Children's Books: Channel Surfing

Children's Sales by Channel, 2008.

It may have started with Harry Potter, but thanks to Twilight, Diary of a Wimpy Kid and even SpongeBob SquarePants, the walls between marketing channels are starting to crumble. No retailer can afford to miss out on the books that are selling, especially when children's/YA sales are so strong—$100.5 million for the month of May, according to the Association of American Publishers' most recent report. Mass merchandisers are no longer the bastion of low-end coloring and activity books; they also want a piece of Rick Riordan's Percy Jackson and the Olympians series, while traditional bookstores now tout Sesame Street product on their shelves. Not to mention that shops up and down Main Street, as well as online, are adding top-selling books to their product mix.

That books are not just sold everywhere, but the same books, is one of the biggest changes to hit the children's book market in recent years, according to Andrea Pappenheimer, senior v-p, associate publisher and director of sales at HarperCollins Children's Books. “The market is no longer as segmented as it once was,” she says. “You can find the hottest product in any category and in any format at most retailers.” Teen books especially are benefiting from that crossover, especially in the vampire/paranormal category. And publishers are catering to teens with author Web sites where they can meet and greet their favorite writers virtually.

Given that publishers and retailers are all trying to reach the end consumer, that means experimentation with both the books themselves and how they are sold. “We're used to customers going into the bookstore. Now they go to lots of places,” says Joan DeMayo, Random House Children's Books senior v-p and director of sales. “We have to make sure wherever they're going, we're there.” Even how publishers service channels has

The Borders at Columbus Circle in Manhattan. Every Borders in the country is expanding its children's section by the end of summer. Photo: Joseph O. Holmes.

become a gray area. At Random, for example, national account reps sell to mass merchandisers.

The only piece of doom and gloom concerns libraries. Despite high usage, with children's materials making up 35% of all circulation transactions, and strong attendance at library-based children's programs (57.8 million, according to last April's State of America's Libraries report from the American Library Association), funding just isn't there. ALA found that 41% of states had decreased library funding in 2009 and another 20% of these states anticipate additional cuts this year. Still, many libraries may well decide to keep their support for children's materials strong, and take the budget hit elsewhere.

Speed Bumps

With competition ramping up, the time for making a book has shortened and the ability to cross channels can be more difficult. “For a book to truly succeed, or break out, we have to find a home for it across multiple channels,” says John Mendelson, senior v-p of sales and digital initiatives at Candlewick Press. “We traditionally like to share successes in one channel to build a book. The window to do that is ever-shrinking. If you don't have support before publication date, it's harder to get customers on board.”

In a Houston Costco, 19-month-old Eden peruses the offerings. As one sales director said, "Warehouse clubs cherry-pick. They look for successes, like the House of Night series."

Off the record, several publishers cite an additional squeeze. While book retailers have grown pickier about what titles they're willing to stock and are ordering them earlier, media attention that drives sales often comes far after pub date. “With supply chain pressures and long lead times, publishers can't react,” says one sales director.

Not that there aren't exceptions to the rule, as with Jay Asher's Thirteen Reasons Why (Razorbill). First published in fall 2007 in hardcover, the book's sales continue to build. Penguin Young Readers Group shipped more copies so far this year than in all of 2008, says senior v-p, director of sales Felicia Frazier, adding that there are no plans to move it into paperback.

Despite an increase in children under five—up 1.8 million since 2000 to 21 million in 2008, according to U.S. census figures—picture books is the only category not to have benefited from the current children's book boom. “All of our customers are choosing picture books more carefully than they ever have,” says Mendelson. Some small presses, like 20-year-old Charlesbridge Publishing in Watertown, Mass., continue to maintain their commitment to the traditional picture book; several larger houses are playing with format.

Mendelson points to Candlewick's success with Martin Handford's Where's Waldo? The Ultimate Travel Collection, which at 7.5”×5.9” is in effect a mini picture book. He sees growth further down the line for novelty formats. Tyrrell Mahoney, v-p of sales, marketing and business development at Chronicle Books, agrees. In 2010, she says, Chronicle will partner with some widely known authors and institutions to create a range of new formats.

Mass—and Specialty—Appeal

But it's not just publishers who are trying to move away from publishing as usual. According to Mahoney, even mom-and-pop gift stores that have never carried children's books are carving out space for children's boutiques. And the Gap, which previously sold only its own branded lines, has begun stocking other brands. BabyGap online, for example, offers strollers, several brands of shoes, and books like Where the Wild Things Are, the Fancy Nancy series and Curious George board books. That selection dovetails with what Mark von Bargen, director of sales at Macmillan Children's Group, has observed: classics and board books are holding their own.

