A bookseller slashes prices on bestsellers by as much as 40% over the publisher’s suggested retail price. It starts doing a brisk business, and as a result is able to stock more backlist titles that move more slowly. Competitors cry foul. Some go under. Publishers are driven out of business, or need to consolidate with other publishers to survive.
Am I talking about Amazon, whose $9.99 e-books drove publishers into a conspiracy, or the recent consolidation of Random House and Penguin? Actually, no—I’m talking about Barnes & Noble in 1974. Futurebook is carrying an essay by Tim Coutis, from its recent competition, pointing out that the loss leading strategy in books by no means began with Amazon.
In introducing a loss leader strategy, Barnes & Noble essentially sowed the longer-term seeds of its own destruction, Coutis writes—because Amazon was able to expand upon that strategy and out-discount the discounter, especially when e-books came along.
It’s an interesting and insightful essay. My one quibble with it is that Coutis implies Amazon was discounting all or most books it sold below publisher wholesale price. But according to Amazon’s testimony and the DoJ’s investigation, it was doing exactly the same thing Coutis says Barnes & Noble did: discounting just the bestsellers, a very small fraction of its overall catalog, while charging more reasonable prices for backlist titles.