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Helping or Hurting the Little Guy: Big Booksellers Sell Cheap Books

By Brian | December 28, 2009 | Share on Facebook

Building on the book theme from yesterday, we turn to this post from Megan McArdle at Asymmetrical Information. She relates a story about the American Booksellers Association, which is upset at Amazon, Target and Wal-Mart for selling us books too cheaply:

Wal-Mart announced that it would offer Walmart.com customers . . . the chance to buy the books in hardcover editions for just $10. Typically new hardcovers sell for $25 to $35, although some discounting is common. Amazon.com quickly matched Wal-Mart’s pre-order price on the same books.

Wal-Mart then lowered the price to $9, and Amazon followed suit. By late Friday afternoon Wal-Mart had cut another penny off the price. On Monday, Target entered the fray by offering six of the preorder titles on Target.com for $8.99. By Tuesday Wal-Mart had lowered the price on those titles to $8.98.

The association . . . accused the retailers of “devaluing the very concept of the book” and effectively selling the books at a loss in an “attempt to win control of the market for hardcover best sellers.” Retailers typically pay publishers a wholesale price of half the list price of a hardcover book — so on a $35 hardcover, the retailer pays $17.50, meaning that it loses money on a $9 consumer price.

Now, the story of the big chain taking over the Mom & Pop store is so common that Tom Hanks made his movie about it more than a decade ago. But that story usually relates to the big chain undercutting the small store by selling products at razor-thin margins, making its profits on high volume, and reducing overhead by deprioritizing customer service and amortizing its fixed costs (e.g., its employees, its rent) over a much wider customer base.

This time, it’s different. The big chains are offering these discounts on their websites. And they’re selling these books as loss leaders, in hopes that when people click over to buy their $8.98 book, they’ll throw another, more profitable item in their electronic shopping cart as well. The advantage Amazon, Target and Wal-Mart have here is the variety of products they offer and their high-value brand names that drives a lot of traffic to their web sites. Small booksellers could also choose to lose money on certain books by selling them for $8.98, but they’d run a greater risk that people would buy only those books, leaving them with a loss, rather than a profit, on the sale.

My question is this: in the online model, where customer service is mostly self-serve and Google searches, is this a good thing or a bad thing? Yes, the Kathleen Kelly‘s of the world may be forced out of business by these tactics, but then again, isn’t it the Kathleen Kelly’s of the world who would appreciate the chance to pick up the newest hot novel for $8.98, rather than $30? We may be putting the “little guy” bookseller out of business, but are we not providing the “little guy” consumer with equal quality merchandise at a much lower cost? Have we finally jumped off the cliff where the small, specialty shop isn’t so much “under attack” by the big chain, but has become a dying industry because it’s no longer the best way to serve the customer?

That’s your socio-economic question of the day. Discuss…

Topics: Money Talk, Random Acts of Blogging | 3 Comments »

3 Responses to “Helping or Hurting the Little Guy: Big Booksellers Sell Cheap Books”

  1. Janet says at December 28th, 2009 at 4:32 pm :
    Well, that argument might work if the only things you wanted anyone to read were going to be carried by the big chains. Ever checked out the book department at Wal-Mart or Target? Not the range I’m looking for, certainly. If you want there to continue to be customer service from knowledgeable employees, with a range of options for different consumers, then we need smaller book stores. This is a step beyond Tom Hanks and Melanie Griffith – that was about big chain book stores (i.e., Borders and Barnes & Noble) squeezing out independent shops; this is about Walmart, Target, and Amazon squeezing out book stores, period. Tom Hanks is Pop, now.

  2. Brian says at December 29th, 2009 at 2:32 pm :
    That’s my point, Janet – it’s not the store, it’s the website. I don’t know for sure, but I’m guessing that the big box stores offer more of a selection on their website than they do in the physical store. Also, the question of knowledgeable employees disappears, because the web is self-serve (Google is your “knowledgeable employee”).

  3. Janet says at January 4th, 2010 at 2:44 pm :
    Wal-Mart and Target offer more books on line than they do in store, but still fewer (and for a much shorter time after publication) than companies whose primary product is books. And google isn’t knowledgeable at all, though sometimes it does a good job of connecting me with people who are (and sometimes it doesn’t, and sometimes it does but it takes a lot longer than if I knew where to look). And I, for one, would miss being able to go to a bookstore – browsing physically is a very different activity from browsing electronically, though only if there’s some reasonable variety (and probably some reasonable help and guidance). I’m willing to pay extra in order to preserve that. Not every time; I buy most of my books on line (and I buy a lot of books). But often enough. It makes me sad that so many excellent independent bookstores – not just little places but big ones, like Kepler’s – are gone. But books are a bigger part of my life (in a number of different ways) than they are for most people.

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