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Book Retailing on the Internet Market Assessment
Key Note Publications Ltd, January 2001
Online shopping has become one of the hot topics for today's businesses. Despite all the adverse publicity surrounding the collapse of various dotcom companies in 2000, online business is here to stay and it will grow in the years ahead. Of all the goods and services bought by consumers over the Internet, the most popular are books, CDs and videos. In many people's eyes, it is in the books sector where online shopping began. This report looks at the state of online bookselling in 2001.
The 1998 report showed that only 39% of people aged 15 and over had access to the Internet, whereas in 2001, the figure is 61%. In 1998, it was estimated that total online book sales (which includes online sales from High Street bookstores) was £11.5m. In 2001, Key Note Key Note revised the figure for 1998 up to £23m and estimates that in 2000, the total value of books bought over the Internet was £184.9m.
Amazon.co.uk and its US parent Amazon.com are estimated to have a combined share of the UK online bookselling market of 67%. Bol.com, owned by Bertelsmann in Germany, is said to have 8%. Companies such as WH Smith and Waterstone's have made a lesser impact on the market.
Discounts were an initial attraction of online bookselling, but there now appears to be some lessening of discounts in favour of other inducements to make purchases. Good service and fast delivery are seen as very important components of online retailers' strategy.
Booksellers are divided as to how much trade the online bookseller specialists have taken away from them. There is a view that they may have damaged the book clubs much more than the High Street booksellers. Another question is to what extent the online book sector has actually grown the market. Due to the different discounts and voucher schemes that are available both in the High Street and among the online booksellers, it is difficult to assess whether more books are being sold as a result of online purchases. Most figures for this industry are stronger on the value of books sold than on the quantity. However, Key Note believes that online bookselling may be growing the market even if it is only marginally.
The profile of those who buy books over the Internet is interesting. 5% of those aged 15 or over buy fiction on the Internet and 7% buy non-fiction. Men buy 53% of fiction bought over the Internet and 43% of non-fiction. The main buyers of books online are aged 35 to 44.
Convenience is said to be the number one reason why people buy books online, but NOP's survey results in this report show that only 36% of Internet fiction book buyers are working full time. Another interesting fact is that 66% of Internet fiction book buyers have two cars, so they are not buying online because they cannot get to a bookshop easily. Indeed, they are probably high book buyers already and buy their other books from a bookshop.
Many more people are now prepared to buy books online than hitherto. In 1998, 34% of people aged 15 and over told NOP that they did not buy books online because they preferred to buy books in a bookstore. In 2001, only 23% say that they prefer to go to a bookshop. However, there still remain a fifth of the adult population - almost identical to the proportion in 1998 - who are concerned about payment security.
Consumer books represent the majority of books bought on the Internet - 72% of the total by value. Although online book buying was originally strongest in the academic and professional book sector, it is in the consumer book sector where demand for online book purchases is the greatest and where it is growing the fastest. Academic booksellers have reacted very robustly to the Internet, which has meant that they have not lost as many sales as they had thought. This was at least the case in 2000.
The fact that convenience really is a guiding factor behind online purchases is shown by the relatively low share of online book buying that there is in the academic and professional book sector and in the school book sector. For in all those cases, the High Street booksellers and the specialist academic and school booksellers have direct access to their customers. Universities have their own campus bookshops, while schools are largely supplied by booksellers, distributors and publishers who literally come to their door. This is not the case with consumer books. The consumer has the choice of either going to a bookshop or buying from an online bookseller. A few titles can be bought online at a discount from a newspaper following a review. Some titles can be bought from a book club, but they may not be the ones that a buyer wants at that time. So for the consumer the online bookseller represents a very convenient way to buy what they want.
UK Internet usage per head of population is the second highest in Europe after Sweden. UK e-commerce revenues are also the second highest - at 20% of the total - after Germany, which has 26% of Europe's e-commerce revenues. Thus, there is a real readiness to use the Internet in the UK. Key Note estimates that by February 2002, 70% of people aged 15 and over will have access to the Internet. Among the critically important group of book buyers, i.e. those aged 25 to 44, the percentage of those with Internet access is already 70% and so is likely to be even higher in 2002.
Key Note forecasts that the total value of Internet book buying will rise to £555.3m in 2006, representing 14% of the entire book market. The shape of bookselling will change enormously over the next 5 years with the introduction of print-on-demand by the major bookshops and by campus booksellers. Amazon.co.uk and Bol.com will remain key players but some smaller firms will take up market positions in online bookselling.