The book publishing industry, and the area of children's books in particular, are notoriously underreported statistically. And for the statistics that do exist, the categories of children's books don't always correspond to how publishers categorize their own books, which can make the numbers confusing and/or unusable.
In an effort to give as full a picture as possible, we've put together some numbers that we think shed some light on the current marketplace. We have culled a variety of statistics from three sources: the Book Industry Study Group, which issues annual estimates and projections of book sales; Ipsos BookTrends, a service run by marketing research firm Ipsos-NPD, which collects information on book-purchasing behavior and issues research reports; and the Children's Book Council, which issued an Industry Sales Survey of its members last fall, covering the years 1999—2001 (CBC statistics represent an estimated 53% of the total children's market). Though no statistics are perfect, we believe that as an aggregate, these numbers form a reliable snapshot of the industry, and allow us to make some predictions as to what lies ahead for the next several years.
In this article, we take a look at current sales of children's books, both by net dollars and by units, and show sales projections through 2006. We look at who the customers are, what categories of books they are buying, what retail outlets they are buying those books at, and how many books (and of what types) are being returned to publishers.
The Current Market
All indications are that the current market for children's books is soft. In 2000, estimated net sales peaked at $1.95 billion, according to BISG (see chart 1: will appear in a new window). The next two years showed a gradual downturn: $1.82 billion in 2001 (a decrease of 7.1% from the previous year), and $1.75 billion in 2002 (a decrease of 3.5% from 2001, though BISG's estimated figure for 2002 may change). Estimated unit sales have shown a similar rate of decrease in the last two years (see chart 3 ). After a high of 447 million units sold in 2000, sales decreased to 404 million in 2001 and 381 million in 2002.
Hardcovers are declining at a more rapid rate than paperbacks, according to BISG figures: from a high of $1.2 billion in net sales for children's hardcovers in 2000, that figure dropped to $929 million in 2001 (a decrease of 22.6%); a further decline, to $870 million, is projected for 2002 (down 5.1%). Net sales of paperbacks actually increased in 2001; net sales totaled $753 million in 2000, and that number grew to $887 million in 2001 (an increase of 17.9%). They are estimated to have declined very slightly in 2002, to $882 million.
Estimated unit sales followed the same pattern: hardcovers fell from 230 million units in 2000 to 172 million in 2001 (down 25.2%), and are estimated to have declined to 153 million in 2002 (d0wn 11.3%). Paperbacks grew from 217 million units in 2000 to 232 million in 2001 (up 6.9%), and are projected to have fallen slightly to 228 million in 2002 (down 1.7%).
Why the Downturn?
Factors for this downturn are many. A slowing economy, job layoffs, decreased consumer spending, recent cuts in library funding, softness in the overall retail book business—all of these play a part in the market correction that seems to be taking place, after years of growth. But the biggest factor for the downturn may be something that wasn't there at all: namely, a new Harry Potter title. The last Harry Potter release was Goblet of Fire, back in 2000; though paperback sales of the three (then four) titles have been stellar, by all accounts keeping the overall paperback numbers strong (for instance, more than 11 million Harry Potter paperbacks were sold in 2001), the lack of a new Harry Potter hardcover has had a negative effect on the overall hardcover numbers.
Looking to the Future
BISG projects that net dollar sales of children's books will rise slowly over the next three years (see chart 2 ): from $1.69 billion in 2003 to $1.82 billion in 2004, $1.87 billion in 2005, and $1.91 billion in 2006. In 2006, net sales are projected to almost reach the dollar amount from 2000, when sales were at their peak—$1.95 billion.
Unit sales are projected to drop from 381 million in 2002, and are not expected to recover that ground until at least 2007 (see chart 4): 360 million units this year, 372 million in 2004, 373 million in 2005, and 375 million in 2006.
