Can Indie Bookstores Be Saved?
There are now about 2,000 bricks-and-mortar independent bookstores in the U.S. That’s up from about 1,500 a few years ago but way down from the mid-1990s when there were over 7,000.
What has decimated the numbers of your cozy, neighborhood bookshop is the triple threat of big-box stores (namely Barnes & Noble), online retailers (namely Amazon) and the rising popularity of ebooks.
Until recently, indie bookstores didn’t really have a way to compete in the world of ebooks. In Oct., hundreds of them started selling Kobo devices and ebooks and in just the first month they sold more ebooks with Kobo than indies did with Google in two years of a similar partnership.
The problem is, the profit margins on the devices and ebooks are so small that an indie bookstore will have to achieve significant scale for ebooks to become a meaningful part of their business. To make matters worse, prices are going ever lower, making that slim profit margin that much more of a problem: 10% on a $100 item is $10 in your pocket; 10% on an $8 item is $0.80. The latter is the kind of number that indie bookstores are dealing with every time they sell an ebook.
In a nice post that sythesizes some of these problems and looks about bricks-and-mortar and online indies, lawyer, power-reader and publishing industry observer Jane Litte thinks that digital rights management software, which limits the ways a digital file can be used and transferred is the problem:
Ebook retailing is not for the faint of heart. Digital rights management which can eat up to 6% of any retail margin also causes the biggest headaches. For independent ebookstore, All Romance eBooks, the majority of their technical support is directed toward helping readers with DRM issues even though those sales represent a tiny fraction of overall book sales.
While DRM can be onerous for e-bookstores, eliminating it is not a silver bullet for fledgling ebook retail operations struggling to survive.
In the past few weeks, I’ve spoken with about a dozen indie bookstore owners and I’ve been watching as the online indies struggle.
The profit margins on ebooks are very slim and the prices are going ever lower. You have to sell a whole lot of them to support a business, regardless of whether its costs are salaries and servers or rent and heating/cooling bills.
Things like changes in DRM could help online indies but won’t solve their larger problem (as stated above). I think what could solve it is execution. Amazon offers the best customer experience right now for most readers of ebooks. Stores like Zola and Bookish, if they’re going to make it, need to at the very least match that experience.
On the bricks-and-mortar side, I think the hope for some of these retailers to achieve exit velocity on their ebook businesses is to sell enough devices to create digital repeat customers. So far, it’s slow, but if a store can get up to selling, say, 500 or 1,000 ebooks a month, it could start to become a viable part of their business. The device side will never be more than a way to get that ebook/month number up.
For that to happen, I think it’s up to Kobo to make a big push in the U.S. Very few people know about Kobo here and the devices are, frankly, a year behind the competition. The Arc tablets, especially, are not selling at all in the indie bookstores. The company’s move to now sell its readers online was puzzling for some of the bookstore owners who see it as competition that will undercut their own nascent efforts. Probably in most cases that’s not true, but I can’t blame them for thinking that way. Not a great signal to send by Kobo.
Honestly, the sad truth about ebook sales right now is that it’s going to be very hard for anyone small with any kind of cost structure and a need to turn a profit soon to compete against the already-established players.