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Big Chains, Big Savings?

(This article has been revised since its original publication)

Okay, I'm biased. As a small independent bookseller, I don't like what the big chains are doing to the bookselling business, but at least they save you money . . . don't they?

They way most companies offer great discounts is by finding ways to operate more efficiently and to save money by buying in volume. They are then able to reduce prices and survive on small profit margins. Some of the big booksellers have found another way to reduce prices – they put the squeeze on the publishers! A certain large on-line bookstore will only carry titles of small publishers if they can buy as little as 5 copies but get the types of discounts normally reserved for buying 100 copies or more.

Companies need to make a profit to stay in business. How do publishers respond if they have to offer bigger discounts to the superstores? One way could be to raise their retail prices. Then they can give a larger discount off the higher price and still get the same amount of money. The superstore can now give a big discount but actually make more money because the retail price is higher.

Now for the math lesson. Let's say a publisher has a $10 homeschooling book that they sell to bookstores for $8, or a 20% discount. If a store buys 100 copies, they can get a 30% discount. Your favorite homeschool store specializes in titles like this one, so they buy 100 copies and sell them for $9 each.

A big chain wants to carry the book but wants the 30% discount even if they only buy 5 copies per store. The publisher knows that they need at least $8 per book to cover their expenses on small shipments and still make a profit, but they have seen a lot of the small independent stores close when the big chains move into town so they want to make sure the chain sells their products. They decide to raise the retail price of the book to $11.50 so that they can give the big chain a 30% discount and still get $8.05 per book.

The big chain can now promote the 20% discount that they offer shoppers. That means shoppers now pay only $9.20 for an $11.50 book. That sounds like a good deal, but the savings are smaller when you compare it to the original retail price of $10, and you are actually paying more than the $9 your independent bookstore originally charged you. The publisher gives the bookstore chain a bigger discount but still gets the same amount per book. The customer pays more for the book and the bookstore chain gets a higher profit!

Besides increasing retail prices, another trend is that books go out of print more quickly. When high volume sales are important, a book that slows down is more likely to be dropped in favor of a new book. In the past, many small publishers would keep a book in print if it generated steady sales, even if the volume was low. Small independent booksellers could help keep the title alive since many specialize in specific subjects. Your favorite homeschooling store carries fewer titles and can be more helpful in suggesting and promoting good books. The large chains only help you find books you already know about.

Now, many of those small stores are gone. Since publishers have fewer small retailers to serve as outlets for their books, they are forced to cater more to the big chain stores. That means less diversity in publishers, and fewer titles that do not cater to the mainstream. A certain large on-line store is running up tremendous losses as they try to wipe out the competition. If they succeed, will they still offer low prices and will the variety still be there?

The American Booksellers Association supports independent booksellers. They have revealed cases of publishers entering into special deals to provide chainstores with discounts that were not available to independent stores. It has already been reported that for $10,000 that big, on-line store would recommend a book, write a favorable review and offer front page placement on their web site. That puts small publishers at a big disadvantage. Another big chain has been able to get the contents of books revised before they would carry them. Is it wise to let a few big companies have that much control over an industry?

Do we want the "blockbuster" mentality of the movie theaters and video stores to run the publishing industry? We will end up with only books that have "mass market" appeal. Do you like using a catalog to learn about materials? Do you like being able to ask someone questions about a product before making a final purchase? Do you like having someone who can recommend other items you might be interested in? If none of these things are important to you, then you may want to make your purchases at an on-line store that does not provide a printed catalog and does not provide people who can answer your questions. If those things are important to you, then vote with your wallet. Support the companies that provide them. And remember, the extra little discount you get by supporting a big chain store just might be costing you more money than you think!

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