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A shake-up among New Zealand book sellers is looming with the Paper Plus chain poised to launch itself as a serious player and industry veteran Whitcoulls tries to become a trans-Tasman Amazon.com.
The A&R Whitcoulls group, owned by private equity investor, Pacific Equity Partners (PEP) since 2004, is
expected to snap up the cream of the Borders stores that were put up for sale last week by their US owners.
Whitcoulls is continuing to expand as it prepares for a share float scheduled for March next year.
Whitcoulls group managing director, Ian Draper, told the Herald on Sunday last week that the company would be looking at cherry-picking some of the better Borders stores.
The American book retailer sent a ripple through the global book industry last week when it announced it was selling its shops outside America.
The bad times might come to New Zealand as they have in the US, says retail analyst Tim Morris from Coriolis Research.
"The market here could be doing very well now, but there might be clouds on the horizon because all of these industries have got a bit going on globally," he says.
Borders has done good business in the buoyant New Zealand book market, achieving an annual turnover of $17 million, which represents almost 2 per cent of the New Zealand news-stand and bookstore retail book market of $935 million. It opened a new store on Thursday at Sylvia Park and is on track to open another in Albany in October. Borders opened its first New Zealand store in Auckland's Queen St in 1999.
Borders regional manager in New Zealand, Justin Barratt, says he is sure buyers would want all the Borders stores and to keep the brand in New Zealand. The American company has franchise operations in Asia which could be used here too, he said.
According to Statistics New Zealand, New Zealand households spend $16-$17 a week on publications and stationery. In a recent survey, Kiwis voted reading as their favourite activity, said Booksellers New Zealand, the association which represents both book retailers and book publishers.
Meanwhile the major players in the book retailing market, Whitcoulls and Paper Plus, with 40 per cent and 30 per cent market shares respectively, believe there is room for more growth.
According to Paper Plus figures, the publications and stationery market, including office products, is worth around $1.5 billion a year.
Rob Smith, the managing director at Paper Plus, who came in 18 months ago from Warehouse Stationery to change the direction of the company, says Paper Plus will be raising the profile of books and reading in the coming months.
The 200-store franchise announced to its suppliers a week ago that it would be stepping up its book offering, and had appointed Kerre Woodham as its media spokesperson.
The retailer's target market will be women aged 29 and over who relate well to Woodham, says Smith.
"Kerre's choices will be like Richard & Judy's [popular chat-show hosts] picks in the UK. Richard and Judy grew the market. It is not about selling the latest new release," says Smith. "It's about a higher exposure of books."
The new-look Paper Plus with greater emphasis on books will be unveiled in its Sylvia Park store opening in July.
"By Christmas 2007, this business is going to look completely different to how it looks now," says Smith.
Stationery will be another area to be ramped up.
"Stationery is the last Aladdin's cave," says Smith. "Individual stationery is part of the lifestyle choices we are looking at."
Whitcoulls' Ian Draper, confirms the company is working to a schedule that will mean an initial public offering (IPO) in March next year.
PEP may well hold a stake in the business for a period after the public listing, which he says would be a good thing for Whitcoulls.
"There has been a significant investment in store fit-outs, we have not lacked that kind of investment."
Whitcoulls is the most acquisitive of the book retailers in New Zealand.
The group opened 22 new stores in Australia last year under A & R (Angus & Robertson) last year.
With 80 Whitcoulls stores in New Zealand, plus eight airport stores and 190 company owned/franchised stores in Australia under the Angus & Robertson brand, the chain will continue to grow, says Draper.
In the next couple of months, the company will relaunch the Whitcoulls website, where it will sell not only books but also stationery, DVDs and games, setting itself squarely against online competitor, amazon.com.
"We want to be the Amazon of Australasia," says Draper. "The amount of money invested is significant enough to back that."
The company has identified another key area of growth. The retailer's store at Botany Town Centre has a floor dedicated to children interacting with toys and books.
Draper says 70 per cent of book sales were in children's books under $20, followed by lifestyle books.
More retailers are jumping on the book bandwagon with supermarkets and The Warehouse also selling best-selling titles.
The number of internet book sales is still relatively small in New Zealand. Whitcoulls and Paper Plus both sell online. Real Groovy has one of the more mature online book selling businesses and runs Paper Plus's online book business.
Real Groovy book manager, Doris Mousdale says to have an effective online business it has to be regularly maintained.
Mousdale will go to a lot of trouble tracking down a book and may suggest a second-hand copy if that is all that is available.
"We would be profitable if there were another 2 million people in the country," says Mousdale dryly.
Competition for books is being under-estimated, she says.
A $36.99 book purchase competes with an outfit at Glassons or a concert ticket to the Red Hot Chili Peppers.
Independent book stores, meanwhile, are holding their own in the market, according to Booksellers NZ. Dymocks, the Australian retailer which has five stores so far in New Zealand and sees itself as a "large independent", says it is "very happy" with its trading, including that of its latest new store in Queensgate, Lower Hutt.
"I would say that there is more potential here. There are areas where we believe the market is under-served and we are looking to fill these gaps," says Dymocks NZ general manager, Perry Lennon.
"We concentrate 95 per cent on books, our staff are totally book orientated," he says.
"A book is still a very good way of presenting a point of view."
One of the key challenges for book retailers in coming years is the growing trend for readers to digitally download their books.
Michael Moynahan, managing director of Random House and chairman of the Book Publishers Association of New Zealand, said he thinks people will continue to read books but the question is what form it will be delivered in.
"As publishers we need to find different ways of delivering them to people providing authors are recompensed and the public gets what they want," he says.
The publishing sector in New Zealand grew at a rate of 31 per cent last year to $255 million compared with 36 per cent growth in 2005.
"What we are finding in the market is there are multiple opportunities for more than one distribution channel for more than one type of reader," says Moynahan.
He thinks a mix of readers is keeping the market strong. "It's a combination of strong book readers who are buying across a broad range of books, over a variety of genres."
Books buying is viewed by the book sector as a lifestyle choice, up against some stiff competition.
"Why sit down and read a book when you can pick something up that is cordless and shoot?" asks Smith. "We are seeing a swing from parents, saying we've got to get them back into reading."
Linda Henderson, chief executive of Booksellers NZ says a recent survey showed reading is New Zealand's favourite activity.
"We are competing with other leisure operations, with Playstation 3s selling for $1200. You have to sell a lot of books to match that. Booksellers have to be competitive, and always be a step ahead."
