Race to the bottom – Amazon, Wal-Mart see who can sell the cheapest books

If you’re looking for dirt-cheap prices on a few upcoming major hardcover book releases, then you’re in luck. Online giant Amazon.com (full disclosure – I’m an Amazon affiliate) and retail giant Wal-Mart are in a heated price war over upcoming titles by some heavy-hitting authors.

For consumers, this is great, especially for the upcoming holiday season right around the corner. Major titles to be released are Stephen King’s Under the Dome; John Grisham’s Ford Country; and James Patterson’s I, Alex Cross – the latest in his ongoing series. For booksellers, publishers and authors though, this is a worrisome trend.

The independent bookstores will probably hurt the most. They have been battered for years now by big book chains like Barnes & Noble and Borders. But with prices as low as $8.99 on these major new titles, the indie stores just can’t compete. I doubt most indie bookshops will even bother stocking these books, as they can’t afford to discount them enough to draw in customers and still make a profit.

However, the one ace-in-the-hole that independent bookstores have is that they usually stock book by indie publishers and obscure authors. I imagine people who shop at these stores are more interested in the obscure than the latest in pop fiction.

Ironically, the move by Wal-Mart and Amazon will also hurt Barnes & Noble and Borders. A store like Wal-Mart can buy large quantities of these titles to negotiate a cheaper price. They can sell the books cheaply on the idea that a customer will go to the store to buy the book and buy other stuff as well, offsetting the cost of the deep discount. The chain bookstores don’t have the vast assortment of products with higher profit margins to support deeply discounted books.

Now it seems, there is a race to the bottom: Who can sell the cheapest books? According to this New York Times article, this is just one more blow to a publishing industry already worried about cheap ebooks:

Wal-Mart’s move, and Amazon’s reaction, signaled a new threshold in price cutting for books and left publishing insiders wondering how low it would go when the beleaguered industry is already worried about the effect of $9.99 e-books and a slowdown in book sales over all.

The other concern is this might get penny-pinching customers use to cheap book prices, even on new titles:

“If readers come to believe that the value of a new book is $10, publishing as we know it is over,” said David Gernert, Mr. Grisham’s literary agent. “If you can buy Stephen King’s new novel or John Grisham’s ‘Ford County’ for $10, why would you buy a brilliant first novel for $25? I think we underestimate the effect to which extremely discounted best sellers take the consumer’s attention away from emerging writers.”

My take is this: It’s simply not sustainable to sell new hardcover books at these ultra-cheap prices. Hardcover books are expensive to print and distribute, so publishers have to recoup their costs somehow so they can stay in business and the authors can get paid.

The ebook effect

I don’t think comparing cheap hardcovers to cheap ebooks makes sense. As a percentage of the publishing industry, ebooks are still a small (but growing) segment. There are still a lot of dedicated die-hard print book fans who hate the idea of ebooks. Also, ebooks have the advantage of ‘infinite supply’.

Once the ebook is actually produced, the more that are sold, the higher the profit margin goes up. Thus, if ebook consumers get used to cheaper prices, that’s okay because of the whole infinite supply idea. The ebook consumer buys more ebooks at the reduced price, the publisher gets a higher profit, everyone wins!

Hardcovers don’t have that luxury. Only a finite supply of hardcovers can be produced and shipped. To make a profit, a lot of hardcovers need to sell. This is one reason why large publishing houses are reluctant to take a chance on a new author.

What do you think of the current book price war between Amazon, Wal-Mart and now Target? Is this a disaster waiting to happen, or a temporary fix to increase sales for the holiday shopping season? Leave a comment below and share your thoughts!

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