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Et Cetera Disruption

The death of the bookstore

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Image Credit: Nilanjan Das

Making sense of the least understood fallout of the e-retail invasion.

Ajay Mago, owner of the Delhi-based Om Book Shop chain, is angry. “Books are our bread and butter,” the MBA from University of California, Los Angeles, fumes, “but these people are destroying the industry.” The outburst comes when I bring up Flipkart and Amazon, which started as booksellers before burgeoning into all-purpose e-marketplaces. “They don’t want healthy competition and are not bothered about profit,” Mago says. “Books are only crowd-pullers for them. That’s why they throw crazy discounts [up to 45%] that we can never match”.

Mago echoes the recent tirade against e-retailers by consumer electronics companies, which have been hit hard by “predatory discounting”. At the same time, this is the category that, along with books, has fuelled the rise of e-retailing the most. Credit rating firm Crisil says e-retail revenues in India grew an astonishing 900%—from Rs 1,500 crore in 2007-08 to Rs 13,900 crore in 2012-13—“primarily driven by books, electronics, and apparel”. Half of all English trade books (as distinct from educational books) are now said to be sold online. But compared with other sectors which have been the subject of frenzied commentary in the age of e-retail, bookstores have languished.

V.K. Karthika, publisher and chief editor of HarperCollins India, says that’s because “publishing is not even seen as an industry in India”. This, despite India being the world’s third-largest English publishing market estimated at Rs 10,000 crore, trailing only the U.S. and Britain, and growing at a compounded annual rate of 10% to 20%. 

Blame the apathy on the notorious lack of credible sales data. Books are not subject to sales taxes, hence stores are under no compulsion to reveal numbers, and most do not. Publishers, unlisted and without any regulator to answer to, are equally tight-lipped. Penguin Random House India is said to be the largest player, followed by Rupa, HarperCollins India, Hachette India, and Pan Macmillan, but it’s impossible to get a handle on the financials. Third-party agencies like Nielsen BookScan do collect some data, but hardly anything is out in the public domain. “We are a long way off real numbers,” admits Thomas Abraham, managing director of Hachette India.

You don’t need numbers though to figure out that the business is going through gut-wrenching churn. As in the West, where hallowed institutions like Borders have shut, bookstores in India have rapidly become an endangered species. Several standalone stores, as well as large chains such as Reliance Industries’ TimeOut, have closed in the past few years, while others have shrunk in size and number. While there has been no comprehensive survey, store space has fallen by about 35% in the last four to five years, says Abraham. In 2004, stores belonging to the Crossword chain, for instance, occupied an average area of 10,500 sq. ft., which is now down to 2,000 sq. ft. to 3,000 sq. ft. 

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Bookstores made matters worse for themselves by diving into reckless overexpansion. “The chain bookstore phenomenon began in 1987 with the advent of Landmark in Chennai, but really took off about 10 years later,” says Abraham. “The boom years were 2000 to 2006. Online sales hadn’t matured then. Those six years saw crazy expansion, with chains like Landmark and Crossword setting up 70 stores each. A city like Hyderabad, which could probably support six or seven [big] stores, ended up with about 20.” 

Several stores were opened in high-end supermarkets and malls, where rentals were steep and kept rising. “Some of our stores were shut because the lease expired,” says Kinjal Shah, chief operating officer, Crossword. “But we have also opened stores in places like Kohima and Bilaspur, which never had bookstores before.” Shah says despite the slump, Crossword still operates 96 stores in 33 locations.

Samir Kumar, director, category management, Amazon India, says it’s misguided to attack e-retailers for discounting. “We don’t offer discounts—our sellers do,” he clarifies. “In India, Amazon is only a marketplace.

Many of our sellers are either distributors or booksellers who compete on our platform. We don’t interfere with pricing.” (Gaurav Gupta, director, books at Flipkart, concurs.) Amazon’s popularity with buyers owes to its wide selection, value for money, and convenience, says Kumar. 

Publishers, on the other hand, like e-retailers because the latter can mine rich data, which physical bookstores with their dubious record-keeping can’t. Kumar says data analytics—granular insights into buyers’ purchase behaviour—and management of pre-orders are a key part of Amazon India’s suite of offerings for publishers and vendors. 

Finally, there’s the case for e-retailers creating a whole new class of readers. “They have had a hugely positive [influence] by taking books to places which had no access to them,” says Abraham. Amazon India, for instance, supplies to 19,000 pin codes. 

“Five years from now, there will be no bookshops,” says Mago. “Books will be sold along with a host of other products and will comprise 5% of total sales.”

Like consumer tech companies, bookstores have tried battling e-retailers on their own turf. Mago says Om Books dabbled with discounts and free delivery on its website last year, but it made store loyalists unhappy. Others have struggled likewise, and hardly any store has managed to get more than 5% of its revenues online. Mago feels publishers could help. “They could [tell e-retailers], ‘You can’t give more than a [certain] discount on the printed price’. But they don’t.”

