Independent View: A 'late Christmas' for books

<p>Richard Barker</p><p> "Christmas is late this year." If you have not yet heard or seen this statement, then you soon will do, because Christmas is late every year. Christmas is late for book retailers in much the same way as harvests and milk yields are poor for farmers. But there is more to it than that. It is important to understand why Christmas is late for multiple book retailers. It is a function not of trading patterns nor availability of key titles--it is because they have external investors to manage. As such, they come under the spotlight even more than usual during the all important peak trading period. Analysts are waiting to downgrade their ratings at the slightest hint of a poor Christmas, and nothing demoralises City opinion more than missed promises. So, our multiple colleagues play down their performance (although not too much), seeking to manage the expectations of those whose opinions will influence share prices. Then, miraculously, on the back of undoubted senior manager expertise, and an inspirational business strategy, that late Christmas delivers a performance better than expectation, rendering those senior managers and their directors heroes, fully justifying healthy year-end bonuses and the allocation of further share options.</p><p>That said, Christmas is late this year . . .</p><p>Managing decline at W H Smith</p><p>Armed with an indelible marker pen and BA Membership Directory, my rough and ready analysis suggests there are more than 50 locations in the UK where bookselling provision is a straightforward duopoly betweenW H Smith and a local independent. In our neck of the bookselling woods there are plenty of examples--Henley, Marlow, Beaconsfield, Bicester. As such, the ultimate fate of beleaguered WHS will have a material impact on the state of independent bookselling across the country. I suspect that trade is holding up better for WHS in these smaller towns than it has been in more urban locations. The competition is less fierce--typically the specialist music retailers are not present--and the stores have a degree of community appeal not relevant to larger, city centre retailing. But, even in these locations, there is a malaise about the WHS stores.</p><p>If Kate Swann and her fellow directors cannot produce a strong Christmas performance then she and her newly appointed chairman might well find their New Year dominated by reinvigorated takeover approaches, and previously supportive shareholders (including myself) may be less amenable than we have been. I imagine those independent booksellers in direct competition with WHS are benefiting. Heavy price discounting will not persuade the loyal independent customer, nor will the more imposing physical environment that higher gondola units are creating. As with Marks&amp;Spencer, once the aura of decline is present, it is very difficult to get the impression out of consumers' minds. The downside for all book retailers, not just independents, is that a further decline in the fortunes of WHS might easily put a greater share of the consumer book market in the hands of the supermarkets, and that would not be a good outcome.</p><p>Sale for return</p><p>Sally Ann Palmer and I purchased the Gerrards Cross Bookshop in the summer of 2001, and we opened the Wantage Bookshop in July of 2003. Last week we sold the Gerrards Cross shop. We chose not to undertake a strategic review using external advisers and, miraculously, we have managed to avoid a damaging family rift (on this topic at least) but we decided to sell with some regret. We did so not through any lack of optimism about the future for independent bookselling, but because it had become increasingly difficult to make the most from two bookshops, in the face of conflicting demands from three daughters, and full-time employment elsewhere. So, it will be for someone else to worry about the impact on Gerrards Cross of the large new Tesco superstore which will open in the middle of town next autumn. Personally, I think it will be to the benefit of most local retailers, keeping shoppers in the town who had previously driven to neighbouring towns for their groceries. But, as of now, it is no longer our concern.</p><p>During each year of our ownership, we made a return from the bookshop which was comfortably in double figures. These were not the sort of returns which would make venture capitalists sit up and take interest, nor the sort of returns that WHS will need in order to remain in current ownership, but we earned substantially more from our money than we would have done by leaving it in even the most attractive high-interest bank account, and, along the way, we had a great deal of enjoyment. We shall continue with the Wantage Bookshop which now becomes our flagship store.</p><p>We advertised the Gerrards Cross business discreetly on the internet; received more than 30 expressions of interest; talked in detail to three potential purchasers; and completed the sale in something less than three months. Our experience would suggest that independent bookselling--in the right location, with the right people to help you--can be a worthwhile commercial activity and that there is a ready supply of future investors waiting for the right opportunity to appear.