Where the Sales Are
Judith Rosen -- 2/14/00
The changing landscape of children's book outlets
Even before the bottom fell out of the children's book market in the early '90s, publishers that had relied on traditional book outlets -- children's-only bookstores, general bookstores with large children's sections and chain superstores -- had begun looking for new ways to grow their sales.
Initially, many publishers turned to mass merchandisers. Random House, which was one of the first to do so, bought the Happy House line of crayons, coloring books, games and puzzles in the 1980s to ease into what was considered a brave new world where books are just so much product measured in linear feet. Through these low-end items, Random House was able to penetrate what were for most trade houses new markets -- grocery stores, drug stores and other mass retailers. In 1983, Random House transformed its children's division into a "merchandise group," incorporating editorial, sales and marketing and offering traditional books as well as other products (books on tape, videos, calendars and the Happy House line) to reflect a new emphasis on merchandise. Others, including Simon & Schuster, Harcourt and DK, soon followed suit by adding merchandise lines.
At the same time, a consumer revolution was taking place. Mass merchandisers, such as Wal-Mart, Target and Kmart, were not only responsible for changing "the way American shops" for clothes and home furnishings, but they also began adding books to their product mix and opening new stores at an accelerated pace. Suddenly bigger was better, whether it was a Barnes & Noble or Borders superstore or a massive warehouse outlet for home building or office supplies. More recently, smaller specialty chains, such as the Nature Company and Restoration Hardware, have seen the value of adding carefully targeted books.
Now, too, cyber-stores are starting to have clout with publishers. They promise the same one-two punch of large land-based retailers, a breadth of stock and deep discounts to keep customers coming back for more. With their exponential growth, e-retailers, although still small in terms of industry-wide book sales, are quickly becoming a force to be reckoned with, from Walmart.com to eToys.com.
Over the past decade, the number of independent bookstores has dwindled to a perilously low percentage of total book retailers, but those who survived the onslaught of the chains and e-commerce have become tougher, keener competitors. Today they have reemerged as significant players, especially for hardcover picture books and middle-grade hardcover fiction. Outside the Midwest, where the going is still rough, sales are starting to more than bounce back, and some stores are reporting double-digit growth.
Add in today's economic and baby boom, and children's books are poised for a dramatic comeback. Although the December figures are not yet in, the AAP's November '99 report (see News, Jan. 24) indicated that sales for juvenile paperbacks for the first 11 months of the year were up 33.6% over 1998. Children's hardcovers showed somewhat slower growth, up 14.8%.
As the children's book turnaround picks up speed, PW talked with sales personnel at publishers of varying sizes about changes in the bookselling landscape and where they expect to see the next big growth spurt.
Spot checks of publishers' own sales figures confirm the AAP's rosy findings for children's books. At Random House, notes Jack St. Mary, v-p and director of the children's books division, "We've always been able to survive the darker periods, because of our huge backlist, which includes Dr. Seuss and the Berenstain Bears. This year, the whole children's market is growing for us."
Despite a surfeit ofStar Warsbooks, DK reports that its children's sales were also way up. "The simple fact of the matter was our overall business grew at a great rate, and a lot of it was kids' books," comments Gary Gentel, v-p of trade sales. Low-end board books for preschoolers -- such as the My First Board Books and the Touch and Feel series -- were especially strong. "We've tripled our sales on those books over the last year," says Gentel, adding that the house is looking forward to continued increases from "three huge properties" on the spring list: a Merriam-Webster children's dictionary, a BBC/Discovery Channel Walking with Dinosaurs tie-in, and a tie-in to the Disney Dinosaurs movie due out in May.
J.K. Rowling's three Harry Potter books, which tied up the top slots on most bestseller lists throughout the fall, had an impact well beyond Scholastic's bottom line. The spell continues with book four, tentatively titled Harry Potter and the Doomspell Tournament. Even though it won't be released until this summer, its advance sales are so strong that it is currently one of Amazon's top 10.
