Book retailing: Traditional v/s online

Recently I had a casual conversation with owner of a large scale book store. His is a family owned business, been in book retailing for decades with great passion for reading. Upon further discussions he mentioned about his book retailing business heading south (for months together) due to the emergence of e-commerce portals like Flipkart. It is quite obvious that e-commerce portals enjoy benefits of on-demand inventory, lesser operational costs (ex: rental) and direct supplier relationships helps to offer a better price. Added to that, most of Indian e-commerce portals are backed by heavy funds from venture capitalists, which help them to provide un-realistic discounts on books with additional benefits like free shipping, cash-on-delivery etc. Over a period of time, these e-commerce portals build valuation for the company based on number of transactions and incrementally grow by bringing more products (apparels, electronics, toys etc…) thereby becoming online mega store. On the other hand, traditional book retailers are struggling to keep up their operations with increasing rental/labor costs, overhead of inventory and limitation of not able to offer higher discount as it will affect their bottom line.

As a matter of fact this problem is not new. In countries like US e-commerce portals (likes of Amazon) took away significant market share from traditional book stores but some of them re-invented themselves and survived this challenge. I was wondering what Indian book stores (considering Indian context) can do to compete fiercely online bookstores. Here are some of my ideas which can be considered:

  • Similar to book stores of the west (ex: Barns and Noble) traditional book stores should re-shape themselves as modern libraries by creating a compelling reading experience around it. Readers should be compelled to walk in, take a look of their choice and spend hours in the shop by going thru their favorites. By adding additional factors (like coffee shop, comfortable table & chairs for reading, offering sample chapters for free etc…) these book shops can attract regular visitors who will potentially end up buying these books
  • There are some specific types of books (ex: Children books) come in various shape, size and weight, which is still not comfortable to buy online. As a parent I spent lot of time considering these aspects before buying book for my daughter by physically visiting the shop. Such type of books still has a lot of ‘touch-and-feel’ factor associated with it. Traditional retailers should think of some special promotions and tie-ups to push these books thru young parents and readers
  • Among adult readers (both fiction and non-fiction) there is a strong possibility to build a community based on common interest. Such communities combined with social media can be made as early adapters of new releases and share their viewpoints in terms of face-to-face get together, sharing book reviews, meeting authors directly and exchanging book related practical experiences. Such community should be provided with special discounts and covered under loyalty programs, thereby attacking clusters
  • Even now many of the traditional shop owners are expecting customers to physically walk into the shop and order for books. This should be changed by adapting home delivery based on phone order, building a micro-site for the bookstore where alternative channels of reaching out to the customer. Such new channels should be backed with excellent customer service in terms of delivery time and quality to re-invent the whole business.

I am not sure if any of the traditional book store owners got necessary mindset to re-invent their business by adopting new ways to sell books in this digital era. Unless they adapt to this change and re-invent the way they do business, it is going to be extremely difficult to survive.

Innovation – Type8 –Channel [Case: New Horizon Media]

In our ten part Innovation series, let us look New Horizon Media’s channel innovation as the eighth article.

The book publishing business has gone thru multiple changes in the recent years, which I have been covering in my part articles. India, with diversified set of languages offers significant opportunity for the publishing industry both in print and electronic formats. However, with infrastructure (physical & electronic) challenges, building channels and newer ways to reach customers is always a challenging task especially when it comes to books. New Horizon Media (NHM), a Chennai based publishing house has brought in significant change in terms of the way books are sold to consumers by building channels, similar to FMCG way. Sounds interesting? Read on.

NHM primarily publishes Tamil books, which are sold thru existing channels like — online shopping site, books fairs conduced in various cities and by building the resellers across the state. In spite of having all these channels, NHM found they are still not covering the bigger set of readers, who come from tier-2 and tier-3 cities. A different and innovative model needs to be thought for ensuring their reach. That’s they the idea of FMCG base model kicked in – What if books can be sold like a paste or soap? How about creating thousands of small outlets across the state by applying FMCG model into book publishing? What if books can be made available in Kirana shop in your street corner?

