The Bookseller.com

7th August 2008

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'Tis the season to grab market share

30.11.07 Sarah Butler

Last week W H Smith hailed a strong start to the Christmas bookselling season as the early release of some popular celebrity autobiographies and cookbooks put shoppers in a festive spirit. Nigella Lawson and Jamie Oliver seem to have got things cooking, but could the market go off the boil as we head towards the year end?

Retailers don't appear to be taking any chances. WHS has cut prices of celebrity autobiographies such as Sharon Osbourne's Survivor by as much as 50% and launched online promotions on children's books. Waterstone's is also offering themed promotions on, for example, cookbooks and top 10 fiction.

Nick Gladding, lead analyst at market research firm Verdict, says that with Waterstone's and Ottakar's now consolidated as one chain and Borders under new management, competition on the high street could be especially intense this year. Although Verdict is predicting a 3.9% rise in book sales for 2007 as a whole, much of that uplift will be due to this summer's launch of the latest and last Harry Potter book.

Open race for number one

Gladding believes Christmas will be "quite hard work" for booksellers, who will be battling over market share with supermarkets and other general stores that are hungry for a slice of the market. He suggests that the early positive signs in the book market could merely be driven by shoppers snapping up the cookery blockbusters now rather than later. If that is the case, sales could cool off as we head into December.

Certainly, the general retail market is tough. Retail sales fell in October for the first time in nine months as the credit market turmoil, which has caused personal loans and mortgages to rise in cost, finally had an impact on spending. Figures from the Office for National Statistics showed that sales volumes fell 0.1%, despite a fourth successive month of discounting from retailers.

In that tricky environment, books will also be fighting for a place on shoppers' Christmas gift lists, which are increasingly dominated by expensive gadgets like this year's hot-selling Nintendo Wii or Apple iPhone.

However, Gladding argues that recent strong sales might also indicate that books are seen as a more satisfying present than music, for example, because they are more tangible and less technologically threatening.

He says: "WHS has indicated books are selling well because of some well-judged early promotions. It might also be that there is some switching going on with people buying books instead of CDs for Christmas because books are something you can't download."

Certainly, figures from Nielsen BookScan indicate that sales of books have been strong in recent weeks. Its Total Consumer Market revenue figure for the week to 24th November was up 4.9% on the same week in 2006, a sharp uplift of 11.3% on last week and a solid 6.4% up on the 12 months to date, versus the previous 12 months.

Neil Jewsbury, Waterstone's commercial director, says: "We have to be positive about how we are feeling about business at the moment. There's no doubt there's some excellent titles for this year." Rachel Russell, business unit director for books at WHS, says this year will be much less of a one horse race than 2006, when Peter Kay's autobiography was a clear winner.

Lewis Hamilton's autobiography, My Story, and Russell Brand's My Booky Wook are proving popular alternatives to the blockbuster cookery titles and the latest Sharon Osbourne tome. Guinness World Records 2008 is also on target to smash its own record set last year; by 24th November it had achieved sales of 377,470—well ahead of the 184,637 copies sold in the same period a year before, and remaining stock is selling out fast.

"It is much more difficult to predict the top 10 bestsellers this year," Russell says. "The fact there is not a clear runner for the top spot makes promotional activity more interesting."
Industry watchers seem divided on whether there is more or less discounting around so far this year.

Jewsbury believes competition is just as fierce as last year's tough winter. He says: "I feel it is definitely shaping up to be very promotionally driven. WHS, Borders and the supermarkets are all forcefully promotional, and that's no different to the rest of the high street."

W H Smith's tactics

Last year WHS played a very canny hand: the chain promoted carefully planned discounts up until the last few weeks before Christmas but then focused on full-price sales once gift buying was at its most frenzied.

The tactic caught Waterstone's and other rivals out, as they tried to fund belated promotions; and the strategy delivered a more profitable season for WHS than for some of the specialist booksellers.

