Can Bookstores Survive? Prospects and Consequences—Posner

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.

 

Comments

[John]

for starters I know of studies on line length and attention and focus but where I saw them heaven only knows

why do we need studies about something which we can observe, ourselves.

If something is serious, warranting careful attention, later return, etc., who doesn't print and read the hard copy

[Inventory POS System]

I appreciate your post, thanks for sharing the post, i would like to hear more about this in future

[Dan Feldman`]

How about a post on the economics of mental health problems which have criminal potential, as in Tucson. The cost of caring for Giffords and burying the survivors plus the cost of the state and federal effort (I don't know if the media has a marginal cost) v. the cost of tagging the 40,000 (an imaginary figure?) who display the behavior pattern. Maybe even what one does with the information, once an individual has been tagged.

[Jack]

Dan Good suggestion. Might become a book rather than an essay! Some questions: Why is it that the US imprisons its folks at 5 times the rate of the "civilized" nations (we rank #1 over Russia) and still "enjoys" a gun slaughter rate 3 times higher with some 200,000 woundings and maimings per year that cost -- someone -- over $4 billion/yr.

What has it cost to have let the "assault" ban expire in 2004 that precluded the mfg of things like 33 round clips?

And.......... suppose it was easy and not a budget busting event to seek mental health services? Fortunately, with OK City bomber McVeigh having come out of Gulf War I, in mind, I note that the VA is doing a good job of outreach and serving those damaged by, often multiple tours in Iraq and Afghanistan.

[Jack]

Back to the books: No discussion of the difficulties of the book, or for that matter, newspaper and magazine biz would be complete w/o mention of those media tracking the inflation curve while wages for most working folk have not.

Books have probably doubled in price over the last 20 years even as publishers and authors may have tightened their belts, while wage gains have been essentially flat, making what was once a whimsical buy on the way home a far more serious "investment" decision.

The same is likely the case for other local businesses such as restaurants with the "white table cloth" dinner house yielding to the cafe, and the cafe ultimately to the "fast food" fling of obesity causing fame.

Geez! I guess it's now 20 years ago that in this "richest of nations" that I was handed a box of "buttered" popcorn at the show with some vile tasting, heart stopping corporate glop on it instead of real butter............ and no choice. Ahhh, progress, eh?

[Odin]

Life is short. The time and effort required to refute each and every nonsensical point that Jack offers would exceed not only my own life span, but at least two generations of my offspring. So, with that in mind, let's target the following assertion by Jack.

"BTW have you noticed all the recent Home Depot ads install their cabinets, windows, flooring et al? Aah yes a bit more profit off to their HQ somewhere far away, fewer local craftsmen able to remain independent and more $15/hour jobs that don't pay the bills?"

Jack -- let me clue you in. This is not a "recent" development. Home Depot began offering these sorts of home improvement services to its customers about 30 years ago. Did you miss out on this development? If so, what plane of existence -- real, imaginary, drug-induced, or some other kind -- have you been frequenting?

[annie hall]

Thanks for your wonderful analysis. As an aging used bookseller I have been mulling over these same issues for many months now. Have any of you ever considered the effect of the remainder business on all this. Apparently the publishers dump millions of copies every year. These end up in bins everywhere, grocery stores, dollar stores, kiosks in malls, flea markets, drug stores, department stores etc. I'm sure you've all run in to them seemingly at every turn. Even the chains themselves now house huge remainder sections. The customers now seem conditioned to wait for the massive discount and many refrain from ever buying newly released books. A customer told me recently how furious he was to see the hard cover new release of his favourite author reduced to 4.99 when he had just paid 12.99 for the paperback. He had been waiting patiently for the paperback edition as he could not afford the 35.00 cost of the hard cover. So angry was he that he demanded the store give him a refund for the paperback and he then purchased the much cheaper hard cover. I'm wondering how many other book buyers get annoyed to see such unfair price fluctuations. If i had a magic wand I'd wave it over the publishers and make them stop remaindering books. I think these extra cheap copies are the most dangerous threat to the brick and mortar book shops. Since there are millions of them for sale on the internet for one dollar, the publishers must charge next to nothing for what they dump. Surely it can't be worth their while, especially considering the negative impact it must cause to their sales of new, list price titles. Would appreciate if someone could shed some light on these mysteries of the economies of publishers.

[Jack]

Odin: Thanks! Glad there are a few readers here! But! the subject of my post regarding H-D was that of "all the recent ads". Are you seeing them on the net where you are?

Also, quick one, those of today who've self-identified as some sort of "conservative" (even as what was once the principles of that fairly respectable sect appear to have been left far behind) who might tend to disagree with some of my pragmatic suggestions for resuscitating our very sick economy are a curious bunch.

