Bookselling: International Market Comparisons A Benchmark Study of Profitability
Bookselling: International Market Comparisons - A Benchmark Study of Profitability
is available free to all BA members and at a cost of £100 to non-members.
BA Members – Please go to Login page to download the report.
Non-Members – Please download the Order Form and return with your payment and a PDF copy will be emailed on receipt.
Order FormBookselling: International Market Comparisons A Benchmark Study of Profitability
Report reveals UK bookselling poor relation in global market
London November 21st 2008: The Booksellers Association of the United Kingdom and Ireland (BA) today launched its Benchmarking Study, authored by retail experts Sarah Charles and Tim Ingle. The purpose of the study was to analyse how other bookselling markets operate in order to provide insight to UK booksellers on possible causes of differences in profitability. The report compares the UK bookselling market to that of the Netherlands, Ireland, Sweden, Finland, and the USA and specifically considers the changes in market volume and value growth, industry and bookshop profitability and key profit drivers such as competition, pricing, promotions, discounts and costs. The report also briefly explores the related UK retail markets for CDs, DVDs and stationery.
The study included both academic and trade sectors although the findings focus particularly on the trade (consumer) sector (defined as bookshops which primarily sell fiction, non-fiction/reference and children’s books to the general public). The report recognises that there is a significant blurring across the boundaries of the academic and trade sectors, partly because many books do not fall neatly into a single category and partly because booksellers and other distribution channels may sell both consumer and academic titles.
The UK is suffering from a ‘triple whammy' of declining prices, declining volumes and rising costs…
The study drew on a combination of published information, a bespoke online survey, and face-to-face interviews with trades associations and other experts in each of the markets studied. Although the findings of the study are qualified by significant limitations and constraints in the data available, there are clear indications that the UK is suffering from a ‘triple whammy’ of declining prices, declining volumes and rising costs. The UK market is more competitive, and has lower-than-average levels of profitability for booksellers. Relative to other markets studied, the UK is more fragmented with greater on-line and supermarket share, which many survey respondents perceived to have significant influence on sector performance.
Key findings from the report include:
- Total UK market growth appears to be one of the slowest in the sample. Although volume in consumer books has grown at around 2.1% per annum between 2004 and 2007, the value of books in the UK has grown by 2.3% per annum at current prices. All the markets for which estimates were produced appear to have grown in value with the exception of the Swedish academic market where volumes have been flat and prices declined slightly.
- The use of promotions and discounts creates a ‘vicious circle’ for UK booksellers. The US and the UK make significant use of promotions and discounts but this does not translate into higher growth in volumes when compared to other markets studied. The UK has the lowest growth in market value while the US has managed to achieve higher value growth reflecting their ability to increase average prices despite their use of promotions and discounts. UK industry profitability is the lowest of the markets studied, on a par with Sweden which is also a ‘high user’ of promotions and discounts.
- On-line and supermarkets have a more significant influence on booksellers in the UK. The UK has higher per capita book purchases than all markets except the US but the lowest profitability along with Sweden. The study estimates that the volume of books sold through UK bookshops declined by about 10% over the period between 2004 and 2007as loss of market share to other channels outstripped market growth. UK booksellers identified a nearly even balance between on-line retailers and supermarkets as the key influencers of bookseller profitability through their impact on pricing.
- Low prices and low gross margins in the UK combine to drive the lowest gross profit per book in the sample. Even with 0% VAT on books in the UK and Ireland, the average gross profit per book is lower than all the other markets due to low margins in both countries as well as low prices in the UK. At the other end of the spectrum the Netherlands benefits from higher prices and better margins despite 6% VAT on books. However, the fixed price agreement in the Netherlands means that books cannot be sold at a discount until a year after release.
- UK bookshops offer a narrower product range with a lower weighted average gross margin than most other markets. It is estimated that on average across UK independent bookshops and book chains approximately 25% of revenue is generated from sales of goods other than books, personal stationery, gift cards, newspapers and magazines. In other markets studied, non-book sales account for 30-35% of revenue.
- Independent booksellers in the UK do not cooperate as much as in other markets. In the Netherlands, booksellers support an independent foundation which organises high profile marketing campaigns. Independent booksellers in Finland and Sweden collaborate strongly in buying and marketing. Although wholesalers in the UK facilitate buying groups there is greater benefit to the independents in other markets.
Sarah Charles
Sarah is an independent advisor working with companies in the UK, Europe and the Middle East to provide practical strategic solutions to complex problems. Her clients are customer focussed organisations and she has assisted them in a variety of engagements including market studies, transaction support, market and partner selection and negotiation for international expansion, customer surveys, organisation studies and management assessment.
Sarah retired from the UK Partnership of KPMG in September 2006 after 17 years. A retail specialist, she led the Retail practice in the UK and across Europe for 5 years and led the Consumer and Industrial Markets consulting practice within Transaction Services for 8 years.
Tim Ingle
Tim is an independent advisor specialising in business strategy, organisational design, performance improvement and change management. His experience spans a broad range of sectors and his clients include blue chip corporations, financial investors and government bodies.