Hear that? That’s the sound of Johannes Gutenberg rolling in his grave. Amazon, the very company that has done the most to disrupt the industry surrounding the printing press, has opened a physical bookstore.
Dustin Kurtz over at New Republic has a great review of what the company is billing as a “brick-and-mortar store without walls”: Amazon Books, located just outside a shopping mall named University Village in Seattle, comes with the company’s touch; reviews, ratings and all. Books are organised into stacks such as “Most Wish-listed Cookbooks”, customers can look at online reviews while physically browsing a book and the price of all inventory is determined by Amazon’s online algorithm, the one used for the company’s website.
Perhaps it’s only fitting that Amazon has finally opened a bookstore. The store’s existence shows us how developments in the publishing industry, which has often confused business analysts, have come full circle over the past ten years.
The all-too-familiar tale of digital disruption that we’ve seen play out in television (Netflix), transportation (Uber/Ola Cabs), accommodation (Airbnb) and music (iTunes, Spotify) hasn’t quite applied to the printed word. This isn’t to suggest, however, that Amazon is throwing in the towel and plans to open any more bookstores, or even pursue it as a serious strategy; only that the march of technological progress hasn’t followed its usual course.
The past: Worries of digital doom
Bookstores were disintermediated in two separate stages. The first stage was the rise of ‘e-commerce websites’ (a term that seems more antiquated every day), where customers could order physical books online and have them delivered straight to their homes. Two of the most prominent groups of book buyers – gift givers and readers who wanted the hottest young adult fiction title on the date of release – shifted over quickly. The rest followed, attracted by cheaper prices.
The next stage happened when Amazon co-founder Jeff Bezos stepped up on stage in 2007 to introduce the Kindle, a device that he assured people would “project an aura of bookishness” and would be less of “whizzy gizmo than an austere vessel of culture”.
E-book sales soared from 2008 to 2010 – one estimate puts it at as high as 1,260 percent – and many players within publishing industry started fearing for their lives. Questioning its own existence, American bookstore chain Barnes & Noble decided to play at dice and come out with its own e-reader, the Nook, in 2009.
Much of the anxiety and worry surrounding the industry reached its peak when bookstore chain Borders, a rival to Barnes & Noble, declared bankruptcy in 2011; though by that time Borders was more of a merchandising store and had unwisely invested millions into music and physical CDs in the years preceding the launch of iTunes.
In 2011, it appeared as if the digital transformation of the printed book (in developed Western markets at least) was well on its way to completion. Amazon announced that in the first half of 2011, sale of Kindle e-books had, for the first time, overtaken printed book sales in the U.S.
The present: Peak e-book?
From 2011 onwards, however, the initial boom in e-book sales started slowing down. The number of e-books sold in the US grew only by 43% in 2011 – which was no doubt great growth, but also a slight step-down from the triple digit growth of the previous three years. In the years after 2011, discounting a slight uptick in 2013, the growth of sales of e-books in most Western markets have remained in the low two-digits.
Like any other new product category, it appeared that that the first push of natural resistance towards digital books had started showing itself. Some of the more pessimistic observers pointed out that the e-book market could be heading towards saturation. While in 2010-11, digital books accounted for a little under 20% of the total book market in the US, by 2014, that number had changed to only a little over 20%.
To be fair, many of these estimates and figures are put out by the larger, more traditional publishers, and fail to take into account the boom in independent digital publishing (the space movie The Martian, which was released recently, was based on a book that was published through Kindle’s Direct Publishing initiative) that is being supported by Amazon.
Nevertheless, it’s clear that we aren’t witnessing a radical transformation of the printed book, the way Uber has changed transportation in the US, or the way e-mail and instant messaging fundamentally changed the way we communicate.
Figures released by Nielsen Bookscan, for instance, showed that the first 9 months of 2015 saw year-on-year growth for the overall UK print market, the first uptick since 2007. British book chain Waterstones, which finally saw print growth last December, has decided to stop selling Amazon Kindles in its store – in 2012, the company had launched a partnership with Amazon and had touted it as a way of surviving the digital future.
The printed book, therefore, isn’t suffering the quick, painful death that many thought it would back in 2008. E-books haven’t been able to claim a majority share of the overall book market. In fact, here we are in 2015, and Amazon has opened a bookstore!
What’s holding back a complete digital transformation, a transformation of the likes that we saw in the digital music market, even in India? Here are a few possibilities:
1) Price: This has perhaps been the most significant, and ultimately boring, factor. A number of analysts and publications are quick to point out that e-books aren’t a whole lot cheaper than their print counterparts. Even in India, for example, on Flipkart’s e-books section, the digital copy of Fifty Shades Darker is priced at Rs. 254: its physical counterpart is available for Rs.250. Customers who initially take the plunge in buying an e-reader may do so with the expectation of buying e-books for cheap and are usually left disappointed.
