With Amazon's Tuesday evening blog post claiming the company does not expect its dispute with the Hachette Book Group to end any time soon, the standoff between the e-tailer and one of its vendors is once again showing how much leverage the online giant enjoys in the book marketplace. As the Amazon-Hachette showdown continues to dominate talk at BookExpo America this week, many industry insiders are wondering whether any retail player can challenge Amazon's dominance.
Research conducted in March by the Codex Group found that in the month Amazon's share of new book unit purchases was 41%, dominating 65% of all online new book units, print and digital. The company achieved that percentage by not only being the largest channel for e-books, where it had a 67% market share in March, but also by having a commanding slice of the sale of print books online, where its share in March was estimated at 64%.
Amazon and Barnes & Noble are the only two book outlets that have a meaningful share of both the e-book and print markets, assets that are becoming increasingly important as book buyers turn more and more to online channels to purchase books. According to the newest figures from Nielsen Market Research, online outlets accounted for 41% of book purchases in 2013, while bookstore chains accounted for 22%.
While all bricks-and-mortar stores still sell more books than online retailers, the trend, despite the slowdown in the growth of e-books, continues to move in favor of online sales. In part, that is due to the growing share of print book sales that are now online. Additional research from Nielsen shows that e-commerce channels commanded almost the same percentage of unit sales of hardcovers and trade paperbacks as the bookstore chains in 2013.
While B&N is best positioned to be Amazon's fiercest competitor, its e-commerce operation has been a disappointment and has been undergoing an overhaul for months. Last August, B&N's Mitch Klipper said during a conference call discussing results, "We plan to launch a new e-commerce website next year." Klipper added that the new BN.com site "will enhance our search and accuracy, provide faster shipping, and yield some cost savings." He continued: "We believe that the new BN.com site will allow us to be more competitive in the marketplace and continue to be a terrific resource for our customers, whether they would like to buy books shipped home or picked up in the store." A spokesperson for B&N could not provide more details on when the new site may go live, saying an update may come in B&N's next earnings report in June.
Independent booksellers have been slowly increasing their online presence. According to ABA CEO Oren Teicher, the association's IndieCommerce product has been serving about 375 member stores, with those outlets seeing a 5% sales increase in online print books in 2013. In addition to added sales, Teicher says the ABA believes a consumer's ability to connect with independent stores online via IndieCommerce is contributing to the growth of in-store sales. "We are currently in the midst of upgrading the IndieCommerce platform to take advantage of newer and faster technology, and we fully expect additional stores to join the program later this year when the upgrade is completed," he said.
Another organization that is looking to ramp up its online business is the wholesaler Readerlink. The company has been offering a program that allows mass merchandisers and other accounts to sell print books online; Readerlink is also close to rolling out its first e-bookstores to accounts. In January, Readerlink signed with Berlin-based txtr to be the exclusive U.S. partner for its e-book offering, which now has one million e-books. David Barker, president of Readerlink Digital, says a number of mass merchandisers and grocery stores are exploring the new platform, and he expects some e-bookstores to launch by late summer. A website that offers both print and digital books will prevent stores from "driving customers away who are looking for a particular title," Barker says.
Competing with Amazon, even to carve out a slice of the market, is a daunting task. The company has a number of obvious advantages: scale, resources, and a diverse product line that can let the company treat books as loss leaders. The company, as has been well documented, is also focused on driving prices as low as possible. The perception of Amazon as the cheapest place to buy books, enhanced by its combining books with high ticket items with free shipping, gives the company a tremendous advantage over both online and physical bookselling competitors, says Peter Hildick-Smith, CEO of the Codex Group.
Hildick-Smith believes that if publishers want to help ensure a diverse marketplace, they need to move back to agency pricing on e-books once the court-order restrictions expire, and to return to windowing. Hildick-Smith believes publishers should follow the film industry's successful model of releasing new content in premium format first, followed by discount formats in later releases. Hildick-Smith has been a longtime supporter of windowing as a way to "give bricks-and-mortar stores a chance to do what they do best," noting that Amazon's own bestseller publishing program has struggled without physical-world retailer support. (One possible roadblock to windowing are reports that Amazon's contract prohibits the practice.)
Acknowledging that a move to windowing would mean that publishers would need to market both title releases, Hildick-Smith believes that the combined sales of a print first release and delayed digital edition would bring in more revenue than what publishers are earning now from the simultaneous release of hardcover and e-book formats. And, just as important, windowing would help maintain a diverse book marketplace. The way current trends are going, Hildick-Smith says, in a couple of years the American book market could look a lot like the U.K. market, with relatively few bricks-and mortar stores.
Ardy Khazaei, former Bookish CEO and now an industry consultant, also believes a move to agency pricing would help other companies compete more effectively with Amazon, at least on the e-book front. Publishers, Khazaei feels, also need to be prepared to change and broaden their marketing messages to let consumers know where they can buy books other than Amazon.
Publishers, Khazaei says, "should have a plan" for what they will do if Amazon negotiations turn nasty, as they already have with Hachette. One part of that strategy could be for trade houses to get more serious about selling directly to consumers through their own sites and from their authors' sites. Most large publishers, however have been slow to move to direct selling for a number of reasons, including the fear of annoying their retail partners. But, while publishers hesitate, Khazaei feels that the battle lines are nonetheless being drawn. "War [with Amazon] is coming."
