12.06.09 | Neill Denny
The news that Penguin and W H Smith have signed a deal giving the publisher exclusivity for its foreign travel guides in WHS travel stores has generated much heat on our website.
It is a deal that appears markedly different depending on where you stand. For fellow travel publishers, the exclusion will be a painful one, particularly since WHS has a virtual stranglehold on bookselling at Heathrow and Gatwick airports. In a tightening market the loss of such a large sales channel will be a very severe blow, one that will almost certainly cost jobs.
We are not privy to the exact structure of the deal, although we believe it includes a 72% discount, so it is impossible to judge whether it is a good arrangement, on a financial level, for either Penguin or W H Smith.
The retailer benefits from having only a single publisher to deal with, freeing-up shelf space for other categories, and (presumably) better terms than offered by rival publishers. The downside is clearly a diminution of customer choice—although it has to be said that some customers prefer a smaller range—and the possibility that a narrower overall range in travel will be less profitable than the previous multi-publisher situation.
For Penguin, providing the cash payments are not too onerous and the discount level builds in a profit margin, it looks a pretty smart move. W H Smith Travel is a vital player in the market, and the deal pretty much guarantees stronger sales. Penguin is under pressure, with its market share down from 9.7% to 9.1% over the first 16 weeks of the year, 2009 v 2008. Indeed, the whole market was down by 8.7% last year.
Some customers will not notice or care; others will be surprised by the paucity of choice, although WHS travel stores are not always the first choice for the kind of discerning book buyer likely to be concerned by the lack of choice implicit in the deal. A few will stomp off to buy guides from the web or elsewhere, but many will not have the time or the patience. Hardly a great result for the travel sector as a whole.
The deal probably still makes commercial sense, and it follows principles of mass retail long established in food and fashion. But it is a further chipping away (along with paid-for chart postitions) of the vital status of the bookseller as objective arbiter of taste, a purveyor of the best books and not only of the best funded ones. Once customers lose faith in that principle, we are all in trouble.