The future of book retailing

On the surface 2 contradicting and rather striking news items emerged over the last 2 weeks. First there was the message that Borders UK went into administration. Apparently the company had suffered from increased competition from online retailers and supermarkets. Just a week later rumours appeared that Amazon was looking for physical outlets in the UK. So after Borders UK fails to make money out of  brick&mortar shops, Amazon (still 100% online) seems to be moving into b&m?

Amazon opening outlets in the UK may appear as a thumbs up towards the retailers heavily depending on their b&m stores: apparently e-tailers cannot cope without b&m shops. Even if Amazon makes such a move  the conventional retailers are still light years away from companies like Amazon. e-tailers typically work with margins <15%, retailers on the other hand need >25% to sustain their organisations. Many of the book retailers have by now moved into online sales as well but their cost structures did not change. On the contrary: moving into e-tailing requires considerable investments in IT and personnel over a longer period of time without getting immediate returns.

Amazon on the other hand will continue to dominate online sales and will only open physical stores in small numbers initially. They will continue to do so only if the shops really add value to their online business. For Amazon b&m shops are an extension of their successful online business. For the conventional retailers their b&m core business is being threatened and their move to online is a difficult step into a new world dominated by strong players and different rules.

What's next? The future looks bleak for b&m retailers. e-books will make things worse for conventional retailers. It is obvious that consumers will buy e-books via internet, the domain of Amazon. Digital natives becoming the dominant consumers in the coming 20 years is another powerfull force towards e-tailing. Retailers will have to start making changes quickly now they still can. Moving to a cost structure that is more in line with their online-only competitors is key to their survival even if that means making drastic cuts in the number of their physical outlets. Else there will be more companies following the path of Borders UK.

What publishers should understand about "Nowism"

Trendwatching.com, one of the world's leading trendwatching organizations came up with the trend "Nowism" in their November report. Relevant to any company focused on consumers the trend description offers a lot to learn for companies involved in the book industry as well.

Nowism is described as: "Consumer's ingrained lust for instant gratification is being satisfied by a host of novel, important (offline and online) real-time products, services and experiences". Key in the description is "instant gratification": consumers wish to instantly get something the moment they actually want it. Trendwatching.com claims, and I tend to agree with them, that this lust for instant gratification is nothing new but has been and still is ingrained in the mind of consumers. However, with digital technology progressing consumers no longer have to physically go to a business outlet for their intant gratification but their desire can nowadays be satisfied via a multitude of digital platforms and services.

Nowism explains the popularity of smartphones but also the growth in the e-reader segment. Small (if possible pocket size) devices with wireless connectivity allow consumers to satisfy their lust for information/content/entertainment 24 hours a day, 7 days a week and at any location around the world. The attraction of these connected devices as a tool for instant gratification for the consumer also brings an enormous potential for companies involved in the content and media industry.

For authors, publishers and book retailers it means that the digital revolution we are in is not just a transition from paper to ebook. These parties have to realise that the complete Reader Experience is being affected by digitisation: from orientation to purchase of a book and from reading to sharing experiences. For every element of the Reader Experience consumers are looking for instant gratification:

orientation:  looking for book reviews /recommendations on the (mobile) internet
purchase and delivery:  delivery of an e-book should only be 2 mouse clicks away
reading:  having the option to read from multiple devices
sharing experiences:  sharing via social media / digital book clubs

At the end the company that can best satisfy consumer's lust for instant gratification during the complete Reader Experience will become the winner of the digital revolution. I expect that in many cases these winners will not have made their money from paper books....

What publishers should understand about "digital natives"

As mentioned in my previous post I want to take a closer look at important trends shaping publishing, now and in the future. Before turning to Nowism, a trend described only recently in the November briefing of Trendwatching.com, it is better to start off with an oldie: "digital natives" versus "digital immigrants".

These terms were first used by Marc Prensky in 2001 (!) to describe the radical and structural difference between his students  and the teachers. Prensky dubbed his students as "digital natives":  “native speakers” of the digital language of computers, video games and the Internet. As a result of their continuous interaction with digital technology Prensky concluded that: "todays students think and process information fundamentally different from their predecessors:
"Digital Natives are used to receiving information really fast. They like to parallel process and multi-task. They prefer their graphics before their text rather than the opposite. They prefer random access (like hypertext). They function best when networked. They thrive on instant gratification and frequent rewards. They prefer games to “serious” work".

What does that mean for the teachers being in the "Digital Immigrants" category? "As Digital Immigrants learn  to adapt to their environment, they always retain, to some degree, their "accent," that is, their foot in the past". This means the teachers will largely stick to their pre-digital-age programmes (ie. what worked for us, will work for them as well) creating a disconnect with their students.