Analysts believe WHS' rivals might be tempted to adopt the high street veteran's tactics this year—but they will have to play things cleverly in a tough market.

David Jeary, an analyst at Investec, says: "Retailers may look back at last year and think they will go for more profit but it is unlikely the supermarkets will do that. They can promote heavily all the way through because books are just one small part of their overall offer and they can afford to be generous."

The pressure from the supermarkets and general stores is increasing with Tesco, Sainsbury's, Woolworths and even Wilkinson, the hardware store, stepping up their activities in books compared to last year. With Tesco, for example, putting out its first books catalogue this year, specialist bookstores are being forced to offer showy discounts on top titles to keep in the game.

That trend is likely to be entrenched by the magic of Harry Potter. The launch of Harry Potter and the Deathly Hallows, J K Rowling's final book featuring the popular young wizard, was marked by some very heavy discounting. Some industry insiders believe that those who found success with Potter promotions will try the same tactics with leading Christmas titles.

Both Waterstone's and WHS are offering 50% off top titles such as Jamie at Home, Nigella Express and "Top Gear" presenter Richard Hammond's autobiography, On the Edge: My Story. But Jeary says that the days of these two retailers offering blanket "10% off everything" are in the past.

WHS, which has increased its market share in books for the past two years, has so far focused its promotions on a fairly limited, but high-profile, selection of books. In stores it is driving Thursday-to-Sunday themed promotions on key titles backed by very heavy TV advertising. Last week, for example, it pushed 20 celebrity hardbacks at half price; one of a number of offers.

WHS' strategy is essentially quite similar to last year's, although it is impossible to glean whether the retailer will once again try a return to full pricing in the last few days of Christmas sales.

Waterstone's has quite a wide range of promotions on top sellers but is also attempting to go for sales of more off-beat books which its buyers and store managers have identified. Jewsbury says: "We have a closely guarded group of titles that we think we specifically are able to pick out as interesting and they will go into the range."

Some of these books will be related to local writers or interests, promoted and picked by store managers. Other titles will be humorous or quirky books of the Eats, Shoots and Leaves variety.

Ding dong merrily online

But some observers say Waterstone's is already discounting more heavily than its high street rivals, and dismiss the suggestion that the bookseller is less focused on the top titles. "You certainly can't see that in store. They seem to be focusing on the biggest books. They've got all the major titles at half price—there's nothing quirky about that," one industry insider says. Jewsbury insists that Waterstone's will be more competitive on a much broader level than last year, when the chain had only just completed the integration of Ottakar's.

The retailer's website is now in full swing with more than 400,000 regular users compared to just a few thousand last year, when it had recently launched. The site, which it took full control of last year after ending a deal with Amazon, is expected to at least double the amount of sales achieved in 2006. Jewsbury believes that the national roll-out of its multi-channel service, where shoppers can order books from home for pick-up in store, will also prove popular.

Other services such as loyalty cards and electronic gift cards, which can be used online and in stores, are also now in place across the country, giving Waterstone's some different levers to pull with customers beyond price. Of course, Waterstone's is up against strong online competition, not least from Amazon which now controls an estimated 12% of the market and has been running a heavy  promotional campaign.

WHS is also well set up online, and all the supermarkets and general stores have this avenue covered.

This is no surprise, as the internet is likely to eat up the majority of growth in book sales this year. IMRG, the e-tail trade association, predicts that online book sales will rise by about 7% this year and Verdict predicts a 15% rise. Both those estimates are well ahead of Verdict's predicted 3.9% increase in the books market as a whole.

The move online is likely to add fuel to the discounting frenzy as it is much easier for shoppers to compare prices across a range of potential stores online.

With that in mind, all the signs are that booksellers' promotions are likely to heat up in the next few weeks. With shoppers surrounded by gloomy news about troubled banks and tougher deals on mortgages and loans, stores will need to cook up some interesting deals if they are going to keep up the early momentum.

Retail Flagship Feature Christmas Sarah Butler