they use normal commercial channels. A contract with a local newsagents (or more likely a branch of a chain) or postal subscriptions for weeklies or monthlies is by far the most efficient supply mechanism. So far as public libraries are concerned, this actually meets most of their needs because of the general nature of the serials which they provide for their users. For academic libraries, this is far from being the case. Scholarly journals, as we have seen, are typically published in small editions and are either distributed to members of the publishing society or sold only on subscription, or some combination of the two. Each issue effectively goes out of print as soon as it is published. To ensure that their needs are met in an efficient and timely way, most libraries use specialist serial subscription agents as their source of supply.
The agents, some of which are actually specialized departments of major bookselling companies, buy serials from their publisher and sell them to libraries. Like library suppliers, they will, on request and at a price, service the parts as they are published, although this is probably less common than it is with books. They will also chase missing issues (always a bugbear for the serials librarian), ensure that annual indexes are supplied, and so on. Their profit comes from a combination of fees charged to libraries and discounts obtained from publishers. For the libraries, the advantage of the system is that it saves time and effort. All the library’s subscriptions (which may run into thousands in large libraries) can be channelled through one or two agents, and the invoicing and payment of subscriptions is thus consolidated into a handful of transactions. That in itself represents an immense saving against dealing with thousands of titles or hundreds of publishers, some of whom might be supplying only a single low-value title. The agent also spares the librarian the complex dealings which can arise when something goes wrong. It is the agent’s job to ensure that the library receives its entitlement, and the agency deals with publisher to ensure that this happens. This system has operated well for many years; it is now highly automated and generally very efficient.
The problem of selling books and journals to libraries is not the efficiency of the supply system but the cost of the materials themselves. We have already noted the ever-rising cost of academic journals. Perhaps even more damaging to the trade has been the impact on public library book buying of the combination of the decreasing value of budgets and the increasing price of books. In 1988/89, British public libraries spent £135.5 million on books; a decade later, it was calculated that the equivalent expenditure in 1988/89 pounds was £91.1 millions. Moreover book prices were not the only pressure on budgets, and as a result the percentage of total spend which went on book buying fell from 15.8 per cent in 1988/89 to 11.2 per cent in 1998/99. As we have already noted, in academic libraries there has been a shift of purchasing funds from journals to books; in the pre-1992 British universities in 1998/99, there was a total expenditure of £44.3 million on periodicals, compared with £25.9 million on books.
It is, however, in libraries that the Internet had its first, and still its greatest, impact on the publishing world. Libraries began to convert their catalogues into machine readable form in the 1960s. By the late 1970s, many were using electronic ordering systems, and by the mid-1980s it was common for the acquisitions and cataloguing systems to be fully integrated with each other. As librarians and library users became increasingly familiar with IT, libraries, especially in the universities, grew closer to IT service providers. Seamless services were envisaged, in which the end user would seek information which would be provided in whatever form was appropriate; it might be a book from the library shelves, a photocopy of a journal article from a document supply service, or an electronic document supplied to the user’s own computer. The vision came closer to reality with the networked PCs of the early 1990s (of which universities were early adopters), and the subsequent development of the World Wide Web as the almost universal interface in the middle of that decade. The familiarity, simplicity and above all the almost universal availability of networked information brought to fruition the long-cherished dream of electronic publishing, and in particular the electronic publishing of the increasingly numerous and prohibitively expensive scholarly journals.