Paulo Coelho, the bestselling Brazilian writer whose works have been translated into 56 languages, is, of course, wildly popular in the U.S. and among readers in Germany, too. His best-known novel, The Alchemist, originally published in 1988, continues to hold a spot in the low double-digits in the sales rankings of the German Web site of Amazon. Yet a search for the book on Amazon.de produces only a list of audiobook versions and a few offers from third-party retailers.
The omission has roots in the struggle between Germany's largest online bookseller and German-language publishers that mirrors what has occurred in the U.S. this year between Amazon and U.S. publishers. But in Germany, the battle has moved to a level of dispute not matched here: Coehlo's German-language publisher, the independent Swiss house Diogenes (think Knopf and Farrar, Straus & Giroux), has refused to accept Amazon's new terms. As a result, Amazon formally de-listed The Alchemist and other Diogenes titles from its catalogue in May (which makes the book's sales listing all the more impressive).
Amazon is able to be so aggressive in part because over the past few years, it has grown from an exotic Internet retailer to the #1 book retailer in the world's second largest book market, according to some sources. With estimated revenue of 520 million euros ($624 million) from books alone in 2003, Amazon.de overtook all of its competitors, namely the combined mail-order, online and bargain book empire of Weltbild; Bertelsmann's famous yet ailing Der Club (Germany's largest book club); and Thalia, the largest chain of traditional bookstores. (These disparate entities currently are a kind of "gang of four," the most powerful group of book retailers in Germany.) And, with soaring sales during the Christmas season last year, Amazon Germany reported not only continuous growth at a staggering pace (estimated at 50% for 2003), but a profit as well.
With this muscle, Amazon has attempted to renegotiate discounts with at least some publishers. No details of these negotiations have been made public. Asked by PW, Amazon declined, as it always does, to "comment on terms and conditions with partners and suppliers." For its part, Diogenes described the points of contention only in very general terms, noting that "Amazon has decided in early May 2004 to stop offering Diogenes titles from its own catalogue under the given conditions."
The publisher expressed its regret and announced further "talks with Amazon aiming to resolve this issue." But if held, the talks have had no result. Interestingly, Diogenes spokesperson Ruth Geiger told PW that sales of Diogenes's bestselling titles, including Coelho's work, have not been affected by Amazon's delisting.
A Shifting Bookselling Landscape
The unusual battle highlights deeper changes and difficulties in the German book market. For one, overall sales have stagnated. Although Dieter Schorman, the president of the Boersenverein—the German publishers, wholesalers and booksellers association—earlier this month stated "there is no book crisis" in Germany, statistics are not encouraging.
For the third year in a row, sales of German booksellers have declined, dropping in 2003 by 1.7%, to 9.07 billion euros ($10.9 billion). And research from the independent GfK institute indicates that rising prices are to a certain extent masking declining unit sales.
But performance in the industry is uneven. The big players—especially online booksellers—have grown rapidly. In 2003, sales through mail-order retailers (a category that includes book clubs and online retailers) rose 1.5%, to 852 million euros (about $1.02 billion), and accounted for 9.4% of the market. Besides Amazon, Weltbild and Thalia (through its Buch.de Web brand) are also strong online booksellers. In fall 2003, the influential newspaper Frankfurter Allgemeine Zeitung concluded: "Online bookstores are the drivers of growth in a generally lame German book market."
At the same time, market share of the 7,394 mostly small bookstores and regional chains (as compared to only 1,600 bookshops in France), has decreased. Paralleling the situation in the U.S., many old and long-established bookstores have shut down in virtually every major city in the country, although the level of closings is still far behind that in the U.S. Many of these stores traditionally have been in top city locations, between leisure cafés and other retailers of high-quality goods. But rising rents and the replacement of small shops by chain stores or internationally branded fashion boutiques have made it very difficult for low-margin book retailers to compete anymore. In addition, as shop owners from the postwar generation retire, they often have no family members who want to carry on the business.
To add to the pressures, Germany, which is a leader in publishing new titles relative to its population, continues to roll the presses: 80,000 new titles are published a year, and some 900,000 are currently available. In the ever-more hectic, multimedia world, readers seem overwhelmed. In a recent survey, some 74% of readers acknowledged that they can't review new publications as they would wish (up from 62% in 1992).
