independent booksellers fight for their existence 10.23.2009, 10:27 AM
posted by bob stein
October 22, 2009
The Board of Directors of the American Booksellers Association today sent the following letter to the U.S. Department of Justice requesting that it investigate practices by Amazon.com, Wal-Mart, and Target that it believes constitute illegal predatory pricing that is damaging to the book industry and harmful to consumers.
October 22, 2009
The Honorable Christine Varney
Assistant Attorney General
U.S. Department of Justice
950 Pennsylvania Avenue, NW, Suite 3109
Washington, DC 20530
Molly Boast, Esquire
Deputy Assistant Attorney General for Civil Matters
U.S. Department of Justice
950 Pennsylvania Avenue, NW, Room 3210
Washington, DC 20530
Dear Ms. Varney and Ms. Boast,
We are writing on behalf of the American Booksellers Association, a 109-year-old trade organization representing the nation's locally owned, independent booksellers. A core part of our mission is devoted to making books as widely available to American consumers as possible. We ask that the Department of Justice investigate practices by Amazon.com, Wal-Mart, and Target that we believe constitute illegal predatory pricing that is damaging to the book industry and harmful to consumers. We are requesting a meeting with you to discuss this urgent issue at your earliest possible opportunity.
As reported in the consumer and trade press this past week, Amazon.com, WalMart.com, and Target.com have engaged in a price war in the pre-sale of new hardcover bestsellers, including books from John Grisham, Stephen King, Barbara Kingsolver, Sarah Palin, and James Patterson. These books typically retail for between $25 and $35. As of writing of this letter, all three competitors are selling these and other titles for between $8.98 and $9.00.
Publishers sell these books to retailers at 45% - 50% off the suggested list price. For example, a $35 book, such as Mr. King's Under the Dome, costs a retailer $17.50 or more. News reports suggest that publishers are not offering special terms to these big box retailers, and that the retailers are, in fact, taking orders for these books at prices far below cost. (In the case of Mr. King's book, these retailers are losing as much as $8.50 on each unit sold.) We believe that Amazon.com, Wal-Mart, and Target are using these predatory pricing practices to attempt to win control of the market for hardcover bestsellers.
It's important to note that the book industry is unlike other retail sectors. Clothing, jewelry, appliances, and other commercial goods are typically sold at a net price, leaving the seller free to determine the retail price and the margin these products will earn. Because publishers print list prices indelibly on jacket covers, and because books are sold at a discount off that retail price, there is a ceiling on the amount of margin a book retailer can earn.
The suggested list price set by the publisher reflects manufacturing costs -- acquisition, editing, marketing, printing, binding, shipping, etc. -- which vary significantly from book to book. By selling each of these titles below the cost these retailers pay to the publishers, and at the same price as each other, and at the same price as all other titles in these pricing schemes, Amazon.com, Wal-Mart, and Target are devaluing the very concept of the book. Authors and publishers, and ultimately consumers, stand to lose a great deal if this practice continues and/or grows.
What's so troubling in the current situation is that none of the companies involved are engaged primarily in the sale of books. They're using our most important products -- mega bestsellers, which, ironically, are the most expensive books for publishers to bring to market -- as a loss leader to attract customers to buy other, more profitable merchandise. The entire book industry is in danger of becoming collateral damage in this war.
It's also important to note that this episode was precipitated by below-cost pricing of digital editions of new hardcover books by Amazon.com, many of those titles retailing for $9.99, and released simultaneously with the much higher-priced print editions. We believe the loss-leader pricing of digital content also bears scrutiny.
While on the surface it may seem that these lower prices will encourage more reading and a greater sharing of ideas in the culture, the reality is quite the opposite. Consider this quote from Mr. Grisham's agent, David Gernert, that appeared in the New York Times:
"If readers come to believe that the value of a new book is $10, publishing as we know it is over. If you can buy Stephen King's new novel or John Grisham's 'Ford County' for $10, why would you buy a brilliant first novel for $25? I think we underestimate the effect to which extremely discounted best sellers take the consumer's attention away from emerging writers."
For our members -- locally owned, independent bookstores -- the effect will be devastating. There is simply no way for ABA members to compete. The net result will be the closing of many independent bookstores, and a concentration of power in the book industry in very few hands. Bill Petrocelli, owner of Book Passage in Corte Madera, California, an ABA member, was also quoted in the New York Times:
"You have a choke point where millions of writers are trying to reach millions of readers. But if it all has to go through a narrow funnel where there are only four or five buyers deciding what's going to get published, the business is in trouble."
