Simon & Schuster Case Study, Part 4: So You've Conquered the World... Now What?

For those of you just joining us, read parts 1, 2, and 3 first.

I've spent this week going over a pattern of odd behavior by publisher Simon & Schuster that, to my eyes, suggests that they are trying to somehow corner their market through heavy branding, customer loyalty, and complete dominion over the rights to their books. The question one must ask is, of all the possible ways to skin a cat, why pick this one?

(I should reiterate here that I have no connection to S&S and am totally following my nose on this one; so, you can quote me on this as long as we're clear that I may be completely wrong).

To start with, have a look at S&S's webpage. Now, take a look at Amazon.com's homepage. Notice any similarities? For comparison, here are the homepages for Random House, Houghton Mifflin Trade, and St. Martin's Press. Now we're on Sesame Street: one of these things is not like the others.

Those of you who guessed that the S&S website doesn't belong because, in many ways, it looks more like a bookstore than a publishing house were right. From the Father's Day sale to the category browser and the high number of products placed right before the viewer, it's clear that the site is oriented toward selling books to individual people (as opposed to, say, bookstore accounts).

Now, there are a lot of places to buy books these days, but getting them directly from the publisher isn't something many people do. Some publishers (such as Houghton Mifflin Trade) don't even bother selling books through their website (called "direct mail" selling). Between S&S's brand loyalty chess game and their direct mail-oriented website, I'd guess they're trying to change that and divert as many book sales to direct mail orders as possible. If nothing else, they can make people more aware that it's possible to buy books this way.

This would have several advantages for S&S, the main one of which being that they'll make more money by selling books for full price instead of selling them through bookstores at a discount. But it could be even more useful than that.

A while ago, I mentioned the financial hurt that Scholastic takes by publishing Harry Potter. That's universally true; retail discounts and the return system (a relic of the WWII era that allows bookstores to return books they don't sell for a full refund) are and have long been a thorn in the side of publishers. Especially the return system--it's not unusual for more than 1/3 of all the copies of a book to be returned. No other retail industry works this way.

The problem is that book publishers can't just get rid of the return system. Believe me, they've tried, and it usually results in bookstores refusing to carry their books. Mind you, nobody as big as S&S has tried it, mainly because they've got relationships with booksellers to uphold.

But then, that's not going entirely well either. Wal-Mart is currently the most profitable venue for bookselling, but they expect huge discounts and will return their entire stock if it doesn't sell in a week or two. Other big box stores like Costco and Target are a similar story. Publishers have, increasingly, started refusing to sell books to stores like Costco, since they don't feel it's worth the substantial risk of all the books being returned.

I don't imagine that Barnes & Noble and Borders starting up their own proprietary publishing imprints strikes a fabulous chord either.

Neither, I think, do comments I hear increasingly often from booksellers regarding how they'd react if the return system went under, threatening to demand absolutely insane discounts and/or stop buying altogether. Apparently they don't like the idea of having to behave like every single other retail industry in the country.

If the return system goes, it won't be pretty. People will cry, moan, threaten, and say things they'll probably later wish they hadn't. However, most publishing professionals I've ever met have agreed that the system will probably be gone within the next ten years. The publishers just can't survive this way anymore.

When I see what S&S is doing, I have to ask myself: Is Simon & Schuster preparing to kill the return system?

I personally wouldn't doubt it. Increasing awareness of the S&S brand and directing book buyers to their website--which is what they seem to be doing--would be a massive safeguard for the publisher if they made a move that would create enmity among bookstores.

I still don't expect anyone as big as S&S to make their books non-returnable, like, tomorrow. It's not that time yet--though I'm sure that when it happens, it will be when we least expect it.

If nothing else, S&S does seem to be hiding something. Remember their refusal to discuss the contract change openly close to the beginning? And their on-the-record comments about their involvement in Sobol, First Chapters, and Project Publish seem suspiciously stock-ish, more like what the contest organizers expect them to say than the words of experienced publishing professionals.

Now, maybe I'm right and maybe not, but what's most important is how a change like this would affect students and recent grads like you and I. Find out in part 5: what to do when the industry goes bonkers.