The last quarter of 2010 was almost surreal. The first sign of what was to come was an announcement by Borders Books at the end of August that the chain would be setting aside dedicated sections for products from Build-A-Bear Workshop Inc.
Borders’ explanation was, their sales of books were declining and they felt this was because people were migrating to electronic reading devices. This despite strong evidence that ebook sales at that time were accounting for a lot less than 10 percent of publishers’ revenue.
Soon after the Borders announcement, Chapters-Indigo in Canada announced that they intended to be Canada’s largest retailer of toys and games for the upcoming Christmas season. Not to be outdone, Barnes & Noble announced that they too would be setting aside significant chunks of space for toys and games.
I really wonder if the cost to all three chains of trying to position themselves as serious players in the very competitive toys and games retail space paid off versus what they must have lost by not having strong shelf inventory of books.
The Chapters-Indigo Mess
One thing was certain when these three chains cut back space for books in favor of toys and games: they would not have wonderful Christmas sales of books. We saw a massive return of books from Chapters-Indigo — the largest single return we have seen from a retailer, ever. Our customer service telephones and emails became almost overwhelming, and stayed that way into January, with consumers calling to ask where they could find specific Self-Counsel books because they could not find them in their local Chapters-Indigo. Worse, many of those callers reported that staff at their local stores were unwilling to order-in the book they wanted.
If you are an American reading this, you may be thinking, “So what? Take your business to another store.” That is generally possible in America. In Canada, Chapters-Indigo is the sole nationwide “big box” retail chain for books. In many towns, if they don’t have the book you want, there is no alternative store to go to. The chain emerged in Canada via a series of mergers which I doubt would have been allowed south of the border because of the semi-monopoly which was created.
As I write this:
- Borders is shedding key staff, shuttering stores, and teetering on the brink of bankruptcy. Our U.S. distributor stopped shipping to them early in the new year when it became apparent Borders would have trouble paying their bills (publishers who did ship to Borders have not been paid for the past two months). Business journals in the US are predicting a Chapter 11 filing.
- Barnes & Noble have laid off significant numbers of experienced staff, are closing stores, and down sizing the chain. Their finances appear sound.
- Chapters-Indigo continues to carry much smaller inventory levels than it did a year ago and there are obvious gaps. The chain is now positioning itself as a “destination” which includes books.
The Sky is not Falling
I began this by describing the final quarter of 2010 as being surreal. It was, and it may well have signalled the beginning of the end of huge book chains which operate like supermarkets.
The big chain theory was built on the premise that books could be sold like soap powder: computers would track sales in each store, group of stores, and chain-wide, and would determine what to keep on the shelves and what to drop. That model never really worked. The best bookstores have always been those where there is an element of “hand selling” — where staff know and care about books and can advise individual consumers, “if you liked that, I think you will also like this.”
Operators of those stores understood the seasonal ebbs and flows of the business; they knew from long experience in the trenches that certain books sell steadily all year while others are more incandescent, attracting a lot of consumer interest for a brief period before flaring out. They stocked accordingly. Computers working on sales “models” don’t get the differences. The buyers working behind the computers tend to have months of experience, rather than decades, and many don’t reach the point of understanding their market before they are moved on, up or down or sideways.
There is a chance that the voids created by big chain store closures may help some new independent booksellers emerge. Online book sales will no doubt grow and online retailers will learn to “hand sell” in a virtual world — Amazon already does this quite well.
Ebooks are headed fast toward a 20 percent share of the market. Some pundits are projecting ebooks to take as much as 50 percent of the market by 2014 (I will write more about this in weeks to come).
Change, as Usual
Publishing and book selling have always been subject to disruptive changes. I have seen a lot of them in my lifetime. Looking back, I recall each big change being greeted with a mix of apprehension and fear, most of which was not warranted. I see little reason to think the next few years will be easy ones in this business. I see a lot of reasons to believe that publishing will survive.
What do you think?