Monday, September 17, 2012

Lawrence Gooley: Changes in E-Book Retailing

Regional booksellers and other North Country retailers who began selling e-books to earn profits and stay afloat will soon be faced with a big challenge in the online arena (as will stores across the country). The battle of the e-readers will soon break out once again in grand form, just as it did last year in the months prior to the holidays. It led to fantastic profits for Amazon in 2011: they pushed hard to sell Kindles, knowing that the real money was in e-books. Once a customer bought (or was gifted with) an e-reader, they were sure to make use of it―and the strategy worked. E-book sales went through the roof.

Due to a recent court decision, the company will once again bombard us with fantastic deals on readers and e-books. They were going to do that anyway, but the situation has taken a sudden, dramatic change in Amazon’s favor (and perhaps other large online retailers, like Barnes & Noble). I mention Amazon because they once controlled 90 percent of the e-book market. While that number has dropped to about 60 percent, it is likely to rise again with the recent court ruling.

They’ll tell you, of course, that the decision is in your (the consumer’s) favor, and in some ways that will be true. Amazon will maintain the drastically low prices on their new Kindles, and there will be a noticeable drop in the prices of e-books. Those who buy (or are given) Kindles will surely load up on content. CEO Jeff Bezos said they will take a loss on the Kindles in order to earn profits from e-books.

Here’s where the court ruling came from. A few years ago, Amazon used a common Walmart strategy to corner the market on e-books by offering them at such deep discounts that the company actually lost money on many titles. Sounds insane, of course, to the average person, but it’s ingenious―if your goal is to destroy the competition.

Losing money on those sales was covered by impulse purchases made by the customers who were drawn in by the low book prices. It’s a tactic that only works well if you’re a Walmart or an Amazon―a behemoth that can absorb losses long enough to put smaller stores out of business, and big ones, too. Barnes & Noble was on their deathbed a few years back in the e-book market, owning an estimated 0%, while Amazon owned 90% or more.

To counter that dominance, a few major publishers joined forces and set the prices on their e-books, temporarily foiling Amazon’s strategy. Since then, B&N has risen to perhaps 30 percent of the e-book market, while Amazon has fallen to 60 percent. That will change. The court has ruled that the publishers colluded, and that Amazon (and other retailers) can set the retail prices of e-books for the next two years. Prepare for the Kindle/e-book onslaught. It’s coming.

However, from the perspective of any regional bookstores and sellers of online content, lowering the prices of e-books will have a negative effect (as it will elsewhere). Small stores are already struggling to stay afloat, and some took to selling e-books as a way to increase profits (every little bit helps). When big retailers cut the prices of those same e-books, it will almost surely lead to a loss of sales for small retailers, and those losses have the potential to cripple their business.

They stand to lose far more financially than Amazon will gain, but in effect, their losses ARE Amazon’s gains because customers will naturally be drawn there by such low prices. Like the recent bank debacle, the big (Amazon) will get bigger, and most others will fall by the wayside. If e-books do, in fact, become the future of book sales, it follows that dominance of the market by a few players will bring another destructive wave of bookstore closings.

No matter what anyone tells you, in retailing, size matters. Besides being a publisher and author, I’m also an online retailer, and experience tells me there’s little I can do to combat the big players, particularly Amazon. Here’s one reason why. If you write an Adirondack book, I am among the retailers that you hope will buy copies of your book for resale in my store.

Amazon knows this, and they also know they are at a disadvantage in selling regional books, which are best sold by regional retailers. To counter that, they frequently surrender 70-90% of the profit by slashing prices on those books. (They would rather settle for $1 profit than see another retailer make the usual $7 or more.) When consumers see those great sale prices, they buy from Amazon, and perhaps make impulse purchases as well. In doing so, you are also NOT purchasing from a regional retailer.

And that’s what it’s all about: just getting consumers into Amazon’s store will turn many of those visits into additional sales, and at the same time will subtract from sales by regional retailers. Does it work? Don’t ask me … just ask Walmart.

In my case, how do I fight that tactic? I begin with the assumption that consumers will enjoy my books as quality products with excellent content. The next step: DON’T make them available to Amazon, either in print or as e-books. It’s a calculated move on my part, but I can already hear the strategists: not making your BOOK available to the world’s largest book retailer is insane.

That is simply not true. My view is based on practicality. First of all, I support the concept of “buy local.” I’m also trying to sell books that are of interest to readers anywhere, but my focus is on selling in the Adirondacks and the North Country, and that’s where people have to go to get my books.

Rather than sell my books on Amazon, I choose to support regional retailers who have the best chance of selling many copies of my work―stores like Hoss’s in Long Lake, Adirondack Reader in Inlet, Charlie John’s in Speculator, and the Hudson River Trading Company in North Creek. Amazon can’t compete with them for my books because Amazon doesn’t have my books.

I won’t say that local stores are fully pleased with my sales terms, but they have taken a chance on me by carrying my books, and I’m busy funding and writing more books to support those stores in return. In that sense, it’s a locally oriented, symbiotic relationship. I try to write good books, and they try to sell them. They sponsor author events, and I attend those events. That’s how many regional authors operate.

If my books are good sellers, it benefits me, the local stores, and the regional community because the profits stay local, and that money is then pumped back into the local economy in some fashion.

I should note one very important sales strategy. Amazon has occasionally listed some of my books (without my permission and against my wishes, even though I spoke with one of their attorneys), and if you went there to buy my book, you may have seen a notation saying, “Out of Print.”

That’s not true at all, and that term is anathema to an author because (as Amazon knows) it means a book is no longer available ANYWHERE. It’s nothing but a dirty tactic that works. My books are ALL in print, but it’s in Amazon’s interest for you to think that (since they don’t have it) the book is not available anywhere … so you’ll stay in their store and perhaps make another purchase, rather than searching elsewhere for my book.

That’s how they play, and the facts speak for themselves. Amazon and the large retailers are not the best friends of authors who write books of mainly regional interest. Local and regional stores are your best friends, and they deserve your support. Biggest isn’t always best, and the biggest has all the advantages over all sizes of competitors.

The unsettled world of book publishing and bookselling has seen the closure of a great many independent bookstores and booksellers in the past decade (and some chains as well). Here’s hoping that trend doesn’t resume. It’s a comfort knowing that the North Country’s top “bookstores” (mentioned earlier) also sell other products and understand their market. The Adirondacks just wouldn’t be the same without them.

Photo: Click on the newspaper’s name here to read the headline stories―NY Times, LA Times, Politico

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Lawrence Gooley, of Clinton County, is an award-winning author who has hiked, bushwhacked, climbed, bicycled, explored, and canoed in the Adirondack Mountains for 45 years. With a lifetime love of research, writing, and history, he has authored 22 books and more than 200 articles on the region's past, and in 2009 organized the North Country Authors in the Plattsburgh area.

His book Oliver’s War: An Adirondack Rebel Battles the Rockefeller Fortune won the Adirondack Literary Award for Best Book of Nonfiction in 2008. Another title, Terror in the Adirondacks: The True Story of Serial Killer Robert F. Garrow, was a regional best-seller for four years running.

With his partner, Jill Jones, Gooley founded Bloated Toe Enterprises in 2004, which has published 83 titles to date. They also offer editing/proofreading services, web design, and a range of PowerPoint presentations based on Gooley's books.

Bloated Toe’s unusual business model was featured in Publishers Weekly in April 2011. The company also operates an online store to support the work of other regional folks. The North Country Store features more than 100 book titles and 60 CDs and DVDs, along with a variety of other area products.

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