Rocket Bomber - article - retail - business - Bookstores and Bookselling in Graphs - 1992 to 2010 - with some other stuff


Bookstores and Bookselling in Graphs, 1992 to 2010, with some other stuff

filed under , 25 May 2011, 19:46 by

The US Census Bureau has been reporting retail sales numbers on a monthly basis since January of 1992.
http://www.census.gov/retail/

It’s not just about having the numbers. It’s not even the way the USCB breaks retail down into convenient categories, like books. But if you have the numbers, and a little time (and in my case, sufficient beer to keep the brain lubricated while churning data)
…well, the nice thing is being able to visualize almost 20 years of dynamic change in an industry in a single graph

Please note: while I go back to 1992 because those are the earliest numbers available, 1992 is handy because that’s just before the major chains (B&N and Borders) exploded across the suburbs, with new big box bookstores springing up like mushrooms every week. [Barnes & Noble went from 203 “superstores” in 1993 to a peak of 726 big boxes in 2008; Borders went from just 44 superstores to 515 over the same period.]

Of course book stores were also closing, particularly smaller independents and mall locations. Barnes & Noble was closing B.Daltons by the hundreds annually, closing the last of them in 2009. Borders also closed their smaller outlets, but has been much more confident in the Waldenbooks chain; the recent store closings have all been Borders Superstores (more than 200 of them) — but the surviving Waldenbooks have been left largely intact. (I might be tempted to guess they don’t want to shrink Waldenbooks any further as that would make it more difficult to sell them as a unit)

The first chart tells a story of an industry undergrowing massive growth, doubling from 8.3 Billion to 16.8 Billion in just 12 years; hitting a peak of 17.2 Billion in 2007, before the current recession. The past 5 years seem like a minor blip, or maybe a bit of a plateau before future continued growth.

Maybe you can sense there’s a ‘but’ coming…

Let me adjust for inflation — just an quick calculation using the numbers pulled from http://www.westegg.com/inflation/

After adjusting for inflation, 2005 was a definite peak and book stores are struggling — struggling every month, getting worse year after year.

##

Someone is going to come back with e-books, right? “Well this obviously proves e-books are killing bookstores”

Except that ebooks sales were miniscule until Dec. 2009 – and the much-vaunted Kindle wasn’t even introduced until 2007. The graph shows the decline started the year before.

Was it Amazon? Amazon is a problem, and Amazon sales are certainly growing by billions year after year

but their growth in “Media” is much slower than the growth in overall revenue — and is shrinking as a percentage of total sales over time

I would say those that conflate “Amazon” with “books” and “ebooks” might need to make some mental realignments and redefine their terms: Amazon only makes half their money off of sales of “Media” and only 20% from media sales in the US. Amazon, as a website and as a company, is more than a bookstore.

Oh, Amazon is still eating my lunch: Amazon Media Sales exceeded Trade Book Store sales for the first time in Q3 2010; a feat they matched in Q4.

to produce this one, I had to really work the data – Amazon only reports sales results quarterly, and only breaks down sales by category in their annual reports. Media includes digital downloads (not just e-books, but all that music and even the occasional video) and also includes sales of music, movies, and video games on physical media — you know: discs. I’ve done my level best to tease out Just the Book Sales by comparing Amazon to the overall market and ended up frustrated. My best guess is above.

On the book side, I used the publisher’s reported revenue [http://www.publishers.org] to adjust the monthly Census Bureau retail number — taking the Billions of dollars’ worth of college text books out of the equation. The results are much more striking on a monthly basis [with dramatic reductions in January and August, with a smaller but still noticeable effect on September and December] — matching the Census numbers to Amazon’s quarterly reporting averages out the effect over the whole year.

So, even considering that trade book sales are only half of overall bookstore retail and that Amazon’s sales continue to grow year on year — well,

Amazon is not your local bookstore yet. Their market share of physical books is growing slowly, not explosively, and I might even be able to argue that Amazon’s sales of old-school-paper-books has been mostly flat, growing only modestly, and their market share since 2005 is growing only because book store sales shrank. —oh, a gain is still a gain, and a book sold by Amazon is a lost customer for me, but Amazon is doing nothing special and nothing different from what they did—for books—in 1997.

