What is the Value of Your Direct Customer List?

Everyone in direct marketing be it mail order, ecommerce or just mailing knows the value of their list. This comprises all their customers and details when the joined, how they joined, what they have received and importantly how much they have bought and what and when they bought it. Sometimes the list itself is rented out via brokers and sometimes it is retained and reciprocal mailing is done instead.

The one given is that lists are not cheap to acquire, need constant management and pruning and a name doesn’t guarantee anything but the ability to communicate. In fact acquiring names through brokers and purchase is often fraught with disappointment as the conversion rate is nearly always single figures and the earn-out is only achieved on repeat business. It isn’t often about the size of the list but the concurrency, accuracy of the list and ability to mine it.

So we stood back with some amazement when the news broke that Barnes and Noble where buying Borders customer list and information for a staggering $13.9 million. The data is reportedly on 48 million customers but goes back years and in fact has hit a snag because the bankruptcy Judge Martin Glenn has questioned whether Border’s policy covers pre 2008 customers and whether customers must give their consent before the sale can close.

While Borders' current privacy policy, which was implemented in May 2008, clears the sale of customer information, questions remain as to whether customers who joined Borders' database before May 2008 are subject to the policy and whether they must consent to a sale.

The point we would question is the value of the list of 48 million customers, the envisaged conversion rate expected and the cost of acquiring the converted names. This is brought further into question by the fact that Barnes and Noble have already diluted the list and have said that they believe that 31% of the customers are already Barnes and Noble customers. So they are buying 36 million customers.We presume that the list is been de-duped and de-seeded.

We are not privy to the detail of which customers are listed and the mix of these but obviously the two businesses did not have exactly the same profile. We presume the list include the ebook business detail which was run by Kobo but does Kobo have that detail separately as they dispatched the goods? What is proportion of gamers, video customers to book buyers? What is proportion of post only detail and what is the size of the email kist? How many are ‘live’ and have bought in the last 18 months and how has the accuracy of the list been maintained during the last 18 months whilst Borders has fought for its life?

Acquiring a list of 48 million, sorry 36 million, is fine, but delivering a return is another. Just mailing this number is a challenge in itself if they are to avoid merely being viewed as spammers and being automatically rejected at the first hurdle. Some would suggest that it would be wiser to acquire live companies with live lists or simply buying into electoral lists and directories.

Who Wins As Bookselling Suffers?

We are hardly 7 weeks into the New Year and we have already had more bad news on the book publishing High Street than in the whole of last year and probably the year before that!

Yesterday The RED group, owners of Angus & Robertson and Borders bookstore chains in Australia, and Whitcoulls stores in New Zealand, went into voluntary administration. The impact of this on franchise stores and jobs still remains unclear, but it removes miles of book shelves from the High Streets of Australia and New Zealand. This bad news follows only one day after Border went into Chapter 11 and effectively shut down a third of its outlets across the US. More bookshelf space lost. The UK is not immune with Waterstones under serious threat and closing stores and British Bookstores going under. We also have not to forget that this is happening in parallel to the biggest planned and threatened closures in UK public libraries.

These may look like localised bad news, but in terms of English language books this is a serious loss of miles of shelf space. We all presume that the slack will be taken up by the Internet and primarily by Amazon. Some believe that ebooks will just happen faster and that people will not only migrate online, but also to digital books.

It’s interesting to note, that the day major chains went into precarious waters, Kobo, the ebook aggregator supplying the chains customers, declared that they were still open for Border’s business for all those who had bought their ebooks from the chains. Kobo has built a healthy global business partly on the back of these chain’s brands need to be seen to be digital.

Kobo state, ‘the Borders ebook experience is powered by Kobo, an entirely separate company from Borders. Kobo is financially secure and will continue to maintain your ebook library no matter what happens… Kobo will continue to provide ebook services to Borders customers through Borders.com and Borders apps and desktop software. You shouldn’t notice any difference in terms of service or selection.’

Perhaps it’s a case of the ‘The King is dead. Long live the King.’

However, before we pass off this bad news as mere evolution and change, we should step back and understand what the true impact of this reduction of shelf space means to the ecosystem of book publishing.

Does the search for volume sales drive publishers into doing more high discount deals, or what is often termed as ‘special sales’ with supermarkets? As these retailers have demonstrated they will drive down the price narrow the range and will only entertain books if they make their square footage contribution.

It is difficult to envisage the Independents being able to take up the slack. If fewer inventory is going through the traditional channel, will this impact the economics of the current supply chain?