We would find these practices questionable were they taking place in the market for widgets. That they are taking place in the market for books is catastrophic. If left unchecked, these predatory pricing policies will devastate not only the book industry, but our collective ability to maintain a society where the widest range of ideas are always made available to the public, and will allow the few remaining mega booksellers to raise prices to consumers unchecked.
We urge that the DOJ investigate and request an opportunity to come to Washington to discuss this at your earliest convenience.
ABA Board of Directors:
Michael Tucker, President (Books Inc.--San Francisco, CA)
Becky Anderson, Vice President (Anderson's Bookshops--Naperville, IL)
Steve Bercu (BookPeople--Austin, TX)
Betsy Burton (The King's English Bookshop--Salt Lake City, UT)
Tom Campbell (The Regulator Bookshop--Durham, NC)
Dan Chartrand (Water Street Bookstore--Exeter, NH)
Cathy Langer (Tattered Cover Book Store--Denver, CO)
Beth Puffer (Bank Street Bookstore--New York, NY)
Ken White (SFSU Bookstore--San Francisco, CA)
CC: Oren Teicher, CEO, American Booksellers Association
Len Vlahos, COO, American Booksellers Association
Owen M. Kendler, Esquire, Antitrust Division, U.S. Department of Justice
Posted by bob stein on October 23, 2009 10:27 AM
bowerbird on October 23, 2009 4:16 PM:
if booksellers insist on perpetuating the charade
that the recommended retail price of the book is
something that reflects the "real" cost of the book,
then they really truly deserve to go out of business.
i believe in independent bookstores. but not in bullshit.
barbara fister on October 23, 2009 8:49 PM:
I'm honestly not sure which is worse - big box stores selling ten bestsellers at a loss or publishers continuing to place all their bets on potential bestsellers. Wait, I think I do know which is worse.
Some independent bookstores are buying a few copies of these ten cheap books because they're cheaper at the box stores than from the publisher.
Mostly they don't bother stocking the big books because Amazon discounts them ruthlessly, chains get massive coop dollars to push them, and the people who go to a good indie bookstore are more often than not looking for something beyond the top ten slots of the bestseller list.
I really don't get the concern that people who buy a happy meal book are going to expect all meals to be be cheap.
Alain Pierrot on October 25, 2009 1:01 PM:
Markets work better when they are regulated by an authority: dumping is a demagogic aggression, where buyers are soon loosing as much as the seller(s) targeted by the attack. Unfortunately, getting "free meals", while they are dominant in your scope, can provide a better strategy. If no authority is there to moderate and extend scope...
Maree Kimberley on October 27, 2009 12:02 AM:
I totally support the sentiments & concerns of the US independent booksellers, which strongly reflect the issues currently facing the Australian publishing industry over the threat to lift Parellel Import Restrictions (which the UW, the UK & Europe all have). This is a complex issue that goes far beyond having 'cheaper books' available. For more information about the issue visit http://savingaussiebooks.wordpress.com/
barbara fister on October 27, 2009 9:36 AM:
Here's the thing: I don't think Wal-Mart is targeting bookstores, and I doubt that people who shop at bookstores are likely to stop shopping at bookstores because a handful of bestsellers is going cheap at big box stores. I these enterprises realize people are excited about books and they're using them as a loss-leader in order to use books to sell toothpaste and t-shirts. Score one for books (in an odd way).
I'm not in favor of this kind of corporate behavior, but I think in an era when so much hand-wringing goes on about how nobody reads anymore this is an interesting indication that books are actually quite popular.
Kelly on October 27, 2009 7:23 PM:
As someone who once worked for an independent, I can tell you it is a tough game, but seriously: Have you seen the shelves at Wal-Mart? It mainly consists of Oprah, Twilight, a few children's books, trashy romance novels and a slew of silly inspirational books. Independent booksellers *will* lose the game if they continue to try and go after the people who buy these books.
Indie booksellers are going to have to start selling experiences instead of just books. Add more flavored coffees to keep them longer. Plan authorless events. Get them into the store however you must and then, once they're there, have your best booksellers push those books that aren't found on Wal-Mart's shelves. Which, if you have a decent bookstore, should represent about 95% of your inventory.
This archaic way of thinking will kill indie bookstores. Change or die.
bowerbird on October 29, 2009 2:44 AM:
most independent booksellers will realize intuitively that
a few loss-leaders at wal-mart are not the real problem...
heck, even the american booksellers associate realizes it,
i'd be willing to bet...
but in the face of an amorphous "threat", the a.b.a. likely
feels that it should do _something_, and -- not knowing
exactly _what_ it is that they should be doing -- i guess
this action seems as good as anything else they can do...
as for the publishers, well, if you don't want your books
to be used as loss-leaders, then maybe you shouldn't be
using wal-mart and costco and target as your retailers...