Book price comparisons: a Unity Books perspective

Unity Signature 2013

Unity Books Wellington is fortunate to have two commerce students (Courtney Smith and Selina Kunac) on the staff. During the recent intensification in the debate about New Zealand RRPs − particularly where the book has the UK price printed on the back jacket – we produced a price comparison spreadsheet for our lead winter titles on our front-of-house pyramid book display.

Looking at the spreadsheet as a whole, there is not a lot of difference between the publisher/agencies involved.

We sent the specific publisher result to each publisher/agency involved and asked them to respond about their factors for pricing books for NZ. We got great and lengthy comments, for which we give them our thanks.

In summary, comments included that NZ RRP involves flags listconsiderations of: format, extent, print volume and location, UK buy price (their margin), the ebbs and flows on individual title costs created by publisher discount changes, UK home vs export royalties, production values, the forecasted sell-through rate, the air or sea freight costs to the warehouse, then out again by air to NZ, the cost of carrying stock in a distribution centre. Then there is the need for NZ publishers to set some level of standardised price pointing, release date, parallel importing, write offs and depreciation, returns and returns freight, exchange rates (which have been mercifully steady) and, as we are all aware, the many other business overheads feeding book sales and relying on book sales, all involving people & services. No real surprises. Every aspect of the book industry is pared back. The long lunch hasn’t been part of the formula for some time.

Are the originating UK prices too high? Can the multinational’s NZ offices keep improving bookseller margins and Total Operating Margin? Can the pricing process itself (UK price converted to Australian price, converted to NZ RRP) be changed?

Competitively fair pricing has always been vitally important to indie and group viability, and it is amplified now with the growing online offshore consumer culture. NZ online spending offshore rose 11% in a quarter compared with the same time last year. Local web sales increased by half again in the same period. The government’s perpetual “work in progress” about GST capture of offshore purchases is lamentable. Until they resolve that, our RRP is always going to be 15% higher than the Amazon/Book Depository price, regardless of our shop business strategies.

Unity Books Wellington has said for two years, that publisher/agency conversions from UK to $A to $NZ have improved a lot – that NZ RRP’s do not have a lot of fat in them – and this view is reinforced by the results of this exercise. We welcome feedback from others in the book industry.

Unity Books doesn’t want to alienate those for whom RRP is a major industry issue, but our analysis of this survey is that a lot more could be achieved for viability and fair pricing if the entire trade – including the publishers – got behind the Booksellers NZ and Retail NZ lobby for government capturing the GST on offshore purchases.

Article by Tilly Lloyd, Manager, Unity Books Wellington

* opinions in this piece are those of Tilly and her shop, and do not necessarily represent those of Booksellers NZ as an organisation.

Booksellers NZ responds to The Listener’s editorial

The Listener editorial ‘The Book Case’ raises challenges and issues with which Kiwi  booksellers are very familiar: the threat of the internet, the lack of GST on goods bought online from offshore retailers. However, some of the  conclusions drawn by the editorial are invalid syllogisms. For instance, three bookshops have closed + internet sales have increased  = three bookshops have closed because of internet sales. Wrong. The reasons for Benny’s Books closing had more to do with the personal circumstances of the owner than anything else, Parsons in Wellington is closing because the owners want to pursue other interests in retirement and their music business had fallen off markedly. In Timaru, local competition was probably as much, if not more, to blame, for the demise of Chapters and Verses, as internet sales.

It is also invalid to conclude that just because three Independent bookstores have closed that we are going “to be left with a few large shops selling books alongside anything else that makes money.”  Current evidence and trends, especially out of the United States, point to medium and smaller bookshops that focus on meeting the needs of their local communities and customers  are more likely to survive than big chains that have turned themselves into “gift shops”.

The editorial, however, has it right when it states that “reading is a bedrock for all sorts of social and intellectual skills and that we should be making books as accessible and attractive as possible.” There is plenty of evidence that supports this and it is interesting to note the efforts of many New Zealand organisations to boost “reading for pleasure” as a social and economic imperative. This was supported by a hui of educators, reading and writing activists, booksellers, government agencies, and publishers late last year in Auckland.  A lot of new initiatives are likely to come as a result of that exercise.

And the editorial is right in calling for government action on issues such as GST. Booksellers don’t need government subsidies (authors do), but they do need a level playing field in which to compete.  However, it is wrong of the Listener to advise retailers “not to hold their breath” on the GST issue because nothing has changed since 2011. A lot has changed including obviously that a lot more revenue is being lost to the Government since 2011. More importantly, the fallacy that it would not be cost efficient to collect GST on items below $400 has been exposed by research carried out by the Institute for the Study of Competition and Regulation at Victoria University. This research showed that the government was calculating its collection costs incorrectly, but also suggested solutions that would not be unduly expensive. It is time the Government did what the Japanese Government did a couple of weeks ago and declare its intent to collect GST on these goods, including books, while a solution is implemented.

It is also invalid to conclude that “books in New Zealand are very expensive”  because the Book Depository/ Amazon can land books in New Zealand  much cheaper than local booksellers can sell them for. Like for like must be compared, and the books that the BD often sell into New Zealand might have the same title but are not exactly the same book from a pricing point of view. Take for instance the now world-famous The Luminaries. BD are selling Catton’s authorship , both in hardback and paperback in New Zealand dollars at  prices discounted from a Recommended Retail Prices (RRP) much lower than the RRP in New Zealand. This is because BD is buying The Luminaries from the UK publisher where the GST equivalent, VAT, is not charged on books – thus the RRP is lower – and then converting that to NZ dollars and discounting from there.

New Zealand has more bookshops per head of population than most other English language countries. There is a lot of change occurring, with many now selling e-books and e-readers and also selling books throughout New Zealand and overseas through their own online stores. It would be very foolish to write off the kiwi bookshop because of the internet  revolution.

pp_lincoln_gould_colourLincoln Gould, CEO, Booksellers NZ