Keeping it local
03.11.11 | Eloise Keating
Within a week of the UK's Office of Fair Trading clearing Amazon's acquisition of The Book Depository, the Australian Competition and Consumer Commission (ACCC) has also declared that it will not oppose the move.
The ACCC began an 'informal review' of the proposed acquisition in August, following concerns among members of the Australian bookselling community that the acquisition was bad news for the local market.
Exact figures on how much Australians spend buying books from overseas online retailers are hard to come by. Anecdotal evidence suggests that the figure is approximately 15%, but recent research conducted by accounting firm Price Waterhouse Coopers (PwC) for the federal government's Book Industry Strategy Group estimates this figure to be closer to 50%.
According to the PwC report, Australians are estimated to have purchased A$280 million (approximately £180 million) in print and electronic books from online retailers in 2010, with A$150 million (approximately £96 million) of this going to overseas-based retailers. The concern is that a strengthened Amazon/Book Depository offering could increase this number further.
In announcing its findings, the ACCC said that it "formed the view that the proposed acquisition was unlikely to substantially lessen competition in any relevant market". In particular, the ACCC found that: "the merged firm would continue to face competition from several book retailers (including Australian and overseas-based online retailers)" and "barriers to entry into the online retail supply of books were relatively low with the availability of third party sales platforms such as Amazon Marketplace and the use of drop shipping allowing new entrants to enter the market with no significant infrastructure or technical requirements". It also felt that: "barriers to expansions were also low with the existence of several international competitors that could easily increase their presence in the Australian market".
The impact of the acquisition on Australian booksellers is far from clear. It is likely to depend on how the businesses behave once the acquisition is completed. Jon Page, president of the Australian Booksellers Association and manager of Sydney bookstore Pages & Pages Booksellers told Bookseller+Publisher in August that: "if The Book Depository continues to sell heavily discounted books freight-free [after the acquisition] then the local market is still under threat. If Amazon swallows them completely, hopefully we will go back to a more level playing field."
The most interesting aspect of the ACCC's announcement is its assessment that barriers of entry are low for local booksellers wanting to sell books online. Many Australian booksellers would disagree with this point, as does Page who told Bookseller+Publisher this week that local booksellers face greater barriers than overseas booksellers because of the nature of the local supply chain, local book prices, Australia's parallel importation restrictions, its goods and services tax and freight costs.
Parallel importation restrictions on the market mean that it is difficult for local booksellers to order and purchase significant quantities of books from overseas suppliers; they are able to order single copies of any title they like, but must order from local publishers if they want multiple copies for their shelves—and as Australian publishers have 30 days to release a local edition of a title in some cases, booksellers must wait up to four weeks to order multiple copies. As Page explains: "Amazon and The Book Depository [in the UK] have the advantage of utilising distributors like Ingram and Gardners and their existing supply networks, in particular their direct-to-customer shipping services. None of that exists here."
Another important barrier for local booksellers wanting to enter the online space is the cost of postage within the country, which has been found to be much higher than the cost of posting a book from the UK. As explained in this article on Bookseller+Publisher's Fancy Goods blog, the local postal administration Australia Post is losing millions of dollars as a result of significant increases in the number of Australians shopping with overseas online retailers coupled with the recent strength of the Australian currency.