Warehouse clubs, mass merchandisers, and other big-box retailers remain important to publishers because they not only sell books, they are places where books can be discovered. However, it appears that if publishers want those bricks-and-mortar outlets to continue to carry their titles, some changes need to be made. So says Dennis Abboud, who acquired Levy Home Entertainment in fall 2011, and who is positioning the distribution company, now called ReaderLink, to move ahead in an industry with a changing supply chain. Abboud is concerned that ReaderLink’s customers, who include such retail giants at Walmart, Target, and Costco, will decrease the space they allot to books in favor of other products that they can offer the public at the lowest available prices.
The problem with books, Abboud told PW, is that while Walmart and other ReaderLink customers do offer low prices on print books, those prices are still higher than the prices on e-books, an area into which many retail giants have been slow to enter. “Publishers need to rethink their e-book pricing strategy to address the price disparity between e-books and print books,” Abboud said. Well aware of the recent lawsuits and court cases that charged publishers with fixing e-book prices, Abboud stressed that he isn’t asking the publishers to do anything illegal, but rather to take a harder look at what low e-book prices are doing to bricks-and-mortar stores. “Publishers need to see the big picture,” he said, emphasizing the critical roll all retailers play in helping books get discovered. If more physical retailers close, Abboud said, publishers will need to up their marketing budgets for e-books, since fewer consumers will be aware of newly released titles in a crowded marketplace.
Rather than go down that road, publishers would do better by raising their prices on e-books to allow Walmart and others to offer the public competitively-priced print books. Abboud rejected the idea that the jump in e-book sales is due mainly to the format, but rather sees it as largely due to price. “People like paying less,” Abboud observed, adding that by making e-book prices dramatically lower than print books (especially hardcovers), publishers created “a self-fulfilling prophecy” in which sales of the new format jumped.
The growth in e-book sales and the decline in print sales has created the perception among high-ranking executives at some big-box retailers that the book business could go the way of music and video, with sales of physical products replaced by digital. Abboud said ReaderLink has had some success in convincing executives that that will not be the case, but to keep those accounts in the bookselling game, publishers need to do their part. With the prices of hardcovers usually doubling those of e-books, the big-box stores have no chance to compete with Amazon, Abboud said, adding that he has no problem with Amazon discounting e-books, but would like the starting price of e-books and print books to be closer together.
ReaderLink has developed ReaderLink Digital, a platform that will allow bricks-and-mortar accounts to sell e-books and print books online, and Abboud said the company is in advanced talks with three or four retailers about testing the service next year. He acknowledged, however, that some big-box retailers are reluctant to get involved in an area where Amazon already has a large market share. If those companies saw that books could continue to be a viable print and digital business, they would be more inclined to stay with the product, he said.
Abboud doesn’t believe higher e-book prices are the only way big-box retailers can remain relevant in the book business. He said he has had some success convincing a few retailers to be more aggressive in discounting print books in their physical stores. And ReaderLink is preparing to place a few Espresso Book Machines with some of its customers to test the print-on-demand market.
While they are likely sympathetic to Abboud’s views on e-book prices—indeed, publishers themselves were saying the same kinds of things when Amazon first began discounting e-books to $9.99—it is unclear how publishers will react. Abboud first raised the issue of the need to raise e-book prices at ReaderLink’s national meeting in August, and he said the feedback has generally been positive. Given the sensitivity of pricing at the moment, Abboud doesn’t think change will come overnight, but he said that “we’ve got to start the discussion.”