German Book Market Will Be Confronted with New Challenges

The German book trade has been facing competition from the rapidly growing sector of online booksellers since the mid-1990s. The increasing spread of e-books is also a widely discussed topic. But what changes have so far actually taken place on the supply side of the German book market? An analysis by ZEW shows that the market is going through a major transition. Traditional booksellers are currently confronted with the challenge of strengthening their position as service providers.

Between 2002 and 2012 the number of book retailers in Germany decreased by a staggering ten per cent from 5,800 to 5,200. In the same period the number of companies in the entire retail sector also fell by almost seven per cent. Since 2006 the number of shut-downs per year has been exceeding the number of business foundations in these sectors. In the book-selling industry the company birth rate (number of foundations in a year relative to the number of companies existing at the beginning of the year) decreased from five to four per cent between 2002 and 2012. The closure rate increased from five to seven per cent within the same period of time. By contrast, the entire retail sector experienced a greater decrease in the company birth rate (by 4.5 per cent), while the closing rate in the sector as a whole also dropped – unlike the trend in the book-selling industry. Between 2002 and 2012 the book-selling industry was characterised by a shrinking number of company births and an increase in company shut-downs, whereas the entire retail sector experienced a considerable decrease in company births as well as a decrease in closings.

At first sight, the challenges faced by traditional retailers through the growth of e-commerce seem to be very similar for the different product groups. This, however, is a false impression. Because the significant competitive edge of online retailers is not the convenient order and delivery service they offer; it is their considerable cost advantages from which they benefit in the price competition. Traditional book retailers in Germany are not subject to such pricing pressure. The German fixed book price law, which is also valid for e-books, practically suspends the price competition for books.

For music and films, use has become more important than to own the physical media. Similar trends are beginning to show concerning texts. Amazon's "Kindle unlimited" and the initiative of German libraries to provide a loan network for e-books are recent examples of this development.

"Such models of temporary use as an alternative to books have the potential to turn the whole market for texts upside down", says Jürgen Egeln, deputy head of the Research Department "Industrial Economics and International Management" at ZEW. "The question is how traditional book retailers successfully adjust to their new roles as service providers who provide access to texts, and abandon the idea of perceiving themselves primarily as sellers of books." If the development in the book market turns out to be even vaguely similar to the development in the music market, the biggest changes are still to come for the book-selling industry, concludes Egeln.

For more information please contact

Jürgen Egeln, Phone +49(0)621/1235-176, E-mail egeln@zew.de