Book Retailing on the Internet Market Assessment 2007: Industry Report

Book Retailing on the Internet Market Assessment 2007

Product Type: Market Research Report
Published by: Key Note Publications Ltd
Published: January 2007
Product Code: R310-1398

Description

The abolition of the Net Book Agreement (NBA) in 1997 had the single biggest effect on book retailing in the UK. As publishers were no longer able to set minimum prices for their books, the floodgates opened for retailers to negotiate huge discounts that could be passed on to consumers. This, coinciding with the increasing popularity of the Internet, allowed Amazon and other online booksellers to take a significant share of the market. With no NBA in place, supermarkets could also use their aggressive price negotiation skills to offer books at much lower costs.

With pressure on pricing, high-street chains are forced to constantly appraise their inventories in order to ensure that valuable floorspace is given to those books that will sell. This is a risky trade-off, as another advantage for online booksellers is their ability to offer practically every book in print — and, through their second-hand channels — even books that are not in print.

Customers know that they can find what they want online and that they can get it for less than the recommended retail price (RRP). Such has been Amazon's success that it now has a plethora of competitors, and developments in search-engine technology allow Internet shoppers to search for the best deals through a number of price-comparison sites, such as best-book-price.co.uk, bookbrain.co.uk and bookkoob.co.uk.

However, these price-comparison sites will only return results from the better-known online booksellers (including supermarkets and high-street booksellers' own sites). The total number of online sites selling books is unknowable but they do form part of the `long tail' of unlimited selection. This phenomenon was described by Chris Anderson in Wired magazine in October 2004 as a new economic model, made possible by the Internet, whereby consumers can now explore back-catalogues and alternatives to the bestsellers and the more heavily marketed titles.

The long tail means that all books have a much longer shelf-life, their details existing in cyberspace long after they have been removed from bookshop shelves. They are therefore capable of continuing to sell for many years, or experiencing, perhaps through an Amazon recommendation, an unexpected sales burst.

Online traders have succeeded in enhancing the online book-buying experience, not just through recommendations but also through the provision of reviews, recommended reading lists and reader feedback. Amazon is a pioneer in developing the kind of technology that provides readers with so much more choice. Its `Recommended For You', `Customers who bought this item also bought' and `Customers interested in this title may also be interested in' selections, powered by database algorithms that track buying and selection patterns, considerably widen the selection possibilities of its browsers and can compete very well with the advantage physical bookshops have — i.e. of enabling customers to cruise their shelves, pulling out and browsing through a variety of books (but a more limited inventory) before making their purchasing decisions.

Supermarkets, on the other hand, unashamedly offer the more populist titles at the cheapest possible prices.

Bookseller chains have the advantage of also selling online, and many use Amazon to provide the `back-office' functionality of their sites, with their own branded `store front'. Waterstone's entered the online market in this way but, in September 2006, the company ended its 5-year agreement with Amazon and relaunched its own website, offering books from its own stocks, with recommendations provided by its own staff.

