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Local independent bookstores debate strategy in pricing war with 'big guys'

The recently announced deep-discounting of best-selling books online at Target, Wal-Mart and Amazon.com — under $9 for the latest titles from Stephen King, John Grisham, James Patterson, Sarah Palin and others — has caused much hand-wringing in the publishing world and prompted wide-ranging opinions from local booksellers.

It's especially tough for the small bookstores, which can't match prices that are below their wholesale cost and are already battling the e-book phenomenon.

"It doesn't seem to be in anyone's best interest to be heading toward a future where it may be impossible for writers to earn a living and where it's difficult for publishers to exist," said Martin Schmutterer, an assistant manager at Common Good Books in St. Paul.

Common Good Books and other local independent bookstores generally don't rely on sales of best-sellers to keep their doors open — they're already undercut on those by Barnes & Noble, Borders and other big retailers that offer big discounts on New York Times list books that the small stores can't match. (Those 30 or 40 percent discounts, though, are not below actual cost, as is the case in the current price war.)

But small bookstore owners see the low-cost sales as a sign that books are being devalued — used as a loss-leader like $1.99 milk at a gas station — to attract customers, which leads them to worry about the future of the business.

"Like we're seeing with newspapers and music, there's only so much you can give away at a loss without ultimately destroying the business," Schmutterer said. "These companies are telling consumers that a book should only cost so much, and if it does cost more, it's not worth it. The fact that it costs more to produce that book than they're selling it for is irrelevant to them."

Nationally, some small bookstore owners are talking about buying the $9 books from Amazon or Target — which can run $4 to $10 less than the publisher's wholesale price — then reselling them at a lower discount.

The big guys saw it coming, though, and now say they'll limit the number of cheap books anyone can buy at a time, says the Wall Street Journal:

Wal-Mart Stores Inc. has limited its online customers to two copies each of certain bargain books. Amazon.com Inc. has a three-copy maximum on certain discounted titles and Target Corp. has a five-copy limit online.

But the idea had been floated as a serious solution on a national booksellers' online discussion board. One Eastern book seller wrote:

What's wrong with buying super-discounted books and reselling them cheaply? What if all the independent bookstores bought several of the $8.99 books and then sold them to our customers for $8.99?

  • Would it upset our customers? Not ours. Some of our customers actually enjoy paying less than retail.
  • Would it upset the publishers? Probably not, since the Big Guys pay about the same price as we do.
  • Would it upset the Big Guys? Good possibility as it would make their promotion significantly more expensive.

Scmutterer kind of likes the idea. "But I think it's a short-term solution to a long-term problem, and there are some practical problems, like limiting the number of copies you can order," he said.

Susie Fruncillo, one of the owners of Lake Country Booksellers in White Bear Lake, thinks it's a bad plan.

In her newsletter to customers, she wrote:

Some have suggested we start purchasing books from these unscrupulous giants and selling them at a higher profit in our indie bookstores, but we won’t be bullied into this kind of pathetic, unethical behavior. No, we’ll take the high road here at Lake Country Booksellers, keeping our focus on our customers, our bookstore and doing what we love — selling books at a fair price that enables writers, publishers and bookstores to stay in business.

To quote another indie bookseller, “If this is the end of independent bookselling as we know it, we’ll go down knowing we did not participate in our own demise.”

Fruncillo said in an interview that years ago she did partake in some "guerrilla book buying." Small bookstores had trouble getting the early Harry Potter books because the publishers allocated most of the stock to the big chains, which were offering a 40 percent discount to buyers.

"I went to Barnes and bought 20 copies, at 40 percent off, turned around and sold them to my customers," she said. "It was the only way to get the books. That evened out over the last few publicatons of Harry; they saved a few for the little guys."

Gary Shulze of Once Upon a Crime bookstore in south Minneapolis says he's not changing his ordering plans, either, even though he laments that the loss-leader trend "is turning books into a commodity and demeaning the value of a book."

He said his small store doesn't compete with the mega-sellers, unless it's a local best-selling author like Vince Flynn.

"Let people buy those best-sellers at the discount stores; we specialize in books people might not see at other stores," he said. "If you left it to the marketers, pretty soon only the top 10 books would be available."

