Until four years ago, used books were a thriving part of the trade book business, although confined mainly to often-musty stores, flea markets or fund-raising drives. But in as little time as it took Amazon to begin posting used-book offerings next to brand-new titles, the Internet has quickly brought secondhand books into the center of book readers' consciousness.

Nowadays, eBay, Amazon, B&N.com, Alibris, Abebooks and other sites feature used copies of new books as soon as the title is released—no longer do they take months to percolate onto shelves or into the pages of catalogues. Some smaller used bookstores have closed, but many of them now sell online. They've been joined by thousands of part-time "booksellers" who hawk used books from their homes. (Many are "penny sellers" who make their money from shipping and handling fees.) More and more bricks-and-mortar bookstores that focus on selling new books have added used book sections.

Already the e-accessibility of used trade books has helped used books find a wide audience and a new respect; sales of some new titles are off; and book prices are under pressure. Many say the trade book world won't be the same. The most striking point about the changes: they have just begun.

Miriam Sontz, a longtime manager of Powell's Books, Portland, Ore., which sells new and used titles together on its shelves, and CEO of Powells.com, goes so far as to call the growth of used book sales "one of the biggest shifts in the book business that's ever occurred." The reason: while once decisions about "the selling and pricing of books were made by people in conference rooms in New York," she says, now "the future of bookselling and book pricing is being decided in dorm rooms around the country, where kids are on the Net learning about prices and setting price guidelines. The value of the book is much more open to discussion."

Ed Morrow of Northshire Bookstore, Manchester Center, Vt., a former American Booksellers Association president whose store sells some used books, calls the new dynamic "a more perfect market in the classical economic sense, where every buyer is exposed to every seller and vice versa. It makes sense that sales of used books are affecting the sales of new books."

Morrow has also observed a shift in attitudes among customers, saying, "A new generation is coming along without certain hangups and with tightened pocketbooks. As they trade stories about finding deals, people are beginning to think they're foolish" for paying full price or buying at a modest discount. "It's no longer a question of having to go two blocks out of the way to a dusty used bookstore. Now it's in your face." He notes that even customers who have never bought a used book in their lives are impressed by the good condition of many used books.

Textbook Disaster

The used-book situation in the college-store market, which often is a precursor of trends in the trade book world, does not offer solace to publishers and authors.

A few observers estimate that used textbooks make up 30%—40% of textbook sales. Some college bookstores report for the first time ever that textbook unit sales have flattened even as enrollments increase; students and others complain ever more loudly about prices and seek ways of saving money on texts, whether by sharing, buying abroad, copying or purchasing used copies.

In various forums, a few publishers have publicly acknowledged the effect of used textbook sales on frontlist sales. This month, for example, Will Pesce, CEO of John Wiley & Sons, blamed a quarterly decline in higher-education sales of nearly 5% on used book sales. He said that anecdotal evidence suggests that the percentage of used book sales rose in the quarter.

Similarly, in March, Ron Schlosser, president of Thomson Learning, noted that sales of backlist titles were soft because of used book sales. He blamed students' price sensitivity.

The Effect on New Books

For now, the effect of used trade book sales on new trade titles is unclear. Some publishers say they have noticed fewer reorders of slower-moving backlist and older hardcover titles, especially fiction and some book club picks. Others see an impact on new titles.

One publisher who requested anonymity considers used books as just one of a host of new issues—such as booksellers publishing books—that are adding to "margin deterioration." Still, he says, he believes many people don't want to buy used books or sell their own books. For this reason and others, he assumes sales of used trade books will not become as big a problem as sales of used texts in the college market. He estimates that used trade books take away 10% of new book sales.

By contrast, David Shanks, president of Penguin USA, says he is "very, very concerned" about the growth of the used book market and "lies awake nights worrying about reorders." The biggest impact is on frontlist, he says, since the used editions of new books appear on Amazon "the day after books go on sale." If used book sales become more widespread, he continues, used books "could redefine the economics of publishing."

