As Kitchen readers know, I have been working on a project on direct-to-consumer (D2C) sales for university presses. During my conversations with press staff, I was able to put together a list of motivations for why a press would want to sell direct. After all, this is not a self-evident proposition. What’s wrong with the established channels of distribution? What could a university press (most presses are small affairs) add to the distribution capability of Amazon, Barnes & Noble, Baker & Taylor, and Ingram? It’s rather audacious, is it not, to think that someone would come to the Web store of a particular university press to make a purchase when the shopping opportunities on the Web are already so well established; and as anyone who has ever experienced the customer service (and pricing) of Amazon can attest, a university press may find the competition simply overwhelming.
University press people are not stupid and they know that the road to D2C marketing runs uphill; and no one I have spoken to has even suggested that they would like to cut Amazon out of the picture. As for nobody wanting to buy something from an individual publisher when Amazon is just a click away, well, the facts speak for themselves: some people are already buying books directly from the presses. My estimate is that about 1% of all university press sales are on a D2C basis; that’s 1% of approximately $320 million or $3.2 million. That’s pocket change for Amazon or even the suffering B&N, but for a university press, that’s real money. We don’t know why those people buy directly from a publisher’s Web site, but they do. It does not seem illogical for a press to look at its sales figures and say, “Hmmm. I’ve got 1% from the Web site: How do I get this to 3%? And if I already have 3%, what’s the strategy to get it to 10%?” And that’s the order of magnitude we are talking about here, sales in the single digits, with a low double-digit aspiration on the distant–very distant–horizon.
One easy way for a press to accommodate itself to Amazon and other retailers is to conceive of the site not so much as a retail outlet but as a marketing forum. A user comes to a press’s Web site, looks around a bit, finds something of interest, and then says: This looks like a great book; I think I will buy it at Amazon. This happens all the time, but it’s not clear if a press loses in this situation. The press has already made money selling the book (at a discount) to Amazon, so if the press’s own site functions as no more than a marketing platform, what’s not to like? Indeed, all presses (probably virtually all book publishers) see their own sites as the one place where they can tell the whole story about their books, and if someone prefers to buy the book elsewhere, so be it. In such a situation, the press’s own ecommerce capability is more to provide a user with an immediate option than to build a large sales channel. We can call this “pragmatic D2C,” and encourage all publishers to engage in it.
Some presses report that a major reason for creating D2C capability is the need to diversify sales channels. This is most likely an indirect swipe at Amazon’s market dominance, which is the principal obstacle to retail diversity. It’s easy to imagine a press’s thinking on this point. A sales director is looking at sales figures week after week and sees Amazon’s market share growing. At the same time Amazon begins to demand better and better terms. Who in that situation would not want to look for revenue from a different quarter? Channel diversification is also important if a publisher gets into a real battle with Amazon (this does happen) where Amazon refuses to sell the publisher’s books for a period of time. In such a situation the publisher’s books will always be available in at least one place, the publisher’s own storefront.
Not surprisingly, many presses report that an important reason for them to sell on a D2C basis is that it could improve their margins. I am not entirely persuaded by this argument, but here is how it is supposed to work. A press sells books for the most part on an indirect basis–that is, through sales channels–at a discount off of list price. The discount varies by a number of things, but ranges from a low of 20% to a high of sometimes over 50%. If a press has a monograph with a suggested list price of $40, it may be selling that book for, say, $25 to wholesalers. But on the press’s own Web site the press has the potential of selling the book for full price, that is, $40. That’s quite a big increase in margin, most of which (all but the increased royalty) drops to the bottom line.
The reason I am not entirely persuaded by this is that those presses that report the strongest sales from their Web sites are also the presses that make a point of running special promotions. So a press may run a “spring sale,” offering 20% off the list price for all its books. Now 20% is better than 35% or 50%, of course, but it’s less than full price. On top of this are the hidden costs of handling. A print book has to be picked from the warehouse and mailed to the customer: that is not free, but it’s hard to determine just what that costs. The improved margin for D2C sales gets cut down a bit under close analysis.
The margin argument is an important one because it is one reason that we don’t have an all-university-press online bookstore today. I have been trying to gather support for such a project for several years, but the presses I have spoken to both want it and don’t want to give anything up to have it. If you had 130 presses (the approximate membership of the AAUP) all participating in an online bookstore, from where would the books be shipped, from a central warehouse or from the warehouses of each individual press? Some presses would like to ship their own books (under the assumption that their service level would be sufficient to satisfy their customers), but what if a customer wanted to purchase 2 books, each from a different publisher? Then the books couldn’t be shipped together and the customer would incur two shipping costs. Nor does this problem go away with ebooks, as they still have to reside on a server or multiple servers somewhere. To have an effective online bookstore for all presses means giving up margin. I think that’s a small price to pay for an enhanced marketing presence on the Web.
Where most presses agree on D2C sales is that selling direct is a way to establish a relationship with customers and readers, something that is very difficult to do when selling through third-party channels. The question then becomes what can be made of this relationship? And on this point there is a wide range of opinion:
- Collect user data for a marketing database. If I purchase a work of anthropology from the Web site of the University of Colorado Press, the Press may keep my name and then solicit me via email for a forthcoming work of anthropology.
- Assert Branding. This may sound somewhat abstract to people who are not marketers, but one of the frustrations of being a publishers is that very often customers don’t know the name of the publisher of a particular book. On the other hand, when a customer buys a book directly from the publisher, the customer is made to focus on the publisher’s brand and to associate it with books that are appealing to that individual.
- Use sales data to improve marketing activity. When a user comes to a Web site, the path of the user through that site can be instructive. Is the site constructed in such a way as to facilitate sales? What kind of marketing messages yield the best results? None of this information is available to a publisher that only sells books through third parties.
- Use the feedback from D2C marketing to improve the editorial program. A D2C relationship will provide a publisher with insights into the books it publishes. Are these the “right” books? Are these the “right” authors? Are the books too long or too short? Editors work on a combination of cultivated instinct and a network of advisors, but data is data, and D2C marketing generates data that few publishers ever see if they don’t attempt to sell books directly from their Web sites.
While I was researching this project I interviewed a senior executive in the university press world who made an insightful remark. As for all this information people are trying to gather from D2C activity: “What are they going to do with it?” This is not an idle question. It is one thing to collect data, quite another to know how to analyze it and build and implement programs based on it. I cannot shake the feeling that presses have only a sketchy notion of what to do with the data they collect. The direct relationships they seek to forge with their direct customers may be somewhat empty. I am reminded of a story I heard recently about two people who met through online dating. After exchanging messages online they agreed to meet for lunch. And then they discovered they had absolutely nothing to say to each other.
If presses are going to have something to say to their customers, they are going to have to make a concerted attempt to strengthen their D2C activity. They will have to rethink their Web sites (traffic is the currency of the World Wide Web) and they will have to learn what information about users they should collect and how to use it. It’s not enough to hope for improved D2C sales; these sales have to be fought for.