Of
Pricing and Purgatory
Two
New Surveys Suggest That Book Price-Elasticity Is Getting
All Stretched Out
FROM PUBLISHING
TRENDS (JANUARY 2003)
Among
the persnickety trends of 2002 was continued brow-furrowing
from industry observers and surveyors about the perception
that book prices are disastrously high (see
article). Some have cited the ruinous effect of
“increasingly ubiquitous remainders” on the one hand,
and stunningly deep discounts at mass merchandisers
on the other — both of which make people who pay “retail”
price feel cheated. Others note that Len Riggio
is hardly alone in pushing for more discount and lower
prices, further pilfering publishers’ margins. And then,
pity the poor book buyer. “Consumers are often baffled
at the price tag attached to what appears to be little
more than a mass of paper, cardboard, and ink,” declared
Salon’s Christopher Dreher last month,
worrying over that stumper, “Why
Do Books Cost So Much?” The answer: hardcover fiction
and nonfiction books don’t, at least from a historical
perspective. Bowker statistics show that when
adjusted for inflation, hardcover fiction prices have
actually sunk by 2% over the past 25 years, while nonfiction
hardcovers tumbled in real price by 27%. “I’m not very
surprised,” political science professor Robert Sahr
told Salon. “Trade books are one of the clearest
examples of a completely discretionary purchase. They
have to be price-sensitive.”
Still, the same numbers show that even when adjusting
for inflation, mass-market paperback prices have shot
up almost 40% and juvenile titles soared by about 60%.
All things considered, Salon concluded, “what’s
taken a huge bite out of America’s book budget is the
rise of the trade paperback” — which has “supplanted
those less expensive” mass-market titles and driven
consumers to wallet-numbed distraction. “The prices
are kind of astonishing,” as one sticker-shocked Barnes
& Noble customer stammered to the New York
Times late last year. “I keep putting things back
because I look at the price.”
Price
Elasticity: Stretched Out?
It
doesn’t take a forensic economist to figure out why,
according to a recent poll of over 1,300 visitors to
the Book Reporter website,
57% of respondents said they had been buying used books
for years — with 42% of the respondents citing price
as the main factor. (Another 24% said they wanted to
fill in their collection of an author.) More to the
point, about 17% said they recently started buying used
books, and roughly the same number said they had bought
more than 10 used books in the past three months. But
before you go and blame Jeff Bezos, consider
this: by far the largest number of respondents shopped
for used books at their local bookseller, and only 17%
shopped for them at Amazon.com (perhaps poking
a hole in the Authors Guild’s apocalyptic scenario
whereby Amazon’s used-book sales will imperil literature
as we know it).
Of those survey respondents that did troll for used
volumes at Amazon, 41% said that if offered the used
book on the same page as the new one, they’d buy the
used one if it were more than 50% off. However, 38%
would still buy the new book. (Taking another tack,
the New York Times reported that customer loyalty
at Amazon seems much higher than at BN.com: a
1% price increase at Amazon reduces sales there by half
a percent, while the same increase at B&N spurs
a 4% sales drop — eight times as large.) Also of note
in the survey, when respondents were asked what one
format they would choose if price were not a factor,
55% said they’d buy a hardcover. “To me that indicates
it’s not about rising paperback prices,” says Book Report
founder Carol Fitzgerald. “It’s all about the
price of the hardcover.”
Meanwhile, as the swivel-screen dawn of the Tablet
PC rekindles e-publishing visions, consumers may
soon wonder why ebook prices are so high, according
to a separate study. In the Open eBook Forum’s
“Consumer Survey on Electronic Books,” which was conducted
at New York Is Book Country last fall and aimed
to test ebook perceptions among the paper-friendly crowd,
61% of the 263 respondents said ebooks “should be priced
the same as paperback books.” The upshot: “There appears
to be little price elasticity by consumers for what
they will pay for eBooks.” The OeBF’s antennae were
all akimbo over a different result, however: “Contrary
to a commonly held industry belief, results indicate
no correlation between computer skills or daily Internet
use and downloading an eBook,” the OeBF reported, hammering
home the idea that heightened awareness of ebooks would
be the format’s prime mover. And 70% of respondents
said they’d buy an ebook “if it could be read on any
computer.” As the study noted: “The consumers want to
read the eBook they bought on their home computer, their
handheld organizer, their laptop, their personal digital
assistant, and their dedicated eBook reader.” And again,
regarding general book prices, the largest share of
respondents said they shopped at discount bookstores.
Dodging
the ‘Death Spiral’
Yet
it may turn out that backpedaling on list prices is
no surefire remedy for sluggish sales. There are zillions
of bargain books out there to placate the price-sensitive,
contends industry consultant Mike Shatzkin. “Because
the act of reading a book requires a bigger commitment
than money — which is many solitary hours of a person’s
time — it is doubtful that price-cutting will draw too
many non-readers to become readers,” he argues. Shatzkin
also implicates book returns as a key driver of price
inflation. “Returns have been rising,” he pointed out
in a recent online debate on pricing issues, “and those
books manufactured and not bought have to be paid for
by the books that are bought.”
That may be so, but it doesn’t mean publishers can simply
tweak the supply chain and go back to business as usual,
responds Publishers Lunch founder Michael
Cader, who has sounded an alarm over modern-day
publishing’s “mathematical death spiral”: the toxic
convergence of stagnant book dollars being spent, increasing
book prices, and increasing numbers of both new and
used titles on the market. In Cader’s view, boosting
book sales means going back to the beginning. “To prosper,
the business needs to grow. And to grow it needs new
buyers,” he notes. “We spend the very early years reading
to children and encouraging them to enjoy the practice
and see it as a window on their world. And then we turn
them over to the textbook publishers, a medicine-flavored
scholastic ‘canon,’ and a marketplace with little that
appeals to ‘tweens’ and, yes, one that they see as expensive.”
As for adults, Cader sees hope and an instructive lesson
in the significant growth in deep-discounted frontlist
sold at warehouse clubs and other non-book discounters.
“People who aren’t supposed to be core book buyers are
grabbing what they see as an attractive deal on impulse.
To me that alone says something powerful about how price
can correlate to growth.”
©2003
Publishing Trends
