Sunday, July 22, 2007

Price wars? Who wins and who loses

By now many have complained on the decision of the three major bookstores; MPH, Popular and Times to hold out on selling copies of the latest Harry Potter Book 7: The Deathly Hallows in response to Tesco and Carrefour price slash a day before the actual release. Is the complains founded or is it just frustration on the part of consumers and book lovers alike? A knee jerk response by the fact that another store has offered marked down prices on a product or is the anger legitimate and warranted.

There are many arguments abound. Some say books have been overpriced and have limited the typical Malaysian from owning many of the books available in the market. True, books prices are high and a good paperback can cost between RM30 to RM50 while a hardback edition can reach over RM100. Rather than saying that the companies are denying Malaysians from reaching a high level of reading habits, one must look at the market forces, the latest Harry Potter is priced at 18 pounds or an equivalent of RM100 just for the recommended retail prices, factor in the fact that most books are imported from the States or UK, the prices in shipping and handling would increase even if the companies buy in bulk. Book outlets in Malaysia, unlike Tesco and Carrefour which have other income generators in retail and consumer goods, are different. Their operations depend on selling books and with prices and a low readership level in Malaysia this means a harder profit earnings.

Book stores had to reinvent themselves just to get people to come. They offer trial reading (try doing that at a local Indian street store and see yourself getting chased), dining, a comfy atmosphere with reading rooms, customer services and even host programmes and talks to attract people. This is no mean effort and take it from a long time reader, these stores are better off than what we ever had say ten years ago where titles were limited and it took forever for popular books to reach our stores.

Secondly, the consumer can say that Tesco and Carrefour are giving a service to Malaysians by selling cheap. In admission, the distributor have already stated that the retail price of RM69.90 is below the actual purchase costs which means that these two outlets are losing money. But what is the catch? Truth, they can afford it, by lowering prices on a hot title they can recover it back as shoppers who comes for the book will inadvertently shop at these two outlets which means earnings in purchases, allowing them to forfeit profits from the sale of the book if it means added sales from retail products. And by no means is the number of customers small, we can see from yesterday that there were crowds of people at these two stores. With limited supply of books, an excess of demand, it'll mean that only some lucky group of people will walk away with a cheap purchase, others will leave empty handed. By today I bet there are none left. Bookstores can't do this as they do not have alternative income besides books to generate earnings and there are so few chances that their sales or so astronomical due to a single book, meaning less chances to capitalise on it. Tesco and Carrefour cannot sustain selling under priced books for long and this is a fact, so in fact it is a sales tactic on the management to increase store patrons with the lure of a cheap Potter Book.

I am as disappointed as the next Malaysian with book prices. Yes they are expensive. I am an avid collector and my room is a single huge library filled with books which have cost me an arm and a leg. But we have to face facts. Books are expensive but it doesn't mean we don't have a choice. A release of a hardcover book is a sales tactic, making use of the fact that there will be an instant number of readers who cannot wait to read a new book and would be willing to pay a higher amount to be the first to have the privilege. Books also come in paperback editions which usually arrive anytime between 6 months to a year, if you can stand the wait. So consumers can't be saying that bookstores are being unfair. RM109.90 too high? Hang tight and wait for a cheaper edition, prices will and have fallen as previous books sales have proven. Book 6 of the Harry Potter is now going for RM29.90 at Borders and there are often the warehouse and clearance sales, where one can get a bargain. Other try renting it at book rental huts or hunt for second hand editions at places such as the Big Book Store, Payless Books or other second hand outlets. So no complains there? Patience is a virtue if you cannot afford it.

That said, the consumer can continue blaming MPH, Popular and Times for their decision. It is a management and marketing decision on their part and if consumers are dissastified they can find other outlets, say Tesco and Carrefour, but how much stock do they have? Boycott them if you feel you have been cheated, I'm not. I've made a pre-order knowing full well I am paying RM109.90 (cheaper actually since Borders gave a 20% discount and a free Beanie Baby Hedwig). Don't like it? No complains there. I got my book, I've read it and I am satisfied and feel I've paid my money's worth. Consumers, if you think hypermarts can give you a cheaper deal by all means support them, buy from them and give the real bookstores a miss, you have your consumer rights and a freedom of choice. Don't go suing or crying to the Consumer and Trade Ministry saying that MPH, Popular and Times are being unfair. What have they actually done illegally to you? Think people. Don't end up losers because of a price war that just benefits in the short term, competition is healthy but not in access.


Many have said that they have been cheated by buying pre-orders but I don't feel so. For one most major book chains offer discounts of between 10 - 20% which means that the book did not cost RM109.90 but closer to RM89.90 and in addition offered Harry Potter mechandize such as a mug from MPH and a plush Hedwig beanie from Borders which I believe is worth RM10 at the least. What I think is unfair from the hypermarts is that they only released the price undercut the day before the release. The other book chains have been promoting the book months ahead, generating hype and giving it coverage. This costs money and time as well as planning for the launch and events to be held on the release day. What Tesco and Carrefour did was to ride on this (although Harry Potter does not need promotion nowadays, it still is a moot point) and cash in on the last minute. When did you hear about these two chains printing posters, taking pre-orders or generating hype? I think there lies the unfairness. Take an example, a boy opens a lemonade stall in his back yard, telling all his relatives and handing out flyers. On the day he opens for business his neighbour sets up the exact store next door and prices his a fraction lower. Who is the bad guys here? Is it really fair competition. If Tesco and Carrefour were really genuine about it they would have announced ahead of time of their intention to offer cheaper prices so consumers can choose, this is an underhanded tactic not a service to Malaysians so please think of why they did so and I'm sure its not for the benefit of the Malaysian readers although the end effect is that people did get a cheaper deal. But does the end justify the means? Think.