</p><p> Publisher pressure</p><p>In The Bookseller, 26th November, an obviously frustrated Peter Myson of The Bookstore, Walton-on-Thames, identified a number of the very real competitive issues currently facing independent booksellers. Mr Myson blamed large corporate publishers for the rise of those competitive pressures and suggested direct action--a boycott of new titles from those publishers--as a way of influencing their behaviour.</p><p>I do not agree with his suggested approach, but I do absolutely share his view that the publishing industry should be looking very carefully at how it services non-traditional routes to market. Publishers should be considering whether the short-term benefits which might be accruing are adequate to justify what is putting the longer-term strength of the industry at risk.</p><p>A good example of how publishers are not acting as they could, and should, has arisen over the introduction of the launch dates project and the proposal to establish Monday as the official launch day for key, lead titles. This is a good initiative which will benefit the whole trade. It also represents the first practical output from the BA/PA Liaison Group. But the project is in danger of falling at the first hurdle because Tesco has not signed up and its book supplier--EUK--is complaining that the proposal was presented to them as a fait accompli. If Tesco is serious about selling books and sees a relationship between the strength of the book industry, and its own commercial success, then it should sign up--why would it not want to? If it is not prepared to sign up then the book trade, in the shape of publishers, should exclude it and ensure it does not receive relevant titles before agreed launch dates. The trade cannot be held to ransom.</p><p>I do not blame Tesco for taking the position that it does, on this issue, or any other. It is acting entirely with justification, using the strength of its competitive position to further its own legitimate commercial interests. The fault lies squarely with those publishers who supply Tesco and other supermarkets at terms which cannot be sustained and which will ultimately undermine routes to market for those titles which Tesco will never stock.</p><p>It is hardly surprising that EUK saw the launch dates proposal as a fait accompli. It had not been involved in discussions because neither the supplier, nor Tesco itself, are members of the BA. David Roche, product director of Waterstone's, and co-chair of the Liaison Group, is keen that either EUK or Tesco, or both, should become members of the BA and possibly be represented on its Council--presumably because he would rather it should do what it does from the inside, than from the outside. Whether either organisation chooses to join the industry body or not, we should be wary. Tesco has taken close to 10% of the consumer book trade without being members of any trade body and, if it does join, it will not be with any sense of altruism for the greater good of the book industry, it will be to further its own commercial self-interest.</p><p>The launch date initiative offers potential benefit to the whole trade. By focusing promotional, media and thus consumer attention around a single national release date, the opportunities to exploit high-profile launches are greater for all parties. For independent booksellers there are added benefits. A well-managed embargo ensures that independents are not disadvantaged through their larger, more influential competitors receiving and selling copies of key titles early. That level playing field alone is justification for support of the initiative.</p><p>The trade is likely to find itself making similar decisions about Tesco and its participation in next year's World Book Day. Opinion, even among most independents, seems to support Tesco's involvement and, indeed, the involvement of any other supermarket chain. The issue is whether it is prepared to make an appropriate financial contribution in support of the event. Those responsible for making these decisions must not sell the trade short.</p><p>Praise be to Batch</p><p>One of the legitimate concerns of a trade association must be the efficiency of the trade in question. Taking out cost; making transactions quicker and simpler; the provision of universally applicable solutions, are all aspirations towards which a trade association should have ambition. If such aspirations tend to favour the independent trade, and tend to correct the competitive imbalances between large and small, then so much the better.</p><p>Against that background, the continued development of the Booksellers Association Batch system is to be applauded. Batch has had a difficult gestation and has absorbed far greater investment than was originally predicted. Those who have supported Batch through the difficult times deserve credit. It has taken perseverance and not a little courage to remain committed to the concept. Now, Batch is coming close to the critical mass of users which will turn a good idea into something commercially sustainable. Each month we pay more and more of our suppliers through Batch. Our bank charges reduce, out postage costs reduce and--lest they should forget--our suppliers know what funds to expect from us and can have confidence in timely receipt. Batch provides options for electronic commerce to many booksellers who would otherwise be unable to afford development and maintenance costs. Well done to those involved and shame on those publishers and wholesalers not yet signed up.</p>