While extolling the virtues of entrepreneurship (in which they seem rarely involved) they appear oblivious to how very FEW opportunities have been left to the local folk. This discussion of book stores either being thumped by the cyber world or, as pointed out above, by mega-sellers in league with publishers is a case in point, and one shared by those attempting to run locally owned, independent cafes, stores of all types, or any of a number of family businesses that used be viable including small farms et al.

Perhaps?? you've some suggestions for those who'd prefer not to be return to the serfdom of working "FOR" H-D and the other corporatists who pump the profits out of the community, never to return? H-D now being a "leader" in ridding itself, even, of pesky checkout clerks in favor of "self-checkout?"

Aaah yes! The Sci-fi future of automation but w/o even the $15hr job of expediting the cash to some far off HQ? And? do guys of your viewpoint "believe" that something akin to full employment and a job for all who'd like to contribute their energy and talents are "just over the horizon?" or? anywhere near the horizon? Or? that with just a bit more tax "relief" the top 2% of gleaners and "trickle down" will commence shortly?

It's open mike here......... so let's hear your theories.

[Jack]

Annie: Hi! Pretty tough problem, selling a used book is not made easier by the new one being at Costco, Sam's or B&N who surely enjoy a special relationship with the publishers over independent small volume stores.

We have, in Anchorage, what was described to me by, a visitor from NY as the best used book store he'd ever visited. It started small, then moved to what had been (Pre-Lowes/H-D) a great locally owned hardware store replete with clerks of considerable seniority who knew their stuff) and finally to a large space housing a Safeway, (before Safeway bought out the competing Carrs Markets, and HAD to close several locations to avoid anti-trust prosecution for owning too much of the market.

I believe their formula is similar to other towns, with, like Borders etc. visiting authors, some evening entertainment, coffee house etc that make it a popular place to "hang" or meet a friend in the afternoon.

Anchorage with still fairly high, but falling, HH income and long winters is still a "reading town". Best of luck in one of the few local retailing biz left.

http://www.wavebooks.com/

[Armut Koltuk]

Thank you for this post. Im agree with your writings. Internet kills the book stores. Because no one read a book.

[çocuk sandalyesi]

Books are very important for human history. But today book stores continues to be closed. This is really sad.

[Jeff]

Love your articles, always inspiring and interesting.

Thanks for all these

I salute you guys

[Keith]

I think the physical book is not quite as doomed as say the compact disc. Books are viewed as little trophies and have an aesthetic value when placed on a shelf. Who gets excited about finishing a long article on the internet? Not me. I did feel a sense of pride when I finished The Brothers Karamazov and had it sitting on my shelf.

Of course, I'm not sure that the big chains can really thrive like the once did.

[Maria Payroll]

E-books are coming out everywhere. I think, this is one reason why most bookstores are shutting down.

[Jack]

Can the bookstore survive? Yes, I think it would. Even if the future generations, all have tablets that can contain all the books in the world, getting a book from a traditional bookstore, would more likely be a special privilege. I foresee it as some kind of luxury in the future, wherein you have a bookstore where you can read a hardbound book, only for a huge fee.

[http://www.datecover.com]

Hate to say it, but bookstores are utterly doomed. Look at newspaper readership, the daily equivilent of topical relevant information? Readership is down over 40% the past year. Books, while they will always have a place, are a dying breed. Ipads, the internet and tablets are replacing them, and quickly. Sad...

[Lily]

I enjoy reading books in various bookstores...

[ismail]

Being the owner of a small press and an author of a few books, I will be absolutely delighted to see the demise of the business model as it stands

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[PhD-Thesis.com]

As for me, I prefer paper books by all means, and if I need something serious to read, certainly I'll go to the bookstore. I cant explain why but reading paper books are far more pleasant.

[Organic Baby Products]

Amazon is the principal seller in this market. No bookstore is involved unless Amazon doesn’t have the book in inventory.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

[Alley]

BTW have you noticed all the recent Home Depot ads install their cabinets, windows, flooring et al? Aah yes a bit more profit off to their HQ somewhere far away, fewer local craftsmen able to remain independent and more $15/hour jobs that don't pay the bills?

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[Spinal Stenosis]

One example, that comes to mind because I bought one this past weekend, are cookbooks. There is incredible value to perusing cookbooks before purchase - primarily to see if the book as the sort of recipes one is looking for. And while you can obtain cookbooks on the Kindle, I personally find it easier to have a physical book with me in the kitchen as I cook, instead of worrying about dropping my kindle into the sink.