To implement this idea, NHM set up their own stockists (exactly like the FMCG industry) in each small town to whom they supply books. These stockists, in turn, supply NHM publications to a whole range of non-bookshop outlets in that town, such as stationary stores, pharmacies, supermarkets, and even restaurants and textile stores. Assume a case, where you are purchasing diabetic medicine for your aged parent from the medical shop, where you also find a book titled ‘How to control diabetes?’ Assume another case where your family members are busy shopping in a textile store, where they are going to spend next two hours and you are bored. Won’t you feel like picking up a book to kill time?

This is precisely what they have implemented by partnering with various shops across the state by leveraging the adjacency factor. As most of NHM books are priced in the range of 70-100 INR, customers won’t mind paying for it as it is slightly more than buying a magazine. Today NHM has about 2500 such outlets across the state, which has changed the way books are distributed in the state.

By identifying such retail outlets as a new channel for books distribution, NHM is able to transform the vernacular book publishing industry. Apart from the distribution channels, NHM has also created a niche market for translated books. Many of the latest best sellers (ex: India after Gandhi by Ramachandra Guha) is available in Tamil now which is addressing relatively high end customers. I will cover this aspect in a different article.

The Long Tail of book publishing

My previous post about Long Tail, primarily highlighted the concept behind this new model, based on the book written by Chris Anderson. The concept of Long Tail can be applied to any industry/business. This is mainly because any traditional setup today can go ‘digital’, thanks to the Internet. As a book lover, I thought of coving Long Tail aspects of book publishing industry in this post. In the lines of music, the publishing industry is primarily driven by ‘best sellers’ thanks to their sheer volume. For a niche writer getting an individual’s book published is not all the early, as publishers need to make upfront investment in terms of editing, printing and distributing books using traditional retail model. Since they are unsure of the success, niche writers and their content remained in backdoors for years together. Thanks to the Long Tail, niche writers can gain significant opportunity to get their books published by creating a viable business around. Want to know how details? Read on.

To start with, content creation is happening in the Internet at an alarming phase. For example, anybody can start writing by creating blog sites at free of cost (ex: Blogger, WordPress).  Over the years, such free services evolved big time by offering user friendly interface, advanced editing options, SEO optimization methods and interfacing with social media (Facebook, Twitter etc). All of them can be setup in minutes by doing simple ‘drag-and-drop’ approach. Such democratization of tools has resulted in billions of people flocking into blogosphere, as the blog setup is a ‘non-event’ today. As long as an individual is passionate about writing, he can create wonderful contents in no time. I have personally gone thru this experience by initially setting up Blogspot, followed by Jwritings. Such individual writers (including me) have a set of readers who regularly follow, comment and share the content. There are more than 100 million blog sites around the world, which is really a huge number.

Now comes making a book out of such contents. Thanks to the digitization, there are many of ‘Print on Demand’ (POD) solution providers who can take these contents and create a book out of it using the digital printing, even if it is a single copy. This is way different from traditional offset printing industry, as the printer need to print minimum number of copies in order to ensure business viability. For example, if you want to print wedding cards any offset printer today will not print anything less than a minimum number (say 100). In case of digital printing there are no such minimum or maximum numbers exist as things happen ‘on demand’.  In India, I have come across Pothi and Cinnamonteal who offer such POD services. Apart from POD, they also offer conversion, editing and formatting services where the author can design the complete book, which is ready for sale.

The whole distribution and sales can be done online using multiple options. POD service provider themselves offer online shopping cart where the books can be listed. Other options include the author creating a listing in his own blog (by integrating payment gateway) or list it in some of the popular online stores. In case the author has contacts with a retailer, it can be pushed via traditional channels as well. The most important point is, everything happens with button click on the Internet. From the POD provider’s perspective, he can create a community of writers from the Internet, group them and create ‘less number of more books’ ecosystem, which is what Long Tail is all about. Since there is no physical infrastructure required, bunch of existing overheads (supply chain management, demand vs. supply issues, stock management, retailer commission etc…) are automatically removed thanks to the ‘Long Tail’ digital Internet.

