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Thursday, February 09, 2012

The Customer, Not the Boardroom Will Decide Who Wins The Bookselling War

The decision to refuse to carry Amazon published books may well prove to be one more nail in the coffin of the brick and mortar bookstores. Barnes & Noble and Books A Million (and Indigo in Canada) are making this decision at the boardroom level. The small independents in the American Booksellers Association are not making their own business decision, it is being made by the few elected members of the association’s board. Those people do not have a vested interest in the business of any bookstore except their own.  I hope some of the better book stores around the country, stores like Left Bank Books in St. Louis and Third Place Books in Seattle, will see that this decision does nothing to improve their bottom line. It could very well harm it. Part of being ‘independent’ is having the ability to make your own business decisions.

The bookstores that are refusing Amazon published books are forgetting the most important element in their business – the customer. If a customer wants a specific book they don’t care whether the bookstore doesn’t like the publisher, they simply want that book. If one bookstore won’t sell it to them, they will go to the competitor who will. Odds are they will return to that competitor for other books, even if they are available at the bookstore that wouldn’t sell to them previously. 

It would be like a customer who wants Crest toothpaste being told that it is not available at the pharmacy where they usually shop because they don't like Proctor & Gamble. The customer will find a store that sells Crest, and will probably buy other products while they are there. They will probably keep returning to that store, even if they are not out of toothpaste.

If publishers think that Barnes and Noble or the others are their new allies, they had better think again. None of those stores give a rat’s hairy tukas about the publishers. It wasn’t that many years ago that the smaller publishers were railing against the Barnes and Nobles, Borders and Indigos of this world, because of the way they were being treated. Delayed payment of invoices and massive returns were killing the smaller and some larger publishers.

I’ll use the Canadian example of Stoddard Publishing and General Distribution Services as an example of what good friends the big-box bookstores are to smaller publishers. In 2002, Jack Stoddard the owner of both companies was forced into bankruptcy, not because he ran his business poorly, but because Chapters/Indigo were putting long delays on paying their invoices, and excessive returns. It was reported at the time that when pushed to pay a bill they would ship back enough books to cover the invoice with returned (often damaged) books. As an article written at the time said:

             “Among the very specific things that sunk GDS [General Distribution Services] was a practice among booksellers designed to get around the new game rules set by the Federal Competition Bureau. Stoddart provided a basic outline of the practice in his affidavit, implying that both Chapters/Indigo and some of the independents were employing it. It involved the bookstores returning books within the 90 day return period, and then reordering those same books again—thus extending Chapters/Indigo credit beyond the 110 day period, and leveling the playing-field slightly for a few independents, in effect enabling a few of them the privilege Chapters/Indigo already had, of paying only for the books they’d sold. But it worsened the warehouse and accounting logjam for GDS, and set an ugly precedent for the future.”

(Read the entire article at

What other retail sector can get that kind of advantage from their suppliers? I have written before about the looks I got when I asked a florist if she could return unsold roses for a credit.

Stoddard was far from the only publisher that was hurt by those events. General Distribution Services served over 60 publishers. When it went under its creditors were owed over $45-million. 

This also had a huge impact on the authors. Royalties owed to them also disappeared in the bankruptcy. Ten years later, many of them have still not fully recovered. In my case, this was all occurring in the first couple of years after my first book was published. When it received the Stephen Leacock Award of Merit for Humour in 2000, it should have been a huge shot in the arm for my sales. My publisher at the time was experiencing the same business practices from Chapters/Indigo as Stoddard, and was refusing to ship books until bills were paid, mine included. The book made its way into smaller independents, but not into the largest retailer in the country.

Barnes & Noble Indigo and Books-A-Million are behaving like schoolchildren, telling Amazon, “You can’t play in our park.” Amazon can either fight them for control of the park, or make the smarter move and build their own park. Having $6-billion at their disposal, you can be assured that the new park won’t just have a basketball court and a couple of swings.

I think we have only seen the tip of the iceberg from Amazon when it comes to finding new and better ways to serve the customer. Remember the customer; that person who actually lays down their credit card to buy the product. As I said earlier, that’s who is being forgotten by the bookstores like B&N.

Some publishers and booksellers are forgetting that B&N and BAM bullied them a few short years ago, but now they want to hang out in their park because they think that the bullies will protect them now. That thinking doesn’t work in the playground, and it sure as heck isn’t going to work in the business world.

The mantra of independent booksellers has always been that they can provide the customer with better service and a good knowledge of books. That is something the minimum wage employees at the big box bookstores lacked. The smart booksellers will realize that there is no point tilting at the Amazon windmill like some latter day Don Quixote. They will look for ways to promote themselves as being the better choice over Amazon, B&N and the other big box sellers. (We haven’t even mentioned Walmart and Costco in this discussion yet.)

Publishers need to show authors why they are a better choice than Amazon for book publishing. It will take a lot of creative thinking. The book promotion model that many of them use will need to be altered significantly. The royalty formula will have to be reworked significantly. (Many publishers will have a great deal of difficulty with that one.) The timeline between completed manuscript and book release will have to be significantly reduced. They will also need to look at the pricing of electronic versions to bring them more in line with the reality of that marketplace.

You can be sure that Amazon expected this sort of reaction from the other booksellers, and planned for it. If you can make your opponent focus solely on defense, you are the one in possession of the ball. They cannot score and you have every opportunity to do so. Amazon is drawing their focus away from the customers, and therefore away from what will keep them in business. 

The people who actually buy the books will decide how and where they want to shop. They don’t care about the battle going on in the background. The companies that recognize that and use it to their advantage will in all likelihood be the ones to win the war. At present Amazon is in the position to keep their eye on that prize, because everyone else is trying to keep an eye on them.

In reality, booksellers and publishers have a lot less to fear from Amazon than another group of players in the industry. If companies like Ingram and Baker & Taylor don’t see the writing on the wall, they had better visit an optometrist. Distribution, and finding the most practical and cost effective manner to quickly put the product into the hands of the customers will be the key to victory.

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Gordon Kirkland At Large

Writings and Wramblings from the Wandering and Wondering Mind of Gordon Kirkland