Thursday, November 05, 2009

Predatory Pricing - Slow Demise of Book Publishing?

This is worrying. Big box retailers (BBR) like Walmart, Amazon and Target are pricing bestselling books at below cost (link). We need to remind all, consumers especially, that nothing is for free. Short term gains does not necessarily mean long term benefits. Alas! Our culture thinks that way. It is downright self-deception. May we look more at FAIR pricing rather than low pricing. Didn't we read that we need honest scales and balances? Fair pricing reflects that. Life is not cheap. Why should we cheapen the works of other people? See the video below, and my comments later. In my comments, I will suggest some ideas for publishers to take note of.
"Honest scales and balances are from the LORD;
all the weights in the bag are of his making.
" (Proverbs 16:11)

My Comments
I think we have to educate the consumer public not to become perennial 'low-cost' seekers but 'FAIR-price' minded people. This current economic climate may encourage more people to justify their purchasing decisions based on price alone. However, good or bad economic situations do not absolve us from ethical decision making. We are responsible not only to ourselves but our neighbours as well.

Though the customers may be happy with the short-term cost benefits, I wonder what damage it may cause in the long run. Will customers eventually be 'spoiled' by low pricing? BBRs' main line of business is not books. It is mass marketing of different product. They excel in getting people to buy many things in bulk, not single items.For writers and publishers, this development is downright ugly and discouraging. This is another example of big retailers using the easiest P to win marketshare: Pricing. In management studies, the marketing mix consists of 4Ps:
  • Product
  • Price
  • Place (or distribution)
  • Promotion
Every successful marketing campaign needs all of these components. A product is needed otherwise there is nothing tangible to offer the customer. An appropriate place is needed so that customers can easily and conveniently get what they want at distribution outlets, both online or offline. The product or service needs to be adequately promoted especially in the light of keen competition. Finally, a proper price point needs to be set so that the consumer can be enticed and persuaded to choose one over others.

Of all the 4Ps, the easiest to adjust is the price. Price alone can move mountains. Look at how certain companies have even put the word 'Price' in their corporate naming. Think "Price-Smart" supermarket, "Fair-Price," "Low-Price Foods" and so on.

The big box retailers like Walmart, Amazon and Target are rocking the publishing industry with their loss-leading pricing. The American Booksellers Association are accusing them of 'predatory pricing.' I think the ABA has a point. Consumers may be happy with the cheap books, but writing and publishing books are never cheap. Good quality books require time and investment in good research. If the book industry alone cannot sustain its long term viability, the book industry that we know now will disappear for good. Blogging and the blossoming self-publishing industry may be one answer. However, without adequate quality controls and the engagement of the traditional checks and balances of a publishing enterprise, the quality of future publishing may be compromised. We still need reputable publishing houses, with trained and professional publishers to maintain the highest publishing standards. If we cut prices without regard for the future of the industry, it is like chipping away at the roots of a tree. The higher a tree grows, the more space is needed on the ground for the roots to grow and sustain the tall structure.

Unfortunately, BBRs are not interested in books. They are interested in bringing more people into their stores, to buy more stuff. Books are but marketing gimmicks for them to achieve this end. Perhaps, what the ABA could do is to re-look at the marketing mix and play with the "Place - Distribution" component. They could:
  • Limit quantities at BBRs
  • Come up with a 'cheap' version specially for BBRs;
  • Educate the consumer by letting them know the true cost of publishing;
  • Legislation is a desperate move. The ABA needs to publicize other non-legislative measures more prominently so as to win over the consumer to their cause.
Predatory pricing may charm the present consumer, but it will ultimately harm the future of book publishing. That will be most tragic.

ks

2 comments:

Rosie Perera said...

It might not signal the end of publishing as we know it. After all, the publishing companies still get their 50% of retail from Amazon.com and the like, it's Amazon.com that's taking the loss on book sales, not the publishing companies. But small book retailers have no way to compete in this type of marketplace. Even the beloved landmark Elliott Bay Book Company in Seattle is facing an uncertain future. There are rumors it is planning to uproot from its historic location in Pioneer Square near Elliott Bay (for which it is named) and move to a neighborhood with cheaper rent -- and lower tourist foot traffic, I might add, so I think a move like that would seal its doom.

I think what will push publishers out of business isn't so much the WalMart and Amazon.com sales model, but the self-publishing model. Now that it becomes so cheap to publish a book, more authors are choosing to go that route. (The wildly successful book The Shack was self-published.) Why would people want to pay more for books that have been vetted by real editors at a real publishing company with a real marketing budget?

And of course e-books are finally catching on. It took a decade or so. But this will also be devastating to ink-and-paper book publishing. Not that that's altogether a bad thing, as it will save trees. But it will be sad to see the traditional book become a small niche market for esoteric collectors.

There will still be sales of used books for a long time to come. But even used book sellers have a hard time making it, when online book buyers are growing to expect second hand paperbacks to cost about $0.01 plus shipping.

Here's a fascinating video on how the perceived value of any sort of content is approaching zero, and how this is affecting (or will affect) universities:
http://utdemac.blip.tv

YAPdates said...

Rosie,
Somehow I tend to agree with your observations, esp the one on self-publishing. I enjoy good books. The question is, will self-publishing without the conventional guidelines and check-n-balances make the grade?

Small book retailers will be hit hard, as they get steamrolled by Big retailers on the left, and non-traditional competition on the right. For many, including our own Regent Bookstore needs additional revenue from non-book sources to sustain their current model. Soon, I believe book sales alone cannot fund new books. They need other sources of income.

c

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