Publishers may have moved to shorter print runs, but the economics of publishing aren’t exactly short term, so decisions based on channels and sales margins may now prove suspect. We have seen the shift in the reward structure of authors and it is easy to see publishers becoming increasingly wary of risk.

We see the High Street retailer as the vulnerable player today, but you can’t remove miles of shelf space without impact

Borders Take the First Step On The Road to Nowhere?

Today Borders finally filed for Chapter 11 bankruptcy protection in a Manhattan Federal Court. The total debt is $1.29 billion and it lists the top 30 unsecured creditors listed with publishers and distributors being owed some $230 million. Borders expect to close some 200 of their 642 stores but will continue to trade under Chapter 11.

Chapter 11 is not the end of Borders and many US companies have come back from Chapter 11 and now a lot depends to the fincial restructuring and appointed management services. A lot also depends on their now somewhat strained relationship with suppliers.

It’s ironic that like others, they failed to see the threat of Amazon and the consumer trend online. By the time the woke up some seven years later, found a market dominated by Amazon and a thriving online book space. Even with ebooks they decide to partner and spread their bets. They were ideally positioned to go multi media but as music, games and Video went online they were left with cavernous spaces to fill and a name not synonymous with online. o, building loyal relationships with millions of customers. The fact is that others, such as WalMart, Costco etc, were also after their customer and revenues, and were squeezing them further.

Does any market now need or can they even support more than one bookchain? Does the chain have to be on the High Street or can it now operate on the virtual High Street?
The bottomline is that the industry looses yet another link in the existing chain and it is highly likely that Amazon will step up to capture the customers and business. It is hard to see Borders coming out of Chapter 11 without some serious downsizing and refocusing and time is not on their side to do this.

Press Release
Letter to Customers from Mike Edwards, President and CEO
The court filing (PDF)

The Weakest Book Chain Link?

The demise of the current book chain channel is probably far more predictable than the demise of the independent bookstore. These retail giants now find their economic model being threatened and undermined and we have to ask if one chain is even one chain too many?

Interestingly the two who have both moved to the media centre ground Borders in the US and HMV /Waterstones UK are experiencing the most problems.

Borders now themselves in a world full of giant new entrants, who are redefining ‘big’ and making Borders and also Barnes and Noble look small. They now have internet competitors who have superior logistics and pricing and operate with less fixed overheads. Finally, they also find themselves threatened by supermarkets and low cost outlets who simply select better tighter ranges and do it cheaper. Some would say that chains must change if they are to avoid the fate of the old styled bookclub and others suggest that their model is beyond fixing.

Forget the poor Christmas trading period, miss mash of a digital strategy, web site crash these are just symptoms of a company that has lost its course in an ever changing market. Borders can refinance till the cows come home, but unless there is radical change it is in danger of just being another casualty of change.

As US publishers prepare to meet with Borders over the retailer's cash crisis, they carry the threat of them potentially putting the bookseller on stop. They also do so without their top attorney, Thomas Carney and SVP CIO Scott Laverty who both stepped down this week and it is also rumoured that these aren’t the only top casualties as boardroom knives get sharpened.

It would appear that it is in every publisher and distributor interests that Borders survives but if this becomes a slow death then some will not want to be left exposed. Credit insurance may protects some, but it doesn’t instil confidence and a retailer without sufficient positive cash flow to pay their way, either faces serious cut backs, or more often is a retailer on death row.

In the UK the HMV Group face; shares falling by some 24%, Christmas sales down 10%, weak profits and challenges over the servicing of a bank loan. On top of this gloom, this year it plans 60 store closures and also cut costs by a further £10 Million. They claim that the demand for CDs, DVDs and games was weaker than expected and that Waterstone's bookstores has performed and delivered unchanged results during the Christmas period.

It is fairly obvious that DVD, music and games are moving online and that others such as supermarkets are selling increasing numbers on a narrow range of titles. The days of high street video and music have gone, so chains who sought comfort in consolidating media space are now suffering.

However we now need to ask ‘who needs who?’ Is it better today to have a wounded Borders than a dead one, or a lop-sided HMV than a Waterstones damaged by friendly fire?

Can the US market take out the number two bookstore and some 676 stores and not feel the fallout? What would happen in the UK if Waterstones was forced to shrink and Waterstones become a media store in order to protect the HMV Group? Any reduction in book shelfspace in either market will be significant and the fallout may not benefit others in the High Street but further strengthen Amazon’s appeal to consumers and power over publishers.

All chains are only as strong as their weakest link.

Finally, we are entering a era where there will be even more books competing for eyeballs, dollars and shrinking shelfspace. Sale or return works if one has a balance of hits, also rans and misses but if that balance becomes unstable then publishers’ models will increasingly become challenged.

