New Consumer Study: Incorporating Technology Key to Independents' Future

June 14, 2007

One key to the future success of independent bookstores is to embrace technology by building it into their store operations and using it to reinforce the unique combination of services and core competencies (e.g., their "value proposition"), according to the new Kanbay Research Institute (KRI) study, "Book Selling Demand Today." Bookstores that are able to innovate rapidly will "be able to charge the premium required to support their physical location," according to the report -- but these stores' "value proposition" must be drastically different than "just buying a book."

The study, underwritten by Bowker's Pubtrack Consumer and released on June 1, at BookExpo America, is the result of interviews with thousands of customers of national chains, web-based booksellers, and 15 independent bookstores from across the country.

"Traditional book retailers must build competitive advantage by creating strategies that others cannot duplicate easily," said Gary A. Williams, president of KRI, in a statement. "Proven approaches exist and winning concepts can be borrowed" from the restaurant and hotel industries, among others.

Among its key findings, the study noted that, though net publisher revenue is estimated to have grown by $6 billion from 1998 to 2006, "most growth is from web (Amazon.com) and non-bookstore retailers (e.g., Costco), whereas revenue from book clubs and traditional retail stores is shrinking as a percentage of sales overall."

Overall, the study found, what consumers want from national chains, "web-based bookstores," and independent retailers differs significantly except in two areas: fair pricing practices and staff competence. Surprisingly, and perhaps good news for many smaller, locally owned retailers, consumers ranked pricing as only the ninth most desirable attribute in a retailer while ranking staff competence second.

While independent bookstores are already recognized for their "unique book selections" and their ability to meet customer's needs, the study found that "independents can build significant substantial advantage by focusing on their culture and store quality." Citing Apple, Coach, and Tiffany as examples, the study encourages independent booksellers to "think outside the box" as they look for new value propositions to win market share and profits. The reported noted, too, that independents should "be sure to integrate a consistent staff competence and fair-pricing practices directly into the overall book buying experience."

Looking ahead, the report said that "customer loyalty programs are by far the most important elements of success for the future of book retailers, particularly the national chains." Recognizing that loyalty programs can serve "to lower profit margins," the report noted that "loyalty programs that include characteristics other than promotional discounts are most unique, and certainly focus the consumer on more than just price."

For independents, "technology leaps in importance" for customers, the most significant jump in any of the retailer categories. Noting that integrating technology into store operations "while maintaining excellent customer relations will likely be a challenge," the report cites as a key a commitment "to embrace technology rather than fight it -- consumers today and in the future want to use technology."

The report found Barnes & Noble and Hastings Entertainment to be the most desired national chain bookstores, and Amazon.com is the most desired online retailer. Among independent bookstores, consumers ranked those in the South as best at being able to meet their desires.

The study also included a spotlight on Skylight Books in Los Angeles, and stated: "Customer loyalty at Skylight is earned by way of a passionate, dedicated staff. Employee credentials range from over 15 years of bookstore experience, to folks that just enjoy reading and discussing with customers. Either way, the impact the staff has on the customer experience at Skylight is significant."

The study also found that:

• While online bookstores are capturing new market share as a channel, consumers aren't really connecting well with their overall delivery capabilities. In contrast, consumers see plenty of pricing power for both national chains and independent bookstores. Moreover, the report noted that online bookstores are in danger of becoming commoditized.
  
  
• Independent bookstores have a much greater influence on their customers' buying decisions than do chains or online retailers. Their recommendations greatly sway the customer's buying decision;
  
  
• Most independent booksellers possess a competitive advantage "as consumers view these independent bookstores to be more sustainable than their globally recognized rivals."

Topics: Industry Statistics, News - Bookselling,