When the Net Book Agreement (NBA) ended price maintenance in the UK book market in 1995, competitive marketing activity increased.
But the Internet has had a more significant impact on the consumer book marketing scene since.
Taylor Nelson Sofres (TNS) has teamed up with BookTrack, a retail measurement authority, to publish the first of a series of quarterly reports called The Net Effect. Monitoring the growth of online book buying since 1998, the report evaluates its impact on overall market performance.
Results show the Internet’s share of the total consumer market to July 2000 reached five per cent based on value, with most sales coming from the adult sector. The children’s sector is still small but growing.
Growth in the adult sector rocketed in the second half of 1999 but levelled off after March 2000. It is interesting to compare this with supermarkets’ share, which levelled off at six per cent in 1999 following fast growth in 1997 and 1998.
A major difference is that during the growth periods, the overall market was static with an annual value of &£1.7bn. However, since 1999 the market value has been increasing and, in the 52 weeks to July 2000, has reached almost &£1.8bn – four per cent up year on year.
The biggest short-term impact of the Internet has been its influence on competitive pricing. Since May 1999, average selling prices throughout the book market have fallen from &£7.29 to &£7.03, down three per cent.
In the direct-to-consumer market (excluding Internet) – mail order, book clubs and publisher direct – prices are down 14 per cent and, on the Internet, five per cent lower.
In packaged goods markets, particularly grocery, price competitiveness has been shown to be important to market success. The UK consumer book market is showing similar trends, with volume growth since May 1999 directly related to price-discounting levels.
The Internet, from a small base, shows massive growth, with an index of 788 based on 100 in May 1999. Retail, with an average price reduction of one per cent, shows the slowest volume growth with an index of 102.
The hype and price-promotion battle is producing growth, but the real threat is that this comes from a shrinking proportion of the population. In 1997/98, the cumulative annual consumer penetration – the proportion of the population purchasing a book – was 54 per cent. By July 2000, this had shrunk to 47 per cent. During this period, those buying on the Internet grew from negligible to three per cent.
The Net is achieving this growth by cannibalising consumer purchasing in competitive sales channels. TNS information shows the most vulnerable channel overall is consumer direct (excluding Internet), where penetration is down 11 per cent. But the most threatened are independent/specialist book shops.
The average number of books bought per year has increased in the past three years – up from 10.4 to 12 – resulting in average expenditure rising 13 per cent to &£84.88. The threat is that there is an increasing reliance on fewer, but heavier, buyers to drive market growth. In the UK consumer book market overall, through all channels of sale, heavy buyers are defined as those purchasing 15 books or more a year – only 7.5 per cent of buyers.
On the Internet, this heavy buyer element accounts for 22 per cent. The data shows heavy buyers are most influenced by price discounting and are promiscuous.As the impact of the Net increases with rising accessibility, this is a serious threat to market expansion.
In the past year, it has been the specialist and reference categories which have topped Internet sales. Computer technology, unsurprisingly, accounts for 20 per cent of Internet sales – over four times the level in the total market.
But cookery and drink account for 7.5 per cent on the Internet, significantly higher than its level overall. Fiction accounts for only 16 per cent of the Net’s sales value at present, compared with 29 per cent of the total market.
Market growth since 1999 is not just related to the Internet and price discounting. Publishers are focusing marketing activity on authors and on titles with media support – the JK Rowling and Harry Potter phenomenon, and Jamie Oliver and the Return of The Naked Chef, are the two most recent examples.
Stimulating an expansion in the percentage of the population buying books to back over 50 per cent will provide longer term market growth. Publishers’ marketing successes are more likely to achieve this than further in-roads from the growth of the Internet.
Factfile is edited by Julia Day. Philip Wisson, book trade consultant, contributed