2) The rise of tablets: The popularity of the iPad was seen initially as a factor that would increase e-book sales. Tablets, however, distract the reader. On a tablet, there are a number of things that take up ones attention: e-mail, browsing, FaceTime, instant messaging etc. In a Kindle, the e-book ‘app’ is always on; on a tablet, it isn’t. If a consumer owns a dedicated e-reader, the probability of buying and reading more e-books is much higher. However, with tablets outnumbering the number of dedicated e-readers sold globally, this could be putting a dampener on the e-book revolution.
3) Digital literature and situations: We’re slowly starting to see that the digital format suits certain genres of literature and specific types of reading situations more than others. For instance, e-book sales reflect the fact that more people prefer to read fiction over non-fiction on their Kindles. Within fiction for instance, you also see greater preference for e-books in certain genres: Women over the age of 40 in the US report that they would rather read steamy novels in an e-book format.
On the other hand, there are a number of indications that students and readers prefer consuming non-fiction and academic textbooks in a print format. If I had to wager as to why that is so, it could be that the e-books, being digital, tend to make us skim words more easily; a habit that comes from our many years of website browsing. With textbooks and nonfiction, skimming is rarely an option.
On similar lines, perhaps we are starting to see that e-books are suitable for certain reading situations—for instance when travelling or when on an airplane. The advantages of e-books become less important, and in certain cases detrimental, when you look at other reading during other situations, such as curling up in bed on a cold, rainy night.
These reasons are the most interesting, simply because they indicate something inherent in the human condition and the way we interact with literature. It is for this reason that e-books may not wholly triumph; rather than being seen as a substitute for printed books, the way digital music replaced vinyl records, they may come to be seen as a complementary reading option.
The future: A wordy horizon
None of the above factors, however, indicate that the share of e-books as a portion of the overall book market will not continue to rise or even dominate in the near future. Amazon is trying to play around the publishing industry’s unwillingness to lower prices by introducing subscription services (Kindle Unlimited), the way Spotify did with music. The jury is still out on whether these services will succeed – one of the more prominent reading subscription companies (Oyster) recently shut down.
This also doesn’t take away from the damage that has been incurred by other players – publishers, and more importantly the owners of various bookstores.
The effects of e-book disruption are only just starting to be seen in India: in South India, Landmark has started the process of winding down, and in Delhi, residents were shocked to hear the recent news of Fact & Fiction closing down.
Will Amazon’s bookstore offer any useful advice or serve as a template to other booksellers who are looking to adapt to the digital age? In all likelihood, no: many of the design and inventory decisions currently being taken by Amazon are driven by largely public data (reviews, ratings and wish-lists), and can easily be adopted by other bookstores. If Amazon starts cracking into the private data it owns, data on shoppers in the Seattle region for instance, it could prove to be a competitive advantage.
There has been some speculation that the Amazon bookstore is a mirage, a Trojan, whose only purpose is to serve as general brand awareness, the way Microsoft has opened up several ‘experience’ stores across the United States. While this could be true, what would be far more devious is if Amazon is trying to crack at the relatively high percentage of books (roughly 50%, with a little over $7 billion in revenue) that are still being bought at physical stores.
Most bookstore owners spend sleepless nights grappling over a similar problem: customers come to bookstores to browse books, spend a few hours for the experience, and then go home and buy books online for a cheaper price.
Bookstores bear the operating cost of “selling” the physical book and providing readers with the bookstore experience, and the online seller (Amazon) usually reaps the rewards. While bookstores still do make some money, they also lose money due to online sales. An Amazon bookstore, on the other hand, will never lose to those nefarious online sellers that owners complain about – in the US, Amazon controls nearly 70% of the online book retail market.
If this is indeed Amazon’s plan, other bookstore owners will never be able to replicate its success; this is the classical ‘conglomerate leveraging its ecosystem success’ trick that Apple and Microsoft have done in the past.
What then is the future of the bookstore? Large bookstore chains have borne the brunt of the damage and will continue to do so, purely because of corporate greed and the need to constantly expand. A Tier-I city such as Chennai may not need more than two to three large book-chain bookstores. Furthermore, expanding into merchandise, perfume and music is usually a terrible way to go as they often lose their roots. What’s worse is that by no longer selling only books, their profit incentives no longer align with a high quality reader/user experience.
Independent bookstores, on the other hand, need to remember that they are institutions of a literary culture and provide an experience that creates a community around that. Several American bookstores have done such with great success – latest figures point out that the number of independent bookstores have increased from 1,651 in 2009 to 2,094 in 2014.
What must not be discounted are government measures in the form of rent and book price control – the anti-Amazon laws that have been enacted in France and across Europe have been partially successful and can look to be emulated in India. This will help smaller bookstores. As Ajit Vikram Singh, the owner of Delhi’s Fact & Fiction, pointed out in an interview, the change in the city’s rent control act was the last straw that killed Fact & Fiction.