Tesco's giant strides

<p>The much-maligned supermarket giant now stocks books in 731 stores, and aims to double sales to &pound;200m within three years. Planned new approaches span literary fiction, children&rsquo;s books,&nbsp; paperbacks of the year, book clubs and Tesco.com. Graeme Neill hears why publishers are drooling and rivals are quaking</p>
<p>At the Ponsbourne Park hotel in the midst of the Hertfordshire country&shy;side, Tesco last week gathered around 40 publishing sales directors to outline its plans for books.</p>
<p>The projections were nothing if not ambitious. Within three years, Tesco estimates it will be selling &pound;200m worth of books, up from &pound;107.2m in 2007. Tesco&rsquo;s books buying and marketing team numbers just four people, so is this a pie in the sky figure? Not given its retailing pedigree. &ldquo;Tesco are the most successful re&shy;tailer of anything they choose to sell and that includes books,&rdquo; says one publishing sales director.</p>
<p>Tesco has a 6% share of the UK book market by value and 10% by volume. That puts it close to over&shy;taking Borders and becoming the UK&rsquo;s fourth largest bookseller behind Waterstone&rsquo;s, W H Smith and Amazon. It sells books in 731 of its 1,779 stores&mdash;more than twice as many locations as Waterstone&rsquo;s&mdash;and each Christmas an additional 800 Tesco stores offer annuals.</p>
<p>Publishers laud Tesco&rsquo;s ability to shift big numbers of books from small spaces, using clear selection, merchandising and presentation. The tightest range is in around 300 stores with just one bay of books: usually the top two hardbacks (priced from &pound;8), six new releases, a top 20 paperback chart (recently rising to &pound;3.86 from &pound;3.73) and a shelf of children&rsquo;s books. The widest range, in 13 superstores, is sold from a 24-bay book area.</p>
<p>But the offer is not just focused on one aisle. Eighty stores have an end bay of books in the &ldquo;power aisle&rdquo;, which is the main avenue as you enter a store. Some parenting sections carry mother-and-baby books; some Tesco pharmacies stock health titles. Recently, Tesco sold the novel&shy;isation of movie &ldquo;Enchanted&rdquo; alongside the DVD in a buy-one-get-one-free offer. It helped the Parragon title rocket to number one in the children&rsquo;s charts, with Tesco bagging 25% market share. &ldquo;That is getting those people who don&rsquo;t necessarily shop in the book aisle,&rdquo; says Gaynor Allen, &shy;Tesco&rsquo;s buying manager for books.</p>
<p><b>Weighty ally</b></p>
<p>With Tesco fighting on as many non-food fronts as possible, competition for space is fierce (a greetings card makes at least three times as much margin as a book). However, books have an ally in Tesco&rsquo;s chief executive Sir Terry Leahy. &ldquo;He&rsquo;s really interested in books so we get more space than probably the figures would sensibly dictate,&rdquo; says Allen.</p>
<p>This has led to Tesco throwing its weight behind campaigns like World Book Day, the National Year of Reading 2008 and Quick Reads (more than doubling the amount of stores Quick Reads were stocked in this year to 450). &ldquo;We want to get people reading, and if we can appeal to &shy;people who wouldn&rsquo;t necessarily shop in Waterstone&rsquo;s or Borders and get them to buy a book rather than a toy or sweets [then so much the better],&rdquo; Allen says. &ldquo;It&rsquo;s not just a commercial decision, it&rsquo;s also corporate social responsibility driven.&rdquo;</p>
<p><b>Read the difference</b></p>
<p>The book offer is a far cry from a decade ago, when a selection of stores started selling a limited paperback chart. Supermarkets are maligned for pushing misery memoirs and mass market crime fiction, but Tesco has made strides into much broader areas. &ldquo;We have all the major genres covered, so it&rsquo;s more a case of selling more volumes of those big sellers, but also build range sales,&rdquo; Allen explains. &ldquo;It is [about] recommendation&mdash;trying to get people to try something a little different.&rdquo;</p>
<p>One way it has done this is through the Tesco Book Club, which runs with Random House. It has generated sales of around 250,000 books since it was launched last July, from titles such as Markus Zusak&rsquo;s The Book Thief and Danny Scheinmann&rsquo;s Random Acts of Heroic Love.</p>
<p>Another method has been with a Recommended Reads shelf in 440 stores, which carries literary fiction such as Life of Pi or The Accidental, as well as classics like To Kill a Mockingbird. &ldquo;We can sell that kind of book,&rdquo; says Allen. &ldquo;It&rsquo;s a case of putting it in front of the customers.&rdquo;</p>