Noting that used book sales don't benefit authors or publishers, Random House spokesperson Stuart Applebaum characterized them as "lopsided free enterprise." Random, he says, has "spirited and constructive ongoing discussions" with all of its accounts about the impact of used book sales on Random titles, although he acknowledges that it is difficult to measure the used book market.

Another publisher who spoke off the record guesses that the drop in sales of popular fiction is "linked" to the popularity of used fiction.

Discussing his company's results in July, Simon & Schuster president Jack Romanos said that one of the causes for softness in backlist sales, which "are not as healthy industrywide as we would like them to be," is used books. "It's an issue worth watching," he commented. "We're hearing that term around here more and more."

For her part, Jan Nathan, head of the Publishers Marketing Association, says her membership is growing increasingly concerned about used books. Some small publishers are especially irritated by the listing of review copies on the Internet before pub date. She adds that anecdotal evidence suggests popular fiction is the most susceptible to being sold used. If that's the case, she thinks the major houses could be hurt more than smaller companies.

Paul Aiken, executive director of the Authors Guild, says he has "no doubt" that used books "are taking away some part of the new book market" and are a "continuing concern" to authors. Aiken believes the impact is greatest on new books, observing that "every time an author sees a new book facing competition from a used book on Amazon, I get a call."

Numbers, Please

As with too much in the book industry, statistics are difficult to obtain.

Ipsos Book Trends, the market-tracking service that extrapolates data from purchase logs maintained by consumers, estimated that used books accounted for 14% of trade book purchases made by adults in 2003, up 1% from 2002. The company also stated that in the last nine months of 2003, used book purchases rose 5% over the same period the year earlier, while new book purchases fell 2%.

Book Hunter Press, which estimated used book sales in 2003 at $614 million, bases its annual report on responses to an online survey of book dealers. Among its findings: more used books are sold online than "in person"—online sales accounted for almost 52% of all used book sales in 2003, up from 49% in 2001. Some 80% of total used book sales are made by bricks-and-mortar stores that also sell online; pure online booksellers account for only 13% of total used book sales, and about half of them are part-timers.

For the Book Industry Study Group, the used book issue is significant enough for the organization to address, but first it wants to make an "in-depth, comprehensive" study of used books, according to executive director Jeff Abraham. The organization's research committee is working to include "all the important players to get an accurate picture," Abraham says. The committee will be seeking board approval for the study soon.

The Online Players

While Amazon.com and Barnes & Noble.com are the most visible e-tailers of used books, an important force powering the trend are two smaller companies, Alibris and Abebooks.

Both companies sell used books on their own sites. More important for the market overall, they act as middlemen, connecting the customers of these giant e-tailers with the vast, unruly universe of used booksellers. Thousands of dealers, ranging from large independent bookstores to people operating out of their basements, list with Alibris and Abebooks, which provide inventory for Amazon.com and B&N.com

Both Abebooks and Alibris report sky-high growth and both are counting on used book sales becoming a much more substantial part of the overall market. 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 says.

"Secondary markets tend to be more driven by supply than by demand," he continues. "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 adds, 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 notes.

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 all about 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 comments.

The result is prices that are 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, says 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."

Barnes & Noble.com cites a similar reason for selling used books. The company has taken a more subtle approach than Amazon—for one, the used books are less prominently displayed—but it hasn't been able to ignore what its competitor is doing. "We don't operate out of a vacuum," says Tony Astarita, manager of used and out-of-print books. "Our customers expect to see this product and they ask for it, and we're responding to our customers' needs."

Astarita stresses that B&N's involvement in selling used books, which dates back to 1998, began with out-of-print titles, though demand for used copies of in-print books is growing much faster.

Executives who deal in the used book market insist this is a boon for booksellers, in particular independents who now have an efficient way to reach millions of customers who would never have stepped foot in their stores. "My own experience, dealing with a lot of booksellers, is that the Internet saved their business," Astarita says.

But B&N was always able to reach those customers—doesn't the company risk losing new book sales by making cheaper used books so easy to buy? "I personally don't believe that will be the case," Astarita says. "I'm of the belief that by offering products that our customers want, we'll keep them coming back and spending money. They're buying new; they're buying used; they're buying out-of-print."

