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Nathalie Atkinson: What book publishers can learn from luxury brands

In his keynote speech at the International Festival of Authors in late October, literary agent Andrew Wylie urged publishers to follow Hachette's lead and stand tough against Amazon when it came to negotiating wholesale discounts and margins. As someone who sees how the luxury fashion industry works, I have been bewildered by how much power the publishing industry has allowed mass retailers such as Amazon to have. The book industry could take a few pages of lessons from the luxury-goods world by looking at how brands in that market conduct their business. Take the promotional sales notice I received last week from a luxury department store, which has a long list of exclusions in its fine print: well-known, coveted fashion brands and cosmetics that are not on sale.

In several ways, books and luxury consumer goods are analogous. The attractions they tout are supposedly unique. You'll want, for instance, the new Len Deighton book, not just any thriller. You want Chanel No. 5, not just any perfume.

In other forms of retail, such as fashion, the contractual agreement is called "terms." And like big publishers (Penguin Random House, Simon & Schuster, HarperCollins), luxury-goods purveyors such as Tiffany & Co., Gucci and Cartier have enough clout and desirability to control, choose and monitor the wholesale distribution of their goods in the marketplace as well as how they are presented and sold upon arrival – specifically, the circumstances under which they are discounted and even if they should be. Failure to comply risks losing the privilege of selling the desirable brand.

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When I see 37 per cent (or more) off the cover price of a new book title, I wonder why there are even cover prices at all. It's a misguided idea of a loss leader when publishers can't control access to the very thing that people most desire: the work of front-list bestselling authors. Each of the major international publishers has authors in its portfolio who are literary brands. Think of Stephen King, for example, as the Prada of horror novels. The latest Prada bag does not arrive on the floor at Holt Renfrew with an automatic mark-down, so why does a King work? This may be oversimplifying, but publishers should remember that they still control the core product. And not just the physical books, but the digital content provided to companies such as Kindle, which still mostly sell empty hardware.

As a business model, saying that a book – the latest Lee Child or Malcolm Gladwell, say – is the next hot thing and then deep-discounting it seems illogical, even self-defeating. Such a tactic might make sense in the case of a grocer who puts a staple item on sale in order to get customers inside the store, where they will buy other, more profitable items. But books are not staples. They are ideas and dreams in physical form, much like, well, an It bag or a gown.

So here's a thought, publishers: Going forward – and especially as the lucrative holiday buying season approaches – make like Gucci, Prada and other haute retailers and be selective, calling Amazon's bluff. Don't wholesale the new Stephen King everybody wants for Christmas to the retailer who doesn't agree to terms. Your customers are almost guaranteed to frequent the store that has what they want, at the price you set. It's a long game that, no, won't return publishing to business as usual, but will restore a semblance of balance that looks more like what the smartest (and therefore the largest and most profitable) players in luxury fashion and beauty do.

Unfortunately, no publisher seems willing at the moment to make that leap of faith. And even if the various houses got together to do just that, it would likely be challenged as illegal. If, for example, publishers organized themselves to control prices and discounting, they would soon be branded a cartel and competition bureaus would be all over them. In the U.S., however, a group called Authors United has had to plead with that country's Department of Justice to even look into whether Amazon might be a monopoly (according to Publishers Weekly, Amazon sells about 40 per cent of all print books). In both Canada and the United States, a customers– first philosophy (plus anti-trust laws) severely hamstrings publisher control. For them and for the books they commission, shepherd and produce, that means a race to the bottom of the discount bin.

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