The Online Book Trade and its Markets


Part One: An Overview

Charles Vilnis

It seems to me that there are two distinct markets in the booktrade. the high-end market for collectors and the used book market for folks who need information from out of print publications or used substitutes for books that are still in print. The Internet has very different implications for those very different markets.

Alibris threw ten’s of millions at trying to “grow” the high-end market – the end now served by ILAB, Bibliopoly and the recently defunct WorldBookDealers. Rare, unusual, and expensive books are scattered through all the search sites, of course, but those three did try to serve the high end collector and rare book institutions.

How big is the online high-end market from the point of view of supply and demand? Just for the sake of argument, we could set the bottom of that “high-end” at $250. Even given that modest floor, high-end books are a tiny portion of the online book world and the dealers who handle them have relatively high overheads, moderate margins, a steep learning curve, and few listings. As for the books themselves, probably far fewer than 1% of all online titles and variants would qualify: (at over $250 each) with a total inventory of fewer than a million copies, but an average price at least in the high hundreds of dollars into the low 4 figures. The number of qualifying titles is so small that the “elephants” yank the average and the mean away from each other – but you get my point.

If you do the math, we might be talking about a billion dollars worth of such books available online worldwide through the good offices of fewer than 2,000 dealers. This is not to say that there are 2,000 full throttle rare book dealers who handle great rarities exclusively (after all, that hypothetical average “high-end” book in the high hundreds of dollars is not actually a great rarity to begin with) – but there are probably 2,000 of our colleagues who handle material of very high quality, knowledgeably, on an ongoing basis, dealers for whom rare books represent a good part of their livelihood. Now, a billion dollars seems like an enormous inventory of high-end material, but it really only represents a part of what is available from dealers. The online portion of the world’s inventory of rare books is by no means exhaustive. In Japan, for example (a book world I am quite familiar with) the vast majority of rarities would never be posted online for sale. So, there is a large unpublished inventory out there as well, but let us just put that material aside – it is invisible from our perspective here as online merchants in any event. A billion dollars may seem huge, but compared to most other product niches, it is tiny. This “high-end” material does not include the mislabeled, fraudulent junk that appears on some online venues which should be a scandal in the trade (There will be an unfortunate reckoning some day when the folks who buy this junk find out how worthless it really is.) No, we are talking about the real stuff. The difficulty of stocking this “real stuff” is threefold:

  1. You have to find it in the first place, because it is very thin on the ground
  2. You have to know what it is when you see it
  3. By definition, you have to have the money to buy it and hold it til you sell it

The fraudsters get around this by manufacturing rarity and counterfeiting knowledge, but that is not a viable business model – especially as there is a move afoot to crack down in earnest on the cowboys and cowgirls who are creating value the old-fashioned way, by lying.

The potential market of collectors and institutions worldwide for the “real stuff” is tiny, but fiercely committed. Alibris couldn’t reach them profitably, perhaps because they threw money at the high-end mass market and there really may be no way to use mass-marketing tools like glossy ads in the New Yorker to market such eccentric and individual fare as rare books. There is no one-size-fits-all solution here – the rare book dealer and specialist catering to a very small niche may have to think less about online mass marketing and more about using online tools to enhance good old-fashioned one-off marketing techniques crafted to a specific dealer’s style and a client’s collecting obsession. The high-end is really the knowledge business, so the tools have to be up to the task of creating “knowledge environments” that make a given title attractive to a buyer.

There has been a lot of thought expended on this problem. Beyond videotaped sales talks based on a select inventory and crafted for a very specific clientele, there are also such techniques as “catalogues on demand”, either as bare-bones as e-mailed lists, as retro as one-off glossy mailables made for a specific client to show a specific book or group of books, or as cutting edge as a Flash- or Java-enhanced DVD all-singing, all-dancing production. There are also the day-to-day enhancements of tried and true techniques from the past: dealers can now afford to add striking color images to printed catalogues. Long distance telephone & FAX communication is easier and vastly cheaper than ever. Colleagues tramp about book fairs, cell phones in hand, getting word from back at the office or from their clients as to whether or not there is a deal to be made and a dollar turned from the books they see concentrated on the selling floor. The enhancement of communication tools accelerates and streamlines techniques as old as the bazaar.