In the paperback format, unit sales will be quite flat: from 228 million last year, they are projected to drop to 202 million in 2003, rise slightly to 205 million in 2004, then fall slightly to 204 million in 2005 and in 2006. However, unit sales for hardcovers are expected to show gradual growth: from 153 million units in 2002, sales are projected to increase to 159 million in 2003, 167 million in 2004, 169 million in 2005 and 171 million in 2006.
If unit sales will be flat and net sales are expected to rise only modestly, growth in the next several years is likely to come almost entirely from price increases, not volume.
Where Are They Buying the Books?
By far, the greatest percentage of children's books are sold annually through book clubs, book fairs and by direct mail, according to Ipsos BookTrends (see chart 5 ). In 2001, the most recent year for which figures are available, 129.6 million units were sold through these outlets, compared to bookstores, which sold 78.9 million units. Next came mass merchandisers (65.7 million), dollar stores (58.2 million), variety stores (29.6 million) and drugstores (16.5 million). Bringing up the rear: supermarkets at 14.3 million, warehouse clubs at 11.8 million, toy stores at 10.8 million and craft/hobby stores at 5.4 million, and the Internet, at 4.9 million.
Internet sales are on the rise, though the children's category is not rising as quickly as Internet sales for adult books. According to Ipsos, lower-priced children's books, such as coloring and activity books, make up a large percentage of total children's sales, yet these kinds of books generally are not purchased through the Internet. Higher-priced hardcovers (picture books and fiction) tend to be the category of children's books purchased via online booksellers. Though the online sales numbers for these books are not increasing with the same velocity as books for adults, they are indeed growing.
When the numbers are broken down by category of book sold (see chart 6 ), picture/storybooks are the largest single category, at 125.5 million units, closely followed by coloring and activity books, at 121.5 million. The next categories are nonfiction books, at 52.5 million, series/chapter books at 44.0 million, novelty books at 30.5 million, religious books at 28.5 million and educational workbooks at 24.6 million. The lowest-selling categories, according to Ipsos BookTrends, are leveled readers, at 7.9 million, classic literature at 7.6 million (though many classics are no doubt included in the series/chapter books category), sound books at 5.5 million and reference books at 2.3 million.
Combining the two previous sets of findings, to determine how specific formats sell in which outlets, we see that one-third of all books sold via book clubs/book fairs/direct mail are picture/storybooks, a figure that increases to 41% for sales via the Internet. Series/ chapter books and nonfiction are tied for the #2 position at book clubs (14.2% and 14.3%). Coloring and activity books are the highest-selling category in drugstores (72.1%), dollar stores (44.9%), supermarkets (43.6%), variety stores (39.9%), mass merchandisers (35.9%) and toy stores (29.0%).
At warehouse clubs, picture/storybooks do best (20.9%), with educational readers and series/chapter books coming in a close second and third (17.0% and 16.2%, respectively). Nonfiction sells well at craft/hobby shops (24.4%), and least well at drug stores (2.5%). Most sales of series and chapter books take place at bookstores (16.5%), followed closely by price clubs at 16.2%. The smallest share of series and chapter books are sold at dollar stores (2.0%) and drugstores (0.7%).
In bookstores, picture/storybooks sell the best (23.6%), followed by series/ chapter books (16.5%) and nonfiction (14.7%). Picture/storybooks are also the biggest seller on the Internet by far, as stated, with nonfiction coming in second at 19.0%, followed by series/ chapter books at 8.9%.
Who's Buying Them?
Looking over the charts, we can see that 71% of children's book purchasers in 2001, according to Ipsos, earned less than $60,000, while 29% of consumers earned more than $60,000, and more than half of those earned more than $75,000 (see chart 7 ). Consumers earning less than $60K bought the majority of their books at a drug or dollar store (55% and 51%, respectively), while those earning more than $60K purchased the majority of their books at price clubs (34%), with craft/hobby shops (30%) coming in a close second, and bookstores coming in third (28%). Those earning less than $30,000 were least likely to buy from a price club (17%), and the more affluent were least likely to purchase their books from a dollar store (8%).
