The Changing State of Retail

Looking at sales activity over the past half-year has reinforced my feeling that traditional book retailers are headed in a bad direction as they try to respond to the emergence of ebooks as a significant part of the business. Bad for them, and bad for us.

The most obvious trend is not new: retailers of printed books have been reducing shelf space for books for almost two years. Aisles have become wider, shelves smaller, and non-book merchandise is beginning to dominate display space. You don’t even have to visit stores to see this in action: just look at a few flyers and online email promotions from Chapters-Indigo and others to see the shift.


The idea of allowing a retailer to return unsold merchandise is almost unique to the book business, and it was always a terrible idea. While few in our business will say it, the returns system means that books are sold “on consignment” and shipments are not sales. In years past, stores would place large initial orders for new titles, hang onto them for a few months, and eventually return (for credit) those that they had not sold. That approach created problems, mainly when chains over-ordered and the publisher then over-printed.

Now that retail chains are tightening things, they are tending to (a) under-order and (b) return very quickly. Category buyers, working on a budget, place very conservative orders for a new title. About 45 days later, the corporate computer system chews through sales data and spits out a per store list of books to be returned. The computer evaluation is based upon the number of copies sold in a measurement period in each store. The sales-per-store over time target number appears to have been raised somewhat. Once a book has been returned to the publisher, the chances of getting it back into a store tends towards zero.

This approach probably works reasonably well for mass market fiction. Those books have always had a relatively short shelf life, with only the occasional best seller rising above the rest and maintaining strong sales. It does distort the fiction market, in the sense that publishers of mass market fiction will invest more of everything (promotional budget, publicity efforts, etc) in pushing a handful of titles they think have the best shot at best seller status, and under promote the rest.

Non-fiction like we publish, books that teach you something useful, is poorly served by the new, small order/quick return model. The great majority of our books tends to sell steadily throughout most of the year (the two slow periods are Christmas and mid-summer, two times when most people are seeking entertainment and not education).

With the launch of ebooks this past summer, we soon saw some interesting developments. Key among them: titles which have been around a while (ones bookstores now avoid carrying), have been among the best-selling ebooks for our authors. This underlines to me how wrong the current bookstore model is.

Customer Service

One other frustration: the big chains all have the ability to order-in a copy of a book if you ask for it. Not long ago, it was common practice for the staff in those stores to help customers by doing that. Now they don’t. I have personally experienced this a couple of times this year, and the high volume of callers to our customer support line relating the same experience (even with books we know the chain has in its own warehouse!) underlines how badly the chains are treating potential book buyers.

The service problem clearly exists in both Canada and the US. Over the past half-year, we have seen Amazon’s sales of our printed books grow to more than one-half of all our US sales. Some part of that is no doubt attributable to Amazon’s deep discounts, and part is probably also the result of some places no longer having any local bookstores, but I do believe the biggest factor to be the lack of customer service in remaining stores.

Please note I am talking here of chain bookstores and not the small, independent neighbourhood stores, where customer service is usually excellent.


Reference book publishers are perhaps the canary in the coal mine. The Macmillan English Dictionary is going digital-only in January, 2013. Encyclopaedia Britannica dropped out of print last year. Oxford is pushing its digital, subscription-based OED quite hard. These books are easier to keep updated as digital properties, and increasingly hard to sell via traditional retail with the fast returns approach.

New Charges

When Indigo acquired and merged with Chapters, the government imposed some rules about the level of discount the new chain could demand from vendors. At the time, most of us in the publishing business were very concerned about being squeezed by the new, near-monopoly chain.

Unsurprisingly, Chapters-Indigo has found a way around this. This time a year ago, they announced a new fee would be charged for “promoting” books in their stores. The fee was not tied to actual, quantifiable promotions: it would be levied on everyone and everyone in turn would supposedly benefit in mysterious ways. Indigo would calculate their average discounted cost for each copy of a title they sold (they get slightly different discounts depending on whether a book is shipped to a store or to their distribution center), and the fee would be 4% of that discounted cost. It was non-negotiable.

In effect, all publishers whose books are sold by Chapters-Indigo would give the chain an additional 4% of the discounted retail cost each time a copy was sold, without any evidence that any extra effort had been made by the chain, other than having the book on a shelf, to generate the sale.

We recently heard that the fee will go up by “just” one percent to 5%. For the math-challenged, that is a 25% increase. The move reeks of desperation. I’m guessing that candles, toys, and “lifestyle” gifts are not generating hordes of fresh customers. Their latest financials show overall sales per store are down, again.

Crystal Ball

I suspect that non-fiction sales via the large book chains will continue to be a small order, fast return business. I also expect that the large book chains will continue to close stores when their leases run out (this has been happening on both sides of the border for almost two years already and the chains continue to bleed money). At some unknown point the market should reach a new equilibrium. Just when that will happen and what the print retail business will then look like is anyone’s guess. Mine is that there will remain some level of consumer demand for print, and I hope that there will still be retailers able to service that demand.


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