Two Old New Powers
Amazon isn't the only retailer growing dramatically. While neither is new to the book market and both have remarkably conservative company histories, Weltbild and Thalia are shaking up the industry almost as much as Amazon.
Claiming to be Germany's "number one retailer in media products," Weltbild is owned by 14 German dioceses of the Catholic Church. With headquarters in the baroque city of Augsburg in Bavaria, it dates back to 1948, when it was founded as a publisher of periodicals, notably the now-defunct magazine Weltbild ("view of life"), to provide inspirational and useful reading for the Catholic flock. Mail-order services for books became its core business in the early 1970s. Then, in the mid-1990s, the company began an extraordinary expansion. Together with the then-largest book chain, Munich-based Hugendubel, a new and soon highly successful format of bookstores was created under the brand name Weltbild plus. Today, there are 253 Weltbild plus stores across Germany, Austria and Switzerland. In each of their sales outlets—the stores, mail order and, since 1997, an online store (www.weltbild.de)—the company promotes only a few thousand books. (The target consumer is clearly readers who feel lost in the flood of general books available.)
In the German market, where virtually all new titles have a fixed retail price, Weltbild takes an unusual approach by putting an emphasis on bargain books; remainders can, of course, be discounted. And it has not completely abandoned its religious roots. For instance, Weltbild helped make the autobiography of Pope John Paul II a huge bestseller earlier this year.
Carel Halff, CEO of the Weltbild group and the architect of its recent expansion, puts the company's world view this way: "Books need to become cheaper." He considers the group's multichannel strategy—and notably online sales—as the "mainspring of growth." Weltbild's online sales grew 43% last year, to 73 million euros ($87.6 million).
By contrast, Thalia is a rather traditional chain store. The company boasts of its long traditions and says it offers a home for culture in today's harsh competitive conditions. Founded in Hamburg in 1919 and acquired a few years ago by the highly successful Douglas group, a retailer for quality perfumes and beauty products, Thalia has gobbled up many struggling local bookstores. It now has 79 stores in Germany, plus 17 in Austria and another 11 in Switzerland, with sales of 383 million euros ($460 million) in 2003. In addition, through its acquisition of www.buch.de, the group controls the third-largest German online bookselling site (after Amazon and Weltbild).
Thalia has continued its expansion with the recent takeover of the Bonn-based Bouvier Gonsky group. With 280 employees and sales of 40 million euros ($48 million), Bouvier Gonsky was #10 in the German book retail market and a premier example of a traditional, family-owned German bookseller.
"We look only for a reasonably profitable expansion, and not just for market share," said Michael Busch, the Douglas board member responsible for everything related to books, when asked by PW to outline his group's strategy of growth. He noted that customers prefer larger stores like Thalia, which range from 5,000—30,000 square feet.
Although Thalia's market share is less than 10%, it is nonetheless a key account for every German publisher. While Busch would not discuss discount arrangements with suppliers, he doesn't anticipate a situation like the one involving Diogenes and Amazon. "No, there is no case where Thalia would have de-listed completely a supplier," he said.
But in Germany even calling a publisher a supplier raises eyebrows—and demonstrates the shift in this tradition-bound country to a looser economic system more familiar to Americans. Publishers have long seen themselves as providers of intellectual property and as members of a profession that is key to literary culture (with booksellers simply distributing what publishers had helped to create). For generations, the fixed price for books has aimed to limit competition in the book trade, reflecting an unusual consensus among writers, publishers, booksellers and their audience that books are different from any other product.
Still, pricing continues to be an issue, and consumers have shown a taste for discounting. Consider the impact of the last Harry Potter novel. Both the English hardcover and paperback reached the top of Germany's bestseller lists, a first for an English-language title. Because fixed prices apply only to German publishers' titles, these books could be discounted.
The squabble between Amazon and Diogenes highlights another interesting aspect of fixed prices: Germany's fixed price law for books limits the discount to 50%. "The debate on the 50% line existed already before I came to the book business," Thalia's Busch said to PW. "And the debate will carry on long after I will be out of it." But even though he can't imagine Thalia following Amazon's example of aggressive negotiation and de-listing a publisher, he won't categorically exclude anything either. In Germany, this approach alone is earthshaking.
