MP22044

MAPS : Book Retailing on the Internet: October 2004

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This report covers: book retailing, on the internet, leading book wholesalers, Online Booksellers, the academic, schools', and, childrens', market, school, books, online Childrens book groups, electonic book services, book tokens,

Companies and Awards covered include: Bertram Books, Gardners Books, The Big Read, British Book Awards, The Man Booker Prize for Fiction, Whitbread Book Awards, The Orange Prize for Fiction, The Samuel Johnson Prize for Non-Fiction, Bertelsmann, Hachette, Hfoltxbrinck, News Corporation, Pearson, Reed Elsevier, WH Smith, Taylor & Francis, Thomson Corporation, Time Warner, Wolters Kluwer, World Book Day, Blue Peter Book Awards, Nestlé Smarties Children's Book Award, Amazon, Amazon.co.uk, Bertram Books, Cambridge University Press, Lightning Source, Pearson, Swotbooks.com, VNU, Waterstone's, Booksellers, WH Smith,

EXECUTIVE SUMMARY

Practically everyone in the UK now has access to the Internet, whether that be from home, work, school, college or the local library. In 2003, National Statistics figures (Individuals Accessing the Internet — National Statistics Omnibus Survey — Access to Internet from Home) showed that 48% of households have Internet access. Previous Book Retailing on the Internet Market Assessment reports have needed to also examine the market for Internet services, but advances in access now render this unnecessary. For this edition, Key Note looks at the consumer market for buying books online, the schools/academic/children's markets and, for the first time, the market for electronic services to the book trade.

There is also a growing demand for electronic books (ebooks) and this market is examined in some detail in this report.

The UK total book market was worth around £3bn in 2003. Industry estimates indicate that 6% of that market consists of books sold online, with Internet book sales worth around £215m in 2003. Consumer confidence in purchasing goods online is growing as more protection — through the Data Protection Acts and through retailers' own technical securities — is put in place. However, for online booksellers, credit card fraud is one of the main problems they face, with as up to 10% of sales estimated as fraudulent (according to the Internet Bookseller's group).

Amazon remains the market leader but, as barriers to creating an online presence are increasingly lowered, many more booksellers are able to provide online services in addition to their bricks-and-mortar outlets, particularly as one of the UK's largest book wholesalers provides ready-made Web templates for its customers.

There is a growing market for hard-to-find and secondhand books: the Internet, through online auction houses such as eBay, has helped to make those rare editions more accessible to the online community. The leader here is Abe, of which the database of secondhand and rare books continually grows as more and more secondhand booksellers join its network. Abe also works in partnership with Amazon.co.uk, which provides a secondhand book service through its website, linked to the Abe database.

The largest technological advances are, however, in the academic sector. Here, with a huge impetus coming from the Government to move a greater proportion of teaching resources online, advances are being made not only in online book procurement but also in electronically providing texts and other resources. It is within this sector that most advances in the production and refinement of ebooks are expected to be made.

As far as market size is concerned, 2003 was a disastrous year for publishers and retailers in the schools sector as many schools found themselves with funding shortfalls, which amounted to a national scandal. In the face of teacher redundancies, book budgets were cut drastically.

The Internet is pervading the whole bookselling supply chain. Electronic digital interchanges (EDIs) enable messaging between computers that can carry complicated transactional data. Industry bodies are exploring how these can be networked and opened up to enable a freeflow of information between booksellers, wholesalers and publishers in order to keep stock moving around the network. The development of these systems will help to ensure that inventory is not left sitting in distributors' and retailers' warehouses and stock rooms whilst demand is not being met elsewhere on the network.

The cost savings to be made with such systems are immediately apparent. At the same time, titles need never go out of print as the development of digital printing — print on demand (PoD) — enables short run, or even single, printing of books on demand at relatively low cost.

By making books available in electronic format, publishers can also produce ebooks. The dotcom boom saw many enthusiasts extolling the virtues of books available in electronic format and forecasting that they would soon outnumber paper books. Lovers of the bound book, both publishers and consumers, were sceptical but technology has driven the production of ebooks forward and there is a growing consumer market downloading ebooks to portable devices such as laptop computers and personal digital assistants (PDAs). The largest advances in ebooks are being made in the academic sector: the potential for electronic reference works is enormous and it is within this sector that online booksellers have the most to gain.

Industry reports show that the 2003 Christmas period was a bonanza for online retailers and there is no doubt that the Internet is being increasingly used to purchase books. However, this increase is not as great as earlier industry forecasters predicted. The exclusive survey commissioned by Key Note for the 2001 Book Retailing on the Internet report revealed that 5% of respondents bought fiction books and 7% bought non-fiction books online.

In 2003, respondents were asked if they had bought at least one book over the Internet during the previous 6 months: 11% of respondents said that they had.

The profile of online bookbuyers is still predominantly AB grade 24 to 44 year-olds, with those living in the South East as the most likely to buy online. However, survey data revealed that people living in Scotland are also likely to be online consumers.

Key Note concludes that the new trends examined in this report — PoD, ebooks and Internet-enabled supply-chain infrastructure — show that the Internet has become an integral part of the whole bookselling market. Selling actual books online is just part of that.

TABLE OF CONTENTS

Text © 2004 Key Note

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Last updated by Amanda Porteous November 2004