On 7 August I heard the news, first reported by Amenic Film Space, that MPH’s 1 Utama branch has closed down. Some people have attributed the closure of this bookshop, and bookshops in general, to digital consumption of books (e-books).
While I am not affiliated at all to MPH and any of its related companies to know precisely the full circumstances of the closure, I do not believe that e-books are the cause of bookstores closing.
Rather, I feel that the bookselling model that MPH has been surviving on is an expensive model, and if no changes are made to this model there may be further closures of bookstores in the future.
E-Books Are Not A Threat (to Malaysian bookstores, at least)
While many are placing the blame of bookstore closure to e-books, the numbers don’t lie. A publisher whom I worked with revealed to me a few years ago that e-book sales count for only 3% of sales. This number was gleaned by comparing the print and digital sales of their bestselling work.
While there is an unaccounted number of readers who are consuming pirated PDF copies of books, studies in more mature markets have repeatedly pointed that people (particularly young people) prefer reading physical copies because of their tactile quality.
I believe that the closure of a chain bookstore like MPH, similar to the closure of Borders’s international chain of stores, is not caused by a ‘switch to digital’ but by the downward trend in retail. In particular, retail business done through malls is an expensive model due to the overheads that go into rental and upkeep of the space, and the number of dead malls appearing in the Klang Valley are a sign that this business model is in trouble.
(Anecdotally, I do not believe that the presence of high-end fashion stores in malls are an indication of a mall’s financial health. It is entirely possible for these stores to be ‘loss leaders’ – the store itself does not make money but are positioned in malls to make their brand presence known while the brand’s earnings worldwide sustain the overheads of the space.)
So, I do not think it is likely that the closure of MPH 1 Utama is linked to ‘the rise of digital’. Rather, I link it to the downward trend of retail and how the bookselling industry worldwide is caught in it.
How the Bookselling Industry Works
In this section I will explaining where your money goes when you buy a book and why MPH (and similar bookstores) has a vulnerable business model.
I will begin by explaining how international publishing works. As anyone who has dealt with printers know, the more you print an item the cheaper the cost per unit is. Let’s say that you want to print a set number of posters – say about 300. When you take it to the printers, they will usually tell you to print fewer copies so that you can save cost, or to go ahead and print at least 1000 copies so they can mass print your item using a different machine (as the price for 300 copies on a machine producing a smaller print run is about the same as 1000 copies on a machine producing mass prints).
The same mechanism applies to books. Let’s imagine that you are a local author and you’ve written about your favourite subject – maybe you’ve compiled some stories from your childhood into a single collection. You make a rough estimate of your market and you think you can sell about 200 copies. If you take your book to local printers, they will very likely tell you that your number is not cost efficient and will persuade you to produce fewer books or to opt for mass printing at about 1000 or more.
The international book market works the same way, except the number of books per print run is not just in the thousands, but in the tens of thousands and more.
Once printed, the books are sent to their distributors, who will in turn ship them out to bookstores. These bookstores will buy selected titles in bulk and store them in their warehouse, with a handful selected and sent to their branches for display and sale.
From here the price of the book is split between different parties. My memory of the exact numbers may not be accurate, but it roughly follows these lines:
- 30% – 80% goes to the store (which in turn pays for the store’s overheads such as employees, maintenance, and rent)
- 10% – 20% goes to the distributor (who in turn pays for transportation of goods)
- 10% – 15% goes to the publisher (who in turn pays the editors or designers in their employment)
- A certain percentage goes to the author’s literary agency (if the author uses one)
- 10% goes to the author, if lucky (I’ve heard authors offered as low as 7% and as high as 15%).
Now imagine how much each party earns if the average price of a book is about RM 30.
( Some of you may be wondering – well, how do authors make money then? Book sales alone pay measly royalties. Even acclaimed and popular writers like Philip Pullman have complained that a writer’s earnings are very small. Apart from producing many books over a short period of time — think over how many books people like Stephen King, Nora Roberts or R.L. Stein have produced over their career – authors often go through literary agencies who help them handle the business of being a writer. This includes selling and securing rights for film adaptations. Presumably, every time a producer is interested in adapting Gaiman’s novels – like Coraline, American Gods, or Good Omens – to the screen, he gets a little bit of money from the licensing deal. Likewise, presumably, he has little control over how his works get adapted once the deals are made and can only promote them, which he does very well.)
As anyone who has tried selling books before knows, very few authors break the 1000-book target in a year, if at all, let alone 10,000, 100,000 or even more – in fact, arguably, many books in the market make losses when set against the huge numbers of sales that it must meet to turn a profit.
But every once a while, there are a few that do: all seven Harry Potter books, the Steve Jobs biography by Walter Isaacson, the Twilight series or self-help classics like 7 Habits of Highly Effective People are some that do.
These few bestsellers keep the entire book industry afloat.
The profits of these mega bestsellers keep the entire chain of production behind them working and helps to finance the other hundreds and thousands of other books that do not hit the thousands upon thousands of sales needed for the industry to run.
Every year, agents, distributors, editors, and bookstore owners all wait for that magic book that will hit multiple millions of unit sales. And if they don’t get it, they shrivel, go dry – and sometimes (like MPH’s 1 Utama branch) they can die.
