Monday, November 2, 2009

the price war...

Believe it or not, I am not surprised with Walmart, Amazon, and Target's action to devalue best sellers - called 'lost leaders' and books are the perfect choice.

Amazon surely knows how the publishing industry works, but the other two are probably clueless, like most people on the outside of the industry. I understand that Amazon reacted to what Walmart did. That's business. It isn't my philosophy, but most people aren't like me. (Thank God?) I like to make my own business decisions, rather than let others define me.

This is a quick publishing industry overview, certainly I can't write how the industry works in one blog post - nor would I be fool enough to try.

There is a long and complicated process involved in acquiring books. But let's say that has been done. There is THE LIST. At the top of the list are the best selling author's new works. They usually pay handsomely for those books, but the books earn their keep. What else they do is cover the cost of the books that aren't great earners. Some of the mid-list and bottom list are fillers; stuff you have to have to make a well rounded list. Some are slow, but steady earners.

The list pays the salary of all the people it takes to make a book, royalties to the author, contracted services, like printing, shipping, and warehousing. Besides the people any business would have, there are book industry specific people: Acquisition editors, line editors, cover artists, marketing, advertising...blah, blah, blah, who are paid by the earnings of the best seller books.

Money spent on advertising, marketing, and PR is proportionate to the expected earnings of the book. Sometimes the publisher is pleasantly surprised. Sometimes they lose their shirt.

So when Walmart (are we not surprised this company did that?) sells expected best sellers at a loss, the worry is that 1) the public will devalue books and come to expect books to be that price at their local bookstores; 2) that publishers will be forced to reduce their list price (the price on the book cover) because of the changed perception of value by readers; 3) small bookstores will be hurt the hardest and many long standing family businesses will close (Watch the movie "You've Got Mail" with Tom Hanks and Meg Ryan).

The worry about the small family owned bookstores is the one that I think is the most likely to happen, if this pricing war continues. These stores (Walmart, Amazon, Target) can afford to sell the 10 or so best sellers at LESS than they paid for them because they hope in the process other purchases (marked up per usual) will be made at the same time. The small bookstore, or Indie bookstore, is banking on those best sellers to do what they do for the publishers -- cover the cost of less selling books.

If you read my newsletter then you know my trilogy is on When those three books sell I will make minus $3.13. Yes, I will lose $3.13. As you can see, I can't really afford to do that for long before I write more books that cost me less to print and ship. I do have a plan to fix that bleed and I could suck it in and compromise quality by putting the books on amazon another way than the way I am.

I don't think readers will believe that best selling books can be had or should be had for $9.00. Besides readers trade books with each other and read them for free. Same with borrowing them from a library - free. Same with garage or boot sales - nearly free. It isn't like the author is getting royalties on anything past the first sale.

So what is the bottom line? Well, it is likely not going to last. Sure some people will go for the deal, others won't. Most likely people in the industry like me won't shop those places for those books simply on principle. But I do shop those stores regularily.

There is still lots I omitted: coops, sell through numbers, and remainders for example. You can google those. If you want to know more about this, google something like: book pricing war. I had links, but you're capable of researching this, if it interests you. If you are a writer, this should interest you.


  1. I feel for the small bookstores, they cannot compete with the big boys.
    Fortunately for the ones I use here, the postage to Cyprus makes it the same price as my local store. So I shop there to keep them going.

  2. Two points:
    1. When I worked in the chain bookstore WH Smith in the UK we couldn't compete with the price Tesco (a massive food chain/supermarket) were selling the new Harry Potter for. They were selling it at a loss. Why, because no one goes into Tesco and just buys the book. They fill the trolley up with food as well.
    2. In France it is illegal to charge below the cost price for a book. Publishers just won a case against France.

  3. Glyn,
    I saw that in the news (TV) about France. I know money is tight for everyone right now, but we have to shop at the stores we want around after this economic nightmare.

    I hope with understanding like yours, Glyn, that people will not buy into the price war. It might have a greater impact than loosing small bookstores and debut authors' chances at getting published, it could decrease the number of paper books - forcing us to chose between one of the electronic readers. Or force us to buy all of them unless we want to read only the books available in one format.

  4. I feel saddened that the indie bookstores are the ones who lose out in wars like this. We don't even have an indie book store in the town I live in anymore. Such a shame.

  5. Yes, a lot of people could be hurt by this. People who don't understand the industry won't get what's wrong with buying these books until the ripple effect is finished.

  6. This is great. I think everyone having the slightest interest in books, should read this post. It just makes me sad-and I think I'll never get over this-that a book is a market product as much as a can of beef. And exactly at this time I decide to be a writer :)

    Oh, and "You've Got Mail" is one of my favorite movies! I always dreamed about running a small and cozy bookstore like Meg Ryan does! Think twice now?

  7. I think this is a short lived situation. The American book industry isn't taking this laying down. Things will change, the biggest one is that these stores will move on to something else. And the industry will adapt.

    Things aren't bleak for the future. This is just a course correction. You just might end up with your bookstore. Take some business courses and be ready to make your dream come true when the opportunity comes your way.