John Darkin: High price to pay for cheap books

COMMENT

Free or fair trade?

The WTO gathering in Cancun served to remind us of the principles of free trade - trade that is born out of healthy competition and initiative. The meeting also raised some perennial questions about fairness in business, and about those mysterious done deals that serve to confound the public at large.

There was a time when publishers dominated the book trade. From their smoke-filled rooms they did deals with authors and booksellers, dictated their terms and signed contracts.

Publishers were traditionally powerful and revered; the whole trade held them in awe as the industry's provider and driving force.

For their part, bookshops were mostly small businesses run by people passionate about books. Good booksellers knew each customer's preferences and advised him or her accordingly. Competition was relatively undemanding, and even where it did exist, it did not threaten the established purveyor of books, whose clients tended to remain loyal.

These, of course, were the days before the chain store, the multinational, and the conglomerate. The arrival of one-stop shopping marked the moment when an irrevocable shift in bookselling occurred. Free trade had arrived, but at the same moment fair trade started to decline.

For publishers, life changed. Their power was supplanted by that of the muscular retail giant. These demanded, and got, better deals than any retailer had had in the past. The book world was turned upside down.

In recent years publishers have emphasised marketing blockbusters to assist cash flow, and, for a long time, super-sellers were a licence to print money. But reports coming from America point to a decline in sales and profit margins of Grisham, Crichton, Clancy, King et al, once the cream on the publishers' profit cake.

There are several reasons for this; the authors get stale, readers' tastes change, etc, but one reason is of particular concern to the publishing industry. In the United States, the power centre of retailing and supply is now firmly in the grip of just one giant company, Wal-Mart.

This hyper-retailer has more than 2800 huge stores with net sales for 2002 of US$244 billion ($409 billion). The effect of this powerhouse retailing, so it is reported from the US, is that when Wal-Mart moves into town, all the smaller stores, including some supermarkets, close down.

Wal-Mart claims they can sell you anything, including a range of books at heavily discounted prices. On the face of it, this is good news for the consumer.

But the trade-off for a cheap price on a limited range of books is that choice is seriously diminished. Obtaining specialist titles is impossible. Fair trade has lost out to free trade.

Discounting is the key marketing tool for the likes of Wal-Mart. And therein is the rub for publishers. Long gone are the cosy deals in publishers' smoke-filled rooms. The movers and shakers today are the hard-nosed accountants who control the giant retail businesses from their smoke-free computer suites.

They demand deals where the publisher delivers truckloads of books to each outlet, at a super discount and with a promise to take back unsold stock.

For a blockbuster novel to pay its way, the publisher would ideally want it to sell for at least 30 weeks at full price, i.e. at a sensible discount to the retailer. The ruthlessness of Wal-Mart's price-cutting of super-sellers is working against this. Taken with the closure of small independent bookstores, this means fewer books are sold overall and so publishers' profit margins are squeezed even further.

According to the business statistics organisation, Euromonitor International, book sales in the United States were in decline up to 2002. A prime reason was that cover prices had increased significantly. In making sense of that, we have to wonder if publishers, in order to meet the high discounts demanded by Wal-Mart, have been forced to increase their cover prices.

If the American public are paying more for their books purely because of the lack of retail competitiveness, then it flies in the face of free-market principles which claim that the customer is best served by plenty of competition.

For booklovers there looms another, equally gloomy, question. Will they have to pay more for fewer titles?

The decline in publishers' profits inevitably reduces their scope for publishing new writers, and is also likely to squeeze established authors.

Are there forewarnings for New Zealand in this? Most large publishers operating in New Zealand have an American corporate root. What knock-on effects of price increases in the United States are already being felt here by the book-buying public?

The book trade in New Zealand will change irreversibly should it ever face a Wal-Mart type onslaught. Fair trade will be supplanted by free trade if one giant retail buyer can distort the market. If it is allowed to happen, the book-buying public will be the losers.

* John Darkin is a bookseller of Gisborne.