Globally, there are precedents of publishers fixing prices in order to prevent unfair discounting. France, for instance, passed a law last year banning free delivery of discounted books, and capped discounts at 5%. The Wall Street Journal says Germany’s “thriving literary and publishing scene [is also protected by] a system that outlaws the discounting of virtually all new books for 18 months”. But given the industry’s lowly status in India and the government’s overall travails in coming to terms with e-commerce, such a move here is a pipe dream. “The government will always support the consumer’s interest,” says Ananth Padmanabhan, head of sales, Penguin Random House India, as well as secretary, Association of Publishers in India. “It doesn’t care whether you make losses or profits.”

Kapish Mehra, Rupa’s thirtysomething managing director, would have you believe the lament is superfluous. “The main thing is that the market is growing. It is always in the interest of the market that there be more and more sellers.” In reality, given all the advantages of selling online, the temptation to skimp on brick-and-mortar is strong. Recently, Mehra’s firm sold Flipkart exclusive online rights for a limited period to bestselling author Chetan Bhagat’s latest novel Half Girlfriend. In response, Amazon India cut a deal—again with Rupa—to be the sole seller of President Pranab Mukherjee’s The Dramatic Decade: The Indira Gandhi Years, for three weeks. In an ultimate snub, bookstores were denied copies during this period.

A number of bookstores threatened to boycott Rupa for its high-handedness. “We have been supporting publishers for generations,” says Mago. “They can’t tell us overnight that such and such book will be sold only by Flipkart or Amazon.” Lest you feel that’s a mawkish plea, Mago says there’s a real threat of e-retailers elbowing out publishers too just as they are doing with bookstores. “Suppose Chetan Bhagat decides he will partner with Amazon for exclusive distribution of his next book, like some authors in the U.S. are doing. What will Rupa do then?” 

The decline of stores has already wrought at least one major skew. Given their limited real estate, e-retailers serve as a display window for bestsellers only, says Abraham. As a result, while authors like Bhagat sell in the millions, middle-rung authors suffer. Backlists—reprints of books published earlier—have also dwindled. “Bibliodiversity is in danger,” says Urvashi Butalia, publisher of Delhi-based Zubaan, which started off as an imprint of Kali for Women, India’s first feminist publishing house.

At the moment though, publishers are saddled with far bigger worries, topped by anaemic pricing. “Over a 10-year period, the price of the average paperback has gone up only marginally,” says Padmanabhan. “People are conditioned not to pay more than Rs 200 for a paperback.” Karthika of HarperCollins says while author royalties and costs for paper, binding, pre-press, distribution and inventory, and marketing and publicity go up by about 10% every couple of years, the prices of books stay the same. 

In the West, the sale of printed books in general has contracted in the past decade, with e-books now comprising over a quarter of the market. In India, e-books are still a very small component—between 2% and 7%—of sales, but the rollout of 4G could be a game-changer. “I see e-book sales growing enormously over a period of time,” says Mehra of Rupa. “The inflection point will come when we have data downloads at a reasonably fast speed at low cost.” Will they further imperil the physical bookstore? “As yet, e-books have not taken away from print sales,” says Padmanabhan. 
 
There are early signs that store owners are regrouping. “Bookstores are asking themselves what [their new identity] should be,” says Priti Paul, director of the Oxford Bookstore chain owned by Apeejay Surrendra Group. Chains like Landmark have shown the way by increasing the floor space dedicated to non-book merchandise, such as stationery. Mago of Om Books says he is doing the same willy-nilly, in order to recoup the 30% to 35% losses his stores make on books.

Paul says rather than investing in large, nationwide chains, “bookstores need to be [reimagined] as cosy, individualised spaces”. To compete with the customisation afforded by e-retailers’ algorithms, they should be made into “indie stores”, so that customers develop an intimate, neighbourhood connect with them. 

The bookstore of tomorrow may not even look like one. Paul’s firm pioneered the in-store cafe concept with its successful Cha Bar. Now, Chennai-based Higginbotham’s, the country’s oldest surviving bookshop, founded in 1844, is picking up on that template. In January, it announced a wholesale renovation at its Bangalore store (set up in 1905), roping in well-known industrial designer Michael Foley. The Chennai store will follow. 

Senior manager Venkatakrishnan K.S. maintains that the stores will preserve their heritage look, even as the interiors are overhauled to accommodate a coffee shop, an art gallery, a play area for children, and toys, stationery, and electronics on sale, apart from books. “We want to provide the full experience: customers spending quality time in our shops, having coffee with friends,” he says. The store has also launched the HB line of e-readers, though it’s too early to judge whether that experiment will work.

Venkatakrishnan says it’s not all about big-bang changes. “We had this old request from many customers to replace the stools we had in the store for reading,” he says. “So now we will have sofas instead.” No matter how bloody the online-offline war, customers will have the best seats in the house.