Tuesday, February 22, 2011
More Whitcoulls background
I have not seen anyone anywhere mention what must have been the craziest decision made by any bookshop in my experience: Whitcoulls, under their Australian “private investment group” ownership.
As anyone in the trade knows, New Zealand law for years has insisted that publishers cannot set the retail price of books, but can print on each book a recommended retail price—allowing open retail competition, with each retailer setting its own price. Because national retail chains have traditionally been a country’s biggest seller of any popular line, they have bought at maximum discounts. In spite of this, from late 2008 Whitcoulls—prersumably by a head office decision—decided to sell at least major new hard-cover books at above the recommended retail price: by my estimate, 14% above the rrp.
Thus a high-quality, full-colour New Zealand book, with a recommended retail price of $49.95 (the price sold at PaperPlus), has since then been priced in Whitcoulls at $57.
For anyone interested in buying Whitcoulls from the “administrator”, that pricing policy is NOT the way to complete with online book retailers, or even your main bookstore competitors.
By contrast, in 1998 when the second, hard-cover edition of our book, The Learning Revolution (544-pages, one colour), was published in America with a recommended retail price of US$30, Amazon.com bought copies from the publisher for US$22 each and sold them for $19.
How could they do that without going bust? Simple: After launching in 1995, Amazon “went public” with an IPO (initial public offering) of 8 million shares (a small percentage of total stock holding) at US $18 a share. This raised $54 million in cash. By the following day the stock was trading at $25.50, which valued the company then at $438 million.
By last year, its global revenue was US$34.2 billion, with a net profit of US$1.152 billion.
Mind you, from the hourly fees of the Whitcoulls-Borders administrators (this morning’s New Zealand Herald), there may be more income from supervising a bookshop under “administration” than in actually running one.
PS: So how does a publisher make a profit if Amazon sells a book online for $2 less than they paid for it? In 1998, we spent NZ$10,000 producing a full-colour CD-rom, which—for 10,000 copies— even then could be mass-duplicated for $1 each; now nearer 50 cents. Then we sold, as a catalogue special: “$30 book and $30 CD-rom: $60 value for only $30”, including shipping and packaging. If the “administrator” wants to know more, expertise (as he would appreciate) is available—at a price, and an email: email@example.com