Freethinker said...

THIS IS THE BEST opinion on the HP war price !

observer said...

actually, there are still LOTS of stock left in the hypermarkets today. and still at the reduced price of RM69.90. which means, whoever paid RM100 or RM109.90 for the book, has overpaid.

no matter how you try to justify it, you have just been cheated by the bookstores. cos u could have got it for cheaper at the hypermarts.

She's Jess said...

Agree.. very well said

James said...

great writing. but one thing, is it real that bookstores in Malaysia cannot afford to lower the price or that they cannot afford not to lose in not able to make a higher profit margin from a book like Harry Potter?

bibliobibuli said...

at last someone writing sensibly about what's happened!

i feel quite upset that the bookshops have been somehow turned into the villain and the hypermarkets, the good guys

Jeffrey Hardy Quah said...

"no matter how you try to justify it, you have just been cheated by the bookstores."

How can you cheat someone when you're trying to sell a book to make a profit instead of a loss?

Nice work, Kervin. I've been screaming about this over on my blog (cheap plug!) but this is a hell lot more eloquent.

Agnes Tan said...

Malaysia needs consumers who have clear mind to think sensibly and logically. Bookstores pay some overheads unseen to the consumers, unlike hypermarts. I don't agree bookstore cheats consumer but hypermarts are very good at shifting and covering their costs and profits. Just like what they did to small provision shops.

The Eternal Wanderer said...

An excellent and well-observed comment. Not being an economist, I couldn't have experessed it any better!

Yvonne Lee said...

Hi, and THANKS for the sensible comment, Kervin.

I'm an author, an avid book collector and also a business person. It upsets me that in M'sia, these people still don't have business integrity: Tesco and Carrefour and those HP7 buyers who think the hypermarkets are saints.

In my business of selling pianos, it hurts me greatly that some 'freelance' piano salespeople are luring my customers by selling new pianos ( from some no-integrity dealers) at far below retail price. They can accept lower profit because they are freelancer who don't need to store the units, pay warehouse, set up a shop for walk in customers.

I do, I need to pay my staff, business license and my profit needs to cover everything. But you think these scums care?

Fortunately, some of my customers, who are business people themselves know that undercutting is very unfair. I don't give more discount than the 'freelancer' but the customer still bought from me. She said, " I'm a person with integrity. I know of the price war and I think consumers, must support fair play."

Think too, other products like fair trade coffee, apparels etc. Well, in developed countries, their people are taught to practise fair trade. Are we ready?

It is a big shame to me that Tesco and Carrefour, supposedly from developed countries are not practising good business ethics here. Is it because it's another country?

Thanks again Kervin, for the great comment. People, please think.

Vivacia said...

I beg to differ.

'fair' is a completely subjective word. By whose standard is the hypermarkets' practice 'unfair'? A free market economy's main creed is survival of the fittest, I am sure the hypermarkets won't cry out should the bookchains decide to stock groceries. No one business can control another's strategy, especially the pricing strategy. It's your ability to predict or if not react timely and wisely that will decide the winner.

The hypermarkets' move to stock HP7 (btw Tesco and Carrefour do have a fairly updated section for books)is by whose standard 'wrong'? Their move only means that the HP7 industry has entered two extra players, why does it matter that these two players sell other goods as well?

Furthermore, if a business (in this case the bookchains) only aim to reap profits and not expect losses (or cry foul play if any expected profits are taken away), we will see everyone setting up shop then.

As for marketing strategies, if a business can't compete price-wise, then there are a million other ways to gain upperhands; I am sure these bookchains have a huge loyal customer base, their boycott only further demonstrate their inability to improvise or rise after a hit.

Continue crying foul will only set back the business, next the economy, thus the country. Only competence will be rewarded.

(btw even Tesco UK is selling the book as low as 5 pounds, so it's not a matter of ethics or developed country vs developing.)

Allan Yap & Nigel A. Skelchy said...

Good argument. But one only has to see how the bookstore has developed in developing countries to know that the free market system (with all its faults) is better than one that regulates prices.

In any case, competition should focus you. A bookstore provides more than just books nowadays and that's the catch. There are some people like yourself who will go to an MPH or Popular and pick up that book. Price is not ALWAYS a deciding factor.

Prices of popular books will always be hotly contested but that's the nature of the beast. And for those who want the experience of sitting and reading and enjoying the book in bookish surroundings, you'd have the bookstore. Not many people would think of hypermarkets as first choice to go pick up most books.

Competition is a fact. And when people bitch about it like MPH does, to me it seems like sour grapes. The point is, they may have lost some sales, but did they lose ALL of it?

As far as I'm concerned, I still think that in this case, MPH and others acted like peevish children.