TakeAway: Wal-Mart just took price-leadership to a new level; consumers are enjoying discounts up to 74% on best-selling books. Many criticize this price war for its negative impact on the book supply chain and publisher pricing power. At the same time, some see this price war as an opportunity to attract a whole new batch of readers.
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Excerpted from WSJ, “Book Price War Escalates,” By Jeffrey Trachtenberg and Brian Blackstone, October 17, 2009
Book publishers are worried they and retail chains could be caught in the cross fire as Amazon.com and Wal-Mart ratchet up their price war over online book sales.
Wal-Mart triggered the online skirmish Thursday when it began selling its 10 most anticipated hardcovers for $10 apiece when pre-ordered on its Web site. Amazon matched the offer hours later and Wal-Mart then chopped its price to $9. Friday morning Amazon had matched the price … Late Friday afternoon, Wal-Mart dropped its price a penny, to $8.99.
The discount applies to popular books such as Mr. King’s “Under the Dome” … which carries a $35 price tag but is available on Amazon and Walmart.com for $9, a discount of 74%.
Walmart.com CEO said that the retailer “will go as low as we need to” to underscore Walmart.com’s intent to be a low-price leader online … Publishers are receiving its customary wholesale price from Wal-Mart and Amazon … “Publishers aren’t subsidizing this in any way,” …
The nation’s two largest bookstore chains, Barnes & Noble and Borders, each operate their own online retail sites. Neither is matching the prices now being offered by Walmart.com or Amazon …
Publishers said they feared the online pricing could hurt small independent book sellers and big retail chains …
Chief executive of Perseus Books Group … said the price wars will help sales in the short run but create problems if they continue. “When your product is treated as a loss leader, it lowers its perceived value,” he said. “If you are taking margin out of the supply chain, it will eventually put pressure on everyone in that chain.” …
If the industry’s top books continue to be sold for $9 online … it will be increasingly difficult for publishers to launch what he described as “the writers of tomorrow,” because the book market may have narrowed significantly …
Some executives said privately they doubted that the two retailers could afford to maintain the price strategy in the long term, unless they could offset losses on the discounted books with more traffic in other parts of their stores …
But some fear a long-term price degradation. The price war is “eroding the economy of the book,” … what will happen if big retailers try to force publishers to slash their own prices.
Despite the worrying news out of the U.S., the mood isn’t all gloom and doom. The price cuts may lead to a flood of new readers on the market, some executives said. In addition, digital books offer opportunities to include new video and audio content in books.
Edit by TJS
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Full Article
http://online.wsj.com/article/SB10001424052748704322004574477050954174722.html?mod=WSJ_hps_LEFTWhatsNews
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The Homa Files 
October 23, 2009 at 9:36 am |
My brother just showed me a book he bought at lulu.com. Professional self publishing for the writer who cannot get picked up by a big house publisher. I think this concept may have legs. 10 day turnaround on an order and no warehousing costs like Amazon. I am curious as to their pricing structure. I wonder if it may become cheaper to have JIT publishing.