Two of the largest bookstore chains—Barnes & Noble and Borders—are in danger of being forced into bankruptcy; their plight raises the broader question of whether bookstores will survive in any significant number, and, if not, what the consequences will be.
There are two clear threats, both Internet-related, to the bookstore. The newest is the e-book, in which the contents of a book are transmitted over the Internet to an electronic reader owned by the book’s buyer. No bookstore is involved. Slightly older is the sale, as opposed to the delivery, of a book online; Amazon is the principal seller in this market. No bookstore is involved unless Amazon doesn’t have the book in inventory; in that event the customer is referred by Amazon to a bookstore that has the book and will sell it online and deliver it to the buyer; the purchase is made through Amazon. Most of the books that Amazon and the other online booksellers don’t carry in stock are out of print, and bookstores that stock such books tend to be small (though there are some exceptions), because the market for such books is tiny.
A possible third threat is diminished appetite for books. I haven’t been able to find good statistics on annual sales of books in the United States (and anyway “books” is an extremely heterogeneous product category), but it would seem that the amount of entertainment and instruction available online is so great that online substitution for reading books must have reduced the demand for them. At the same time, however, the demand for books should be stimulated by the fall in cost when books are bought online, cutting out the middleman—the bookstore—a point to which I’ll return shortly.
It seems inevitable that the number of books sold through bookstores will plummet. Books bought through bookstores are more costly not only in price (to cover the costs of the bookstore), but also in customers’ time—the time required to travel to and from the bookstore, find the book one wants to buy, and complete the purchase (which takes more time than an online purchase). The only offsetting advantages of the bookstore are the opportunity it provides for browsing and the fact that the customer can see and handle the book before buying it. But these advantages are offset to a considerable extent (doubtless more than offset, for many customers) by the use by online sellers of artificial-intelligence programs to recommend books to their customers, by the much vaster inventory of an online seller like Amazon, by ease of search, by the reader reviews that the seller presents, and by the seller’s ability to allow customers to look inside the online book before ordering it, much as if he were leafing through a printed book in a bookstore.
It is true that Amazon’s book-recommendation program is primitive, and is no substitute for browsing in a well-stocked bookstore, but it will improve; one can foresee the day when customers will furnish (and Amazon store) comprehensive information about their age, sex, education, occupation, and reading tastes, which Amazon will use to create an initial list of recommended purchases, which it will refine as it receives orders from the customer plus supplementary information from the customer as the customer’s tastes and interests change.
At present fewer than 30 percent of all books are bought online (either in hard copy or as an e-book), but I have seen an estimate that this figure will grow to 75 percent within a few years. Very few bookstores will have enough customers to survive if bookstore sales fall from 70 percent to 25 percent of all book sales, except those bookstores specializing in out of print books—whose customers will largely be online. In time, moreover, with more and more publishing electronic, there will be fewer and fewer “out of print” books.
The substitution of online for bookstore distribution of books will provide a substantial social saving and, as I said, increase the demand for books by reducing their retail price. As for the effect on publishers and authors of books, there is concern that it will be adverse, but that seems unlikely. A seller tries to minimize his cost of distribution, just as he tries to minimize his other costs; the publisher is the ultimate seller, and the bookstore part of the chain of distribution. But there is an important, and potentially relevant, exception, and that is where a distributor provides point-of-sale services that increase the demand for the product. This is the rationale for resale price maintenance: manufacturers of some goods place a floor under the retail price of the goods, thus deliberately increasing the retailers’ margin, but hoping by doing so to induce them to engage in nonprice competition that will increase the demand for the goods. Bookstore staffs, by decisions they make concerning choice and display of books to carry, and by making purchasing suggestions to customers, can, in principle, increase the demand for books. But these services cannot guarantee the survival of many bookstores, because unless the services are valued by a greater margin than seems realistic to expect, there will be too few customers to defray the bookstore’s fixed costs at acceptable prices.
The question then becomes whether the loss of point-of-sale services that bookstores provide will hurt publishers (and therefore authors, whose prosperity is linked to that of publishers) more than it will help them by reducing their distribution costs. That too is doubtful. As technology continues its forward march, online booksellers will find it increasingly feasible to duplicate and indeed improve on the point-of-sale services that bookstores offer. Bookstores will decline, and perhaps vanish when the current older generation, consisting of people habituated to printed books (as to printed newspapers), dies off. Yet this may well represent genuine economic progress, just as department stores and supermarkets represent progress though they cause the demise of countless small retailers.