Bookstore Insanity?

Amazon and other booksellers are offering enormous discounts on Dan Brown’s latest book, in some cases, according to the Wall Street Journal, at as low as 52% of the list price. Now, I’m not privy to the inside pricing discounts, but I’ve been led to believe that the top discounts to the major book chains are “officially” set at 47% off list price, and promotional and shipping allowances can add another five percent to the margin of the large chain bookstores. If… if that’s so, then the profit margin on The Lost Symbol is slightly less than $2.00 per hardcover.

Now, bookstores won’t sell my books for less than a margin of close to $6.00. So how can they possibly sell The Lost Symbol so cheaply in these times when book sales are lagging? According to all the trade press, they’re doing it in the hopes that book buyers will also buy lots of other books as well.

Well… maybe…

But consider the fact that The Da Vinci Code sold more than 43 million copies in hardcover in its first three years and that Random House held off issuing a U.S. paperback version for three years because the hardcover kept selling so well. If The Lost Symbol sells as well, and initial sales certainly suggest it might, even at the highly discounted initial sales price, the “profits” on the hardcover sales, of just one book, are likely to approach $100 million. Then, too, book stores have this habit of increasing the “discount” price after several months, and certainly after a year, and these back-end hardcover sales help boost total profits.

One of the problems with this kind of pricing is that it has a tendency to hammer the less profitable stores or chains, such as Borders. When a large chain, such as Barnes and Noble, is profitable, then a book like The Lost Symbol merely adds to those profits, and B&N can price aggressively to maximize total sales. In order just to remain competitive, however, a weaker chain, such as Borders, has to match the B&N price, and thus cannot price to gain a larger profit margin per unit sold. Since the chains have decided to compete primarily on pricing, and since Borders has bought into this, not that Borders has that much choice at this point, Borders is simply hanging on, trying to keep from losing more market share. Since B&N has something like 300 more superstores than Borders, often in generally better locations, overall, a blockbuster like The Lost Symbol may help Borders, but not nearly so much as B&N — or even Walmart, which doesn’t even try to offer more than a token limited book stock.

The other problem with this kind of pricing is that, overall, it reflects higher prices for hardcovers, because publishers tend to follow the “base prices” of the lead titles. Even if The Lost Symbol never sells at list price, all the other books of similar genre, size, and scope are likely to be priced within a dollar or two of the Brown book, and at most, they’ll be discounted at either 20% or 34%… and they might not even top out at the 528 pages of The Lost Symbol. This isn’t just an academic point, either, since there have been recent lawsuits over publishers’ discounting policies, particularly those involving the major chains and how they affect independent bookstores and smaller regional book chains.

Call the high discount on a blockbuster predatory… even short-sighted, but in terms of the competition it’s not insanity, and much as they’d like you to think so, it’s not even a loss leader. Lower-profit, but not a loss leader.

3 thoughts on “Bookstore Insanity?”

  1. David says:

    I had to ask a question somewhere about the Hugo Awards. Who does the nominating? Every single year since 2004, Charles Stross has been getting nominated for one or another of his books. Is he that consistently good? Also frequently appearing are John Scalzi, Robert J. Sawyer, Ian McDonald, Ken McLeod, Robert Charles Wilson and some others who seem to be fairly regular. Do some authors have an "inside track"? I'd have thought that the Top Five nominees would be a little more plural than it is.

  2. L.E. Modesitt says:

    The Hugo Awards are a popularity contest voted on by those who consistently attend the World Science Fiction convention. Historically, they've tended to vote for the "flavor de jour," which sometimes has included books later termed to be great, but often has not. There is usually, but not always, a distinct bias toward hard science fiction, written by authors who have assiduously courted the kind of readers who attend WorldCon regularly. As noted above, this tends not to promote diversity, or even necessarily excellence, although I think it's fair to say that, for the most part, the process has not rewarded borderline competence or worse.

  3. Arin says:

    Mostly, I assume the Dan Brown book is being treated as a loss-leader. Given the projected amount of sales, bookstores are just trying to get the buying populace into their stores, under the assumption that the buyer will buy more than just the Dan Brown book.

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