David Nelson, v-p and director of sales at Harcourt, calls Harry Potter "a real boon to the entire children's book business." Mariann Donato, v-p and director of sales at Penguin Putnam Books for Young Readers, who cut her book-publishing teeth in the ID market, concurs, adding that the books have been "terrific" at breaking down the price barriers at mass merchandisers. "When I used to sell to Kmart, the rule of thumb was if it's not $2 they couldn't sell it," she says.
Not only are the price points a-changing, but for some bestsellers mass merchandisers are outselling the chains on a store-by-store basis, even for such higher-end titles as Harry Potter. "Overall, they don't outsell chains," says Anne Zafian, director of sales for children's publishing at Time Warner, "but, depending on the book, Target or Wal-Mart can outsell a Walden or Barnes & Noble."
One book Zafian singles out is Nadine Bernard Westcott's board-book adaptation of a jump-rope rhyme, TheLady with the Alligator Purse. "Target's done terrific with it. It was published in the spring of 1998, and [Target's sales of that book] account for one quarter of all our sales," Zafian says.
Even the least low-end-oriented publishing houses are now looking to mass retailers for sales. As Christopher Carey, director of sales for Walker and Company, points out, "To succeed, we must capture not only the traditional bookselling markets but also broaden our base of customers.
Whenever a book is appropriate, we try absolutely every avenue of sales and do business directly or indirectly with book fairs, mass merchandisers, the Nature Company, Zany Brainy, Noodle Kidoodle, Store of Knowledge, many direct-mail catalogues and others. These accounts are a growing part of our business, and we are aggressively pursuing more opportunities."
Walker has had great success with alternative retailers for The Period Book by Karen Gravelle and Jennifer Gravelle. First published in 1996, it has 150,000 copies in print and is currently the company's bestselling children's book. It has not only sold well at Target but also in independent bookstores, catalogues and girls' magazines. Similarly, Judith Harlan's Girl Talk, which came out in 1997, is also available in many outlets that cater to girls' interests. A companion journal, Girl Thoughts, will be publishedin the spring.
Ten-year-old Charlesbridge Publishing has had a similar experience with, among others, The M&M's Brand Counting Book, which has sold more than 900,000 copies since its release in 1994."Our backlist," remarks v-p and associate publisher Mary Ann Sabia, "tends to have a longer life because of the nontraditional stores. If your book works and it's in, it's going to keep rolling over on the planagrams." (Planagrams chart every item in the store, foot by foot, and mass merchandisers keep careful track of the turns for every item on them. If a book makes its figures, it stays on the planagram. This system is much more manpower-intensive -- and effective -- than anything currently in place at either indies or the book chains.)
Those publishers whose books have long been entrenched in the mass merchandisers cite the migration of those outlets from "special sales" to becoming a regular part of the companies' sales efforts as the biggest change they have encountered to date. Depending on the publisher, how an account is classified can determine which reps service it and how often, as well as if it can buy on a returnable basis, or must purchase everythingnonreturnable. DK's Gentel explains: "The nontraditional accounts are an important part of our business. There's such a blurring of the distinction between traditional and nontraditional accounts. We are looking at it as 'retail is retail.' What's happened is now people are taking accounts out of special sales and treating them as regular retail accounts."
Random is one of several publishers that have recently begun servicing T. J. Maxx as a national account. After reviewing its juvenile business when it merged with Bantam Doubleday Dell last year, St. Mary says, "We took a whole new view of special markets." As a national account, T.J. Maxx is now called on regularly by a children's book specialist.
"With our growth in Nickelodeon licensed property," says Alan Smagler, v-p of sales and marketing at Simon & Schuster, which has the licenses for the popular book tie-ins to Blues Clues and Rugrats, "the mass market discounters -- the combination of Wal-Mart, Target, K-mart -- is what we count on for regular business. The supermarket and drugstore chains have been growing for us as well."
Mass merchandisers also carry weight when publishers consider new projects. "I think most publishers would agree," says Time Warner's Zafian, "that when they're evaluating a project, they do look at a projected sales number from trade sales and special sales. That's an indication that all these channels are becoming more and more important." For example, she points out, sales for preschool-book author and illustrator Todd Parr, whom License magazine ranked in its "40 under 40" list of hot licenses in 1999, have been evenly split between traditional and special sales accounts. Parr's brightly colored books are a favorite with special sales accounts, and F.A.O. Schwarz featured them in their windows last spring.