Borders US Rushes In To Join The Self Publishing Offer

It appears anything Barnes and Noble can do so following B&N’s launch of PubIt, Borders follows them into the self-publishing beauty contest and joins the likes of others such as Amazon, Lulu and Smashwords with their new Borders Get Published program for eBooks. The program will be driven by the BookBrewer publishing platform.

Authors will be able to publish and sell eBooks through the Borders eBook store, as well as other partner eBook retailers. The author can pay $89.99 for the basic package, which assigns an ISBN and make it available to major eBook stores at a price set by the writer. Alternatively the author can pay $199 and buy a package which gives them an Pub file, that they can share with friends, family and press and submit to other eBook stores.”

However it wasn’t clear to us on visiting the site exactly what you got and the quality of the delivery. With time this could improve bit today it looks like a rush job to join the party and the wording certainly would not instil confidence if we were to want to self publish.

Borders, Bookchains and Hard Times

Describe the state of US and UK bookchains today and you have to wonder where they are going to be tomorrow? Many think that these are institutions and that as institutions they just keep going but they aren’t and they don’t have a divine right to trade.

We have seen the demise of some and read many analysts column inches on the challenges facing others. Will Barnes and Noble be privatised and will its sale change anything? Will Waterstones become all things to all people and end up with HMV over the door and a cinema inside? Whatever the issues the greatest challenge is sustaining a physical presence in an increasingly digital world. It not about ebooks its about the Internet and consumer trends away from the High Street. It’s about competing with virtual inventories and stores who do not have the brick and motor cost overheads and are open all hours for self service. Its about competing with libraries fighting for digital virtual business and could change the model to one of lending for free. Finally, they now have to compete also with the likes of WalMart and Target in the US and Asda and Tesco in the UK.

Today Borders has laid off more employees at its Ann Arbor headquarters. Mary Davis, a spokeswoman for Borders, declined to specify the number of "job eliminations" at the company's headquarters, which had 650 workers before the cuts. As recent as January, Borders laid off 88 staff in Ann Arbor. Borders have also reported a net loss of $64.1 million in the fiscal quarter ended May 1 and although this was down from the $86.0 million in the first quarter in 2009, the company's total revenue has dropped from $650.2 million to $547.2 million.

Borders is heavily backing its digital strategy and is selling an e-reader developed by Kobo, which also created an e-book store for Borders. Although Borders claim that they hope to secure 17% of the e-books market within a year, this would seem to some highly ambitious. Kobo is not Borders and their reliance on a third party could be seen by some as being similar to when Barnes and Noble thought Amazon would be its internet store!.

Large chains are public companies and have large investment holders who demand a return and set performance targets and these are often not easy to achieve in the current climate, let alone in a market subjected to a high volume of digital ‘noise’ and radical change.

Some would suggest that one of the biggest problems the chains have is that they have forgotten how to be booksellers and have become glorified shop windows for publishers. Nothing wrong with that as long as the market is buoyant but when it isn’t and times are difficult they may find themselves exposed and with only one hand to play. Amazon taught everyone that bookselling is about selling new, used, old, rare, remainders, self publishing – BOOKS. It not about letting publishers ‘wallpaper’ or effectively merchandise bookshelves with low risk sale or return front list.

Retailers Are Stepping Up to the Digital World

The news that Barnes & Noble is back in the digital ebook business is no great shock, nor one that is likely to be a repeat of its last entry and exit. Our ‘Brave New World’ report clearly put down the case for retailers to play a major roll in ebooks and digital sales and today, 3 years on, the shoots of our findings are starting to be seen. In the UK Waterstones went with an exclusive Sony deal and have now been joined by more open offers from Borders UK and Blackwell and will soon be joined by many others. In Australia Dymocks have long championed their offer. So the return of B&N is both welcome and a sensible move.

We can ignore the public posturing of ‘my repository is bigger than yours’ this is just mere schoolyard bragging that when stripped down soon becomes irrelevant. However, we can’t ignore the acquisition of Fictionwise, nor the market strength and brand that Barnes and Noble now reintroduces to the market. Will the offer dethrone Amazon – unlikely? Will it increase the battles over ebook pricing – almost certainly? Will it make more publishers create ebooks – almost certainly? Will the impact be restricted to the US – no?

What is certain is that consumers will want choice of what the buy and where they buy it. With offers from Barnes and Noble, Borders and Amazon will US consumers seriously select a device that restricts choice and one which shot itself in the foot last week with its Orwellian actions? Do publishers really believe that they can make the step change from producer to retailer and offer both range and depth? Some will succeed but many will realise what their core strengths are and that retail may not be one of them.