<p>There have been further forays into children&rsquo;s books. Last year, Tesco&rsquo;s children&rsquo;s sales grew 17% by value (excluding Harry Potter), &shy;driven by a new shelf of children&rsquo;s books in 731 stores. This week sees the launch of a children&rsquo;s version of the book club, also with Random House. It has supported age ranging, with stickers stickers signifying a books&rsquo; suitability for ages 5+, 9+ and Teen.</p>
<p>Despite respect from publishers (&ldquo;Tesco should be considered just like a chain bookshop for the standard they bring to the market,&rdquo; says one sales director), Tesco and other supermarkets have borne the brunt of criticism for the changing face of book retailing. Independents who go out of business say that they cannot cope in the face of relentless discounting, fuelled by pliant publisher terms. Allen responds that such criticism is &ldquo;unfair&rdquo; given the difference in the offer, adding that independents are stronger when it comes to personal recommendations. &ldquo;Tesco is very much self-service, picking up a few paperbacks with your grocery shop. We have to make it as easy as we can with instore point of sale, marketing materials and chart posters.&rdquo;</p>
<p>While Tesco continues to stress the importance of a value offer, key given the &pound;3.86 paperback chart threshold, it&rsquo;s also planning to tweak some prices upwards. It estimates that an extra &pound;1.5m of revenue will be achieved from an increase in its average selling price this year. &ldquo;We are moving into a higher price point market,&rdquo; says category manager David Cooke. &ldquo;We actually can sell quality products at good value.&rdquo;</p>
<p><b>Self-service shopping</b></p>
<p>Then there&rsquo;s the Tesco influence on homogenisation of book covers&mdash;such as misery memoirs featuring a tearful child and a handwritten title. Allen says jackets are so important to supermarkets because of the quick purchase decision that shoppers make. &ldquo;Our aim is to get the customers passing down the aisle to stop and pick a book up,&rdquo; she says. &ldquo;They are not browsing like in a Waterstone&rsquo;s. There is no point having a true-life story with a pink jacket and a flower. In a way it is formulaic, and we do encourage [publishers] to experiment with jackets. But at the end of the day, when we do the product selection we know what sells.&rdquo;</p>
<p>Allen is unapologetic about striving for better terms, buying in partnership with wholesaler EUK. She says the savings are channelled into marketing material such as chart posters, stickering and the Tesco magazine. &ldquo;We feel those that support us get it back in spades, and get the promotions that they want and the support for their big books.&rdquo;</p>
<p>So where to from here? Last week&rsquo;s presentation revealed that Tesco expects sales of &pound;125m for 2008. Factoring in the absence of a new Harry Potter, this means it needs to grow sales by approximately &pound;25m. Part of this growth (&pound;4m) will be generated from range sales, with a new &ldquo;Best of Boys&rsquo; Action and Adventure&rdquo; shelf, featuring authors such as Andy McNab, rolling out to stores this week.</p>
<p>It&rsquo;s working with Dunnhumby, the marketing agency behind the Clubcard, to target shoppers with vouchers to draw them into the book aisle. Publishers can request data in order to refine their deals.</p>
<p>One publisher criticism of Tesco is that it underperforms at Christmas, with books easily lost among the festive food, cards and gifts. To combat this the supermarket will introduce a &ldquo;Best of 2008&rdquo; paperback bay to 300 stores this autumn, and in 423 stores there will be a drop of books at the end of a shelving unit in the &ldquo;power aisle&rdquo;. This display will run for two three-week periods before Christmas, and Tesco estimates it will contribute &pound;5.3m worth of sales.</p>
<p>Another criticism is the wasted potential of Tesco.com. One sales director says that the online offering is underdeveloped. &ldquo;Given the customer base, it&rsquo;s the biggest opportunity. They could be a very serious competitor to Amazon.&rdquo; This is something Tesco acknowledges, with plans to price match or better Amazon on 5,000 titles by this summer. A commercial manager has been appointed to drive its online books brand. So could Tesco, after dominating the wider retail landscape for years, be drawing battle lines against Amazon? Well, every little helps.</p>