(Note: Some readers object to off-topic posts, so I've decided to start writing them on a regular basis. From now on, on any Sunday when I feel like it, I'm going to post a completely off-topic mini-article that has nothing to do with photography. I will label them all "The Sunday Sermon," for the convenience of those who only want to hear from me about photography. If you're one of those folks, all you have to do is avoid any post with this title. All I can promise everyone else is that the content of the 'sermons' will vary wildly. Probably the quality too, although I'll try my best. Cheers! —MJ. P.S. If there is a great chorus of objections to this feature, I'll stop.)
'Harry Potter': A Disaster for Bookstores
You'd think that if you owned a store that sold only one kind of product, and an example of that product came along that everyone and her brother wanted to buy, you'd be happy, right?
If you own a bookstore, however, and the product is the final Harry Potter book, wrong.
Harry Potter and the Deathly Hallows, which if god has any mercy will be the last in the series, came out on July 17th. Because of its crushing popularity (caused by spells, we think), many huge retailers will skim the product. Wal-Mart and Amazon, using their huge buying power to negotiate a better deal than is even available to small independent bookstores, are selling the book at 49% off—for no profit, simply using the book's popularity as a draw. Megachains Barnes & Noble and Borders have priced it at 40% off, slicing off all but the narrowest of profit margins. Here you have a product so popular that people would buy it no matter how much it costs; so, in order to insure themselves a decent portion of the trade to be done, retailers willingly give away all their potential profit. This is, frankly, insane. But that won't stop anybody. You will be able to buy Harry Potter and the Deathly Hallows in some surprising places, we think—Costco, grocery stores, big box stores—including some places you hardly ever see books sold.
What this means for actual real bookstores—i.e., establishments that are in business to serve actual readers—is a) there will be no profit to be made on sales of the book, and b) they risk either alienating customers or wasting money on useless or expensive-to-return stock.
To match the Wal-Mart price, small bookstores would have to lose money on every copy sold. To come close to Barnes & Noble's discount, the small bookstore will have to sell the book with no markup at all.
A few small bookstores will simply buck the competition and charge full price for the book, or offer a much smaller discount. They'll sell only a few copies, but they'll make money on what they do sell.
But even if stores lose money on it, it's still a draw that will bring customers into the stores, isn't it?
Perhaps. But there's a big risk for that dubious return. If the small store elects to stock a limited number of copies, it risks running out and turning away customers who come in looking for the book. What will new visitors think of a bookstore that doesn't even have the biggest-selling book on the planet? How good a store could it be, right?
But if you're in a market where returns of stock aren't sanctioned, a store could end up like Scotland's Bookworld stores, some of which had to close with 10,000 unsold Harry Potter hardcovers (representing a disastrous financial loss) in its warehouses. With so many buyers pulled away by the huge discounters, it's difficult to predict when the demand will cool. Given that you're not making a penny on sales, overstock becomes mighty expensive.
What's the remedy? Apart from breaking up the giant retail juggernauts—which isn't going to happen—there isn't one. The situation can't be helped. But the book business is certainly one of the world's oddest industries, in which a runaway success is magically transmogrified into a lose-lose proposition for retailers of every description. Never have so many different kinds of stores realized so little return from such very great potential.
As a Quixotic and entirely symbolic antidote, T.O.P. hereby declares July 29th "Bookstore Day." We like small bookstores—small, quirky, independently owned, hole-in-the-wall stores where one cantankerous owner puts out an idiosyncratic motley of titles based on eccentric personal taste, numerology, offbeat politics, or whether or not they like the cover designs. Buy your Harry Potter where you will, but we hereby urge all contrarians, real readers, curmudgeons, freedom fighters, cranks, and lovers of self-determination, independence, and small enterprise to march to their local small independent bookstore today and buy any new hardcover at full price. Strike a small and semi-pointless blow for freedom of thought and independence!
(And if you actually do this, please write a comment and tell me what you purchased!)
P.S. Please leave comments for this article underneath the original post on the blog page
Featured Commentby Paul Amyes: "The concept of loss leaders is not confined to the retail book business. All the major chains of any type of retailer does this. Consequently it makes life very difficult for the Mum & Dad stores (Mom & Pop in the U.S.) to survive. Does this phenomena benefit the customer? No. It's fine when the product is common, or has no ongoing service issues etc. But, when you want some service, advice, warranty work, repair, spare parts forget it.
