The recent Winter Institute panel “Industry Trends and Analytics,” moderated by American Booksellers Association CEO Oren Teicher, featured panelists Michael Becher of Industry Insights, the company that assists ABA in compiling the annual ABACUS report; Brian O’Leary of the Book Industry Study Group (BISG); and Allison Risbridger of NPD Group, Inc. ABA member booksellers can visit BookWeb’s Education Resources page to see a complete video of the session (booksellers will need to log in; e-mail firstname.lastname@example.org for login credentials).
“ABACUS is a benchmarking tool that helps booksellers measure profitability against other stores and to analyze opportunities for improvement,” Becher began. “We collect information about the income statement, the balance sheet, and demographics, and we slice and dice the data to show you where you’re doing well, where there may be some improvement areas, and how the industry in general is doing.”
Industry Insights, which currently serves more than 200 associations, has been working with ABA since 1980, Becher said. The company is composed of statisticians, certified public accountants, and industry professionals. “We’re not the funnest group,” he said, “but we’re a group that really loves working with data, working with associations, and [delivering] results back to participants.”
The confidential ABACUS survey is conducted online, or a PDF version is available for those who would rather use pen and paper. Last year’s survey was completed by 292 participating ABA members representing 331 retail locations, up about 28 percent from 2017. In return for providing their data, respondents receive a full industry report, a company performance report, and online reporting tools.
For ABACUS-16 and ABACUS-17, Industry Insights introduced a number of new aspects to the survey results, noted Becher, including a balance sheet that allows respondents to adjust a number of new metrics, such as asset turnover, return on assets, and return on net worth, among other things. The minimum wage rate, sales mix, credit card sales, information on co-op dollars, and cost of goods sold breakouts were also included. “I wanted to share that just to let you know that this survey is a living entity,” he said. “We are trying to progress and move with the industry as the industry changes, and we want to provide you with the data that’s most important.”
The most recent survey showed that the cost of goods sold — generally one of booksellers’ larger expenses — is trending downward, which Becher said is likely because publishers are finding innovative ways to help booksellers, coupled with the fact that there are more non-book sales now than 10 years ago.
Another highlight of the ABACUS report is total payroll, which Becher said depends on cost of living and state standards for minimum wage. This report shows that total payroll has hovered between 23.7 and 24.5 percent of stores’ expenses for the last few years.
Occupancy expenses, Becher noted, are something booksellers often don’t have complete control over, as they are determined by the landlord; in addition, such expenses have been trending up in the past few years.
The last highlight Becher pointed out was total operating expenses, which includes anything that can’t be incorporated into any of the previous categories, such as business insurance, advertising and marketing, fees for an accountant, and more.
According to O’Leary, BISG is an organization that tries to make information transparent for the book business in a variety of different ways. The core piece of BISG’s work, O’Leary said, is to solve problems that affect two or more parts of the industry. BISG has four main objectives: to serve as the information hub of the book business; to set standards and promote best practices; to conduct research on behalf of the industry; and to build a diverse community of members to solve those problems.
In December 2018, BISG implemented the State of the Supply Chain survey, which garnered approximately 200 responses, nearly double that of the year before. The survey, O’Leary said, serves as an opportunity to get perspective across the supply chain, as it gauges opportunities as well as the problems that the industry is facing.
“There are three top issues that people responding to the survey gave, and these are not specific to retailing, but to the industry as a whole,” O’Leary said. “The first was data-driven decision making, the second was high-quality metadata, and the third was the ability to keep up with emerging technologies.”
For 2019, BISG has made these three things a priority. O’Leary said that in regard to data-driven decision-making, BISG will be creating and sharing maps of the supply chain as a whole, so that it’s made more visible within the industry. The company will also continue to support initiatives such as Batch, the U.K.-based online invoicing and payment system that ABA is aiming to bring to the States this year.
In terms of high-quality metadata, O’Leary said, BISG will be breaking down a 270-page document on metadata best practices into something more manageable. The organization will also offer 200 webinars this year for free, O’Leary added, which will be available to members as well as non-members.
NPD, Risbridger explained, is the leading global provider of market information and business solutions covering more than 20 industries, including books. While NPD allows for a bird’s-eye view of retail in general, NPD Book provides data to publishers, retailers, media companies, and the press at large.
Book industry data comes from a variety of different sources, Risbridger said, including sales data of books and e-books, in addition to consumer research conducted through surveys disseminated to book buyers to collect demographic and psychographic information. “This all comes together to inform strategic thinking and industry trends across the book industry in the U.S.,” she said.
