By Nancy K. Herther
(This is Part 1 of a 2-part series. Part 2 will be posted later in the week.)
Last November, IBISWorld published their most recent industry report on bookstore industry, finding that with pressure from other entertainment and scholarly options for learning, the “industry establishments have decreased an annualized 3.4% to 21,246 stores over the past five years.” Barnes and Noble (B&N) continues to be the leading company is this sector with 21.3% of the market share; however, nearly 80% of the market consists of independent bookstores, online sales and used outlets. The IBIS study concluded that “while some small, independent book will continue to flourish over the next five years, the industry as a whole is expected to continue its decline due to heightened competition from external competitors. The revenue decline is anticipated to slow, however, with revenue decreasing at an annualized rate of 0.7% to $12.1 billion over the five years to 2023.”
Many independent bookstores continue to close, as the London Guardian recently noted: “Like pay phones, typewriter repair shops and middle-class housing, bookstores are a vanishing presence in New York City. In 1950, Manhattan had 386 bookstores, according to Gothamist; by 2015, the number was down to 106. Now, according to a count by the city’s best-known bookstore, the Strand, there are fewer than 80. Book Row, a stretch of Fourth Avenue between Union Square and Astor Place that once housed almost 50 used and antiquarian bookstores, now claims just one: Alabaster Bookshop at Fourth Avenue and 12th Street. (Plus the Strand, which relocated a block away in 1957.)” Just what is the current status of bookselling and bookstores in the U.S. today? ATG presents an update to our earlier features on the state of bookselling.
B&N – A ROCKY ROAD IN AN UNSURE MARKETPLACE
B&N currently has over 630 stores across the United States, selling their ereaders, ebooks, trade books, paperbacks as well as magazines and other news sources and in their recently released 2018 annual report notes that the company also “maintains an eCommerce site, develops digital reading products and operates NOOK, one of the largest digital bookstores.” Each year since 2014, Nook has continued to produce decreasing revenues for the company, accounting for just 3.14% of their 2018 revenues.
“We are doing everything possible to get back to growth, and I feel optimistic that we will,” Leonard Riggio, B&N’s Chairman, assured shareholders, noting that the company “is utilizing the strength of its retail footprint in combination with its online and digital businesses to provide an omni-channel experience for its customers, fulfilling its commitment to offer customers any book, anytime, anywhere and in any format.”
B&N began during the first years of the ‘big box’ bookstore era and is the only survivor. They have shown innovation from the early introduction of Muzak in the 1940s. In the 1970s they experiments with smaller stores. In the 1970s, they began republishing classics with their own imprint and offered significant (40%) discounts to publishers list prices. By acquiring the B. Dalton book chain in the 1980s, they expanded into shopping centers as competitors Borders and Waldenbooks closed.
Bradley Metrock, CEO of Score Publishing (which owns the annual Digital Book World), agrees that B&N has had a recently bumpy ride. “I think the boon that independent booksellers have seen has been a little overblown, but you’re right, B&N is in dire straits. The indie booksellers that are indeed doing well are doing so by cultivating a sense of community and interweaving live events into their marketing strategy in order to continually drive traffic. Parnassus Books, here in Nashville, is a great example of this type of homegrown bookseller that has grown as B&N has declined.”
2018 was a very difficult year for the company with leadership changes, the decision to end full-time staffing for most instore personnel in order to reduce personnel costs. By October, the company’s board announced the company would consider offers to buy the company – with Riggio (who now owns 12% of the stock) as one possibility. As an article in Fortune noted, “the retailer has struggled to compete with Amazon.com, which dominates the online sale of physical and digital books. In its most recent quarter, Barnes & Noble’s comparable sales fell 6.1% amid a strong consumer environment and rebounding sales of physical books. Despite a number of facelifts, the chain’s website has also failed to win favor with online book buyers; online sales fell 14% last quarter.” However, the company has been in similar positions in the past, so they can’t be counted out now.
AMAZON CONTINUES THE MOVE INTO BRICK AND MORTAR COMMERCE
Although B&N still dominates in the retail market, Amazon has continued its move into physical storefronts as well. Joel Friedlander, proprietor of Marin Bookworks and the author of The Book Designer blog sees little comparison between B&N’s challenges and the ongoing strength of indies. “Indie authors have thrived primarily because Amazon created a market for their books and removed virtually all the friction and risk from the project of publishing a book. The problems inherent in the evolution of large-scale retail don’t seem (to me) to have much of an analog in the indie publishing world.”
Calling this division Amazon Books, the company now has 17 stores with more planned for the future. The boasts of their 20 year experience and “curated” offerings of products rated four-star by Amazon online users, best sellers as well as a selection of toys and other products from their online catalog. “Customers can test drive Amazon devices from our Echo, Kindle, Fire tablet and Fire TV” lines. And, although everyone is welcomed to their stores, Prime members receive are able to “pay Amazon.com price in store, and customers who aren’t already Prime members can sign up for a free 30-day trial and instantly receive the Amazon.com price in store.”
