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Discounting drives down sales growth

7 July 2003

Market research agency Mintel has attacked widespread deep discounting of books in the UK in a recent report, claiming that it has adversely affected sales. Since the UK has the deepest book discounting in the world, but appears to be spearheading a worldwide trend, these figures are worth looking at closely.

According to Nielsen BookscanUK bibliographic organisation, describing itself as 'the definitive retail monitoring service for books', which shows UK bestseller lists on its website., heavy discounting has pushed down the average selling price of books sold in the UK General Retail Market from £7.51 in 2001 to £7.33 in 2002. The Mintel survey of 1,000 adults concluded that personal recommendations were a far more important factor affecting book purchase than discounts. It added that: 'While discounting may attract customers, it certainly does not ensure customer loyalty.' and advised retailers; 'Discounting only cuts into their margins and damages their sustainability over time... it also brings all retailers down to the lowest common denominator.'

This may be the most serious problem confronting the British bookselling chains as they battle for market share. The retail sellers of books with the deepest pockets are the supermarkets, which showed that they would sell Harry Potter and the Order of the Phoenix as a loss leader if necessary to undercut the competition. In the same way American bookselling chains arguably have more to fear from the price warehouses, where books are a very low-priced extra, than they do from the competitive efforts of other booksellers. This is an unequal competition which the book trade cannot win. But booksellers can in the process do much to destroy themselves by driving down prices to a level where their own margins are simply too low to sustain their businesses.