There is another dimension for digital publishing, which comes in the form of ‘e-books’. By creating the digital form of books (say in form of PDF document) plus associating Digital Rights Management (DRM), these books can be pushed to any possible device (PC, Tablet, Mobile phone), thereby opening up a new market. Amazon Kindle is already leveraging this model, but when it comes to emerging markets like India challenges are way different which I called out in my post about Aakash ecosystem.  When I wrote the Long Tail book review, couple of my seniors referred to few other (related) examples:

  • Krishnanum Radhayum – A Malayalam movie which became popular thanks to its marketing and release in YouTube. How can we compare this with getting a chance to direct a feature film?
  • BookPrep – POD service offered by Hewlett-Packard (HP) where readers can print some of the old classics which are not currently in print. MagCloud is another example where Magazines can be created using POD.

What other examples one can think of when it comes to Long Tail? How this digital transformation will alter other traditional industries like retail?

BOOK REVIEW : The Long Tail

 

Price: 275 INR

Author: Chris Anderson

The Business world has gone through disruptive changes during the past decade – one of the main reasons being content (ex: music, books, photos) is created, maintained and consumed. Internet was instrumental for fueling this change, thanks to digitization of anything and everything. The new ‘digital’ way has literally changed (in some cases ruined) many traditional business models, which is been working for decades together. One classic example is Apple iTunes, which has democratized the way music is created and shared across billions of people across the world. Another major aspect of digitization is about providing equal opportunity for niche players by connecting them with niche audience, which did not exist previously. As the digital infrastructure can be scaled overnight (that too with global availability), many innovative models are emerging around it.

In his book ‘The Long Tail’ author Chris Anderson introduces a new model which he calls as ‘endless choices creating unlimited demand’. He explains it with the power law graph (see image on the right). The left side of the graph is about ‘hits’, which has maximum number of non-niche customers. The right hand side is about ‘non-hits’ which reaches niche customers, which also has a huge number, at least comparable to mainstream non-niche customers. The ‘Long Tail’ of business is about selling to niche customers, aided by digital infrastructure.

Let us take an example of creating and distributing rock music in the form of albums. During earlier days, a particular rock band will create an album and approach some or the other major music distributors for making a production (in form of CD/DVD) and distribution out of it. From the distributor’s point of view, they will take a very stringent approach for short-listing these bands as they want to really ensure that the album becomes a hit. This is mainly because the distributor needs to make an upfront investment of creating the physical network (CD/DVD creation, distribution to channel partners/retailers, staff expenses etc…). While this ‘hit’ based world/approach still exists, the niche based items also gaining high importance due to the digital transformation. Today any rock band can still create the music, edit is using freely available tools, make an album out of it and upload into the Internet (ex: MySpace). By doing this, they are completely getting rid of traditional distributors, thereby targeting niche audience who are bored with popular bands and interested to explore something new.

According to Chris the ‘Long Tail’ is created because of three factors:

  • Democratization of tools for production (MySpace online tools)
  • Democratization of tools for distribution (Internet)
  • Connecting the demand and supply (MySpace social networking platform)

The similar model can be extended to other industries, using which organizations like Apple (iTunes music, iPhone Apps), Amazon (Online retailing, which can literally list infinite number of items), Google (Ad-sense, Ad-words), Wikipedia (democratic content ecosystem) has become a global success by leveraging Long Tail customers. From the consumer side, the behavior has changed as they are expecting more and more choices which can be met only by such system.

Throughout the book, author explains above mentioned aspects in detail across different chapters, thereby giving complete perspective to readers. In few chapters I felt he repeated same information multiple times, but he takes examples from different industries makes it an interesting read.  In order to understand the recent business changes, aided by Digitized Internet, Chris Anderson’s Long Tail provides an excellent framework where one can put things into perspective.