Classics and tie-ins are all part of the mix at this Target in Brooklyn, N.Y. Photo: Joseph O. Holmes.

Last fall, high-end children's retailer FAO Schwarz took a slightly different route, adding a book boutique for a single publisher, Barefoot Books. “From an economic perspective we opened it at the worst possible time,” acknowledges Barefoot co-owner Nancy Traversy, who is planning to keep the store open despite a change in FAO's ownership. “It's still very high-profile, and [new owners] Toys R Us came to us and said, 'Whatever you do, please don't leave.' ” Traversy is currently looking to roll out Barefoot's store-within-a-store consignment model to department stores and is in talks with Macy's.

Although sales can be very strong in the specialty market, competition for shelf space there and in mass merchandisers and warehouse price clubs has ratcheted up. Even Chronicle, which was one of the first publishers to sell to Urban Outfitters and Anthropologie and has strong double-digit sales in the specialty market, is starting to feel the pinch. Mahoney says that she's also noticed some price sensitivity for books. Even so, she sees some pickup with nonbook items such as lacing books, puppet games and oversize coloring books at high price points.

However, some sales executives believe the biggest shift could come from an overall tightening in mass. They point to last month's Wall Street Journal story on retailers like Wal-Mart, Target, Kroger and Walgreen cutting back on variety to simplify shopping. What's happening in cereal and shampoo, they say, is also taking place in books. “At Babies R Us,” one sales director comments off the record, “you don't have as many facings; their planograms are reduced. And Babies R Us is a pretty strong account. Wal-Mart is looking scrupulously at its book sections. It's part of the music section, and the music section is smaller.” Another, who also spoke off the record, says that warehouse price clubs, which cherry-pick their book selections, are also consolidating the amount of space they devote to them.

Trading Up

Sisters Phoebe (l.) and Sylvie, two regular customers at Farmington, Maine indie DDG Booksellers, browse for new books.

On the trade side, some retailers are doing the opposite and expanding. Borders is taking space from its multimedia sections, where sales continue to decline, to enlarge children's and take advantage of sales growth. During the first quarter, which ended May 2, comp sales for children's books at Borders rose 3.4% for infant through young adult. YA alone was up nearly five times that. Comp gains climbed 18% even excluding Stephenie Meyer titles.

BookPeople in Austin, Tex., already devotes a staggering 4,000 sq. ft. to children's books and has seen its kids' sales grow every single month, according to children's book buyer Meghan Dietsche Goel. For her, expansion is tied to the store's growing school business. Last year, BookPeople took 19 authors into 16 schools. This year it will kick off the school year with parties at three schools with Jon Scieszka on the release date for Truckery Rhymes. BookPeople is also working on Austin's first Teen Book Festival, to be held October 24at Westlake High School.

For smaller independents like Booktenders' Secret Garden Children's Bookstore & Gallery in Doylestown, Pa., which stock books for children under 14, school business has been essential and accounts for just over half of overall sales. Owner Ellen Mager coordinates author tours for 40 to 50 days a year to schools throughout Pennsylvania and the Mid-Atlantic region and generates income from selling their books.

In her community, Mager has found price resistance for the amount that schools will pay authors, down from $2,400 for some well-known writers to $1,500. Her in-store customers are equally cost-conscious. They postpone buying books, even ones their kids request. “I hear more, 'Your birthday's coming up; write it down,' ” she says. In addition, she is supplementing book sales by carrying original art from children's books.

Mrs. Nelson's Toy and Book Shop in La Verne, Calif., winner of this year's Pannell Award for children's bookselling, has long relied on book fairs to improve its bottom line. Pat Nelson, who heads the three-year-old library division, calls the store “the face and front of the company.” The book fair division typically generates 30% of Mrs. Nelson's business. In 2008, for example, Mrs. Nelson's held 422 school book fairs and earned enough to give back to schools nearly $861,000 in cash and books.

Nelson is convinced that library services has the potential to become an important segment of Mrs. Nelson's, especially with this year's purchase of 40-year-old Mook & Blanchard Wholesale Library Books, which gives it an entrée to begin offering binding services. Nelson views this as an opportunity not just to get into the school library market but to compete for public library business. For now, Mrs. Nelson's is targeting Southern California for both its book fairs and library services, which have side-by-side warehouses in Pomona.

Fair Play

Mrs. Nelson's Toy and Book Shop has been setting up school book fairs like this one, with Chandler School in Pasadena, Calif., since 2000.

Even large stores are looking to book fairs for added sales. According to an Associated Press story in April, Barnes & Noble held more than 10,000 in-store book fairs in 2008, which represents double-digit growth over the past few years. And in tough economic times, book fairs offer cash-strapped schools an opportunity to raise funds and promote reading, since they typically give back a percentage of what they earn to the sponsoring school or PTA/PTO.

