Minding the Bookstore Redux: How a Mentality Turned into a Mistake
A few years ago, when I was reading several annual SEC reports from the soon-to-be defunct Borders Group, I came across a sentence that not only defined the dysfunction of one retailer, but the dangerous mindset that has been crippling the book industry for decades.
It may sound rather innocuous, but here it is: "The Company's growth strategy is dependent principally on its ability to open new superstores and operate them profitably."
That sentence was in Borders' 10-K SEC filing made in April 2003. The very same sentence was in the 10-K the year after that. And the year after that.
And the year after that.
When you consider the changes the book world was facing even then (before the Kindle, before the tablet, before a lot of things) it's an arrogant statement -- and one that horribly mangles the purpose of "expansion." Expanding a business should be done to meet demand. Expanding for its own sake and simply expecting demand will be there is simply a bad idea.
That's the core of how the book industry got to where it is today. At some point retailers and publishers seemed to think (wrongly) that the biggest problem consumers had was that they couldn't get their hands on books fast enough.
It's not at all difficult to wonder how this mentality was reached: Promotional infrastructure has been mostly built to reward the reader that booksellers and publishers already have. The series trend, author web presence, three-for-the-price-of-two -- all of it has the book addict in mind and not the far more common person who has, at best, an intermittent relationship with reading.
One can go even further than that and look at the publishing world's own demographics: As (mostly) city dwellers who are very "wired" and highly educated, we're going to read a lot more than the average person and probably surround ourselves with people who do the same. It's a real "blind man and the elephant" situation because publishers and retailers only have their hands on the most passionate readers and think: "this is who my customer is."
Of course, when the Kindle was finally released, that mentality got even worse and led to stories in the media supporting publishers' assumptions. But in hindsight, a lot of these stories could be knocked over with a feather: For instance, when Amazon first announced it was selling more ebooks than print books, the fact remained that an ebook unit -- often priced under a dollar and a very quick read due to a short length -- would obviously outsell the more expensive and longer print counterparts on a unit basis.
Another knee-slapper was the reports saying a person who owns an ebook reader is more likely to read a lot of books compared to someone who doesn't own an ereader. It's true, but wouldn't you expect a person who owns a bicycle to take more bike rides in a given year than a person who doesn't?
We also -- especially as Borders began drawing its last breath -- kept reading statements from self-appointed digital gurus about "the end of bookstores." Of course these same people could often be found standing needlessly in line at an Apple Store whenever a new gadget was about to land, which begged the question: If physical retail is dead, then shouldn't you be at home hitting a "buy it now" button?
But publishers -- having long forgotten about the role bookstores played in the success of the Harry Potter series by hosting midnight parties on their own dime -- didn't ask these kinds of questions and continued stuffing their content into online and offline stores that didn't need to sell them. As big as this industry is, book sales are little more than a rounding error to entities like Target, Walmart, and Amazon.
One glance at Amazon's financials tells that story plain as day: In 2010 Amazon's media division, which includes books, was eclipsed by its "electronics and other general merchandise" segment. For its most recent fiscal year (during which Amazon made almost $75 billion) media came to represent just 28% of the company -- and I'm sure it'll represent even less than that when this year closes. The fact the company actually suggested customers could just go buy books elsewhere when the Hachette price feud broke says very clearly how little value a happy book buyer has for the entity.
In a Book Business column on this same subject that was, almost by coincidence, published exactly five years ago (August 2009) I wrote that the industry was too distracted by the emotional reasons to support bookstores and was overlooking the practical ones: "In a bookstore, the future of the store depends on books. In a non-bookstore, the future of the book depends on the store," I wrote. "If publishers don't ask themselves hard questions and do a better job managing their offline content, they might just wake up one day and realize the future is out of their hands."
Eventually, Borders eliminated that growth strategy statement from its annual filing, but by then it was too late to save the retailer. Hopefully publishers will finally drop that same mentality and realize the future isn't about satisfying the fictional "power reader" but rather building a relationship with consumers one person at a time with one book at a time. That kind of mission statement will work great with committed bookstores as retailing partners, but publishers better move fast while there are still some left.
Michael Norris is an independent consultant specializing in consumer media and retail. He spent more than nine years as editor of Book Publishing Report and senior analyst at Simba Information. He lives and works in Stamford, Connecticut and can be reached at firstname.lastname@example.org