If communications enhancement is one aspect of the new technological advantage the rare book dealer exploits, access to information is the other. There are traditional sources – formerly in book or serial form, which are now integrated and available for instantaneous reference: ABPC, OCLC, bibliographies of various flavors – all available on the ‘Net or via data CD-ROMs or DVDs. But there is more… I once had a colleague ask me if there was any way to figure out where a Twain salesman’s dummy might have been used – it had a long list of addresses of book dealer’s visited. It took about 40 minutes to come up with the answer. There are folks who are passionate about the history of firefighting – they compile and publish the records of fire call boxes from all over the country. All the streets in the publisher’s dummy appeared in one town and one town only – Brooklyn. Except….. there was one stubborn street that didn’t match. Another few minutes research revealed that there had been a catastrophic fire in Brooklyn at the turn of the century which had wiped out several blocks of buildings – the street in question simply “disappeared” when the neighborhood was rebuilt. Ten years ago we simply could not have found that out at any price, in any reasonable amount of time, much less 40 minutes.

Brand new marketing approaches, enhanced knowledge and communication – technology is changing daily. The infrastructure is changing, too. For example, broadband is broadening, as well.

But, at the high end, at the end of the day, it is the books themselves which will make the marketing tools successful or not. The essence of the rare books business lies at the intersection of true scarcity and true significance. For the last decade, or so, technology has been in the driver’s seat and first the librarians and then the book dealers went where technology told them to go. That may have to change if we want to get back in control here.

Actually, standing the problem on its head, the ultimate utility of the Internet for the specialist rare book trade may actually lie in its value as a source for books rather than a marketing venue. Imagine… what if you wanted to start accumulating material on postwar Japanese book illustration or the history of Italian emigration to Northern California in the late 19th century? Ten years ago it would have been a long and laborious process of finding sources and amassing material. Now, new collecting fields lie wide open to anyone with bibliographic knowledge and imagination. If your interest has been written about, the ‘Net will help you track down and obtain the secondary and even primary materials necessary to a collection. You, the bookdealer, can put on your collector’s hat and create whole new fields of collecting interest yourself. If you know the field and your customers, you will sell what you find and you will profit.

In brief, that is why I believe that, despite all the dislocations of the high-end book market in the Internet Age, there are definitely signs that it will continue to flourish.

However, the second market – that of used and out of print books – is really a head-scratcher and may actually have no real future as it is now constituted. ABE, Alibris, and Amazon are the major venues for “stuff” – good used copies of in-print and out-of-print titles of more common currency and lesser value. There are claims that this inventory might reach 40-60million titles, but its aggregate value is falling by the day and falling fast. What needs to be borne in mind here is that the world publishing industry pours out literally millions of titles every year. Many are very attractive, both as new and used books, and others aren’t – the “dogs”.

Three approaches to defining a used book “dog” are:

1. A goodly proportion of published titles are utter failures from a profit perspective – at the extreme, no one buys them when they are new and no one wants them when they are used. Ouch…. I don’t know what proportion of the x million titles now online fit into this category, but it is not insignificant.

2. When released, there are many titles that have a currency and popularity that is largely created by hype and buzz – a year goes by, the buzz dies and that bestseller is now crowding the online shelves, along with a gazillion other copies of the same book – ouch. Unlike Example 1, the publisher may have made a good profit initially, but without the hype the title is just so much insulation on the used-book market.

3. There are scads of short-discount scholarly and trade books which are updated regularly – the new edition is guaranteed to sell to a captive audience of professionals, or academics, or students – the old copies are just junk.

