Quote:
Originally Posted by Penforhire
It isn't a unique lack of vision. It seems older industries often fail to embrace paradigm shifts (thinking of the player-piano & live music business versus early radio too!).
|
The classic economics case study is the collapse of the US Railroad business.
The railroad operators literally failed to recognize that they weren't in the railway business, but in the transportation business, and that interstates + cheap cars = no passenger rail business.
To an extent, B&M retailers are facing the same delusion; confusing the delivery medium with the product. They still think they are in the book business, that the dead tree pulp medium is the product. In their case, their true product has always been *access* to the books, not the books themselves. People who shop at B&M stores are doing it because they prefer the experience, not because they're unaware that the same product can be found cheaper elsewhere.
It's all a matter of added value. Or lack there-of.
The superstores killed off the non-chain bookstores because they had the back-end logistics chain to command volume discounts and efficiently maintain and distribute large catalogs of product with a lower overhead than their smaller competitors. Without a compelling value-add to justify their price structure, the smaller competitors faded.
But the same consolidation and logistics principles that helped the superstores dominate the B&M landscape turned out to be their undoing because the online vendors and the department store chains could be even *more* efficient with lower overhead. And if the name of the game was to move massive amounts of dead tree pulp as efficiently as possible to maximize the discount and total revenue, skipping the overhead of hundreds of expensive storefronts is clearly the way to go.
Just as the interstates changed the value equation for personal transportation, the internet has changed the value equation for dry goods retailing. The industry as a whole is still trying (and mostly failing) to come to grips with the reality that the book industry has essentially fractured into two parts; one selling high profile commodity "bestsellers" with universal availability at launch that generates the bulk of the industry's revenues, and the other a smaller, neglected business of selling (relatively) low-volume genre and niche content.
The BPHs and the B&M chains have hitched their wagons to the commodity side of the business and are now seeing what happens to commodity product retailers; volume becomes their life. They are forced into a never-ending struggle to trim costs so they can price match their competitors' ever-dropping pricing. The result is a death-spiral for all but the most efficient player. The nominal product itself (the book) ceases to matter, the real product becomes the *access* to the book. Without added-value services attached to the core product or higher margin tag-along sales the leaner, meaner players win. And when it comes to buyers of commodity bestsellers, even the chain superstore have little value to add.
If you want a copy of a given hot NYT bestseller you can get it just as easily at WalMart or Target, if you prefer immediate local access, as at a Borders or B&N. It'll be the exact same product. At a lower price. And typical buyers of this content are solely interested in the one book, the one they saw on Oprah or the evening news; they're not going to spend an hour strolling the aisle looking for something else to read, they acrue no added value from the deep catalog at the bookstore. If they buy something else along the way they are just as likely to buy a box of chocolates or a case of beer as they are to pick up clothing or detergent. The added value, if any, is from getting the book on the way to the counter with the new BD Movie releases.
Conversely, other buyers of the same content don't care if they get the book immediately and find that online storefronts meet their needs just fine. The value-add lies in the price and convenience of home shopping. No need to drive anywhere; just click, save, and wait.
For all that fans of B&M bookstores wax poetic about the joy of wandering the racks (and I rather enjoy it myself) the fact is that a business that relies on volume sales of high-profile commodity titles doesn't need (nor can it *afford*) those deep library-like racks. The bookstore costs come from trying to sell one type of product while their revenue is coming from another. Their business model simply makes no economic sense.
If Borders goes under, B&N merely gets a temporary reprieve, because their problem isn't just those pesky Borders stores across the street of 70% of their sites; it's their core business model. As long as the industry as a whole gets the bulk of its revenue from the commodity NYT blockbusters instead of cultivating the deep and wide backlist and midlist, they will be under unending pressure from the department stores and online vendors. They need to transition to higher margin product or find a way to deliver added value enough to break out of the commodity-pricing death spiral they find themselves in. Preferably both.
And, as noted elsewhere, all these issues facing the two chains are separate and distinct from the mainstreaming of ebooks. The ebook transition is simply the last straw that will break the camel's back by simply siphoning away a fraction (and just a fraction) of the best customers. It doesn't have to be a big fraction in raw numbers before the loss eats away the sliver of profitability of the storefront.
When you live by sales volume, you die by sales volume.
And the day of the superstore chain is just about done.
It's all a matter of time, now.
It might be months, it might be a decade before the final obit, but the patient is terminal.