New research finds that e-commerce and brick-and-mortar stores are not perfectly substitutable: when local bookshops close, some consumers buy fewer books or stop purchasing books at all. The services provided on the internet do not make up for that provided by their local dealer.
The study also finds genre-specific patterns. When an average bookstore closes, aggregate sales of fiction titles decrease by 4,249 books whereas the sales of non-fiction titles decrease by only 1,338 books. This is an indication that consumers perceive e-commerce a closer substitute to brick-and-mortar stores for non-fiction than for fiction.
Traditional brick-and-mortar bookstores play an important role when it comes to selling books. While this seems an obvious statement, the question of whether these stores are necessary for consumers to buy and read books is at the centre of an international legal and policy debate. Proponents of regulations such as fixed book price laws point to the importance of traditional bookstores for the volume of books sold.
Daniel Herold and colleagues show in their research that a lower number of bookstores lead to a lower number of book sales. If their local bookstore closes, a significant share of consumers do not switch to an e-commerce platform to buy physical books online or to buy e-books but simply consume fewer books and potentially choose other leisure activities instead of reading.
In many European countries, it is a policy goal to promote the consumption of books. These findings indicate that traditional brick-and-mortar stores are crucial to achieve that goal. Smaller brick-and-mortar bookstores particularly benefit from fixed book price systems as they are in place in France, Germany, and other European countries. The research provides empirical support for a positive effect of these regulations on the promotion of books as a cultural good vital for society.
The empirical research asks the question what role brick-and-mortar stores play in shaping the demand for books. A related question relates to the extent to which consumers perceive the two retail channels e-Commerce and brick-and-mortar stores as substitutes. The research also must solve the chicken-and-egg problem of whether the number of bookstores decreases because people buy fewer books or whether they buy fewer books because there are fewer bookstores.
To answer this question and to determine the causal direction, the authors compiled a unique data set that covers almost all sales of physical books in Germany from 2011 to 2017 provided by Media Control Metis. These data were merged with information on the number of brick-and-mortar stores in Germany.
The study also used consumer-panel data provided by GfK, which cover the period 2014-2017, to extrapolate the sales of e-Books and audiobooks. The authors received support by the German Publishers and Booksellers Association in performing the research project and collecting these data.
In Germany, the sales of physical books went down by approximately 11% from 2011 to 2017. But revenues remained almost constant, which indicates that book prices increased on average. Sales of e-books and audiobooks show an increasing trend. Notably, the sales of e-Books account for at most 8% of yearly sales over the course of the observation period. These figures indicate that e-books and audiobooks did not completely offset the decline in book sales. The number of brick-and-mortar stores went down by approximately 20%.
The results indicate that the drop in the number of brick-and-mortar bookstores explains 33.4% of the decrease in book sales. This means that had there not been a decrease in the number of these bookshops, the demand for books would have been 33.4% higher. This number decreases to 26% when e-books and audiobooks area including in the estimation.
These findings imply that e-commerce and brick-and-mortar stores are not perfectly substitutable: when local bookshops close some consumers buy fewer books or stop purchasing books at all. The services provided on the internet do not make up for that provided by their local dealer.
The study finds genre-specific patterns. When an average bookstore closes aggregate sales of fiction titles decrease by 4,249 books whereas the sales of non-fiction titles decreases by only 1,338 books. This is an indication that consumers perceive e-commerce a closer substitute to brick-and-mortar stores for non-fiction-titles than for fiction-titles.
Authors:
Georg Götz, Daniel Herold, Phil-Adrian Klotz and Jan Thomas Schäfer (all Justus-Liebig-University Gießen).
Contact: Daniel Herold
E-Mail: Daniel.herold@wirtschaft.uni-giessen.de
Phone: +49 641 / 9922055