Plot twist - Book sales are up, but they're worth less and less to retailers

Retail Ireland says the weak pound has knocked up to 15% off the value of some stocks.

By Conor McMahon Deputy editor, Fora

THIS CHRISTMAS, RETAILERS are likely to have sold more books – but the weak sterling will probably ruin any happy endings.

That’s according to Ibec sub-group Retail Ireland, which said the book market has experienced “significant price deflation” this winter thanks to the poor exchange rate.

Like the retail industry as a whole, this is by far the busiest time of the year for bookshops.

Coupled with the August back-to-school season, book stores complete around 60 to 70% of their annual sales during the four-month period leading up to 25 December.

The vast majority of titles for the Christmas shopping blitz - around 80% of them – are sourced from the UK.

Retail Ireland reckons up to 15% has been shaved off the value of current stock thanks to shifts in currency prices after the Brexit vote.

The group’s director, Thomas Burke, told Fora a reduction in the value of sales is “very significant” for already hard-pressed shops.

“It is adding pressure to book sellers locally when they’re having to compete either with UK-based book sellers or the online big players such as Amazon,” he said. ”It is a pretty challenging market for them at present.”

Thomas Burke Retail Ireland director Thomas Burke
Source: Retail Ireland

Tight margins

By its nature, the book market is slow to react. Sellers that took a gamble on exchange rates early in the year – when the euro was worth around 15% less against the pound – are now being forced to sell their wares for relatively low prices compared to late-moving rivals.

“It is a tight margin business at the best of times,” Burke said. “It’s a difficult business when you’re relying on other factors such as foreign currency. It makes it a little bit difficult for them to forecast and predict.”

Nevertheless, the drop in sales values come at a time when the volume of books sold in Ireland is on the up.

By the first week of September 2016, total sales increased by around 20% compared to the same nine-month period last year, according to market researcher Nielsen Bookscan.

“Just as we started to see that return, shops were hit with the sterling problem,” Burke said.

“Book retailers that may have been battling through years of migration to different formats (like tablets) and were continuing to try and sell the physical book thought they had turned a corner.”

In order to remain competitive with online merchants, brick-and-mortar shops have had to issue deep discounts to customers, which is driving footfall but evaporating profit margins even further.

“They’ve giving away margin in order to stay competitive and to be able to price competitively,” Burke said.

“You can see that in the market. There are two-for-ones, three-for-the-price-of-two, all sorts of promotional activity in order to try and attract consumers in the door.

“It’s back to the down-and-dirty of promotional activity, of deep discounting, of intense competition,” he said. “That’s the only way really they’re going to make a profit this Christmas. Even at that, it’s going to be a battle.”

On the upside, Burke noted that sellers who buy stock at the lower rate now will be able to pass on savings to consumers, which helps them compete with digital retailers.