Often, a particular property will open mass channels for trade publishers. Such is the case with Candlewick's Maisy by Lucy Cousins. Tammy Johnston, v-p of sales and marketing and associate publisher at Candlewick, states flat out that "we're not a mass marketer at all, but Maisy opened us up [to new distribution outlets]." Thanks to the Nick Jr. connection, where the animated TV show Maisy has appeared for the past year, Cousins's adventurous mouse has been able to move into various venues despite her high price points, well over $10. "With Maisy, they're coming after us," says Johnston, who acknowledges that last year Candlewick created TheMaisy Busy Box just for the warehouse price clubs (which tend to prefer higher-end titles or book assortments).
For most nontraditional retailers, having the latest books is not even an issue. "If it's a very strong title and a very strong price point, it's new to that consumer," explains Harcourt's Larry Jonas, director of special sales. Still, this past Christmas, the company's newly released Auntie Claus by Elise Primaverawas a hit at both mass merchandisers and independents, despite its $16 price.
In less than a decade, educational retailers such as Noodle Kidoodle and Zany Brainy, which now have close to 200 outlets between them, have also gone from special sales to key "traditional" accounts. Even their buyers hail from the trade: a former bookseller with Joseph-Beth is now assistant buyer at Zany Brainy, while an ex-Scholastic staffer buys for Noodle Kidoodle. S&S's Smagler is not alone when he says that "these are two accounts we definitely look to for growth. They both have very nice children's book departments." Still, there is a downside to this rapid growth. Charlesbridge's Sabia observes, "Kind of what's happening with the independents and the chains is what we see happening in teacher-supply stores. As Noodle Kidoodle and Zany Brainy grow, we see some of our little teacher-supply stores going out of business."
No such complaints have been voiced against the deep-discounting warehouse clubs. Many independents have to avoid carrying the books that the clubs stock. Also, because of the SKU crunch, too much merchandise and not enough space, book sales at warehouse clubs have leveled off. "It's pretty steady, and we do a nice bit of business with them," says Smagler, " but as a general statement, the warehouse clubs have not been a growing area for us."
E-commerce Enters the Mix
The one "alternative" children's book area that has been growing fast for publishers large and small is e-commerce. As Random House's St. Mary notes, "It's not a significant part of the business right now; it's still single-digit percentage of our growth. But if it g s from one percent to two, it's still double."
While Farrar, Straus and Giroux has had less success with such mass-oriented Internet sites as Nick, Jr.'s Redrocket.com, it has seen increased online reviews burgeon into online sales. "There are a lot of sites out there that don't sell books but review our books," says associate publisher/marketing director Michael Eisenberg. "A lot of these sites have direct clicks to online wholesalers, and hopefully they'll have links to Booksense." Still, he questions just how much of a boon Internet sales will ultimately be. "Are we going to find new customers on the Internet? Or are we just going to take them away from the mass market or the bricks-and-mortars?" asks Eisenberg. "Given our list of books, as long as library funding holds up, that's still an important market."
There's still a lot to be said for the "traditional" book market. For Time Warner Children's Books, "The chains are still the hugest in terms of all our business," comments Zafian. "The independents remain an absolutely vital cog in the wheel. They can still make or break a book," she adds, noting the impact of independents on Joan Steiner's Look-Alikes and Look-Alikes Jr. picture books.
St. Mary, too, gives credit to independents for their role in the success of Christopher Paul Curtis's Bud, Not Buddy, which won both a 1999 Newbery Medal and the Coretta Scott King Award. "Independents helped drive traffic to the awards," says St. Mary. "Handselling still counts. Even with the Newbery, the majority of books will still sell in the independents and the chains. A $15.95 middle-grade fiction hardcover is not for a Wal-Mart. We think the independent marketplace has more than stopped bottoming out. We're actually seeing in the retail field area that the percentage of overall business has grown in the last couple years."
Finding More Uncharted Territories
With alternative markets becoming traditional, and traditional markets growing, what's next? For St. Mary, it's more of the same at Random House. "It's concentrated more in the growth of our existing business," he says. "Barnes & Noble, Wal-Mart, and Kmart are still adding stores."
