Booksellers squeal as Minister states the obvious

15 June 2011

It is a truth universally acknowledged (at least within the Australian retailing sector) that a failing retail business is in want of cosy government-funded protectionism.

Yesterday Senator Nick Sherry, Minister for Small Business, made what he probably thought was an innocuous observation about the imminent death of the high street generalist bookstore.  Cue confected outrage from industry rentseekers lobby groups:

His view was not shared by Robbie Egan, manager of Readings book shop in Carlton, who called the minister's comments ''amazing'' and misguided....
Australian Booksellers Association chief executive Joel Becker's initial response was similar. ''I'm gobsmacked,'' he said.
''We're getting ready to have National Bookshop Day in August, celebrating the role of the bookshop in the community, and we just found his comments extraordinarily unhelpful,'' he said.

Yes, 'National Bookshop Day'.  Now it's my turn to gobsmacked.  Mr Becker doesn't seem to have considered that the fact that they feel the need to hold 'National Bookshop Day' might be an indication that Senator Sherry is right.

The incoherent yelps from Australian booksellers have focussed on their idea that Senator Sherry, as the Minister for Small Business, should be doing everything he can to keep them in business, and that he was talking them down.  Minister Sherry, however, was doing no such thing.  A little context is needed here.  Nick Sherry is a Senator for Tasmania - he lives on the north coast, not too far from where the initial stages of the National Broadband Network have been rolling out.  He therefore understands what it is like to live in a community which has long had a dearth of bookstores, but which is in the midst of accessing super-fast internet connections combined with a traditionally reliable national postal service.  Nick Sherry is also Minister for Deregulation.  His job is to reduce protectionist measures for inefficient local industries.  The message he was trying to give Australian businesses is that online is where all the growth is going to be in the next decade: if they want to stay profitable, they need to build an effective online presence now, because if they don't their customers will go elsewhere.

The outrage from booksellers is particularly surprising given that they have already identified the problem themselves.  REDGroup recently made a submission to the Productivity Commission's Inquiry into the retail industry, citing a Morgan Stanley report from December which suggested 117% of growth in newspaper & book retail is likely to be taken by online by 2015.  REDGroup might know a thing or two about the precarious nature of physical retail book stores, given that they recently went into receivership.  The Australian Booksellers Association also noted in their submission to the 2009 Productivity Commission report into parallel import laws that profit margins for large bookstores were just 0.5% in 2003-04 (and asserted that this was likely to be the same in 2009).  Interestingly, the average profit margin was 1.3%, so the larger bookshops had smaller margins - although any former Borders employee probably wouldn't be surprised by that.  What we're now beginning to see is big stores becoming unprofitable, because they can't compete with online stores that provide what customers want.  If you need any further convincing, simply consider this from the Shopping Centre Council of Australia:

The demand for retail space for bookstores at the moment is zero, and shopping centres are losing significant tenants in Angus & Robertson and Borders, and it's a foretaste of what's going to happen on a more macro level.

The knee-jerk declarations that the Minister is letting down small business makes no sense at all when you consider his actual words:

I think in five years, other than a few specialist booksellers in capital cities we will not see a bookstore; they will cease to exist

That's right, other than a few specialist booksellers.  That is, small bookstores that understand their local market and provide specialist knowledge will survive and probably thrive.  Generalist bookstores stocking the top 100 from Nielsen BookScan and a few classics from the Everyman series will die.

An experience I had last week perfectly exemplifies why.  My usual bookshop (friendly service, convenient location, excellent backlist with a couple of specialities) had run out of stock of the title I wished to purchase.  I was thus forced to walk to Dymocks, which seemed to only stock crime thrillers, cook books, notebooks and cooking aprons.  I searched the store, not an assistant in sight, desperately trying to work out where they might have stocked a book on Australian culture.  Eventually I stumbled upon it in the history section, which mostly consisted of books about ANZACs.  Bear in mind that I'm a librarian - the average reader would struggle even more than I did.  An online store is much less likely to run out of stock, and if designed properly should make it easy to find particular titles.

An example of what Minister Sherry was talking about can be found in the suburbs of Boston.  The West Roxbury Patch quotes Brad Kinne, who owns a bookstore specialising in sci-fi, fantasy and horror:

"I built the kind of store I would drive two hours to get to," Kinne said.
Kinne suggested that other genre-specific shops could go over well, particularly a mystery novel shop.
Over at Pazzo Books, owner Tom Nealon specializes in rare used books. His strategy in adapting to the internet age, he said, has in fact been to use the internet. Nealon estimates that he does 75 percent of his business online, with foot traffic being fairly low.

While Borders USA joins its antipodean cousins in closing stores, these small, specialised independents are successfully providing local and specialist knowledge to make sales both in their physical and online stores.  They are the future.