Table of Contents

Executive Summary
1. Introduction: REPORT FOCUS; DEFINITION
2. Strategic Overview: BACKGROUND; MARKET DYNAMICS AND SEGMENTATION; Market Share; Table 1: UK Book Retailers' Sales Changes (%), 2001-2005; Table 2: UK Retail Outlets' Market Share by Value (%), 2005; ebooks; Google versus the Publishers; Market Size; Table 3: Total UK Book Sales by Value at Current Prices (£m at rsp), 2001-2005; Table 4: UK Book Sales on the Internet by Value at Current Prices and Share of the Total Book Market (£m at rsp and %), 2001-2005; Table 5: UK Broadband Household Penetration (% of households), First Quarters 2004-2006; ebooks; DISTRIBUTION; Automating the Supply Chain; Door-to-Door Delivery; Main Suppliers; The Bertram Group Ltd; The Book Service Ltd/Grantham Book Services Ltd; Gardners Books Ltd; Macmillan Distribution Ltd; Customer Deliveries; COMPETITIVE STRUCTURE; Competition with Other Online Activities; Table 6: Hitwise UK Top 25 Most Popular Websites by Market Share (%), August 2006; ebook Readers; ADVERTISING; Table 7: Main Media Advertising Expenditure by Online and High-Street Bookshops and Other Booksellers (£000), Years Ending June 2005 and 2006; THE CONSUMER; Table 8: Internet Activities of Adults Who Have Accessed the Internet in the Last 3 Months (% of UK adults), 2006; Table 9: Adults Who Have Purchased Goods or Services Over the Internet (% of all UK adults and % of UK adults who have ever made purchases online), 2006; Table 10: Internet Purchases by UK Adults in the Past 12 Months (% of UK adults who had made purchases online), 2006; KEY SUPPLIERS AND TRADE ASSOCIATIONS; Publishers; Bertelsmann; Bloomsbury; Hachette; Holtzbrinck; News Corporation; Pearson; Reed Elsevier; Taylor & Francis; Thomson Corporation; Trade Associations; The Booksellers Association; The Independent Booksellers' Network Ltd; Independent Online Booksellers Association; The Publishers Association; MARKET FORECASTS; Table 11: Forecast Total UK Book Sales Value at Current Prices (£m at rsp and %), 2006-2010; Table 12: Forecast UK Book Sales on the Internet by Value at Current Prices and Share of the Total Book Market (£m at rsp and %), 2006-2010
3. The Consumer Market — New Books: BACKGROUND; Table 13: UK Book Retailers — Revenue, Number of Stores and Employees, and Market Share of Sales by Volume (£m, number and %), 2005; The `Long Tail'; Print on Demand; Literary Book Blogs; MARKET SIZE; Table 14: Market Share Trends by Value and Volume by Source of Purchase Overall (%), 2002-2005; Table 15: UK Manufacturers' Sales of Consumer Books by Type by Value and Volume (£000 and 000), 2001-2004; CONSUMER TRENDS; Table 16: Overall Book Purchasing Levels (% of respondents and number of books), 2005; Table 17: Book Buying in the UK (million, %, number and £), 2002-2005; Table 18: Motivations for Choosing Which Book to Read for Pleasure (% of respondents), February 2005; MARKETING ACTIVITY; Book Awards; Man Booker Prize for Fiction; Orange Prize for Fiction; Costa Book Awards; BBC Four Samuel Johnson Prize; The Bookseller Retail Awards; The Direct to Consumer Bookselling Company of the Year; The Nielsen Booknet Supply Chain Initiative of the Year; The HarperCollins Award for Expanding the Retail Market; Trade Fairs; Frankfurt Book Fair; The London Book Fair; Other Marketing Activities; COMPETITIVE ENVIRONMENT; Table 19: Top 20 UK Online Book Websites by Market Share of Hits (%), Week Ending 7th October 2006; ebooks; The Bookseller Awards — Reasons for Nomination
4. The Consumer Market — Used Books: BACKGROUND; MARKET SIZE; CONSUMER TRENDS; Those Who Do Not Buy New Books Purchase Second-Hand Books; The Literary Book Sector; Students; Darwin Online; MARKETING ACTIVITY; COMPETITIVE ENVIRONMENT; Electronic Books
5. The Academic and Schools Markets: BACKGROUND; MARKET SIZE; Table 20: UK Manufacturer's Sales of School, Academic and University Books by Value and Volume (£000 and 000), 2001-2004; Table 21: UK Manufacturers's Sales of Children's Books by Value and Volume (£000 and 000), 2001-2004; Table 22: The Public Libraries and School Library Services Market — Children's Books by Value and Volume (million and £m), 2002/2003-2005/2006; Table 23: UK Publishing of Books by Genre by Value and Volume (£m and 000), 2003 and 2004; Table 24: UK University Spending on Books by Total Expenditure by Type of University and Average Expenditure per Full-Time Student (£m and £), Academic Years 2000/2001-2004/2005; Table 25: Trends in UK Academic Library Spending on Books, Periodicals and Electronic Services (£m and %), Academic Years 1998/1999-2003/2004; CONSUMER TRENDS; Table 26: Importance of Textbooks to Learning and Understanding of Subject (% of respondents), 2005; Table 27: Source of Textbooks Purchased (%), 2005; Table 28: Average Prices of British Academic Books (£), Academic Years 2002/2003 and 2003/2004; MARKETING ACTIVITY; Children's Book Awards; Nestlé Children's Book Prizes; 9 to 11 Age Category; 6 to 8 Age Category; 5 and Under Age Category; The Carnegie/Kate Greenaway Medals; World Book Day; Open Books, Open Minds Scratchcard Campaign; COMPETITIVE ENVIRONMENT; ebook Services; Online Libraries; Student Services Online; Trade Suppliers
6. An International Perspective: MARKET DEVELOPMENTS; COMPETITIVE ENVIRONMENT; Table 29: The Top Ten UK Export Regions by Value (£m), 2003-2005; CONSUMER BEHAVIOUR; Table 30: Books, Magazines and e-Learning Material Purchased Over the Internet in the Past 12 Months by Selected EU Member State (%), 2004 and 2005
7. PEST Analysis: POLITicAL FACTORS; ECONOMIC FACTORS; SOCIAL FACTORS; TECHNologICAL FACTORS
