The great race

What is going to be the iPod of the book industry? We should have the answer over the next few months and certainly within a year as the major book retailers—online and traditional—jockey for position in a category that is quickly going high-tech and digital. 

Grocery stores are sitting on the sidelines on this one. With few exceptions, most supermarket retailers exited the book category a decade or more ago, seeing limited opportunities in the category. Not surprisingly, they chose to concentrate on magazines, which have faster turns than books. Those grocery retailers still selling books appear to be content to offer in-and-out displays with hot or seasonal or one or two paperback racks near the in-line magazine section.

Still, what is going on in the book category is a fascinating example of merchants trying to outmaneuver the competition through marketing and pricing and, at the same time, using the latest technology to gain an edge with increasingly savvy consumers.

The book business has greatly evolved over the past few years. Many independent operators have closed their doors as larger retailers and Internet-based companies such as Amazon.com have cut prices and increased selection. Now, the surviving retailers have developed different strategies to win shoppers over. Amazon.com, of course, continues to stress pricing and the convenience of the web as its points of difference; Barnes & Noble is stressing selection and expertise; and Borders is using a puzzling strategy of price-off coupons and in-store discounts to counter a high-priced image that seems to have the company on the brink.

Now comes the next step. Many book industry executives believe that wireless electronic readers, including Amazon’s Kindle, Barnes & Noble’s Nook and the Sony Reader, will do for the book category what the iPod did for the music business. If it happens it means a dramatic increase in the number of books sold. It also means that many books will be delivered by unconventional methods and at a fraction of their old prices. The end result, however, is that electronic books will create more profits for suppliers.

Amazon.com and Sony are the two main culprits behind much of the activity in the category. Amazon has used convenience and pricing to score a huge gain in market share over the last decade. Now with Kindle, Amazon seems intent on driving a knife through the figurative hearts of its competition by combining its much-visited website with the instant gratification that electronic readers can provide. Sony is doing the same thing, only also adding its strong distribution system and strong brand name to capture consumer attention. 

Not to be outdone, Barnes & Noble, the largest traditional book retailer, introduced the Nook in November. Selling for the same price as the Kindle, Barnes & Noble officials obviously hope that its brand name and its store locations will make the Nook the industry favorite. In fact, Barnes & Noble is selling the Nook through its traditional stores, which must raise a question among store employees as to whether they are selling a device that could eventually put them out of work.

The race will come down to which device will catch the eye of the greater percentage of consumers. The iPod won out because Apple was able to corner the market in a very brief amount of time through deft marketing and simply having the best (read: easiest to use) product on the market.

Which one of these electronic readers will be the next iPod? The answer will be the one that is simple to master, affordably priced and marketed the right way. Hmmm, could the winner be……Apple?  
 
Seth Mendelson can be reached at 212-979-4879 or at smendelson@groceryheadquarters.com.

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