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Competitive Markets - Independent booksellers consider a purchasing union

Jonny Clark

30th January 2018

A group of independent bookshops are considering joining forces in an attempt to be more competitive. The plan, led by the Big Green Bookshop based in London, is to create a purchasing union that acts cooperatively to ensure better deals when negotiating prices and supply from major publishers and authors. More details can be found from this Guardian article.

The physical book market appears to be starting to grow again after years of steady decline as consumers switched to e-books through online retailers such as Amazon.  In 2016, the physical book market was worth approximately £3.4bn, a rise of 15.6% on the previous year.  However, at the same time the number of independent bookshops is steadily declining in the UK - there is approximately 850 independent stores compared to nearly 4,000 stores belonging to chains such as WH Smith and Waterstones.  Although those figures alone can't be used to calculate a concentration ratio they do suggest that that the high street book selling market is not highly competitive.  It is no wonder then, that the independents would struggle to get some of the exclusive access to books and authors (the way, for example, that WH Smith has some exclusivity to the work from vlogger Zoella Sugg and her bookclub).

The capacity to cooperate and create some purchasing power must seem attractive to the independents.

However, the analysis here does indicate what all students should remember - that individual markets have their own idiosyncrasies!  Independent bookshops often exist because they offer a slightly different mix of available books - people are attracted to them as they are not just local versions of the big chains.  As such, they may be purchasing fewer best sellers whose prices may continue to be high as they don't benefit from as many economies of scale.  Also, if publishers and authors receive even less money from the bookshops then the creation of the books in the first place becomes less profitable and possibly less sustainable.  In short, the market will not be able to sustain as many authors and the breadth of provision may be reduced.

Jonny Clark

Jon Clark has been teaching economics and business studies for over 25 years primarily in the Further Education sector. Before joining tutor2u, he was a senior manager at South Cheshire College in Crewe.

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