The Bookseller.com

3rd December 2008

Paul Smiddy is a City analyst.

Where's the limit

31.08.07

With 10% of the market, supermarkets are already significant players in the book market. But how much bigger can they get? One obvious place to start is by looking at other categories they have targeted. By 2006 supermarkets were generating £1.2bn sales of electrical items, giving a 5% market share, up from only 1.2% a decade earlier. Music and video (M&V) have been categories ideally suited to a supermarket push—high value per square foot of selling space, and generally known value items where the price message can be shouted loudly. Here market share has risen from 8% to 27% over the past 10 years: again sales are currently around £1.2bn a year. This rush has seen Tesco overtake Woolworths as the nation's  second-largest M&V retailer.

Together with books, the three markets have differing characteristics that affect their attraction for supermarkets. Supermarkets like to exercise their buying scale through developing own-label lines: this is difficult (but not impossible) for their scale in electricals. It is a similar story in books; while own-label has been a non-starter in M&V. To be a credible electrical retailer demands a commitment to after-sales service—a struggle for supermarkets. Books and M&V provide no such hurdles. Electricals also demand trained staff to provide advice at the time of purchase—again, a hurdle for supermarkets. Skilled staff are by no means necessary for M&V, but as most Bookseller readers would argue, they are certainly a help in books. So the lessons from this overview are that it is easy to see why supermarkets' share in electricals, while still impressive, is much lower than in M&V. Unfortunately, the book market looks more like its fellow entertainment category than the technical knowledge-driven category of electricals.

But do not turn on the gas oven just yet. In some ways supermarkets behave like rampaging 19th-century armies on the march. They will pick up damsels from one village, and discard them 50 miles down the road when a fresher example has caught their eye. Supermarkets have no inherent long-term commitment to any non-food category, and will only remain involved as long as they perceive it to be in their interest. They are already reacting to a declining music market by shrinking space allocation; the video market is flattening out and I would be surprised to see much increased DVD footage over the next year or two. They will continue to increase their market share in books.  But this rate of growth depends on how helpful publishers wish to be, and whether the book-buying public can be dissuaded from seeking specialist knowledge at the point of sale.

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