Wi11 Education Session Reveals Overall Trends in Book Retailing

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At the Winter Institute 11 education session “Overall Trends in Book Retailing,” on Monday, January 25, Peter Hildick-Smith, founder and CEO of Codex Group, and Kristen McLean, the director of new business development at Nielsen Book, presented their latest data on trends in U.S. book retail.

Hildick-Smith, whose New York-based company is a book audience research and pre-publication book testing firm, said that e-book sales peaked in the first quarter of 2014 and are now actually dropping, as evidenced by the results for the quarter ending September 2015.

“People are just getting tired of e-books for a variety of different reasons, and so we are just seeing a general downward trend. There is still a pretty steady core of about three percent of people who only read e-books, but the hybrid readers — those who read both print books and e-books — is where this change is taking place,” said Hildick-Smith.

E-book sales will continue to decline, he predicted, but e-books that are being sold at 99 cents and super low prices through daily e-book deals and via promotional offers will continue to sell well. This market is clearly very robust, he said: BookBub, a daily e-book deal site, currently has seven million users. Genre fiction and romance will continue to be an e-book sweet spot, he added, as will e-books by self-published authors.

The decline in e-book sales belies the fact that overall online sales, dominated by Amazon, are way up, so “this big sigh of relief is completely misplaced,” Hildick-Smith said. Physical book sales online are now up to two-thirds of all book sales through the third quarter of 2015, he reported, although they were only 28 percent of the market five years ago.

“Amazon is riding not just on e-books,” said Hildick-Smith. “They are riding on a much broader platform that includes online physical book sales.” There are ways, though, that independent bookstores can learn from strategies the online retail giant uses to dominate the market, he said: specifically, its popular Prime membership program.

The Prime subscription model is part of Amazon’s overall strategy to treat books as loss leaders, he said. And engaging the Prime user’s attention through the website’s original proprietary TV shows and other media guarantees that members will stay on the site long enough to buy other merchandise, which offer Prime perks including free or expedited shipping. According to Hildick-Smith, an Amazon user who signs up for Prime will go from doing 35 percent of their total book buying on Amazon to ultimately doing 56 percent of their book buying there.

Prime is part of Amazon’s multi-product strategy, but multi-product selling can increase flexibility for any retailer, including indie bookstores: It’s about not putting all of your eggs in one basket and creating more ways to connect with your audience, he said. For independent booksellers, this can include finding compatible non-book merchandise categories and disseminating media content, such as book reviews, title recommendations, and content from authors, through the store’s website and social media channels to increase daily contact points with customers.

“Because really what Amazon is saying is, ‘Come look at my store! I’m going to keep you entertained between purchases!’” said Hildick-Smith. “So, if you can have more of a dialogue of interesting things in the media space, then doing that might be another way to build your community and your relationships as well.”

Indie bookstores’ omnichannel strategy can also include learning their customers’ favorite authors and letting them know via online communication when those books are coming out as a way to gather pre-orders, said Hildick-Smith.

“Physical books will absolutely continue to dominate, which is your strong suit, but do continue your online efforts to connect because we are in a multichannel world,” he added. “Everybody who is in your space is pretty much behaving in an omnichannel way.”

Finally, Hildick-Smith shared a piece of good news for indie booksellers: showrooming is not as big of a problem as was once thought. Only about five percent of books bought at Amazon were first found at physical stores, while 34 percent of books last bought at an independent bookstore were discovered in the store, so “stores continue to be the most powerful book discovery tool,” he said.

During her presentation, McLean, who is the founder of the publishing analytics company Bookagee and former executive director of the Association for Booksellers for Children, noted that, through its BookScan reporting tool, Nielsen captures 85 to 90 percent of sales in the trade and digital book markets and surveys about 72,000 consumers a year about their book buying habits.

“Although you compete with Amazon for the items you sell, you are not really in Amazon’s business. Amazon is in the convenience business,” McLean told booksellers at Wi11. “I think that you are actually in the community business: It is a different business, and we have reached a point where we really have to think about it differently. The emotional experience is what is going to keep customers coming back to your store.”

Nielsen’s latest segmentation study, she explained, looked at attitudinal and behavioral buying values for U.S. book buyers in order to sort out who are the most valuable customers in the children’s book market.

Through the study, Nielsen found that there are four types of book consumer households: the disengaged (households whose members are not highly interested in books, media, entertainment, or devices), the gamers (to whom games are more appealing than books), the social omnivores (who are interested in many different kinds of entertainment, including books, games, and social media), and the avid readers (accounting for 70 percent of all dollars spent in the children’s book market).

In studying the buying habits of these groups, Nielsen found that over the last six months, disengaged consumer households bought five books, the gamers bought four books, social omnivores bought seven books, and the avid readers bought nine.

“I think that the social omnivores are the demographic to watch in the book industry, and as we [at Nielsen] move forward with ABA, we will bring out more research on these groups, because we are really interested in being able to convert the social omnivore group into more frequent book buyers,” she said. “They are a powerful market and a good demographic for buying books.”

Nielsen’s data also shows that the strongest category for print sales is currently in the juvenile market.

“The children’s market for print is one of the bright spots, for the book market generally and for indie booksellers,” she said. The latest trends in juvenile book buying reflected by Nielsen research include the popularity of graphic novels and coloring books, a trend that also drove sales in many adult BISACs this past year.

McLean noted that the rise in adult coloring books is a real opportunity for indie booksellers to reach out to customers who are seeking “comfort and peace.” Numbers are up in the categories of art and design (driven by coloring books); home and gardening; crafts, hobbies, and games (driven by coloring books); and self help, she said. Other evidence supporting this conclusion includes an increase in comic book and humor sales and fairly flat sales for books on politics during an election year.

“I think people are really anxious and in need of comfort generally, so a lot of what is driving this is people having an aspirational need to be comforted and feel okay,” said McLean. “You have an opportunity to create that in your bookstores by putting in front of your customers things that are going to be very impulsively interesting to them in that way.”

McLean’s Wi11 slide presentation is available to ABA members here.