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A Changing Retail
Marketplace
Phil Ollila | Chief Content Officer
What does Ingram’s data tell us about the
        future of the publishing industry?




         Ingram
         Everyone else
There are more retail

opportunities
   for publishers today
      than ever before.
40%
 Since 2007
Gift and
              Ingram has added

              13,000
              new accounts
Internet
Accounts
40%
Gift and
           Since 2007


Internet
Accounts
A sample independent store stocks:
     14% of the top 10,000 titles
Top 700 independents collectively stock:
      95% of the top 10,000 titles


                           2011
How do you raise
           awareness of what




40%
           sells in a way that
           leads to stocking
           decisions?


Gift and
Internet           ANSWER
Accounts
                   DATA
68%
FICTION      Merchandising



32%
             Mix Today—Still
               Focused on
                  Fiction
NONFICTION
Why?

40%
Fiction
Sales
Gift and
               Natural competitors

                  Ease of use and
            penetration of e-books

Internet     Sales concentrated in
           low number of titles and
Accounts            few publishers
Fiction and Nonfiction*
     100.00%


     90.00%


     80.00%


     70.00%


     60.00%


     50.00%


     40.00%


     30.00%


     20.00%


     10.00%


      0.00%


                  2009                2010                   2011   2012
                                          Fiction   Non-Fiction

*As a Percent of Sales to Independents.
E-reader Growth = Category Shifts

                              Bibles                                     Design
                                               Photography

          Antiques &
                                                             Art
          Collectibles

                                                                                    House
                                Architecture       Study                            & Home
                                                    Aids


                  Reference
                                                                    Fiction
                                                Political                         Business &
                                                Science       Self-               Economics
                                                              Help



                                               Increase            Decrease
Chart based on dollar sales.
Challenges?

40%
Nonfiction
Opportunities
Gift and
                          More titles

                        More diverse
Internet                marketplace

Accounts         More potential sales
                              outlets
What has
happened to
bookstores
located in the
same ZIP
code as a
former
Borders?
More than one quarter increased sales with us last year
75% are up YTD vs. LYTD
40% experienced growth of 50%+
Almost three-quarters experienced growth of 20%+



              The stores that grew had a
              30% increase in nonfiction
           The stores with no growth
      increased only 5% in nonfiction
2010            Top 700
           independent
             bookstores
 vs    purchased more
       individual EANs

2011
              in several
              nonfiction
             categories
23%    22%               14%




20%         12%        14%
                   Increase in categories in merchandising mix.
Fiction will not save the independent bookstore.

Bookstores will not just be places for literary discoveries—
      rather for book sales and discovery overall.

What can publishers do to compete for
    shelf space at these stores?
1
DISTRIBUTION is ubiquitous.
Because discovery is consumer-driven, having
books in the most channels is key to success.




2   Help bookstores DISCOVER what sells in
    their market.
A Changing Retail
Marketplace
Phil Ollila | Chief Content Officer

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Phil Ollila - A Changing Retail Marketplace

  • 1. A Changing Retail Marketplace Phil Ollila | Chief Content Officer
  • 2. What does Ingram’s data tell us about the future of the publishing industry? Ingram Everyone else
  • 3. There are more retail opportunities for publishers today than ever before.
  • 4. 40% Since 2007 Gift and Ingram has added 13,000 new accounts Internet Accounts
  • 5. 40% Gift and Since 2007 Internet Accounts
  • 6. A sample independent store stocks: 14% of the top 10,000 titles Top 700 independents collectively stock: 95% of the top 10,000 titles 2011
  • 7. How do you raise awareness of what 40% sells in a way that leads to stocking decisions? Gift and Internet ANSWER Accounts DATA
  • 8. 68% FICTION Merchandising 32% Mix Today—Still Focused on Fiction NONFICTION
  • 9. Why? 40% Fiction Sales Gift and Natural competitors Ease of use and penetration of e-books Internet Sales concentrated in low number of titles and Accounts few publishers
  • 10. Fiction and Nonfiction* 100.00% 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2009 2010 2011 2012 Fiction Non-Fiction *As a Percent of Sales to Independents.
  • 11. E-reader Growth = Category Shifts Bibles Design Photography Antiques & Art Collectibles House Architecture Study & Home Aids Reference Fiction Political Business & Science Self- Economics Help Increase Decrease Chart based on dollar sales.
  • 12. Challenges? 40% Nonfiction Opportunities Gift and More titles More diverse Internet marketplace Accounts More potential sales outlets
  • 13. What has happened to bookstores located in the same ZIP code as a former Borders?
  • 14. More than one quarter increased sales with us last year 75% are up YTD vs. LYTD 40% experienced growth of 50%+ Almost three-quarters experienced growth of 20%+ The stores that grew had a 30% increase in nonfiction The stores with no growth increased only 5% in nonfiction
  • 15. 2010 Top 700 independent bookstores vs purchased more individual EANs 2011 in several nonfiction categories
  • 16. 23% 22% 14% 20% 12% 14% Increase in categories in merchandising mix.
  • 17. Fiction will not save the independent bookstore. Bookstores will not just be places for literary discoveries— rather for book sales and discovery overall. What can publishers do to compete for shelf space at these stores?
  • 18. 1 DISTRIBUTION is ubiquitous. Because discovery is consumer-driven, having books in the most channels is key to success. 2 Help bookstores DISCOVER what sells in their market.
  • 19. A Changing Retail Marketplace Phil Ollila | Chief Content Officer