As for how the market will fare—that's harder to answer. While he admits to some bias, given the focus of his job, Astarita puts it this way: "I think at the end of the day, whatever is good for the customer is good for the industry, because what else are we there for than to serve the customers' needs?"

Likewise, Wertz believes that, overall, used book sales are "expanding the book market. It might cut into new book sales, but that's not been empirically proven."

Used Books: The New Thing

Used books are becoming so hot, they're crowding onto the shelves of stores that once sold only new titles.

Avin Mark Domnitz, CEO of the American Booksellers Association, believes the growth in used-book sales has become ever more significant in the past several years and observes that "more and more" ABA members, bookstores that primarily sell new books, are adding used books to the product mix.

Once a rarity except in parts of the West, the model of a new-book bookstore with a sizable selection of used books has several attractions to indies. They can differentiate themselves from chains and other nontraditional book retailers; offer lower-priced books to increasingly cost-conscious customers; achieve better margins; and regain some control over pricing.

But as used books have become ever more popular, some of the advantages of used books have eroded. Price pressures have slimmed margins and led to much confusion about books' value. Several booksellers note that because many of the relatively new used-book sellers don't know books and the market well, they are pricing many titles so low that few people can make money on them. Still, many traditional bookstores are forging ahead, adding and expanding used book sections.

Harry W. Schwartz Bookshops carries used books in two of its four stores in the Milwaukee, Wisc., area. Although the bookseller has sold used books to varying degrees for years, it began to do so "more aggressively" only in the past three years, according to used books manager Bishop Hadley. Most of the used books have been sold by category in discrete sections next to new books in the same categories, although Schwartz is now experimenting with shelving new and used titles together in a few categories. "We're taking a slow approach to gauge how mixing new and used books will be received by customers," Hadley comments. Although Hadley is not certain of how much new and used book buyers cross over, he does know that sales of used books have been "very strong in the past year, and we're on the verge of taking used book sales to a higher level."

Between the two stores, Hadley stocks anywhere from 12,000 to 15,000 used book titles at any time. The most popular category is fiction. Other important categories are mysteries, world and general history, biography, cookbooks and children's books.

Hadley emphasizes that he buys selectively, looking for used books in excellent condition because "we're competing with new books that are pristine and with remainders that look like new." He prices most hardcover fiction at $7.95 retail so that it will be competitive with mass market editions of the same title.

Northshire Bookstore, Manchester Center, Vt., has been selling used books since 1996, when it opened the Next Chapter, which for a time was a separate store with some 700 square feet of display space. After a recent renovation and expansion, Northshire now sells used books mainly in its event space and online. In some sections, such as literature, the new and used selections are next to each other (in literature, new books outnumber used by a 5-1 ratio). Distracted by the move, the company will begin paying more attention to used book sales to see which sections have strong crossover sales and whether the store should develop used books further. Co-owner Ed Morrow notes that what Northshire can do with used books is constrained by the store's size. In addition, he says, if the store adds too much, "used books could push out the new."

Northshire had experimented with mixing new and used titles together on the shelves, but judged it a failure. Morrow explains: "A few people liked it, but existing customers were confused. New book customers would bring up a book and say, 'It looks awfully ratty.' Used book people like to browse used and don't want to cull through new and used books."

Morrow notes that as price points for used books continue to drop, the amount of margin available to pay for data-entry costs (particularly to sell online) and to stock heavily becomes thinner. "After a certain price point, a used book is not worth it," he notes. While the store initially had pegged that cutoff price at $3.50, Morrow estimates that it is "probably higher now."

The used books department at Book Passage in Corte Madera, Calif., is operated by the Hospice of Marin, one of the store's longstanding and favored charities. Readers donate books to the Hospice, which has a paid employee and volunteers run the section.

Owner Elaine Petrocelli says that most used-book buyers are "regular customers," although sometimes "families without lots of money bring children to buy in the used-book section," and mystery fans tend to buy many used titles. Used fiction is more popular than used nonfiction. Customers who want to save a little on hardcover nonfiction will buy a used copy only if the title is not available in paperback yet.

