Reading under fading light
Wednesday, October 17, 2007/
The newspaper, book and stationery retailing industry in Australia is feeling the e-pinch. By JASON BAKER of IBISWorld.
By Jason Baker
The $8.8 billion newspaper, book and stationery retailing industry is in decline. The rise of the internet, decline of newspaper sales and increase in discounting at mass merchants such as Kmart and Big W of popular products has put the 7710 mainly independent retailers in this sector under pressure. Several have folded. The next five years looks just as challenging.
Consolidation of the bigger book chains is continuing apace. The private equity firm behind the 200-store Angus & Robertson book chain is fighting rival 74-store Dymocks for the Australasian assets of book and music retailer Borders, including 20 stores in Australia. These assets are reported to be worth about $100 million. And last week Collins Booksellers announced the acquisition of franchised chain Book City for an undisclosed sum.
IBISWorld estimates that revenue for the industry will decline at an average annual rate of 1.1% over the five years to 2008-09. In 2006-07, the industry generated revenue of $8.241 billion, representing a decrease of 6.3% compared to 2005-06 revenue. The fall was influenced by a change in readership. Product offerings in 2007 were influenced by imitations, commoditisation and growth in private label products.
New products that entered the market focused on education, home and micro business consumer segments. However, industry sales were affected by a significant surge in online readership numbers. In 2007-08, IBISWorld expects industry revenue to fall even further, despite expected modest increased employment.
We forecast the industry will grow at an average annual rate of 0.7% during the five year period to 2012-13. After declining in 2008-09, retail sales in general should benefit from a decline in the unemployment rate and stable GDP growth. A recovery in disposable income levels bodes well for this industry, as does anticipated consumption growth. Revenue may however be hindered by weaker growth in the consumer sentiment index.
The larger, more dominant players in this industry have been able to aggressively cut prices and offer merchandise at close to wholesale prices. Coles’ subsidiary Officeworks, which caters for the small business market, is the biggest market participant with 8% market share. Launched in 1994, Officeworks is expected to turn over about $1.3 billion in the current financial year, representing a 3% increase on 2006-07.
Establishment and enterprise numbers are expected to rise, as are employment and wages. The internet and online stores will continue to create increased competition. Rationalisation is also expected to occur, especially among the independently operated bookshops. And the industry will continue to be sensitive to competition from department stores, supermarkets and grocery stores.
Key success factors for operators in the industry:
- Having a clear market position. This enables consumers to develop brand awareness and aids in customer loyalty.
- Attractive product presentation. This encourages impulse buying. Display both outside and within the shop assist in the conversion of sales from impulse buyers and shoppers.
- Having links with suppliers is imperative for daily products such as newspapers.
- Ability to control stock on hand is particularly important for high turnover merchandise such as newspapers.
IBISWorld supplies business information databases, including industry reports, company reports and business indicator reports. www.ibisworld.com.au