Tuesday, July 10, 2007

The Bibliophile's Chicken or the Egg Question

A quick look at the foreign exchange rate and the Philippine peso is significantly doing better than it was a year ago. However, the price of consumer goods hasn't really dropped (and I honestly don't expect it to). As a bookworm who doesn't buy his books secondhand (most of the time), I'm paying retail price for my books and unfortunately, "retail price" varies from bookstore to bookstore. I don't know what it's like in most countries but here in the Philippines, the book market is monopolized by a few although it's one governed by market forces. It begs the question whether independent bookstores can catch up.

The local bookstore market has an interesting history. Perhaps the most prevalent bookstores were originally National Bookstore and Goodwill Bookstore. Lately, however, the latter is declining (at least in terms of non-textbook, non-school supplies sales) while the former spawned its own sibling, PowerBooks. Now National Bookstore has been running on several decades worth of dominance and is easily the bookstore that has the most branches nationwide. Recently, the only other big bookstore chain that comes close is Fully Booked, and while I'm impressed at Fully Booked, I really don't know if 1) they're earning money or if they are, 2) when will they break even or recoup their investment. Of course Fully Booked has the advantage that the owner is wealthy or at the very least has a huge sum of money that they can tap into. Moving on, both of these bookstores make use of economies of scale and are able to ship a lot of books into their bookstores and more importantly, sell them at a cheaper rate. The question I'm asking is how cheap.

The prices of both bookstores hasn't really fluctuated lately. While we're currently enjoying a $1.00 = P45.xx exchange rate, remember that that wasn't always the case and it was as high as $1.00 = P55.xx last year. Anyway, I randomly chose two books from the website of Fully Booked and PowerBooks (their prices are the same as National Bookstore) and here's what I came up with. (If you're interested in the math, it's simple: get its peso price and divide it by its dollar price--I consulted Amazon.com for its US retail price.)

Fully Booked: Divisadero by Michael Ondaatje: $1.00 = P45.00
PowerBooks: Eleven Minutes by Paulo Coelho: $1.00 = P42.93

As can be seen, the exchange rate of both books are roughly the same. If you want a more precise example, try visiting both bookstores and pick up a copy of the same book (it has to be the same edition) and do the math yourself. It's tempting to use the new Harry Potter book as an example but every bookstore seems to be overstocking on copies so the rate you're getting them is probably cheaper (and this affects the independent bookstores more than than the big retail bookstores like the two mentioned here).

Anyway, I recently bought a book from A Different Bookstore and a quick mental division leaves me with $1.00 = P46.00 although I remember a time when it was $1.00 = P50.00 (so the current exchange rate they're using is actually competitive compared to the big bookstore chains). Take the time to visit your independent bookstores like Aeon Books and Booktopia and try to compute the exchange rate they're using. It's not always an exact science as the prices of books will fluctuate. For example, another book I bought at A Different Bookstore was The Girl in the Flammable Skirt by Aimee Bender. The exchange rate? A whopping $1.00 = P73.35. But it's that high because the book was special ordered rather than the regular method of mass-ordering books. (Of course to be fair, special orders are always more expensive. I remember the last time I placed a special order on a book at PowerBooks, the conversion rate was somewhere at $1.00 = P55.00. I'll tackle book orders in a future article.) Most likely however, those independent bookstores won't be able to match the prices of either National Bookstore of Fully Booked.

Now here's the killer question: if the big chain bookstores can afford to sell their books cheaper, does that mean the death of independent bookstores? I mean following the rules of a free market, the logical answer would be yes--people would go to the bookstore that sells books cheaper. And following that train of logic, the next question that will be asked is whether independent bookstores can sell books at an equal, if not lower, price as those big bookstores themselves short of having a rich investor (as was the case of Fully Booked).

Before I answer both of those questions, let's observe why the bigger bookstores can afford to sell their books cheaply. In the case of National Bookstore, not only are they importing books in such huge quantities that it pales in comparison to all the other bookstores combined (economies of scale), they're also being subsidized by their school supply merchandise (and in fact around 70% - 80% of their sales are not from books, last I heard). PowerBooks for me is the anomaly--most of its merchandise are really books. However, I'm ignorant of their business model so I don't know how much of the company is similarly being subsidized by National Bookstore (if any at all). Their distinct advantage however is that they're getting their shipment from the same source as National Bookstore, so they're definitely importing books at a cheaper albeit slower rate (I'll talk about book shipments in a future article too). I don't think Fully Booked is importing as much books as National Bookstore but it's definitely importing more books than all the other independent bookstores combined. The only one that comes close is probably A Different Bookstore as it has several branches but you know, the largest branch of Fully Booked probably has more bookshelves than all the branches of A Different Bookstore combined. What's interesting about those two bookstores however is that they have two shipments a month as opposed to National Bookstore which as far as I could observe only gets new stocks once a month at the earliest. Bookstores like Aeon Books and Booktopia only has one or two stores to consider so their regular shipments can't be that much.

Yet the miracle is that these independent bookstores are thriving. In fact, A Different Bookstore is expanding and is the closest thing we have to an independent bookstore moving over to a big bookstore franchise. There are several reasons for this phenomenon. One that comes to mind is that independent bookstores can cater more specifically to its niche audience--something the big bookstore chains can't do because their book orders are in bulk and so they usually choose mainstream books, something that the niche market isn't always interested in. Another is variety as independent bookstores have more control over their book buying habits (you're probably tired of this by now but the book buying article is finished... I'm just waiting for it to be published as of the time). And it's probably a small minority (and I hope I'm wrong about the minority part but then again, I'm just guessing) but independent bookstores also survive thanks to a loyal customer base.

Despite all those reasons however, one still can't deny the fact that the bigger bookstores can give cheaper prices. Thus arises the chicken or the egg question. In order to sell books at a cheap price, you need to be a huge bookstore chain but how do you become a big bookstore chain when you're selling books at a more expensive price (barring the rich investor way out of course)? I think that's why we need to support independent bookstores--that's the only way they'll grow and be able to sell us cheaper books. One can think of it as money you're throwing away now is money the future generation will save. Honestly though, when I shop at independent bookstores, I accept the fact that they're more expensive. There's a reason why they're independent after all. Of course having said that, I don't always do my shopping at independent bookstores.

One thing going for independent bookstores however is that they can frequently provide a service the big bookstore chains can't. It can take the form of knowledgeable personnel. For me, it's the book ordering system of the various independent bookstores. I don't believe that bookstores are charity cases but rather they have gems worth fighting for if one pays close attention.

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