The $9 Hardcover

[Christopher Valen]

I wonder if there was any talk among authors at Boucheron (or anywhere else for that matter) about Walmart's recent decision to launch an online price war with Amazon and the nation's book retailers by pricing the latest hardcovers by Dean Koontz, Stephen King and others for $9. If Walmart is able to sell hardcovers at a loss, they could drive Barnes & Noble, Borders and other retailers out of business, just like they did to many local merchants years ago. Walmart's decision could have a profound impact on authors and publishers nationwide.

[I. J. Parker]

Yes. Not that I'm interested in supporting B&N and Borders. But the end result is that fewer and fewer authors will make more and more money. Nobody else will get published.

Unless the electronic thing takes off.

[B.R.Stateham]

I dunno. Walmart be be cutting their own throats. There profit-margin is barely 3%--if that. So if they're betting they're going to get a higher traffic by lowering prices on just a few of the top sellers, they might instead, lose their shirts.

What'll be the final say in this is how publisher and distributors react to this.

[Christopher Valen]

B.R.
It's my understanding that Walmart is also cutting online prices in half for 200 current bestsellers. They're able to do this because they sell enough products in enough categories to make up any losses on individual items. How long this pricing will continue is anyone's guess. But given their track record of success, I think Walmart gambled because they thought it would pay off.

[Daniel Hatadi]

I've always heard that the big department stores treated books as a loss-leader, ie they're a way to get people in the store. Still, this polarisation of the market worries me.

[B.R.Stateham]

I agree it is a gamble for them.

[Jon Loomis]

They won't be able to sustain it for long unless the publishers play ball, which will also take a significant chunk out of the publishers' bottom line. If they're smart, they'll tell WalMart to stuff it--it's not like they can go get the same books cheaper in China.

[Christopher Valen]

If the typical $25 hardcover is sold to retailers at a 47% discount, that means it costs Walmart $13.25. So they're losing $4.25 on each book. UNLESS Walmart negotiated a better price from the publishers because of their clout and high number of sales. But as you point out, Jon, this takes a chunk out of the publisher's bottom line. Still, at that low price, it could mean substantially more hardcover sales, which makes up for some or all of the publisher's loss.

[Jon Loomis]

Maybe, maybe not, Christopher--you'd have to generate a hell of a bump in sales to make up the difference. I just read on one of my political sites that both Amazon and WM will be selling Sarah Palin's book for $9, at least initially. So we'll see what happens. It's been my view for some time that HC books are grossly overpriced, at least at full retail, and probably ought to sell for something under $10. We'll see what happens...

[Bob]

Your figures are correct for novels sold via the distribution stream. Walmart and Amazon aquire the books via the wholesale stream at a negotiated price with the publisher based on volume. For a $25 Hardcover book, they are probably paying around $8.00 due to the huge volume. To the publisher, a volume sale with no returns that may even be larger than a single print run means fast cash. Unfortunately, the long term revenues are diluted. It's sad these publishers today have lost the staff that could show them the long term impact of these decisions.

[Christopher Valen]

I just heard that Target has thrown it's hat in the ring and is selling new hardcovers for $8.99. The war is on. How low will the price go and how long will it last?

[B.R.Stateham]

The bright side to this issue is the fact that outside marketing forces are putting pressure on publishers to produce a less expensive book. Perhaps Walmart's decision has some benefits to it.

[Christopher Valen]

Good point, B.R. With the price of hardcovers approaching $30, something needs to be done to bring the price down, particularly in this economy. Maybe if publishers decided not to offer million dollar plus book deals, perhaps the price could be lowered as well. But that's a whole different discussion:)