In addition, you have the inevitable consequence of Gresham’s Law when applied to online book inventories. Gresham was an English economist who explained the process whereby adulterated or bad currency tends to drive good currency from the market and replace it. “Bad” books drive good, saleable books from the shelves simply because good, saleable books sell and the unsaleable (or at least yet unsold), remain. Traditionally the thinking was that the book market was so imperfect that every book was simply waiting for that special someone to buy it – hope sprang eternal. Book sources were scattered and isolated in thousands of little shops. But the Internet changed all the that – from a technical economic standpoint, a far more “perfect” market was created in which supply and demand could ruled unswayed. The result was and is a crash of prices for more common titles, a process accelerated by the price sensitive sorting of searches by the search services and the increasing use of price-reduction software like Seller Engine, Homebase’s add-on price reducer or the new Alibris price reduction system. Quite simply, if you make a perfect market and create tools to make competitive price reduction automatic, or at least easy, then prices will inevitably trend down to whatever the set minimum would be. However you frame it – it is inevitable. Think of the inverse of an auction where many buyers are competing for the same item – the price goes through the roof. Here there are competing suppliers – the price goes right to the “floor”.

So what stops the price at auction from going through the roof and on to infinity? – simply a lack of practical means. At some point there is only one buyer left willing to pay the freight. What we are seeing on Amazon and other venues is that there are hundreds, if not thousands, of dealers who are willing to see their prices go to near zero – the inverse of “infinity” – but the reason is simple – at first it doesn’t hurt so much to lose a little money selling a book. Plus there are lots of other folks selling that selfsame “junk” book, so the chances of your copy being purchased and money lost on the transaction is relatively low. Instead of the big financial blow suffered when you try to pay for the item you bought at auction at the too-high end, you are suffering a death by a thousand cuts as more and more of your inventory trends to zero and you have to lose a little bit selling copy after copy after copy….

Obviously this cannot continue forever. In theory, the costs of production provide the floor. In the case of booksellers that cost of production is overhead and opportunity cost. If you can’t pay the electric bill to light the warehouse, or you find you can make more money doing something else, then the chances are that you will quit the book biz. Many people have. The problem is that this process is imperfect as well – you have many ostensible booksellers who really have quit or who don’t depend on bookselling for money whose inventories of dead titles continue to haunt the Internet and keep everyone else’s prices down. This “overhang” will eventually disappear, but there seems a big shaking out is on the horizon – one that might bring the number of copies online from 40-60 million to perhaps half that number very quickly. If the marketing venues changed their policies and started raising the overhead charges for posting and maintaining huge inventories of slow-moving books then the drop off would be sudden and severe. That business model change is embodied in the transition from Half.com to eBay fixed price listings… Half/Ebay may simply be a special case or it may be a trend (Though Half has been at least partially revived for now – its ability to handle large listers has been reduced and it is not signing up new customers to upload in bulk)

Also, there is the ongoing threat of “print on demand” which, if it expands and proves profitable, may end up eroding the market for saleable and scarce out of print titles, as well. What is a used book dealer to do if they want to stay in business? Especially since the online marketing sites have, ironically enough, brought many new sellers to the trade – where they provide new competition and lower aggregate prices even more.
Part Two: From Theory to Practice

More to come…

Charles Vilnis is principle of BookRouter, at www.bookrouter.com, which uploads booksellers’ inventory listings to 20+online databases and listing sites. A longtime bookseller and member of the ABAA since 1980, he has been a full-time computer consultant to the bookselling community since the late 1990’s. BookRouter and the other bookselling tools created by Mr. Vilnis’ Allusive Information Systems www.allusys.com are aimed at reducing the drudgery of online sales and simplifying the day-to day interactions between those enduring foes: bookseller and computer.

Copyright Ó 2004 Charles Vilnis

The Standard: The Journal of the Independent Online Booksellers Association

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