8. Consumer Dynamics: OVERVIEW; INTERNET ACCESS; Have You Accessed The Internet In The Past 12 Months? (S1); Table 31: Internet Access in the Past 12 Months (% of respondents), 2006; ONLINE BOOK PURCHASing; I Sometimes Buy Books Online (S2); Table 32: Online Book Purchasing (% of respondents), 2006; I Have Purchased At Least One Book Online In The Past 12 Months (S3)/I Am More Likely To Buy A Book Over The Internet Than From A Bookstore (S4); Table 33: Online Book Purchase Behaviour and Intention (% of respondents), 2006; I Have Used The Internet To Find Books I Could Not Find Anywhere Else In The Past 12 Months (S5)/I Have Bought Books From Internet Sites Other Than Amazon In The Past 12 Months (S6); Table 34: Online Book Purchase Behaviour and Intention (% of respondents), 2006; MORE THAN JUST BROWSING; For Me, Buying Books Over The Internet Is More Convenient Than Going To A Bookstore (S7)/I Think There Is Much Greater Choice Of Books In An Internet Bookstore (S8); Table 35: Convenience and Choice of Buying Books Online (% of respondents), 2006; THE COST-CONSCIOUS; I Am More Likely To Buy A Book From A Supermarket Than On The Internet (S9); I Think Books Bought Over The Internet Are Generally Less Expensive Than Books Bought From A Bookstore (S10); Table 36: Buying Books from Supermarkets, and Attitudes Towards Cost of Buying Books Online (% of respondents), 2006; Are You Aware That Some Internet Sites Offer Free Downloads Of Classic Books? (S11); Table 37: Awareness of Free Classic-Book Downloads (% of respondents), 2006; CHOICE OF GENRE/ability to preview pages; I Am More Inclined To Buy Business Or Academic Or Self-Help Books Than Fiction Over The Internet (S12); I Would Buy More Books Over The Internet If I Could Read Some Of The Pages, Like You Can In A Bookstore (S13); Table 38: Book Buying by Genre and Buying Conditions (% of respondents), 2006; MAIL ORDER VERSUS THE INTERNET; I Belong To At Least One Mail-Order Book Club (S14)/I Sometimes Buy My Book Club Books From The Book Club's Website (S15); Table 39: Book Club Membership, and Purchasing from Book Club Websites (% of respondents), 2006
9. Supplier Profiles: ABEBOOKS INC; Corporate Strategy; Strengths and Weaknesses; New Product/Brand Development; Innovations; Appointments; Advertising; Distribution; Profitability; Future Company Developments; AMAZON; Corporate Strategy; Strengths and Weaknesses; New Product/Brand Development; Innovations; New Research; Appointments; Advertising; Distribution; Profitability; Table 40: Financial Results for Amazon.co.uk Ltd (£000), Years Ending 31st December 2002-2004; Future Company Developments; BLACKWELL UK LTD; Corporate Strategy; Strengths and Weaknesses; New Product/Brand Development; Innovations; New Research; Appointments; Advertising; Distribution; Profitability; Table 41: Financial Results for Blackwell UK Ltd (£000), Year Ending 29th June 2003, 53 Weeks Ending 3rd July 2004 and Year Ending 2nd July 2005; Future Company Developments; THE BOOK DEPOSITORY; Corporate Strategy; Strengths and Weaknesses; New Product/Brand Development; Innovations; New Research; Appointments; Advertising; Distribution; Profitability; Future Company Developments; THE BOOK PEOPLE LTD; Corporate Strategy; Strengths and Weaknesses; New Product/Brand Development; Innovations; New Research; Appointments; Advertising; Distribution; Profitability; Table 42: Financial Results for The Book People Ltd (£000), Years Ending 31st December 2003-2005; Future Company Developments; COUTTS INFORMATION SERVICES LTD; Corporate Strategy; Strengths and Weaknesses; New Product/Brand Development; Innovations; New Research; Appointments; Advertising; Distribution; Profitability; Table 43: Financial Results for Coutts Information Services Ltd (£000), Years Ending 31st December 2003-2005; Future Company Developments; GARDNERS BOOKS LTD; Corporate Strategy; Strengths and Weaknesses; New Product/Brand Development; Innovations; New Research; Appointments; Advertising; Distribution; Profitability; Table 44: Financial Results for Gardners Books Ltd (£000), Years Ending 29th February 2004 and 28th February 2005-2006; Future Company Developments; WATERSTONE'S BOOKSELLERS LTD; Corporate Strategy; Strengths and Weaknesses; New Product/Brand Development; Innovations; New Research; Appointments; Advertising; Distribution; Profitability; Table 45: Financial Results for Waterstone's Booksellers Ltd (£000), Year Ending 24th April 2004, 53 Weeks Ending 30th April 2005 and Year Ending 29th April 2006; Future Company Developments
10. The Future: OVERVIEW; MARKET FORECASTS; Table 46: Forecast Total UK Book Sales by Value at Current Prices and Book Sales on the Internet Share of Total Book Market (£m at rsp and %), 2006-2010
11. Consumer Confidence: METHODOLOGY; KEY FINDINGS THIS QUARTER; THE WILLINGNESS TO BORROW; Confidence Rebounds; Table A: The Average Amount Consumers Are Willing to Borrow in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), August 2005-2006; Fewer Adults Wish to Borrow; Table B: The Number of Adults Willing to Borrow in Order to Purchase Expensive Items (000 and %), August 2005-2006; SPENDING FROM SAVINGS; Strong Recovery in Spending from Savings; Table C: The Average Amount Consumers Are Willing to Spend from Savings in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), August 2005-2006; Savings Grow in Relative Importance; Table D: The Average Amounts Adults Are Confident Spending to Purchase Expensive Items (£ and %), August 2005-2006
11. Further Sources: Associations; Publications; Government Sources; General Sources; Other Sources; Bisnode Sources

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