The Bookseller.com

4th July 2009

Discounting failing booksellers

21.11.08 Tom Tivnan

UK booksellers are locked in a damaging "vicious circle" of discounting, and are making fewer profits and seeing less growth than their counterparts overseas. Those were the main conclusions from the Bookseller Association's Benchmarking Study, released today (21st November).

The report said that UK bookshops were being hit by a "triple whammy" of declining average prices, stagnating growth and rising costs. Of the countries studied, only the United States had a lower average selling price than the UK, with the number of books sold at discount in the UK rising from 44% in 2004 to 51% in 2007.

The report estimated that UK bookshops had lost 10% of volume sales to other sources, such as supermarkets and online retailers, in that same period. Gross margin for UK booksellers per book was put at 25%—lower than the average of countries surveyed. The result was that the "typical" UK bookshop net profit margin was at 2% in 2007, the joint lowest figure in the study (see charts below).

Tim Godfray, the BA's chief executive, said the report was an "eye-opener". He added: "I didn't think we would come in so bad on profitability. I think the key is the discounting. We are not saying discounting is necessarily bad. What we are saying is that booksellers should not adopt knee-jerk discounting without sitting down and thinking very carefully about what is best for their businesses."

BA president Graham Rand said: "We have to ask ourselves whether the industry has gone too far in creating this -'lowest price' environment for consumers; through this serial discounting are we simply devaluing the worth of the book in consumers' eyes?"

The study, compiled for the BA by retail analysts Sarah Charles and Tim Ingle, compares the UK bookselling industry against five other markets: Ireland, the US, the Netherlands, Sweden and Finland. The results were compiled from a variety of sales data sources, industry interviews and a survey of 176 booksellers from across the countries. The report focused on traditional bricks and mortar booksellers, excluding e-tailers and supermarkets.

The report said British booksellers had to deal with a "confluence of factors" their overseas counterparts did not. These factors included the simultaneous growth of online and supermarkets, heightened centralised competition and increasing promotions.

The BA said it was hoping that the report would be a springboard for booksellers to think about their business models in -difficult economic conditions. It recommended careful strategies on discounting and -closer negotiations with publishers, rethinking of labour costs, increased product ranges and ensuring the supply chain was being used effectively.

Godfray insisted it was wise to release the report in a run-up to a potentially difficult Christmas trading period: "The timing is fortuitous. When booksellers are facing great pressure, for them to be aware and also to be encouraged to look at various key indicators to their businesses is an extremely useful thing to have."

Blog: Is the price wrong?

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