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Margin matters

In an open letter, published online this week and in The Bookseller, Foyles chief executive Sam Husain has called for greater publisher support. The bookshop model is broken: it needs a rethink. Big publishers have not exactly rushed forward to engage, many have simply declined to comment for our news piece this week. Some may think that Husain is simply railing against the wind, that the high street is in terminal decline as sales drift online or to digital, and an aloof government refuses to budge on rates. Some may think that booksellers need to help themselves, not rely on others.

Husain’s particular issue is over terms. He wrote a similar letter four years ago asking for a level playing field. Margin matters. Bookshops add value, they operate on expensive high streets, and need to offer environments attractive to literate customers. This all comes at a cost. There is a good recent example to turn to. One of the first things James Daunt did on becoming m.d. of Waterstones was to negotiate new higher flat terms. Some of the conversations were painful, and not all publishers were happy; but one year on and the results are in. Waterstones has been able to refurbish many of its stores, it has been able to be competitive where it needed to be, and has sold more books this Christmas than last.

Daunt says he sells nothing at a loss, and yet some hardbacks have been selling at half price. Foyles, like many other independent booksellers, cannot compete in the same way. Publishers have got better at supporting bookshops—our independent booksellers’ Christmas trading survey bore this out—and they need to be mindful of their own growing costs. But Daunt’s use of the term “husbandry” is apposite.

Amazon, thanks to the remarkable patience of its investors, has been able to operate on wafer-thin margins for years, driving competitors into the ground by ramping up discounts. Nowhere is this more evident than the 20p e-books that we wrote about last week.

Publishers need to be aware that this won’t last forever. At some point investors will want greater profits and bigger returns from the Seattle giant, and this will put pressure on suppliers to stump up. Husain’s arguments may be not be wholly altruistic, but keeping competition healthy is one way of countering the growing might of Amazon. In other words, giving an inch now may mean not having a mile taken later.
 

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Sam was right to raise the issues he has. The Book industry is sleepwalking towards it's own destruction. Even the music industry, which was the first to encounter these difficulties, responded by trying to support the high st with favorable terms. Whilst that may not have saved HMV the principal has meant that people are interested in taking on a remodelled HMV with the support of the industry.

I'm not sure about using Waterstone's as an example is a good idea. We have little idea how we are trading overall or how profitable we are - indeed we have yet to file the accounts for April 2012 and, in common with a number of British Institutions, ownership by a rich Russian doesn't always equate to sound commercial principles.

Stick with supporting Sam - he runs a proper business which needs support from farsighted Publishers, Government and even some customers.

Thanks for your advice Leko. We won't have that information about Waterstones for some time, and it certainly won't be revealed in its results, which are just out btw. But the principle of investing in better surroundings, in order to encourage more book buyers in, buying more books, seems sound.

Sam was right to raise the issues he has. The Book industry is sleepwalking towards it's own destruction. Even the music industry, which was the first to encounter these difficulties, responded by trying to support the high st with favorable terms. Whilst that may not have saved HMV the principal has meant that people are interested in taking on a remodelled HMV with the support of the industry.

I'm not sure about using Waterstone's as an example is a good idea. We have little idea how we are trading overall or how profitable we are - indeed we have yet to file the accounts for April 2012 and, in common with a number of British Institutions, ownership by a rich Russian doesn't always equate to sound commercial principles.

Stick with supporting Sam - he runs a proper business which needs support from farsighted Publishers, Government and even some customers.

Thanks for your advice Leko. We won't have that information about Waterstones for some time, and it certainly won't be revealed in its results, which are just out btw. But the principle of investing in better surroundings, in order to encourage more book buyers in, buying more books, seems sound.