By heavily discounting Harry Potter and the Half-Blood Prince, U.S. retailers and e-tailers forfeited some $70 million in sales on July 16, when Scholastic reported that 6.9 million copies of the record-shattering book were sold. Bookstores, particularly the chains, have been discounting bestsellers for years, but the deep discounts for Half-Blood at bookstores and nonbookstore outlets brought into sharp focus how pervasive the practice has become. But does it make sense for an industry to discount its most popular products?"From a top-down view, it looks foolish to discount bestsellers," said industry consultant Mike Shatzkin. However, at the store level, Shatzkin said, retailers believe discounting is the most effective way to bring in customers. Discounting "increases traffic and gives us a chance to sell customers other products," said B&N spokesperson Carolyn Brown. According to Brown, 40% of customers who bought Half-Blood bought a second item. A Wall Street analyst who follows B&N, Borders, Amazon and other retailers observed that chains "have a pretty good formula to use discounting to get people in stores."
The formula is so good, however, that analysts doubt chains could stop discounting even if they wanted to. "It's a battle for market share," said one analyst. Another noted that unlike the early days of discounting, the bookstore chains "are not the cheapest game in town any more," a position that has been taken over by e-tailers and warehouse clubs. "No chain could unilaterally walk away from discounting. They would get creamed by the competition," said the analyst. And in the case of a high-profile book like Half-Blood, not discounting would put the chain at risk of appearing to be a high-priced store.
With their tremendous volume, chains can take a margin hit on discounted titles, something independent bookstores cannot afford. "We need to stay in business," said Mitchell Kaplan, owner of Books & Books in Coral Gables, Fla., explaining why he didn't discount Half-Blood. "If we discounted heavily, it would be hard to run the kind of store we do. Our customers understand there's added value to our customer service," he said.
Other independents, however, made the difficult decision to discount Half-Blood. Ruth Erb, owner of Richmond, Va.'s Book People, sold Half-Blood at a 30% discount. "We felt we had to compete," Erb said. Her store also gave customers $10 in vouchers to buy used books. Other indies experimented with a combination of incentives and discounts to lure customers into their stores on July 16. Malaprop's in Asheville, N.C., didn't discount Half-Blood, but did offer a $5 Potter-themed gift card with each purchase. "Discounting doesn't necessarily build customer loyalty, but the gift cards do bring people back to the store," said general manager Linda Barrett Knopp.
A favorite tactic of a growing number of independents is the sliding-scale discount. Customers who ordered Half-Blood by 8 p.m. July 15 at Brown Street Books in Rhinelander, Wis., received a 25% discount and an ARC of another book. Brown Street lowered the discount to 15% once the doors opened for the Potter party.
The Halo Effect
Many major publishers got a bit of Christmas in July last weekend, thanks to Potter. Several houses reported double-digit increases on a wide range of children's and adult titles.
Bestsellers positioned at the front of stores saw sales increases in the 15%— 25% range, said sales executives at four of the biggest publishers. Holtzbrinck sales division president Alison Lazarus even observed triple-digit increases at some accounts for new two Janet Evanovich titles.
"Retailers had the advantage of having [a Potter book] two years ago, and they're getting better at figuring out what works," commented HarperCollins senior v-p of sales Josh Marwell. "A lot of retailers built anticipation using the Scholastic countdown calendar and took advantage of it to push other books."
While adult books rode Bill Clinton's coattails when My Life went on sale last June, the new Potter title gave kids' books a somewhat bigger boost, said publishers. Children's books positioned "at the front of store within a Harry sightline" had the edge, according to Random House spokesperson Stuart Applebaum. Children's booksellers commented on strong sales for other fantasy titles, including Dragon Rider and other novels by Cornelia Funke, and the Charlie Bone series by Jenny Nimmo.
Holtzbrinck's Lazarus and Harper's Marwell reported a lift in concept books and board books as well as YA titles, offering further evidence that parents who bought a Potter book for an older child may have picked up books for younger ones as well. "We even saw some early back-to-school action on dictionaries," Marwell added.
Borders saw gains for adult titles in its summer reading program, as well as newer bestsellers. For Harper, bestsellers like Karrine Steffans's Confessions of a Video Vixen and Bernard Goldberg's 100 People Who Are Screwing Up America outperformed forecasts. —J.M., C.A. K.H.
