Used Books: The Real Force Behind the Trend
by Karen Holt, PW Daily for Booksellers -- Publishers Weekly, 9/28/2004
Editor's Note: This is Day 3 of a multi-part series on how the used books market is affecting the book industry. Today, we look at the online middlemen who connect buyers and sellers of used books. Tomorrow, we explore possible solutions for dealing with the threat to new book sales posed by the growing popularity of used books. For more coverage of the subject, see Part 1 and Part 2 of this series, as well as the September 27 issue of PW.
Amazon.com and Barnes & Noble.com may get most of the attention, but much of the force driving the fast growth of used books online comes from two smaller companies, Alibris and Abebooks. These companies act as middlemen connecting consumers with the vast unruly universe of independent used bookstores. And because used books are their core business--not a trendy sideline--they may have more at stake than anyone in making sure that used books continue to gain a greater share of the market.
Both companies sell used books on their own site and provide inventory for Amazon and B&N. That's not all they have in common. Abebooks and Alibris both report sky-high growth at their own companies and forecast a big increase in overall sales of used books for the foreseeable future. Marty Manley, president, CEO and founder of Alibris, forecasts that used books will someday make up 15%-20% of the market. How soon will depend on changing consumer behavior--not on the buying side, but on the selling side, Manley said.
"Secondary markets tend to be more driven by supply than by demand," he continued. "Most of us, myself included, when we're done reading a book, either give it to a friend or hold onto it." To support growth in the market, readers will have to adopt a habit of re-selling books once they're done with them, much as they unload an old car. Getting readers to buy used books should be relatively easy, Manley added, because "used books work just as well the second time; it's not like buying used clothing."
Alibris's sales have grown 45%-50% a year for each of the past five years and the company expects to post sales of $60 million-$70 million in 2004. About half of those sales are made on Alibris's own Web site, while the rest are made through other retailers. There's no question that the growth is primarily driven by bargain hunters. Sales of out-of-print and collectible books make up only about 30% of the company's sales. The rest are used books that are readily available for purchase new--but at a higher price. "You can commonly buy the hardback at the trade paperback price, and you can commonly buy the paperback for $5," Manley noted.
Abebooks.com is also experiencing stratospheric growth, with sales of $100 million via its North American site last year (the company also operates sites in Australia, France, Germany and the U.K.) and projected sales this year of $140 million. About three-quarters of its sales are through its own sites, while the rest is through third-party retailers that the company supplies. About half of its sales are books that are collectible or out of print, while the other half are used copies of current titles.
Because this market is driven by price sensitivity, Alibris and Abebooks have each developed software programs that enable sellers to set prices to reflect supply and demand. With buyers able instantly to compare prices from dozens of sellers, the days of capricious pricing are over. "If someone's buying a used book because it costs less and your book is not in the bottom 10 of all listed books, it is effectively not for sale," Manley said.
The result is pricing that is lower and more uniform. And customers are able to feel more confident that they're not overpaying for a book, as in the old days when it came down to haggling with a merchant over a single copy of a book, said Abebooks COO Boris Wertz. "Before, basically, there was really no market price. Now the customer has much more selection: when they come to our site looking for a specific title, they suddenly have 140 choices."
Earlier this year, Abebooks began listing new books on its site. "In the end, all of our customers were buying new books as well, so our question was, 'Why should we send those guys away?' " Wertz explains. While Abebooks isn't trying to become the destination customers think of for new books, its strategy does reflect a belief about a changed relationship between the new and used book markets. "Online, it's a perfect product to mix," he said. "I think a lot of customers don't differentiate between new and used anymore."
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