A Breakdown by Age
Examining unit sales by age level yields further findings, according to the CBC's statistics (bear in mind that these numbers reflect roughly half of the total market). Unit sales of board books have seen a slow but steady increase from 1999 to 2001, growing from 14.6 million units sold in 1999 to 18.6 million in 2000 and 19.5 million in 2001. The numbers for picture books also increased each year, from 35.7 million in 1999 to 46.6 million in 2000, reaching a high of 60 million in 2001. Anecdotally, however, many publishers are reporting softness in the hardcover picture book market, except for high-profile bestsellers.
Sales for books for grades 2—6 peaked in 2000, but have since declined, from a high of 92.7 million in 1999 and 92.0 million in 2000 to 85.5 million in 2001. Young adult sales were more level, with a high in sales in 1999 at 38.9 million, a slight dip in 2000 to 37.6 million, and another decline in 2001, to 30.8 million.
Breaking down each age level by format (hardcover vs. paperback), other trends emerge (see chart 8 ). As might be expected, paperback sales of books for grades 2—6 were the largest category by far: 58.9 million units sold in 2001. Significantly, that was only double the number of hardcovers sold for that age group (26.6 million), reflecting the strength of this age category and the willingness on the part of customers to buy books for this age level in a hardcover format. In contrast, paperback sales for young adult books were almost five times greater than hardcover sales (25.5 million vs. 5.2 million).
Return to Sender
Returns have always been a thorny issue in publishing, and they have become a much bigger issue in children's books in recent years, as larger publishers are adopting the publishing strategy of their adult book counterparts: large first printings for celebrity-written books, highly anticipated sequels and other media-driven titles, with a big frontlist push, rather than the traditional slower-and-steadier approach. (Another problem that arises from too much emphasis on frontlist is the loss of shelf space for backlist titles, at the same time that some publishers are reporting a decline in backlist sales.) With first printings of 100,000, 200,000 and even 300,000 and above, publishers of these books are adopting a much riskier publishing strategy, and large return rates are almost inevitable. Here, we take a look at numbers for total returns, as well as a breakdown by format.
Total returns in units are up, from 42.4 million in 1999 to 47.3 million in 2000, to a three-year high of 50.2 million in 2001 (see chart 9). Paperback returns were more than double those for hardcovers in 1999 (see chart 10 ), and just shy of double in 2000, but by 2001, the picture had certainly changed. Paperback returns dropped from 31.4 million in 2000 to 27.5 million in 2001, while hardcover returns were up from 15.9 million in 2000 to 22.7 million in 2001, a 42.8% increase that clearly reflects the higher print runs for picture books.
Looking at the returns by format (see chart 11 ), we see that hardcover picture books and hardcover books for grades 2—6 had the highest rate of returns, both at almost 20%. Paperback books for grades 2—6 had a rate of return of 13.9%. "Other" hardcover books (books-plus, reference books, etc., excluding calendars and coloring books) contributed a return rate of 10.9%.
"Other" paperback books came in with the lowest returns, at 4.3%, while hardcover and paperback young adult novels had return rates of 6.1% and 6%, respectively.
The market for children's books is predicted to be fairly flat over the next three years. Back in 2000, sales were at an all-time high, but those numbers have dropped off and are not expected to return to those heights until at least 2007. The years ahead will consequently be challenging ones for children's book publishers. Funding cutbacks for libraries and a general softness in the retail market due to the weak economy will play a large factor in keeping those numbers down.
However, there are a few bright spots. The age category of grades 2—6 remains very strong, in both paperback and hardcover, as children in the middle of the demographic bulge have begun to read independently. A new Harry Potter title in the market this summer will certainly drive up total dollar sales (a list price of $29.99 has been announced), and publishers from houses other than Scholastic can hope that once demand for that book has been sated, parents and children will head back into bookstores and libraries, hoping for more good summer reads.
We'll keep you posted.