Most used books at Book Passage are sold in one section, although Book Passage does have "little used book sections around the store to tell everyone about their availability," Petrocelli said. "The public loves it."

In the past, Book Passage sold used books itself. Now, Petrocelli says, because the market has changed "so drastically, I don't know if I'd know how to be a book buyer today. The prices of ordinary used books have gone down tremendously. I wouldn't know what to pay."

Petrocelli notes that the changed marketplace has led to some unfortunate situations. For one, people intending to sell signed books online, including first editions, come to author events "with cartons of books. In one case, the person wanted the books predated!" She observes that some of these new booksellers "have a sense of entitlement and real nerve."

In addition, some of the new dealers behave like penny stock promoters, she says—for example, buying out small printings of a mystery, then writing reviews online and otherwise promoting a title that no one else has.

On the positive side, she calls used book sales "very entrepreneurial," in major contrast to the new book market, which "is so controlled in that the prices are set, the discount is set, and you can't go above the list price."

Even the bricks-and-mortar Barnes & Noble, which in the 1990s closed its Manhattan Sale Annex, has dipped its collective toe back into used books. Last year, the company began a "limited pilot run" selling used books in selected stores. The used and rare books (usually numbering fewer than 300 books in each store) have been displayed on tables rather than in shelving units. Each location's used books are genre-specific (for instance, B&N's Astor Place store in New York City has sold only poetry books). "The areas you have seen in some of our stores are just one of the small product line tests we do from time to time," says B&N spokesperson Carolyn Brown.

For its part, Borders Books & Music has "no plans in the near future" to change its focus on selling new books. However, spokesperson Anne Roman says shoppers on the Borders and Walden Web sites, which are run by Amazon.com, "have access to an active used book channel." In addition, through the company's connection with Alibris, customers using Title Sleuth kiosks in Borders stores "are able to identify titles that are out of print and may be available used, which can be shipped to our store for later pickup by the customer."

In which case—and a sign of the times—a book would come full circle in a most roundabout way.

For SaleUsed book prices have a greater range in fiction than nonfiction, as these two titles show.

*As of September 20.
Battle Ready by Tom Clancy with Gen. Tony Zinni (Ret.) and Tony Koltz (May, Putnam, $28.95)
Amazon.com $3.00
Barnes & Noble.com 4.88
eBay 6.95
Powells.com 9.95
The Abs Diet by David Zinczenko with Ted Spiker (May, Rodale, $24.95)
Amazon.com $12.00
Powells.com 16.95
eBay 16.99

Seeking Cover While many booksellers see used books as an opportunity, most publishers view them as a problem—one with no easy solution. Several people in the industry have suggested that publishers sell titles on a nonreturnable basis as a way to address the used-book problem. Alibris's Marty Manley especially likes the nonreturnable option. Booksellers would be at less risk because anything they don't sell they could unload on Alibris (or, presumably, another site). There would be bigger discounts for booksellers; no returns for publishers; cheaper books for customers; and, theoretically, everybody wins. But publishers, some of whom have tried and failed to sell nonreturnable, see that option, in the words of one head of house, as a "pipe dream."
Several industry observers independently suggest that a major publisher or two might be able to force Amazon to deactivate the used book option from its listings—by threatening not to supply the e-tailer with new books. But such a move, not unlike Diogenes's recent boycott of Amazon.de over trade terms, would risk losing sales through a major channel. For one publisher, the flashpoint is co-op. This publisher says it "won't tolerate customers taking co-op money to promote new titles while simultaneously pushing used editions."
Some publishers suggest that they might set up Web sites to sell their own used books.
And there could be greater threats on the horizon: one industry insider worries about a scenario whereby Barnes & Noble opens substantial used book sections and allows customers to buy and sell used books for credit. "B&N could end up in effect running a library, and then return the books when they become too beat up," he says.
Creative pricing that acknowledges the realities of a price-sensitive reading public might pay major dividends in the long run. As in the fight against piracy, one way to protect the brand is to lower prices to make them competitive with the otherwise inferior product. (Some textbook publishers admit that aggressive price hikes have only added fuel to the used book fire.)