Digital sales hit supermarkets 'more than other book retailers'

Big publishers are likely to feel a squeeze on their supermarket sales as a result of the sector experiencing a “once in a generation change”.

Two of Britain’s biggest supermarkets, Tesco and Sainsbury’s, are also big retailers of books. Both retailers reported slumps in profits in their recent financial results: Tesco reported half-year pretax profit was down 92% to £112m, after more than £500m was spent on one-off costs; and Sainsbury’s reported a
pretax loss of £290m.

Mike Coupe, Sainsbury’s new c.e.o., warned that supermarket sales would be falling for the “next few years”, adding that Britain’s grocery market was undergoing a “once in a generation change”.

Earlier this week (17th November) analysts at Goldman Sachs warned that the “only viable option” for the sector to cut costs and grow profits again was for supermarket chains to close one in five shops.

Poor supermarket performances have inevitably affected overall book sales in the UK. Between January and August 2014, supermarkets’ share of overall book sales in volume terms fell to 8.9% (from 10.5% between January and August 2013), according to Nielsen’s UK Books & Consumer survey. Supermarkets’ share of consumers’ overall book spend in this period dropped from 8.3% to 6.9%, Nielsen told The Bookseller.

Publishers, meanwhile, have privately expressed concern about declining supermarket sales and, in particular, about the reduced amount of shelf space given over to books in Tesco stores nationwide.

Enders analyst Douglas McCabe said the industry “should not be surprised” that supermarkets’ sales of books have declined. “There is a substantial shift in supermarket usage, away from big weekly shopping trips and towards smaller, ‘top-up’ shopping,” he said.

“Books will be suffering from this shift, as they are not a fresh necessity. Similarly, supermarket sales are skewed towards genre and bestseller fiction, categories that have shifted to digital much more quickly than other genres. In other words, supermarkets are likely suffering from [the] digital transition more than other book retailers.”

He added: “Despite the success of its Hudl tablet, Tesco is planning to offload blinkbox books in its rationalisation plan.”

Goldman Sachs analysts have said that if current trends continue, sales in large out-of-town supermarkets will fall by 3% every year until 2020.

Heiner Evanschitzky, professor of marketing at Aston Business School, agreed that supermarkets’ huge stores were “not viable anymore”. However, he suggested specialist retailers—such as independent or chain booksellers—could partner with supermarkets to use some of their out-of-town stores’ space.

Evanschitzky told The Bookseller: “There are press reports that SportsDirect wants to rent space from Tesco . . . in the same way, Waterstones or an independent bookseller could partner with [supermarkets] to create a ‘shop within a shop’. We see this in many international hyper stores.”

Retail analyst Nick Bubb added: “As the big [supermarkets] pull back from big superstores, non-food items will get less priority, and it’s tough to make money in ‘entertainment’, versus Amazon. In books, I can’t see more than a few pick-up lines and bestsellers in the average superstore in the future.”