There is no way for anyone to really know until the economy improves and consumer confidence (and spending) finally gets back to 2007 levels. Ask me again in 5 years.

It also remains to be seen how much ebooks will continue to cannabalize physical book sales, both in stores and online. It is Amazon’s own admission that they sell more e-books than books.

##

The recession didn’t hit until 2008; book store sales began sliding 2 years earlier. Why?

I don’t know, but I have two theories.

First: consumer spending took a hit in 2006 because credit card regulations changed, and suddenly everyone (well, everyone still using credit cards) had to rethink all of their spending. Discretionary purchases (like books) took a hit first.

http://www.dailykos.com/story/2005/08/20/139986/-Your-Credits-The-October-Surprise-2005
http://mooreslore.corante.com/archives/2005/08/21/dating_the_next_recession.php
http://useconomy.about.com/b/2010/05/12/how-2005-bankruptcy-bill-led-to-recession.htm

The other explanation is much harder to swallow, and has implications for the long term health of my industry:

Kids aren’t reading. Well, of course they’re reading but they look at a screen, not a page.

The Consumer Expenditure Survey program [http://www.bls.gov/cex/] consists of two surveys, the Quarterly Interview Survey and the Diary Survey, that provide information on the buying habits of American consumers, including data on their expenditures, income, and consumer unit (families and single consumers) characteristics. The survey data are collected for the Bureau of Labor Statistics by the U.S. Census Bureau.

That top line is total spending on reading, in Billions. Note the downward trend, and note the loss of about $3 Billion over the last 10 years. That’s all you need to know. No need to blame Amazon, or E-books — this is a much larger trend, visible across all age demographics.

It isn’t just that the kids aren’t reading—though they aren’t—much more disturbing is the slope on the next two brackets, the Under 45 and Under 35 sets.

The Bad News: Even ebooks are competing for a shrinking market.

The Good News: Even if all current trends continue: reading is still going to be a $10 Billion Market 10 years from now — and ebooks and the internet are inventing new forms of ‘reading’ and building new markets even as you read this.

It’s not only about competing for readers, but also just competing for eyeballs. Games, movies, online video, blogs, aggregators, and social media — the much bigger market is the Attention Economy: How do we get people to spend time with us, and with our product?

Here is where bookstores have an advantage over Amazon:

people are here in the store using our wifi for hours every day — they come back day after day — some folks only come once a week but they stay all afternoon. Folks coming in for “just a book” only leave hours later. Bookstores are ‘sticky’ in a way that many websites wish they could be. Of course, we provide the chairs and tables, the browsing and atmosphere for free.

How do we monetize this? Can we monetize this? Is there a value for bookstores that has nothing to do with books? Is there value in providing a public space? Can we do more than just sell coffee?

##

I don’t have an answer for this. Or at least, I don’t have a single, definitive answer; I just have a lot of ideas and a lot of questions.

Pessimists will look at the charts posted above and say, obviously the book business is dying. I think it’s more a matter of coming off of an awesome high in the 90s, and rediscovering a business model that is more reasonable or sustainable — or finding a new use for this massive bookstore platform moving forward.

There are about 1500 or so Big Box Bookstores all across the country; more than half are already making the rent, even if we can’t quite please investors with massive profits.

Say only 500 locations are truly worthwhile, and worth keeping open on a self-sustaining basis for the next decade: that’s a hell of a lot of prime real estate that hundreds of thousands of people visit regularly — the longer they’ve been open, the more valuable they are. Bookstores also have a bit of a ‘halo effect’, as we are already associated with learning, knowledge, literacy, culture, and entertainment. Bluntly: We’re known for books, and even if you don’t read them, you know about books.

Apple [The Almighty, can-do-no-wrong APPL] only has 312 stores. Apple has it’s own thing going on; apparently their products key into the same neurons as religious cultists or obsessive hobbyists and hoarders.

But if you were trying to compete with Apple, wouldn’t it be handy to have a retail platform like a bookstore, with free wifi already in place and millions of square feet nationwide and an established brand, and locations your customers already know about, and have already visited in the past?



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