What is clear is that ebooks will go global and geographic restrictions on devices, their support or exclusive deals are not the way forward. It is perfectly feasible today for all retailers to participate and to sell physical alongside digital. The more retailers that take up the challenge, the healthier and more diverse the market and the offer will be. Retailers do not need a reader device or to buy a Fictionwise, or to strike up an exclusive deal, or even to set up a complex technical infrastructure, they just need to offer the consumer what they want , at the right time and at the right price – no different than today. They need to have one that offers physical and digital side by side in a single basket, one that is technologically inclusive not exclusive, one that fully exploits digital marketing and promotion and many will be surprise to find a more level playing field than they think.

Borders Enter A Brave New World

Borders Uk in going live with its new e-book service in the UK has taken a significant step into the Brave New World we reported on some two and half years ago. Some would say it is merely just another ebookstore and after all Waterstones has been selling ebooks for some 8 months and US retailers a lot longer. However, there is a difference and a significant one, for all the UK retailers who wish to sell digital books - it is powered by Gardners Books Digital Warehouse.

Gardners Books were the first to adopt an ‘inclusive’ technology that enables them to distribute not only the titles in its warehouse but titles in others digital warehouses and the resellers aren’t Gardners but any retailer with a connection. The same technology also underpins major digital publishers such as Taylor and Francis and the Danish library system eBog.dk.

No more does the publisher have to give even reseller, or even an aggregator their digital files. Everyone just agrees the messages to be exchanged and the files are held once, wherever and are only supplied direct to consumer when sold. Importantly it enables resellers to sell digital alongside physical books and have the books drop shipped direct to the consumer. No more is the customer handed over to another when they want an ebook. The retailer retains the transaction and the customer. This enables any retailer to sell ebooks on the internet, over the phone even in store and importantly continue to own the consumer relationship and their transaction.

Well done Borders for adopting an ‘inclusive’ not the ‘exclusive’ digital model of others.

We Have Our Say On 'Customer Recommends'

The news that Borders UK is offering customers 20% off their next purchase if they can recommend a book makes a lot of sense and is something many of us do today unrewarded. Word of mouth and sharing books we enjoy has always been what book reading is often about.

The news broken in the Bookseller today and refers to the campaign as “Have Your Say—customer recommends” and that it will start in stores on Saturday.

However we thought that there may be a small hole in the logic. The report claims ‘When a customer buys a book, they are given a belly band to write a short customer review of the title. Once it is handed back to the store, the customer gets 20% off their next purchase.’

So the customer hasn’t read the book only bought it, but is expected to make a recommendation based on what – the jacket, the blurb, the author the day of the week? We obviously may have got this wrong but surely they can’t recommend what they haven’t read?

Ok, they must be recommending another book and one perhaps Borders doesn’t stock. No, that can’t work either. Ok they bought it last week, have read it, want to go back to the shop and write a review and claim 20% of their next purchase. We hope they kept their receipts and did question whether they bought the book before or after the campaign started? Maybe all they are doing is saying ‘i've bought it’, in which case a simple sales chart would do the business. What happens if the recommendation is not altogether positive, can the still get their 20% off?

Perhaps we are missing the point and its just another way to discount books!

Finally, we do see the exercise as being a great way to gather lists and email addresses of book buyers and linking them to genre but if the process doesn't capture that information only the review which is just by ‘a reader’ this obvious benefit is also lost.

Anyway, the one good point is that as books need to be bought it unliokely that we shall see swathes of marketing department people filling in recommendations.

Google's Digital Book Jigsaw

First we had Amazon’s Search Inside, then the explosion of widgets in every shape, colour and format. Now we have the mobile phone application. Being able to search discover and qualify, or ‘browse before you buy’ is clearly here. So where is it going and who are the potential winners and the also ran’s? As with any venture, who pays and what is the return on the investment? Finally, are we now seeing the blurring of digital content and digital context (the metadata that helps you qualify and value content)?

Google has announced an Android search tool called the Barcode Scanner that recognises through the phone’s camera a book's barcode. According to Jeff Breidenbach, Engineer, Google Book Search, "it will automatically zoom, focus and scan the ISBN - without you even needing to click the shutter...You'll then have the option to search the full text of the book on Google Book Search right away"

There are limitations on the bar codes being post the mid 90s and of course the books being in Google Book Search. But then what? Some would argue that you already have the book in your hand so why do you need Book Search? Others may point out that the next question is that of price and availability and although you may have it in your hand would you transfer the sale to someone else if it where cheaper and delivered to your home? Some say that it provides additional digital services to explore external links, reviews, and perform keyword searches.