NPD Bookscan is the gold standard of sales tracking in the U.S., said Risbridger, adding, “We capture weekly POS data from all of the major book retailers in the U.S. We have data from over 16,000 retailers, so that includes Amazon, chains like Barnes & Noble and Books-A-Million, wholesaler mass market channels, and over 500 independent bookstores. We ultimately cover about 85 percent of the U.S. trade and book market.” Booksellers can learn more about sales reporting here.
NPD PubTrack Digital is the company’s e-book sales data source, which is collected directly from publishers and covers about 80 percent of the U.S.’ traditionally published e-book market; this does not include the self-published market or the digital audio market, though there are plans to include the latter in the coming year.
Overall, 2018 was another consecutive year of growth for the book industry, said Risbridger, with 696 million units sold, a 1.3 percent growth over 2017. She noted that the pace of growth has slowed over the past two years despite having five bestselling titles that sold over a million books each. “The success of those bestsellers does not propel the overall market forward in a way that we would expect,” she said.
She also noted that holiday sales in 2018 were essentially flat, but there were a couple of shifts in consumption habits. First, buyers shopped later in December than ever before, including a 28 percent uptick in the week leading up to Christmas that made up for lags earlier in the season, as well as a spike in sales during Black Friday.
One concern for the book industry is the consolidation at the top in bestsellers, which was even more notable during the holidays, she added. This may have been correlated with printing shortages in the industry. “It’s becoming very difficult for these middle, particularly literary fiction titles to break through and see the sales that they saw a couple of years ago,” she said.
According to recent data on specific category performance, adult nonfiction and children’s books have been leading the market growth over the past four years, while adult fiction and young adult fiction have been suffering, Risbridger said. While nearly all categories for adult nonfiction saw growth in 2018, the leading categories were political science and history, which saw unprecedented growth for the second year into an administration, as well as cooking. Of the top 10 books of 2018, four were related to politics.
Additionally, lifestyle books are on the rise. There was a 26 percent increase in sales of titles related to cooking; a 15 percent increase in self-help; a five percent increase in health and fitness; and a 50 percent increase in house and home. “We see this as an extension of what the Danish call ‘hygge,’” Risbridger said, “which is the kind of quality of wellness and comfort that we see increase across industries at NPD, with increased sales of things like candles and blankets and home accessories.”
Risbridger added that while fiction sales across categories, including romance, fantasy, and religion, have mostly declined over the past few years, general fiction did see a three percent increase in 2018. In children’s books, books focused on social situations and holidays/religion did particularly well this year. Young adult fiction saw a slight rebound in 2018 because of screen adaptations of both culturally relevant and critically acclaimed books like The Hate U Give by Angie Thomas (Balzer + Bray), Simon vs. the Homo Sapiens Agenda by Becky Albertalli (Balzer + Bray), and To All the Boys I’ve Loved Before by Jenny Han (Simon & Schuster Books for Young Readers). Science fiction, fantasy, and magic was also a top category thanks to bestselling title Children of Blood and Bone by Tomi Adeyemi (Henry Holt and Co. Books for Young Readers).
Some of the broader trends in the retail market include an emphasis on the dichotomy of convenience and high touch. “Amazon bookstores are a great example of convenience,” she said, “but they lack that high-touch handselling that indies can provide. Where the two come together in retail is where we really see that magic happen.”
This is where the omnichannel concept comes into play, Risbridger added, noting that indie bookstores can use a dual online/bricks-and-mortar approach to create an integrated and cohesive customer experience. She also said that many larger retailers are emulating small businesses by creating a localized community feel in their stores because in recent years customers have tended to spend more money on experiences than material goods. “Retailers are seeing this and looking to get the buyer back into their stores for the experience,” said Risbridger. “This can take the form of in-store technology like virtual dressing rooms, or live events like the ones booksellers have in their stores.”
“Bricks-and-mortar retail is not dying, as some reports suggest,” Risbridger said, “but it does take innovation to succeed in today’s competition against e-commerce giants. The good news is the world’s largest retailers know that consumers will reward those that they feel the greatest emotional connection to, and these retail giants are really looking to emulate that curated, local store that independent bookstores have pioneered.”
“My hope is that you’ll walk away from this session feeling empowered in today’s retail environment to keep succeeding, keep thriving, and keep being the example for the world’s largest retailers in other industries, while also thinking about the ways to, perhaps, enhance your store’s experience,” she added.