Moving to publishing the parallels with Prensky's education environment are striking. "Digital natives" are all consumers below the age of 30 while the "Digital Immigrants" are the publisher's executive teams. Nowadays paper products no longer fit the prefered way in which digital natives consume information:
fast: real-time news updates
parallel: access to multiple apps at the same time
graphics: video over text
random access: hyperlinks
networked: social media
instant gratification: instant access to informatie (including mobile access)
frequent rewards: recognition for contribution.

The publisher's executive teams are trying to adapt to the changing environment by adding bits and pieces of the digital age to their offering. However they do so from a pre-digital-age background and perspective trying to put their past success in a new jacket. Murdoch's continued struggle to adapt his News Corp businesses to an internet dominated by Google exemplifies the struggle of digital immigrants to come to grips with the digital age. The question arises of course whether today's publishing CEO's are able to lead their companies into the future successfully or whether more digitally adapted or even digital native CEO's are needed....

Next time Nowism, any comments on above?

Nowism: Consumer trends should lead developments in publishing industry

The above title may seem logical to most of you; isn't it an obvious statement for all companies and industries? It should be obvious indeed but after attending 2 publishing related conferences last week it appears to me many parties have forgotten about this including the organisers of such conferences.

In both conferences the time spent on changing consumer behavior is close to 0. Instead the companies involved discuss defensive moves, what should be the price of an e-book and how can democracy survive without quality journalism. It is clear that the position of the companies involved is used as the starting point of discussion rather then the consumer.

In the coming weeks I want to focus in my blog on consumer / market trends that have an impact on how consumers (you and I ) "consume" content in the future. It is difficult to tell how the future will look like but by understanding the consumer trends it will be easier to judge in which direction we are heading. Starting point will be: Nowism, a trend described in Trendwatching.com November 09 briefing. Read it, it is an excellent briefing giving a lot of important clues to the publising industry on how to act in the coming years.
Let me know how you think Nowism will impact the publishing industry. 
 

Understanding Reader Experience crucial for future of book industry

After many requests I have added the text of my speech at FBF09 to the ppt slides for easier viewing on slideshare. Have a look at the ppt about Reader Experience.

How to survive the digital revolution in book publishing and distribution: understanding the Reader Experience

Have a look at my Frankfurt Book Fair presentation regarding e-reading and impact on book industry. Advances in digital technology and changes in the Reader Experience will drive changes in the book industry. For the full text of the presentation please download the ppt and look at the notes pages of the ppt file. Looking forward to your comments

EU publishers digging their own graves? FBF09 feedback

I was disappointed after my visit to the Frankfurt Book Fair last Friday. No, my e-reading presentation at the pecha kucha went well (it will be posted very soon here, need to translate to english) and yes I had some good meetings. The thing was I had somewhat high expectations about witnessing the impact of the digital revolution (e-books, e-readers etc.etc.) at the largest book fair in the world. These expectations were fed by the fair's organisation making so much fuzz about events and activities related to the same digital revolution.

Unfortunately that is where the disappointment came in. The Innovation Area was as small as last year and I did not see or hear any evidence of digital initiatives by publishers (at least not from the consumer trade publishers). Complains were plenty about the limited number of e-book titles available in non-english languages and the lack of speeding up the conversion process. Most illustrative of the gap still existing between the early movers and traditional publishers was a short article in the Bookseller Daily. It mentioned criticism from book publishers on the Tools Of Change pre-event. Publishers found it a missed opportunity and more geared towards programmers then publishers...

[silence]
[a bit more silence and thinking]
OFCOURSE!

What makes a digital revolution happen: sw, internet, services, digital content = programmers and other wizkids /entrepreneurs. Which are the companies most likely to threaten the existing publishers: Amazon, Google and other digital companies that never published a paper book.


So wake up publishers before it is too late. Re-look at your activities and re-think where you can still excel in the digital era. Then work together with the digital experts and "programmers" to start trying out. In my opinion publishers (at least the EU consumer trade publishers) are digging their own graves by their lethargic attitude and failure to start experiments with digital initiatives and new business models.


In Europe we are at the beginning of the hockey stick curve with interest and revenues in e-reading increasing. But all new books need to be published as e-book to bring e-reading to the mass market. And when paper book publishers do not move faster then other companies will take up their role in the digital era.

Frankfurt Book Fair or e-book Fair?