The arguments are immaterial, what is important is that the technology to link a mobile camera application, a bar code and Google Book Search is now a given. Why Google developed it and what they intend to do with it is subjective, the fact is they have.

Will there now be an iPhone, Blackberry or Symbian follower and will they link to Google or some other repository? It’s almost certain. Is it an application for librarys, retailers or consumers, remains unclear. The questions to ask are what can be achieved through this mobile linkage, where is the value and its potential within the Google world.

Publishers Weekly report that Borders has also stepped into the Google contexural world and have enabled Google Preview on their site. Borders joins Books-A-Million and the Blackwell Bookshop in using the service. The enhanced version of the Preview software enables the retailer to offer Google Preview to books they stock and that are within Google whilst effectively locking them into the retailer’s site. The interesting aside is that the majority of retailers promote non stocked inventory, so this feature could potentially obviate the publisher’s own widgets and also those supplied by others such as wholesalers.

If we step back and look at the various pieces of the Google Book World jigsaw we see many that could easy fit together and offer not just a solution that covers digital content but digital context and digital rights. Interesting times!

UK Trade's Ditital First Steps

The Bookseller in its feed today has let the secret out. They report on the news that the ebook programme has now unofficially landed and being powered not by the publishers but as we predicted at the New Year, by the retailers on both sides of the pond.

Waterstone's and Borders are now poised to put their muscle into the market and although sales will be small the acts themselves will kick start the publishers into action. With Gartdners Books now well under way and offering all the ability to participate we can start to see the Brave New World that we wrote about some 18 months ago.

Rights will be and should be an issue and will take time to resolve. Authors need to be rewarded and the debate over investment is understandable but investment is in the main a one off exercise and brings with addition opportunities and this should not be at the cost of the author. The likes of Gardners and others have stepped up to the challenge and have grappled with the issues. We must recognise that digital content is part of the landscape if you want to be in the market moving forward.

The question of Kindle versus Sony versus online versus iPhone is not for today. But what is an issue for today is building consumer confidence and awareness and matching their expectations. It would be stupid to make a huge fanfare and only have a small fraction of people want available and at a price that is unacceptable.

Audiobooks are also at a watershed and finally have the ability to break out of the DRM straightjacket but again we must address pricing issues and availability now.The industry has a long time to debate the issues and prepare itself now its time to move forward with caution but with purpose.



So 2008 looks as predicted as being the first giant step forward for digital content but is only one step in a long journey and is not yet a leap into the digital world.

Pushing back the Borders On Demand

We read today about Borders move into the on demand in the store offer with Tribeka.

It makes sense to offer the widest inventory and service the long tail through an on demand service. The consumers selects what they want and the assistant is able to produce it there in the store without the retailer holding any inventory. The store is no longer restricted to what it can put on the shelf but to what inventory it can tap into and service it can provide at point of sale.

Music, games, audio and software are all logical sales. After all in some stores you take an empty case to the counter and they retrieve the disc there so hardly any difference there then. The interesting area is whether the human and physical interface is seen by the consumer as added value, whether it migrates to a kiosk or what additional spin offs can be provided by having virtual inventory – that old shrinkage will certainly disappear.

So does this mean we shall see the Espresso book machine in a bookstore near you soon? Well last year’s potential sighting in a major store in Oxford Street didn’t happen and its still doubtful whether the technology is compact and robust enough today or more importantly the service will be viewed as added value. It will be great when it does happen but for today let us watch Borders experiment on demand and wish them well.

An Interesting Insight to City Thinking

It was very interesting to read the speculative report this week that made a case for combining Barnes and Noble and Borders. In this world of consolidation and big is beautiful, it was intriguing insight into a city analyst’s thinking.
The speculation is based on the fact that Pershing Square Capital Management recently revealed in their currently stake holdings in both Borders and Barnes and Noble. The hedge fund is known for its activisim and recently successfully forced Wendy's into their restructuring plan that and also spined-off of Tim Horton's,

The report recognises that Barnes and Nobles and Borders Group are the number 1 and 2 US book stores and there would be obviously considerable cost savings in merging the two companies. Interestingly it also recognised that each company's online presence is still not competitive and that an combined unit may be stronger in this growing channel and present a much stronger competitive proposition to the likes of Amazon.

If we recognise and accept the potential growth of online physical bookselling and also the opportunity to supplement this with digital content then there must be logic in the combination. However if we address how the current channel could potentially offer a virtual one stop shop that incorporated all then we may find an alternative option. The hardest thing is getting competitors to collaborate and share a bigger pie.