Amazon Pop-Up stores feature devices only and are described as “popping up in malls, Whole Foods (owned by Amazon) and Kohl’s across America.” The Kohl’s partnership is called the Amazon Smart Home Experience. However, by building relationships and partnering with existing brick and mortar partners like Kohl’s and their own Whole Foods, Amazon was really exploring a cost-effective way to penetrate new markets and solidify their dominance in both online and physical markets. However this month, Amazon announced that they were closing all of these stores in favor of developing their own Amazon Books and supporting more Amazon Pop-Up stores. In addition the company has 10 Go stores, “which offer a 7-Eleven type offering, but with a twist: no cash registers. Customers open their app to gain entrance and cameras and sensors pick up your purchases, and send an e-mail receipt after you leave.”
Susannah Greenberg Public Relations is a full-service public relations firm for book publicity. Greenberg, herself, has been a major factor in the success of many key books and has her own perspectives on the Amazon challenge: “I speculate that the reason Amazon opened physical bookstores was not to sell books in stores but rather to enhance their collection of data on a regional basis as well as promote their devices and web site. In short, I believe the Amazon bookstores are showrooms. My own visits to an Amazon bookstore on 34th street in Manhattan certainly gave the impression of being more of an ad for Amazon and its devices than an actual bookstore. The store was attractive and centrally located in prime real estate, but inventory was minimal. A lot of floor space was given to display of devices such as Alexa and other technology for the home and much less space was given to books. While Amazon built its business beginning with books, I believe its web services and the data it collects on customer buying habits may be its real business now, and more so in the future. I believe they see the web services and data are where their real value lies.”
As reported in 2016 in Wall Street Journal, Amazon “plans to open as many as 400 bookstores, Sandeep Mathrani, chief executive of mall operator General Growth Properties, Inc., said on an earnings call on Tuesday. “You’ve got Amazon opening brick-and-mortar bookstores and their goal is to open, as I understand, 300 to 400.” If true, this would pose a major challenge to B&N, given their current financial situation. As the WSJ noted, “if Amazon were to open hundreds of stores, it would take years to pick locations, reach leasing deals, and hire staff.” Amazon has the deep pockets allowing it to try out different potential schemes for future commerce – something B&N and other bookstores sorely lack.
Digital Book World has been at the center of many of the issues facing the digital transformation of the industry. Bradley Metrock, the organizer of the conferences, reminds readers that “Amazon has the capability of dominating physical bookselling, but you’re right, they haven’t rushed in. The sense I get, although this is far from official, is that the company has waited as its Amazon Go convenience store retail model gets built out and tested in the marketplace. With the ability to integrate Amazon Go technology into an Amazon bookstore retail model, and then further adding integration with Amazon’s Alexa voice assistant and AI, the company can enter the space en masse whenever it’s ready to do so.”
Friedlander, as a book designer, has a unique perspective on the bookselling business. “I believe it’s way too early to tell how Amazon will do as a bricks-and-mortar bookseller, but I wouldn’t bet against them. And who thought, before we saw them, that Apple Computer stores would be able to revolutionize retail? Amazon’s experience at retail: Connection.”
WHAT HAPPENED TO THE EBOOK REVOLUTION?
In a recent blog post Michael Kozlowski announced that “our love affair with ebooks is over.
There are a few reasons why ebook sales have been declining over the past four years,” he wrote. “They doubled in price, when publishers gained control over pricing, instead of Amazon or Kobo charging their own. You cannot loan an ebook to a friend and cannot resell an ebook, once you have finished it.”
Not so long ago the mantra was that print was dead, that ebooks (whether on dedicated readers or on other devices) were the future; however instead, print has made an incredible comeback. The failure to take off – at least thus far – can be attributed to the deep relationship that people have with the printed page and the lack of compelling applications that use the affordances that technology allows for sharing, enhancement and enjoyment.
“Affordances are an object’s properties that show the possible actions users can take with it, thereby suggesting how they may interact with that object. For instance, a button can look as if it needs to be turned or pushed. The characteristics of the button which make it look ‘turnable’ or ‘pushable’ together form its affordances,” notes the Interaction Design Foundation. “In human-computer interaction (HCI) expert Don Norman’s 1988 book, The Design of Everyday Things, affordances became defined as perceivable action possibilities—i.e., only actions users consider possible. Thus, an object’s affordances depend on users’ physical capabilities and their goals and past experiences. A chair only affords “sitting,” because past experience supports that action. Don Norman’s definition of affordances as perceivable action possibilities soon became the predominant one in HCI and UX design.”