Editor's Notes

  1. Is the shift we think that’s happening in the book industry between physical and online stores and category sales real? Are sales made online versus in stores changing at different speeds for narrative books and illustrated books? The answer is yes. From where Ingram Content Group sits and observes the publishing world and by looking at our data, which is a slice of the total pie, we’ve come to some conclusions on where we see the industry going.
  2. In the last five years, Ingram has opened more than 13,000 new retail accounts
  3. 40 percent of which are in growth markets including Internet and gift. These new accounts selling books create opportunities and challenges for publishers. By definition, once  the top customers are accounted for, there are more total customers selling fewer books per location, and more titles competing for less and less shelf space in these locations. The problem now is about distribution reach (which can be expensive) and relevant marketing (which with today’s growing title base is hard to do).    
  4. At Ingram, we are selling a broader list than what our independent stores are buying. A snapshot of a sample store indicates that a typical, stand-alone independent is only buying about 14% of the top 10,000 Nielsen titles in the market. A broader sampling of our top 700 independents shows that as a whole they are buying 95% of the top 10,000 Nielsen titles. In the aggregate, independents are buying the top 10,000, but at individual stores, stock outs, assortment gaps, and lack of information about the market all cause lost sales. Yet independent bookstores collectively purchased nearly a half a million unique titles in each of the past three years. While unit sales have declined, the number of unique titles has gone up, and the “long tail” has become thicker—from Ingram’s data, roughly 50,000 titles sold more than 50 copies to indies  in each of the past three years, and the number of titles above that threshold has risen steadily in each year.
  5. The question for publishers is how to raise awareness of what sells in a way that leads to stocking decisions at the store level. Mike Shatzkin would say this is the value that sales representation brings to the independent market.  
  6. At the same time that title count has increased, unit sales per title have decreased, which make it very difficult for a physical retailer to compete with an always “in stock” assortment at an online retailer. Looking at the merchandising mix of the new independent accounts, we found that these bookstores are still focused on fiction, with the category making up 68% of what they buy from Ingram, and nonfiction trailing at 32%. This also reflects the same approximate percentages of the Nielsen top 10,000.If you consider a general trade bookstore, is it possible that by looking at new categories or expanding some they already carry, they may attract new book buyers?
  7. Overall, we have seen our sales in narrative fiction decline to our independent bookstore customers in the past five years while sales of nonfiction has increased slightly; however, nonfiction sales have expanded to more outlets but with lower sales per outlet. My assumption is that narrative fiction has some natural competitors in certain market segments, or formats, which leave traditional channels, like bookstores, a less attractive place for purchase. At the same time, aggressive discounting in  fiction in Internet and mass merchant channels makes competitive pricing difficult for independent stores. This factor combined with the ease of use and penetration of fiction in e-books makes recovery of past sales levels in fiction at independents unlikely. A final factor is that fiction sales are fairly concentrated in a low number of titles and few publishers (the big six). The publishers with the most in terms of selling resources are selling products (bestselling fiction) to the stores that can least compete on price in the subject and have the most competition from other  outlets (Internet and mass).   
  8. Fiction has declined at the same time nonfiction has risen as a total percentage of sales.
  9. The increase in e-readers has definitely played a role. Narrative books have shifted to digital while “books you can use” have increased on the physical side.
  10. Nonfiction categories have greater competitive moats, at least in terms of price and location competition, but receive lower selling resources to independent stores. Bookstores have more opportunities in nonfiction and will begin to take advantage of selling opportunities in this category. Going forward, publishers will see a reduction in the number of locations selling fiction, making the stakes even higher in competing for diminishing shelf space in this market. At the same time, the sale of nonfiction titles has more potential. The challenge with the nonfiction—“books you can use”—category is that there are more titles (as opposed to fiction sales concentrated in bestsellers) and more potential locations for those titles. Add in assortment inefficiencies across the independent channel and publishers have a real distribution and reach problem.How can you get more revenue out of a growing list of available nonfiction books across more outlets?
  11. To look at sales and categories from a specific market view: Following the close of Borders, Ingram analyzed our sales of bookstores in the same zip code as a former Borders.  
  12. What we found: in those first months after the close of Borders, we saw an increase in sales over prior year from more than a quarter of our independent bookstore customers located in the same zip code. Perhaps Borders’ customers began shopping at another local bookstore. However, 72% had no increase. I would not suggest to those stores that they stock a standard inventory, but an increase in sales just carrying more of the same thing won’t help bookstores compete in the long run . Further analysis shows that of the stores with an increase, 75% of them are still up YTD vs LYTD and  40% have experienced growth of 50% or more.  Almost three-quarters experienced growth of 20% or more. The stores that did not experience growth had only a 5% increases in NonfictionWhen I look at this data, I see opportunities to help physical bookstores to develop category strengths outside of fiction, and publishers need to be thinking about how to help bookstores understand customer need at  the store level, and support those needs. 
  13. Our data shows that our top 700 independent bookstore customers purchased more individual titles in several nonfiction categories in 2011 versus 2010.
  14. We are finding that our top independents are expanding their categories, and purchasing deeper across our offerings.Travel books were up 23%; Antiques & Collectibles up 22%; Design up 20%; Crafts & Hobbies and Photography both up 14% while Art increased 12%. Broad general assortments are being trumped by deeply assorted verticals targeted at more specific communities, whether in a physical store or online.  .  
  15. Publishers will need tocreate content that grabs the attention of the enthusiast customer. Informing bookstores of what they are missing is going to be a big part of this equation. Unfortunately, the fiction category is not going to be the category that carries the day in independent stores. Ironically, it is the fiction publishers that have the resources to sell to these stores, but they are selling them the least competitive choice.