(As an aside, this is also why an author’s first novel is called a debut novel. While some may consider them to point to the same thing, the terms are not exactly interchangeable. A debut novel is the first novel by an author that a publishing house will decide to choose to invest upon. Bigger publishing houses overseas will sometimes arrange for film rights of a book immediately upon choosing to publish it – a lot is at stake. If the sales of a debut novel are good, the publisher may decide that the author is bankable, and will invest in his or her second work.)
How Bookstores Work
As you can probably tell by now, mainstream bookstore chains such as MPH, Borders, Times and Popular cannot really sustain themselves by the mainstream book industry alone. Even with a 60% – 80% cut of a book’s cover price, the overheads are very high.
Bookstores have diversified by selling stationery and magazines. If there is any argument to be made about how digital consumption has taken away print sales, it is not through the competition caused by e-books but by how social media has overtaken the role of magazines – before social media made it easy to follow trends and acquire news, magazines were a major source of income for book stores.
Contracts are important for bookstores and suppliers. In Singapore, Popular bookstore is able to deliver textbooks to parents by mail.
Sometimes, bookstores may also negotiate to sell shelf space. Certain areas in a store attract better readers, and publishers sometimes negotiate for better placements of their books. While this practice may come across as unethical, it is not unheard of in retail.
But as anyone can see, these may not be enough to pay for all the overheads a bookstore and as such bookstores are still highly dependent on the presence of a few bestsellers.
One of the more frequent complaints by local readers is the lack of availability of niche titles in mainstream Malaysian bookstores and an abundance of conventional bestsellers. This state is partly a response to the current climate for book sales – the more challenging the market becomes, the more conservative bookstores become in their selection of books to sell.
Alternatives in the Industry
There are exceptions. While the chain bookstore model is facing trouble everywhere around the world, Kinokuniya is still doing quite well in Kuala Lumpur. Anecdotally, I have noticed that they are very good at selling to niche readers.
Let’s say that you are interested in esoteric religions. If you buy one expensive book from the ‘religions’ shelf (say at about RM 250), you will find that once you return to the shelf the store will have stocked the shelf with another book on a similar topic that they think will match your interest. I have always liked Kinokuniya this subtle feature of theirs, and I find the experience well worth the supposedly higher prices that I pay for the books there.
Independent bookstores such as Silverfishbooks, Lit Books or Tinta Budi run different business models. A good part of their success will likely depend on their resourcefulness in finding alternative distribution chains for the books they choose to sell and in finding niches to cater to – Silverfishbooks specializes in Malaysiana, and Tinta Budi on rare books. (Psst, here’s a list of indie bookstores).
Some stores are set up by publishers themselves – Kedai Fixi and I Am Lejen bookstore are among them – allowing them to sell their own books. Publishers in Malaysia have also opted to sell at book fairs such as the Kuala Lumpur International Book Fair and the KL Alternative Book Fest, reducing their reliance on retail space.
Foregoing the costs that go into retail space is the main business model for online book stores such as Book Depository (a subsidiary of Amazon) and the local bookseller Bookurve. As MPH has been directing the past customers of 1 Utama’s branch to MPHOnline, it is likely that this is the direction that MPH may be taking in the future.
And then there’s Bookxcess and its affiliated company, the Big Bad Wolf – both of which are to the book industry what Uber or Grab was to taxis and Airbnb was to hotels. Bookxcess and The Big Bad Wolf are remainder sales outlets – a sales model that runs by not paying the distributors, publishers, editors, designers or even the writer involved in the book-making at all.
Remember the high print run mentioned earlier – the thousands upon thousands of units of books that are printed? What happens if the sales of a book do not reach the number in the print run?
The answer is: they are returned from the bookstores to the publishers, where they are trashed (or to use an industry term, ‘pulped’). The books are recycled and destroyed.
Sometimes, publishers are approached by remainder sales companies who are willing to buy these unsellable books in bulk. By this time, the cost of the book will only be about the cost of the paper it is printed on. The remainder sales company will get many of these books, transport them to a less developed company, and sell them at their preferred price.
(So if you see the book of a friend or an author you know sold at The Big Bad Wolf or Bookxcess, don’t tag them on social media with the news – for them, it’s usually a bad thing!)
We Need Third Spaces
It is easy to shrug our shoulders, accept that older ways of doing business were not as efficient, and move on. However (and perhaps more importantly) the loss of MPH at 1 Utama is also the loss of the bookstore as a third space. For a community to develop a good sense of wellbeing, it is important for their third spaces to not only be entertaining, but safe, relaxing and useful for the betterment of a person.
Bookstores – large, hefty ones such as the older double-storeyed form of MPH’s store in 1 Utama – formed these places. Indirectly, they replaced public libraries in the lives of Klang Valley residents (another important third space under threat). We need to recognize the value that these places have for us, and we need to find ways to keep them, or at least the function that they had for society, alive.
Do you agree with Catalina? What do you feel contributed to the closure of MPH’s 1 Utama branch? Share below or email us at email@example.com!