Smartphones built off these principles by offering options that evolved into gaming, video creation and play, and so many other opportunities for users. However, ebooks have yet to match, let alone surpass, the affordances of even paper. “Print is remarkable persistent,” Friedlander reminds us. “There are so many niches within which print remains dominant that it looks like, long-term, there may simply be two separate but growing markets (three, if you include audiobooks) with readers deciding on a book-by-book basis which format best suits their use or enjoyment of that book.”
In colleges, most students still prefer print for texts and ebooks for more leisurely reading. Metrock sees a more complicated, “circuitous route” that is still evolving. “First, pricing has been an issue: digital books have not been discounted appropriately, relative to their physical counterparts, to outweigh the continued preference toward having a physically printed book to study. As a result, students also have continued to prefer the ability to lend, borrow, and sell their books, none of which is possible with digital books currently. Lastly, digital books are supposed to be easily modifiable and endlessly flexible, and for many ebooks and ebook ecosystems, this just isn’t true. So needless to say, obstacles still remain in the path toward where digital books need to go, to be the preferred method of learning within higher ed.”
Greenberg also believes the future of ebooks is troubled. “Ebooks, once thought to be the end of print books, are now in decline. ‘It’s tough to make predictions especially about the future’ as Yogi Berra is thought to have once said. Print still dominates for most readers. There are statistics to bear this out and it is also what I observe. At the same time, print has a new challenger – we are also seeing growth in audiobooks. The good news for print though in this is that audiobook listeners often turn into readers of print books. So, there is reason to hope and suspect that multiple formats of books will continue to exist including print. Ebooks serve certain functions as well, mostly convenience and portability. But I believe print will endure and remain a favored format for reading because it is a technology that works. It still serves and has advantages or features that electronic formats do not have. Those features include not needing a power source or device, privacy, and, last but not least, print books provide relief from screen time.”
Has self-publishing been an issue – especially for ebooks? “Self-publishing is huge, and not just among individuals who want to bypass the traditional publishing landscape to release books,” Metrock explains. “Companies and various types of organizations have also benefited greatly from the advent of self-publishing, as they use many of these same tools to release content for either external marketing purposes or for internal training purposes. Companies like Southwest Airlines, Stripe, Nissan, the American Psychiatric Association, and countless others have ‘self-published’ material that no traditional publisher ever would have touched. And yes, for individual authors, self-publishing and showing competence, as well as sales and marketing buzz, is a great way to create a conversation with traditional publishers that can, and often does, lead to a contract.”
Friedlander believes people “misunderstand self-publishing if you believe that it’s simply a way for ‘potential authors to find a publishing contract.’ The motivations of most of the authors I’ve helped over the last 30 years are many and varied, and certainly some would like that contract. But self-publishing offers many advantages over traditional publishing, and that’s why there’s so much interest in using these publishing systems today.”
WHAT ABOUT SMALLER BOOKSTORES?
Industry operators invest mainly in computers, scanners and other electronic devices to improve store efficiency. Similar to other retailers, book stores are relatively labor intensive with staff providing customer service and processing sales. Additionally, labor is needed to complete auxiliary business tasks such as creating in-store promotional activities, administrative tasks and maintaining inventory levels. Investing in technology is not always beneficial for stores who struggle to stay afloat through heightened external competition. A knowledgeable and service-oriented staff is much more valuable for day to day operations than the latest technology. Operators with a knowledgeable and helpful staff will differentiate themselves from other stores and online operations due to the added value to the consumers.” In the case of ebooks, and sales through online sources, brick-and-mortar bookstores have suffered. All bookstores, from the largest to the neighborhood book shoppe.
“B&N is struggling,” Greenberg agrees. “It may yet turn around. I hope it will survive because it is often the only bookstore around in some areas. Because of its past dominance of the total bookstore market, Barnes & Noble was once considered the enemy of the independent bookstores, but now Barnes & Noble and the independent bookstores are allied in their interests to survive in the face of Amazon and the more generalized ‘retail apocalypse’ affecting all retail. Indeed, Riggio of Barnes & Noble was the keynote speaker at the 2018 Bookexpo 2018, signaling an alliance between the independents and the one remaining bookstore chain giant. The survival of B&N may come to depend on scaling down the size of their stores, many of which are COSTCO sized huge, and also on learning to model some of the innovative programming and tactics of the independents, to learn the regional market in a more targeted fashion, to understand the communities in which their stores reside. In short, smaller and less generic bookstores might be the answer. There may be other answers though. Sidelines are a strength for them. Keeping their customers may entail a greater dependence on sidelines as well. Bookish socks, anyone?”
With B&N pulling back on labor costs for their stores, one can’t expect a very motivated staff. And Amazon is still testing and tinkering with their models for the future of book distribution and sales. However, we are seeing a major resurgence in the success and strength of independent bookstores across North America. In the second part of this series, we look at how the indies are rising to the challenges, creating new opportunities, programming and working to deeply engage with their communities.
Nancy Herther is Sociology/Anthropology librarian at the University of Minnesota, Twin Cities campus. firstname.lastname@example.org