Many think the Amazon/Target/Wal-Mart price-cutting scheme may be just a holiday season gimmick by the big guys, but it's seen as a big enough threat that the American Booksellers has asked the Justice Department to investigate the move as predatory pricing.

The New York Times noted that David Young, chief executive of Hachette Book Group — publisher of James Patterson, whose “I, Alex Cross” is included in the discounted promotions — doesn't like the low-price gambit.

... [Young] said he wished that the United States would emulate France’s prohibition against booksellers’ pricing books below cost. “I do think this massive devaluation of the industry’s crown jewels could very quickly be extremely harmful. And I would not be alone in thinking that.”

The Wall Street Journal quotes David Steinberger, chief executive of Perseus Books Group as saying:

... [T]he price wars will help sales in the short run but create problems if they continue. "When your product is treated as a loss leader, it lowers its perceived value. If you are taking margin out of the supply chain, it will eventually put pressure on everyone in that chain. It's not great, certainly not for publishers."

"It's like three dinosaurs doing battle, and we're the collateral damage," said Fruncillo, the White Bear bookstore owner.

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Comments (7)

Enjoyed the article and the quotes.

"'It doesn't seem to be in anyone's best interest to be heading toward a future where it may be impossible for writers to earn a living and where it's difficult for publishers to exist,' said Martin Schmutterer, an assistant manager at Common Good Books in St. Paul."

------------

We're already there, Mr. Schmutterer.

Movable type printing presses displaced scribes and the cultural elites they represented. Contemporary booksellers of any stripe are simply the new victims. Who will go down with them? Control is what should concern us all.

I doubt that too many 'Independents' will ever consistantly, resell big-box store books.

Then again, if they labeled the books up front as Hand-Me-Downs" special section...but of course if practiced this 'independent alternative', law suits would probably follow by the big-book fellows and 'the book' as a valid and valuable word-form would become all tied up in the courts by those whose eyes rarely read much farthur than the dusty matched volumes of law books flaking away on their office shelves.

It was the seventies and I bought Jon Hassler's "Staggerford" at a Walden bookstore. From the discard, discount table. Assistant manager said cynically, "Well, Hassler won't be going too far. He's already down to half price."

"Speaking of some clerks," I said under my breath,"they more likely deserve the discard bin." (He heard me, yes.)

So much for some managers of chain bookstores; don't know their books...only know the dollar sign.

Even one U of M bookstore way back when...had Tillie Olsen's "Silences" on the discount table. I bought two copies for half-price; copies of her powerful historical history...her indictment of womens-right-to-write ...and at one of the the Main U's underground bookstores, would you believe it?

Postnote: good time to read Tillie Olsen's novel "Yonnondio" or "Tell me a Riddle" short story collection..."I stand Here Ironing" as a short story, none better...all set in the thirties, Depression era...timely indeed.

Now if it were the Japanese dumping cars or the Chinese undercutting domestic products, there would be a howl and a bunch of Congressional saber-rattling.

But the Bigs crushing the little guys? It's the free market, American way, baby!

Feh. By the time this article came out the "price war" was over: Target and Amazon had already raised prices: http://mediadecoder.blogs.nytimes.com/2009/11/03/the-online-price-war-ov...

Let's look at the real numbers. Amazon is selling Ford County, the new Grisham book, for $11.99, off the list price of $24. Amazon demands a 55% percent discount from a publisher -- common in the industry -- so even at that price Amazon is making money. Walmart was selling it for $12 -- so they're turning a profit as well. (Amazon and Walmart put shipping costs on the publisher; they pay shipping costs only on full-credit returns.)

Book selling is a horribly inefficient and unresponsive industry in America. It should die. As a publisher, I'm actually happy to see some modernization in the distribution channels. I love indie bookstores and hope they can evolve to fill vital niches in the market. But I also have to say that my experiences working with indie bookstores on our last two titles was decidedly mixed, while working with B&N and Borders was a much better process. Maybe it's because B&N is less about striking a pose and more about actually selling books.

Kevin, the discounted pricing remains in place for pre-ordered books. Stephen King is still $9, for instance. Because Ford County's laydown was the 3rd, its pricing changed to 50%-off. This is still below cost for most bookstores.

A 55% discount is not the typical discount for most independent booksellers, although it is what B&N and Amazon sometimes get because of their buying power. Likewise, they also get favorable credit terms.