Mississippi booksellers were not surprised when the country’s biggest book retailer abandoned a deal to buy the largest wholesale book distributor in the U.S.
“Maybe it’s a signal that there’s a change in the industry,” said John Evans, owner of Lemuria Books in Jackson. “Maybe the pendulum will start swinging back toward the independents. In the 1980s, it seemed to swing in favor of independents and then in the early 1990s, it began to swing the other way, totally away from independents.”
Earlier this month, Barnes & Nobles (BKS) $600-million bid to buy privately-held Ingram Book Group hit a snag after American Booksellers Association called for the U.S. Justice Department to block the acquisition, citing the potential of a monopoly in the bookselling business. The Federal Trade Commission and the California attorney general’s office also opposed the plan.
Richard Howorth, owner of Square Books in Oxford, said he was happy but surprised about the FTC’s opposition.
“I believe the FTC conducted a thorough investigation and made the right decision,” Howorth said. “In one way, I’m not surprised because we believe it’s the decision the FTC should have made. On the other hand, given the way things happen in the so-called new economy, I am somewhat surprised.”
The acquisition called for $400 million in stock and $200 million in cash that would have given barnesandnoble.com, the company’s online store, a boost over amazon.com and other online booksellers.
“With Barnes & Noble’s proposed acquisition of the billion-dollar Ingram Book Co., there can be little doubt that the book industry is falling prey to the same anti-competitive ills that currently plague the computer software and other industries,” read a statement by the ABA. “This deal would make independent bookstores virtually dependent upon their largest competitor.”
Barnes & Nobles CEO Alan Kahn had said book orders would have continued to be filled in the order they were received.
“It didn’t seem to affect me. So when the deal fell through, it was not a big deal,” said Sherri Reid, buyer for The Curiosity Shoppe in Hattiesburg.
Colleen Embry, manager of Waldenbooks in Jackson, said she doesn’t know what the repercussions would have been, “but it is going to make life a lot easier,” Embry said.
Where does this put Baker & Taylor, the No. 2 wholesaler? Would independent booksellers jump ship and decrease volume and efficiency of Ingram?
“It puts Baker & Taylor in great shape,” said Evans. “The migration away from Ingram has been extremely steady since last fall. If wholesalers in other parts of the country, and Baker & Taylor in the South, continue to service their customers in a competent way that competes with Ingram, consumers in the South who have been so loyal to Ingram for two decades now can question their loyalty and go other places. Then it will make it more difficult for Ingram to go back and get that business.”
With one of every eight books in the U.S. sold by Barnes & Noble, the book retailer would have acquired 11 book distribution centers around the U.S. and could have overnighted book delivery from its warehouses to more than 80% of its online and retail customers.
“I was glad to see the deal fall through because B&N buying out Ingram would almost monopolize the wholesale market and would penalize the independent bookstores because we would, no matter how you put it, be buying books from our main competitor,” said Dr. Walter Wicker of Ye Olde Bookshop in Hattiesburg.
With the purchase of Ingram Book Group, independent retailers were concerned that Barnes & Noble could gain access to purchase orders.
“I wouldn’t doubt that another deal may pop up because there have been rumors about someone else buying Baker & Taylor,” Wicker said. “You never know when they may want to test the waters. There may be another merger down the line.”
Local representatives at Books-A-Million declined comment and local management at Barnes & Noble was unavailable for this story.
Amazon into toys?
Just as quickly as Amazon balked at the union of Barnes & Nobles and Ingram Book Group, the Internet bookseller is making a play to enter the toy business.
“I think Amazon.com is using the book industry as a loss leader,” said John Evans, owner of Lemuria Books in Jackson. “I think they chose a retail-priced product they could discount to build a customer base so that in five or six years, they’d be able to sell refrigerators, BMWs, stoves and computers. If so, they used a very inexpensive product to lose money on. They’ve lost about $70 million or so.”
Amazon recently hired experienced personnel in the toy market, firmed up partnerships with toy manufacturers and distributors and amassed a sizable toy inventory. Financial analysts, some of whom call Amazon the “king of online commerce,” predicted the play for toys could begin later this month.
“If they start making money selling something else, it’s not going to be as important to them to make money selling books,” Evans said. “They’ve used the book business to provide a customer base.”