TeleRead: Bring the E-Books Home

Death of the big box—and an e-book angle

By Michael Cairns, former President, Bowker

Moderator’s note: At the end I’ll add my own thoughts on what this could mean for e-books. - D.R.

Travel up Route 17 in northern New Jersey and you traverse the spectrum of big box retailing. These stores—from Ikea to K-mart—represent the shop windows on late 20th century retailing; but, in contrast to their apparent ubiquity, the days of the stand-alone big box retailer may be numbered.

Many years ago I saw some old photos of Route 17 and was shocked to learn it used to be a four lane (two each side) parkway with a wide grass median strip bisecting its length. Today it is a clogged eight-lane shopping aisle and is just one of similar examples across the United States from Rockville Pike in MD to Beach Boulevard in Orange County, California.

Fewer B & N boxes?

So what does this mean for the book industry? Barnes and Noble, on its call a week ago, noted that many of their leases are coming due and these will be renegotiated at lower rates. While that sounds like good news to shareholders, the current dire economic situation coupled with the Borders situation will result in a significant reduction in superstore locations. Projecting current physical retailing trends will make many current locations simply unprofitable even at significantly lower rents. We may be witnessing the demise of the suburban book superstore and suburban consumers may be indifferent. Online retailing is going to be the huge winner across all retail segments, but particularly in book retailing.

We have a perfect storm: An excess of media options reducing the time traditionally spent reading books, the economic slow down reducing all spending, the increasing acceptance and comfort of online retailing to virtually all consumers, and the advent of the online superstore which encourages a cost-conscious basket approach to consumption.

Buying everything online

Increasingly all of us—not just those of us who have been checking our bank account and buying airline tickets online for years—will be buying everything online, at the best combination of pricing and free delivery, and all without dealing with the expense and hassle of traveling.

Multi-store malls will continue to live on for many years. In contrast, we will see many large, empty retailing boxes punctuating the sides of our traditional highway shopping aisles. Already this year, the big-box retailing environment is dire with a range of store liquidations and bankruptcies from Linen & Things to Circuit City. In years past, other retailers would fill these spaces with their new formats or new concepts, but those days are gone never to return. Retailing innovation, to the extent that it exists, is emerging on the Web but not in physical retailing. The big losers will be the real estate owners who won’t be able to find tenants (there are only so many ice rinks or roller rinks you can have in any one community).

Pushed over an imaginary Rubicon

Superstore physical book retailing, particularly its suburban version, may be a casualty. For a strong retailer like Barnes & Noble, there will be plenty of time to adapt but others will fail. The current recession is going to change many things, and some business segments just won’t recover as consumers transfer all their shopping online. The economic crisis will push retailing over an imaginary Rubicon: More physical stores are unprofitable so they close, which reduces consumer access and pushes the consumer online. The cycle repeats itself and big-box book retailing will be no different. Ironically, big-box retailing made shopping convenient for suburbanites, and retailers chased the consumer diaspora with vigor. The convenience that suburbanites sought is now the demise of the same retailers that promoted convenience. Physical can’t compete with virtual. Tant pis.

Some good news

But perhaps it’s not all bad news. Mitigation may be driven by a population migration back into city centers which is most apparent in big cities like NYC, Washington and even Los Angeles. Couple this urban population growth with the daily office crowd and we have the re-genesis of an old phenomena: Main Street shopping, which doesn’t attempt to compete with the Web stores’ abundance but serves deeper consumer needs. Retailing on a small scale operating with smaller inventories that turn rapidly, defined as "scarcity’" merchandising. The notion that if you don’t buy it now it will be gone —which is the philosophy of The Gap, The Limited and some others.

Best-seller fixation: Last hurrah?

Books are sold exceptionally well online but their merchandising could adapt to smaller format retailing. Urban book retailing will continue to be dominated by chains; costs will simply be prohibitive for independents to support sophisticated merchandising and supply chains that will be needed in the type of retail environment foreseen. Regardless, store size will shrink as the inventory mix skews to movie-style "openings" and "events" designed to bring in a volume of buyers in a short time frame. A publisher once told me that if he owned a store he would only stock 40 best sellers. That concept (or a variation) will become the next phase in physical book retailing. Will it be the last hurrah?

Moderator: The e-book angle is obvious. I love p-book stores, but the industry needs other forms of distribution—especially for midlist and backlist titles that small p-stores may not carry. In time, of course, local POD will make it possible for even tiny p-stores to offer an unlimited number of titles, but E still could help. Consider the recession and so many readers’ wish to economize with lower-priced electronic editions if hardware prices drop and screen quality goes up. What’s more, even with POD, many midlist titles could suffer since readers will have to discover them. - D.R.