Despite more book fairs at chain stores and independents, Scholastic continues to be the industry leader, with more than 120,000 school book fairs projected for the 2009—2010 school year. Its plans call for more book fairs with less. To cut costs, Scholastic recently reconfigured its book fair regions, which were reduced from 14 to seven. As a result, seven warehouses were closed and 100 people laid off.

One of the biggest problems that Scholastic Book Fairs president Alan Boyko is looking to overcome is that children are coming to fairs with less money to spend. In its earnings for the third quarter ending February 28, Scholastic reported slight revenue declines in book fairs due to lower revenue from clearance sales. By appealing to grandparents and turning its fairs into multigenerational events in 2008, Scholastic was able to get solid orders. It is planning to build on the success of a program held at a number of fairs this year to bring out grandparents, Lunch with Someone Grand. In addition, Scholastic is working with schools to hold two fairs, one early in the year and a second in May to promote summer reading.

Scholastic Book Clubs, which also had a slight revenue decline in the same quarter, hit a milestone in May: more than six billion books sold since the business was founded 60 years ago. Although the clubs continue to be committed to making books affordable for all

A Scholastic book fair this spring, at Robert F. Wagner Middle School in Manhattan.

kids, the way they reach them is changing. “A large percentage of business has migrated online. We're one of the top Internet retailers for books,” says president Judy Newman.

This year, Scholastic Book Clubs beta-tested a program in which teachers were given a code that students and their families could use when they placed their order so that the teacher would get credit. Newman plans to roll out this program nationally over the coming school year. Scholastic is also at work on a digital strategy. “Our job is to stay relevant, whatever format, to make sure we're where the kids and parents are,” she says.

Going Digital

Other publishers and resellers are also grappling with how best to approach offering e-content and selling books online, especially for teens, which is where many initiatives from publishers and authors have gained traction. Earlier this month, Sourcebooks told the Wall Street Journal that it would postpone the release of an e-book version of Kaleb Nation's Bran Hambric: The Farfield Curse for at least six months, while Candlewick, according to Mendelson, is looking to move forward with original e-book publishing as early as next year. And Penguin U.K. is exploring selling content through its newly launched WeMakeStories.com interactive site, which is charging £5.99/$9.99 for individuals, £49.99/$74.99 for schools. The goal is to encourage younger readers to engage with classics like The Jungle Book and Black Beauty.

14-year-old Sophia shops for Sarah Dessen's latest novel on her laptop. Photo: Joseph O. Holmes.

“E-books are starting to happen, and we forecast exponential growth just as it has begun to happen for adult books,” says HarperCollins's Pappenheimer. “We see online sales growing, and not just with teen product. As online retailers figure out better ways to reach parents and teachers, there will be growth in kids' books for all ages.”

Every publisher is exploring marketing opportunities online. “Online is the marketing engine, especially in children's,” says Random House's DeMayo. For Rebecca Stead's newly published novel When You Reach Me, for example, both the author and her editor, Wendy Lamb, will appear together at an online event. Random House also regularly makes podcasts available to teachers.

A number of online marketing programs are geared to teens and social networking. Simon & Schuster Children's Publishing recently launched its Pulse It Web site, which lets teens create profiles and make friends, à la Facebook. They can also choose one of two books posted online each month to read for free.

A young Spider-Man fan peruses the offerings at the Mt. Lebanon Public Library in suburban Pittsburgh, Pa.

Mendelson speaks for many publishers when he says that the school and library businesses continue to be strong. But the concern is what will happen in the next six months. “It's not rising,” says Kevin Walsh, CEO of prebound book distributor Children's Plus in Beecher, Ill., “but the good news is that distributors are looking for a decent year, with flat or modest growth.” In places like Kansas City, which has a $59/per student budget, discretionary spending has stayed the same for the past few years. “Business should be on a par with last year, and we were up 17%,” he says. Still, for states where school systems rely on property tax, the news isn't very good. As one distributor notes off the record, “You have well-funded states and not-so-well-funded states. From my perspective, it's not a simple answer.”

Clearly many libraries will be forced to do the same with less. As for the other children's channels, the boom in teen sales and middle-grade sales does not seem to be leveling off. As Pappenheimer observes, “Even with an uncertain economy, hardcovers for teens are still working very well. Series publishing, always important in the world of children's books, is more prevalent now, across various ages and channels of distribution. Once kids fall in love with a character, they want more.”

With retailers across channels paying more attention to the children's category, that's good news for publishers, despite threats from competition and consolidation. Now if that other market—the stock market—would just stay up, especially through Christmas.