I am looking forward to my trip tomorrow to the Frankfurt Book Fair. Finally "digitisation" is a key subject at the Fair with presence of TOC, for digital publishing, e-reader vendors, e-book publishers and e-book side events. During the day I will have a couple of meetings with companies leading the waves of digital innovations in the book domain.

At the end of the day I will participate in a pecha-kucha event (new experience for me): Buch die Zukunft! (Book the future, impact of the digital revolution on the book industry, Friday 16 Oktober, 17.00 - 18.00 in the tent in front of Hall 4). Yes indeed in german so that is going to be a bit of a challenge for me. I will present the changes in the book industrie from a consumer angle. My key point in order to survive is that people/companies should first of all focus on the future "Lesererfahrung" (Reader experience) rather then to be only concerned about their current business interests and how to translate their paper books into e-books.
So go to Frankfurt to join the pech-kucha tomorrow and else I will update you with the presentation (mostly images since it is a pecha kucha) and text of the story on my blog.
Auf Wiedersehen! 

The future of navigation

Yesterday the annual European Navigation Event took place in the Netherlands under the inspiring title: the future of navigation. I visited the seminar with presentations from both well established brands like TomTom and Navigon and lesser known innovative companies with exciting initiatives like Layar and Routeyou. 

My take aways from a day of navigation:
- Exciting value added services and information are in the pipeline with real life traffic updates, 'eco' route suggestions, advise on car parks etc.

- Although still young as a product category Personal Navigation devices (PND's) have been very successful in conquering the market showing above 30% attach rates to cars in key EU markets.
- Despite this success the market is being threatened by severe price erosion and the rise of smartphones with gps inside.
- Navigon seems more confident than TomTom in approaching the smartphone segment as an opportunity rather than a threat. They have a platform agnostic approach for their software offering it for all major mobile platforms where they leave TomTom behind them.
- Layar and Routeyou explained the exciting open platforms they have created upon which companies and individuals can built further. Have a look at their websites to get an impression of augmented reality on your mobile (Layar) and outdoor personalised routes (Routeyou). In my opinion these kind of companies offering their platform to others have more growth potential than the 'older' (if I may say so in such a young market) companies with closed systems.

It was interesting to notice that there are a lot of parallels between the navigation market and the e-reading market, despite being completely different markets. In both cases content goes digital and companies from different backgrounds are forced to work together to create the best commercial proposition (content, hardware, wireless connectivity). The open versus closed platform approach can also be applied to e-reading. Some cross-overs can certainly be imagined where players involved in e-reading learn from the navigation market. I am looking forward to a Dan Brown Bernini tour through Rome based on Layar...!

iRex attacks Amazon Kindle, open versus closed e-book and newspaper offering

Last week iRex announced its new e-reader for the American market: the iRex DR800SG. Although the product itself is a big improvement compared to its predecessors (faster switching time, longer battery life and ofcourse 3G connectivity) the biggest step forward in my opinion is  the content service offered in combination with the product. Working together with Barns & Noble (700,000+ e-books) and NewspaperDirect (1,100+ newspaper titles), e-books and newspapers can be purchased and delivered wirelessly (Verizon) to the device. More content partners are being to join the platform.

Finally, 2 years after the launch of the first Kindle, Amazon is being challenged by a serious competitor. Ofcourse Sony and others have been in the market with competing e-readers but all of those lacked the convenience of Amazon's content service (selection, purchase and instant delivery of content). Until now it seems.

On the surface Amazon and iRex seem to offer a similar package to the consumer but behind the scenes the business models differ greatly. In the case of the Kindle Amazon controls the business model AND the customer, selling the package of Kindle & content. One drawback of Amazon's one-stop-shop model for the customer is the fact that content purchased for the Kindle cannot be viewed on other devices (except the Iphone).

In case of the iRex DR800SG the customer buys an 'open' reading platform to which multiple content parties will be connected. The product will be sold via one channel (Best Buy) while the content is sold by the content partners. With epub format supported on the DR800SG (next to the ereader format used by B&N) the user can read e-books from other sources then B&N as well.

To me the iRex model makes perfect sense as it offers consumers improved flexibility in choosing content from multiple sources. It is a good step towards a fully open content - hardware model which will be a key facilitator to drive e-reading to the mass consumer market. Only an open model allows consumers to buy content from various favorite sources and share it across multiple reading platforms. Being an advocate of an open model I do not see a bright future for the closed Amazon Kindle model, even though it is by far the most popular e-reading platform in the USA.... There is clearly still a lot of work to be done both by hardware and content parties to reach this truly open environment.

How do you see the chances of the Amazon Kindle model versus more open competitor models? Please share your thoughts on this.