For others, DK among them, the mass merchandise business is "very stable now," according to Gentel. "The real growth area is going into such non-mass retailers as the Gap that have never traditionally sold books. We have somebody on staff whose job is to search out places like that." That work is already starting to pay off for DK with such books as last fall's The Ultimate Lego Book, which sold thousands of copies in Lego stores, and Toy Story 2 tie-ins, which did well in Disney stores despite the fact that they have mostly gotten out of the book business.
Many publishers say that they are adding new online accounts at the rate of one per week. "In particular, our Internet business is growing rapidly," says Walker's Carey, "and we've become increasingly proactive in getting our titles' increased visibility online. We've also increased our office sales staff to specifically increase sales in e-commerce." At Candlewick, e-retail business is also up. With sales increases of 207%, Candlewick has recently added an e-commerce sales and marketing manager to work with the online side of independents as well as stand-alone cyber-stores.
Looking to today's educational trends, with a greater emphasis on parental involvement in helping children learn, Penguin Putnam's Donato predicts that the CBA market will be the new, new thing. Many parents who homeschool their children for religious reasons prefer to shop for books at CBA stores. This is one potentially large sales area in which few trade children's publishers have made significant inroads, either because of the content of their titles or because their sales force isn't attuned to the special needs of this market.
Smagler laughs at the seemingly old-fashioned notion of sending his sales reps out on the road to drum up new business, as was done a decade ago. "Today, with the demands on reps' time and the account load, they have all they can do to cover existing areas," he remarks. With such hot properties as Nickelodeon and Jim Henson, which are part of S&S's Simon Spotlight imprint, customers come directly to the publisher either at trade shows or by phone.
Perhaps Donato sums up best where the growth is when she says, "There's a place for every book." Now it's just up to sales and marketing departments to find that place and see how many sales channels a book can cross. So if it seems like children's books are everywhere in today's changed bookselling landscape, they are. And if they're not at your local beauty parlor or gas station yet, they will be soon, when the right book comes along.
The Key Players
With the children's book business on the rise in 1999, the outlets are growing, too. Here are some of the key "traditional" and "alternative" players whose needs are increasingly factored into publishing decisions.
The independents. Every publisher interviewed for this story noted that despite their dwindling numbers, independents continue to be the core of their business.
The chains. Barnes & Noble, Borders and their cyber-stores are all essential to the children's book business. While they don't necessarily "make" a book, they can still have a significant impact on the velocity of sales.
Institutional sales. These outlets are the bread-and-butter for many smaller houses, which tend to publish books with higher price points. But even big houses can't afford to take the school and library market for granted.
Mass merchandisers. "The Big Three" (Target, Wal-Mart and K-mart) can move a lot of the right type of children's books. Other mass retailers, such as J.C. Penney, have been less successful when it comes to book sales.
Membership warehouse clubs. Serviced primarily by Advanced Marketing Systems, clubs such as Costco can sell many books and book assortments. They prefer only high-end individual titles or bundled groupings of lower-price books that they can mark down and still make a profit.
Grocery stores and drug stores. Most of these outlets prefer low-end product, and many publishers have added lines that appeal directly to them (e.g., Harcourt's Kipper Books or Simon Spotlight's Blue's Clues series). Most are serviced by ID distributors. Drug stores, much like publishing houses, are currently going through their own acquisition and merger phase.
T.J. Maxx and Marshall's. These apparel-plus retail outlets have done very well with books in the last few years. While Burlington Coat Factory had a bad year with books in 1999, most industry insiders expect it to make a comeback this year.
Special sales, premiums and catalogues. In today's business climate, getting to the right store with the right book can be highly profitable. Depending on the book, special sales outlets can range from F.A.O. Schwarz to Restoration Hardware and Bed, Bath and Beyond.
E-retailers. In just a few years, e-retailers have become such a significant part of the business that publishers often refer to the older online retailers -- such as Amazon, Barnes & Noble and Borders -- as "traditional" outlets. Others not connected to bricks-and-mortar book outlets, such as Nickelodeon's Redrocket.com or eToys.com, are treated as special accounts.
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