"I'm all in favour of supporting small local businesses, because although you'll end up paying more per item in the end you end up as the winner. I have a deep love of roots music, particularly the blues. Before the internet I used to go into a local record store and buy my stuff from him. He'd order me in stuff from obscure labels all over the world. After a while he got a good handle on my tastes and if he saw anything he thought I'd like he'd get it for me with no obligation on my part. It was fantastic. A trip to local mall used to take ages if I popped in and saw Dave, and I'd always leave happy. The internet came and basically finished off his business and I feel my life is the poorer for it. Support your local stores now because after they've shut up shop its too late to go and get that widget you can't get anywhere else."
Mike replies: Paul, thanks. You put this much better than I did myself.
I putter around thinking about writing books, and one of the books I've been working on for years is called "Twenty Six Extremely Upopular Ideas." Chapter Three (or Six, who knows) is about what I call "The Johnston Postulate": "Conservative economic theory is wrong about everything."
Years ago I wrote an editorial about french fries. It is in fact the case that McDonald's makes all its profit from two high profit items: soda and french fries. In the case of french fries, the markup is 500%, more or less. (Now you know why "associates" are required to ask of every customer, "Would you like fries with that?") Everything else it effectively sells at cost. So what if a sidewalk vendor set up outside of every McDonalds selling french fries for, say, a 10% markup? McDonalds would be forced to lower its french fry prices in response, and economists would say this is "good for the consumer" because competition is resulting in cheaper french fries for everyone. But McDonalds has to make its money somewhere, so presumably it would have to raise all its other prices. How does that benefit the consumer?
Now imagine if the sidewalk soda-and-french-fry vendor were to sell his goods for so little that he drove the restaurant out of business (he has only a cart as overhead, and only himself to pay, etc.). The consumer's problem is then somewhat larger: while he can get cheap soda and french fries, there's nowhere he can go to get a hamburger.
You can argue this example all you want, but something similar has happened, and is happening, all over. One looming problem is that Wal-Mart is beginning to sell groceries. Now, Wal-Mart has no contract with the grocery worker's unions, so it has an unfair advantage right from the start. Moreover, a grocery store has 12 long aisles of food products, allowing the consumer a great deal of choice. Wal-Mart has four short aisles of food products, comprising mostly the high-profit items, which it sells for less than the grocery store does. This seems fine to the consumer, who now gets his milk and bread for cheap at Wal-Mart. But imagine the not-unlikely scenario that Wal-Mart puts the grocery store out of business. You now have to stock your entire larder from four meager aisles of high-profit food items at the Wal-Mart. Forget fresh fish, ethnic ingredients, esoteric spices, all that. Is the consumer the richer? Of course not.
If anyone doesn't think this is a danger, look at the book section of your Wal-Mart next time you're there. You're looking at the #1 seller of the world's #1 best-selling book. But would you like to do all your book shopping at this particular "book store"? (At my Wal-Mart, the "book section" is one five-foot wide shelving unit with some Christian and inspirational titles, some self-help, a number of classics and quasi-classics such as Alex Haley's Roots, some cookbooks, and a few bestsellers.) I think not. Granted, the internet provides an alternative to this dire situation—in the case of books, and for those who have internet access. But you will not buy tires or furniture or fresh food or any of a hundred other categories of items over the internet any time soon.
The fact that America has evolved without reasonable retail laws is simply an accident of who's been in power when, the ideas that appealed most to those people, and the gradual evolution of customs. There's nothing inherently right or wrong about the way we do things. But—in contrast to the Dutch and many other Europeans—we have a distinct tendency not to correct bad situations when things do go wrong, because of our unreasonable attachment to certain simplistic ideas about the nature of economics.
And yes, I realize that the "Support this Site" links below are a little ironic in the context of this topic! C'est la vie.
UPDATE: Attempting to take my own advice, I went to my local independent bookstore this evening—it's actually a decently large mini-chain (three stores) with a good selection—but it was, um, closed, because they close early on Sundays. So I went to Barnes & Noble and ended up buying a couple of remainders. SIGH....
Copyright 2007 by Michael C. Johnston—All Rights Reserved
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