As 2011 begins, I am hearing two different predictions for changes in the book business. Book marketing experts say that independent bookstores will mostly disappear, and that this could happen as soon as this year. At the same time, financial analysts are saying that most of the major bookstore chains are in dire financial condition and will be forced to cut back in the first half of this year, closing hundreds of stores and cutting back in other ways.
Within the book business, these sound like conflicting predictions. The story of the book business over the last decade has often been described in terms of a battle between independent bookstores and the major bookstore chains. Could both sides in this battle be losing at the same time?
Perhaps so. Consider that the entire book business is under stress. Publishers, wholesalers, bookstores, trade journals, printers, authors, and the book-buying public are all under pressure. On the edges of the industry, paper manufacturers, trucking companies, and package delivery companies are facing rising energy costs. It is not as if anyone involved has the free cash flow to step in and rescue the bookstores.
There are reasons to believe both of the predictions, as dire and abrupt as they might sound compared to what people were saying six months ago. Book marketers hear about the condition of independent bookstores directly from the sales representatives who visit these stores two or three times a year. The financial analysts who look at the bookstore chains are the same ones, in many cases, who observed the decline and disappearance of the record store chains seven years ago.
There are reasons to imagine that the bookstores will not repeat the story of the record stores. For one thing, investors hate to repeat their mistakes. There were plenty of investors who stepped in to try to rescue the record stores. The record stores closed anyway, and the late investors lost a fortune. The bookstores follow almost the identical business model of the record stores, many even including record departments; investors will be appropriately cautious.
In my opinion, the number of bookstores will have to decline, as it has been doing already, just because of the increasing time pressure on consumers. You cannot expect consumers to read as many books in 2011 as they did in 2010, unless they can learn to read faster. Bookstores will have to adapt to this. But will they adapt merely by closing?
I am not so sure of this. That’s because the bigger story in the book industry right now is rising energy prices. The business model of the major book publishers is to print books in large quantities and ship them off to the stores, where roughly half of them sell. The other half are shipped back to the warehouse after a few months or a year, and from there, most find their way back to the paper factory to be made into new paper. Energy prices are already double what they were ten years ago and are likely to double again in the next five years. Eventually, any business model based on shipping stuff back and forth all over the place has to collapse.
But if large numbers of bookstores have to close, I don’t see why it should happen this year. The landlord can’t rent the store out to another retailer, at least not very quickly, and the bookstore workers can’t easily move on to other jobs. And the books that are in the stores — the publishers don’t gain anything by taking them out of the stores and sending them off to the paper mills. Five years from now, when the excess retail space starts to work itself out, then we may see half of the bookstores closing, one by one.
In the meantime, the financial arrangements of the bookstore business will have to change, and quickly. This week, one of Borders’ suppliers says it is withholding deliveries while waiting for financial clarification from Borders. That’s a situation that will have to be resolved in a matter of weeks, rather than years. What I expect to see is that the bookstore chains especially will have to stop borrowing so much money to put books in the stores, and this means they won’t be showing so many new releases from major publishers on the shelves. In other words, the major bookstore chains will start to look this year the way the independent bookstores started to look last year.
And this may not matter as much as it might seem. No bookstore carries even a third of the important new book releases. The book-buying public knows, by now, that they cannot go to a bookstore and expect to find a book that people are talking about. But people go to bookstores anyway. And I believe the bookstores will be able to maintain the bookstore experience that their customers expect, even as their access to the latest book releases is declining.
So, by the end of 2011, it may not be the bookstores so much as the major book publishers that are in a panic. Aside from their bookstore presence, the major publishers have no particular advantage over the independent publishers. Already, independent publishers sell more than half of the books out there, and the major publishers’ share of the total could decline as fast as their shelf space in the bookstores declines.
When the record stores shut down, the major record labels all but disappeared from the public eye. That may be an indication of what is likely to happen in the book business in 2011, whether the bookstores shut down or just change their business model.
