Price War

Yesterday morning Borders Books filed for Chapter 11 bankruptcy.  They plan to close roughly one-third of their 600 stores.  See if your neighborhood bookstore is among the casualties:

While there are many contributing factors that lead to a drastic move like this, let me highlight an important aspect that is so fundamental it’s often overlooked:  prices.

Years ago I worked for a Big Box mega-chain (not Borders).   The most frequent complaint I heard from customers was that books were too expensive.   Countless times I witnessed people read the bookjacket of the newest Stephen King novel (or James Patterson, John Grisham, et al.) and saw their noses wrinkle as they noted the cover price, after which the book went back on the shelf as the would-be buyer remarked, “I’ll just get it from the library.”

Ten years ago publishers gave bookstores a 40% discount, the difference between wholesale and retail price.   Let’s say, for example, you bought a book at Borders.  You paid $25 for it, the cover price.  The distributor “bought” it (on credit) from the publisher for $15.  After selling it to you, they pocketed $10.

Over the years these distributors have consolidated, allowing fewer businesses to apply more pressure on publishers.  As a consequence of this, in the past decade that 40% discount has increased to 60% or more.  (Diamond Book Distributors, for instance, requires 62%.)

This forces publishers to pass higher prices to the consumer. 

According to the School Library Journal, between 1990-1995 book prices jumped 9.5%.  From 1995-2000 that number rose to 12.3%.  Then 14.4% from 2000-2005. 

I’ve heard Amazon demands a discount increase of two percent every eighteen months, which means in the near future average trade hardcovers will top $30 to compensate.

Sometimes this benefits the consumer, as with steeply-discounted bestsellers.  Because the bookstore gets 60% off from the publisher, they can give you a 40% discount and still take 20% profit.  However, this works in your favor only for bestsellers, the fifty top-selling books in the store.  Because these discount policies are in place for all titles, the amount you saved on John Grisham’s latest is offset by higher prices for the other two hundred thousand titles in the store.

It’s rare for me to pay full price for a hardcover novel.  I did it once in the last year, for Robert McCammon’s Mister Slaughter.  Most volumes in my personal collection are either limited editions or out-of-print titles I picked up from a used bookstore. 

Recently I’ve noticed prices for small-press publications skyrocket from $40 apiece to $50, $60 or even $75.  I don’t think that is a sustainable business model either, but that’s a rant for another time.

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