Bestsellers are best way to survive economic crisis

  • 2010-11-25
  • By Ella Karapetyan

OFF THE SHELF: The number of books sold in bookshops is declining as mail order and direct-from-publisher sales rise.

TALLINN - In Estonia today, all booksellers are private apart from one, which is partly state-owned - the Ministry of Culture holds 51 percent. Currently there are approximately 100 bookstores dealing only with books, but it is becoming more and more common that bookshops sell other goods in addition to books in order to improve their sales and to attract more attention.

Regarding design and layout, most bookshops in Estonia have changed from the traditional socialist structure, with sales’ staff behind counters, to a more modern approach, in most cases allowing self-service.
At present, retail prices are not fixed by the publishers, and wholesalers and retailers are able to decide on their mark-ups within a certain range of percentage. Publishers charge their calculated sales price (publishers’ price), no matter whether the books are bought by individuals or the trade; these prices are graded according to quantities. The book trades’ mark-up on this price totals 25 to 30 percent in urban areas, but are remarkably lower in remote regions. Here the mark-up rate is only 15 to 20 percent since booksellers have to face the lower purchasing power in these regions. 

Furthermore, relatively high transportation costs increase prices in remote areas. These costs are partly covered by the mark-up percentage, or are partly added to the booksellers’ price. The system of fixed book price used in most European countries does not exist in Estonia. In addition, there are no general strategic agreements between the book trade and publishers, and the economic validity of the pricing is not yet clearly defined. 

Despite the cautious price finding, the volume of books sold has decreased many times in recent years and the position of the bookshops, the main distribution channel for books, has weakened as selling directly from publishing houses or by mail order has gained importance. This forces booksellers into constant hardships; with an average trade margin below 25 percent in urban stores and an annual profit rating only between 2 to 4 percent. During the past few years, the reduction of VAT for books has reduced the retail prices.

According to some bookstores in Estonia, under present conditions it is very hard for the average booksellers to fulfill the role as a cultural player, and the economic constraints force booksellers to focus primarily on fast-selling titles and bestsellers that they know will sell. If a title is sold out, it is rarely reordered, even though it is still in demand and instead, booksellers rather order new publications or titles they had not stocked before. As a result of this practice, books are sold out extremely fast if they are successful. Most books are no longer available in the bookshops one and a half years after publication, although they are available at the publisher’s warehouse; successful titles are sold out in 3 to 6 months.

Because of the inefficient wholesaling sector, most booksellers have established direct contacts with publishers. A major bookseller maintains approximately 300-500 delivery contracts with different publishers, but it can happen that they have several contracts with one major publisher due to his lines of publication. These contracts are either for individual titles, a certain part of a publisher’s title output, or for a publishers’ whole output. According to these contracts, books mostly are not returned to publishers, making booksellers cautious regarding ordering.

Internet bookstores have not yet had any significant effect on the book trade in Estonia. There are about twelve on-line bookstores offering a rather selected assortment of books in Estonian. The largest Internet bookshop offers over 1,200 titles. The prices customers have to pay including delivery are normally higher than in ordinary bookstores, but although postage fees make books more expensive in the end, Internet bookshops can still be welcomed by people living in remote regions where the bookselling system has practically collapsed.

The wholesaling sector is the weakest part of the Estonian book chain, and booksellers complain that they have to spend much time to locate certain titles, especially if they are no longer available from the publisher. In former times, wholesalers were part of a quite well functioning system, distributing not only Estonian books but those published in other Soviet republics as well. After independence, those active in the market at that time closed down and today, there is only one major well functioning wholesaler together with several small and rather inefficient ones. All in all, there are 15 wholesalers in the Estonian market. 

There are different types of wholesalers: those belonging to a group of companies together with either printing companies and/or bookstores, independent wholesalers selling books only from selected publishing houses, wholesalers selling mainly imported western books and those selling mainly books from the new independent republics of the former Soviet Union. In addition, there are three specialized wholesalers for libraries not serving the book trade.
  At the beginning of this year, Rahva Raamat, one of the biggest and most popular bookstores in Estonia, announced that the company is planning to start marketing of e-readers - e-books, which are going to be introduced to the Estonian book market. Rahva Raamat’s marketing manager, Anu Vagenstein, said that the company will start offering e-readers in the near future in the chain’s biggest shops in Tallinn and Tartu. The readers will have freeware and no restriction concerning books that are downloaded. The chain will also create an environment for e-books in its new Internet shop.

According to the Menu book publisher, the company has already started electronic book sales. “We are at the starting line, our books are already available in electronic form at our homepage,” said Janari Lage, the head of Menu publishing house, adding that the main obstacle now is the high price of e-readers.
According to the book publisher, e-books are around 30 percent cheaper than paper books, as the printing work expenses are eliminated.

Estonia’s largest publishing house, Varrak, hasn’t started developing e-books yet, but doesn’t intend to turn its back on the innovation, either. “The success of the e-book will largely depend on the price of e-readers becoming more affordable,” said the company’s head, Krista Kaer, adding that paper books and e-books will exist side by side for a long time to come.