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Category Management at Borders

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When Borders announced the hiring of a high-powered executive from the grocery business to implement something called “category management” for its stores, the publishing community reacted with horror. “Books,” we said to ourselves and each other, “are not bananas.”

Then Borders revealed that the largest publishers were invited to participate in and help pay for market research, the point of this market research being to provide data for the “category management.” In other words, Borders was going to put the lions in charge of the zoo.

How has this frightening initiative unfolded so far? Well, the Careers book category has been put through the “preliminary assortment process”; this is the first step in a multi-step category management program expected to require 16-20 weeks per category to complete. The result of this very basic first step in that category, according to Borders, was a 10% reduction in the inventory stocked and a 4% increase in sales. This was achieved, they say, after the slowest-selling 20 titles out of a typical Careers shelf of about 100 titles were dropped and more copies of the best-selling ones were added.

 

What’s Happening Here?

If these numbers are accurate and similar results are possible across the board, category management has the potential to stunningly increase the profitability of Borders and they would be crazy not to go after it hot and heavy. But let’s look a little deeper into the actual process.

Large publishers who want to participate must fill out grueling forms that document their capacity to contribute to the planning and implementation of serious market research. Usually only one publisher (sometimes two in the very largest categories) is chosen to be the “lead vendor” for each category. The lead vendor then works with the relevant Borders staffers to develop a list of issues on which market research might shed some light.

Then an independent firm hired by Borders conducts the actual research. Focus groups, in-store interviews, telephone contacts, surveys–all the usual methods of market research are employed to discover what drives the actual buying patterns in each category. So far, research has been done on Cooking, Early Readers, and Magazines but, unlike with the Careers category, none of this research has yet been tested in the stores.

Questions that research might answer include:

  • How much choice among titles, and what sorts of choices, does a customer want in a category?
  • Where in the store should books of various kinds be shelved? (i.e., erotica near the computer books?)
  • How do consumers find out about titles in a given category?
  • What influences their decisions (cover, price, author?) to buy this title rather than that other one on the shelf?

Is this research smart or a waste of money? I think it’s smart. Publishers almost never do serious market research because books are so cheap to produce; $15,000 will buy the editorial work and 5,000 copies of a new book, but it will not buy any meaningful market intelligence. By far, the most cost-effective way to find out about the market for a particular title is to publish it. But market research on a whole category could be cost-effective and of great benefit–not only to Borders but also to publishers of any size.

 

Access to the Information

This may be the rub. Who will have access to this information? Certainly the participating big publishers will have it first for the categories they are involved in. That is fair enough since they’re paying for it.

But I think this information will also become available to the publishing community in general, and quite quickly, because it’s so clearly in the interests of Borders to disseminate it. They need a constant stream of titles with strong appeal to their customers, and no one publisher, no matter how big, will be able to supply anything like all of them in any category. The salespeople who call on the Borders buyers–if they listen carefully as they present new titles–will soon have the gist of any new research.

And I don’t think that category management will hurt small presses. Indeed, the smart ones should benefit from it. What we do best is niche publishing. Borders is not about to cut its selection back to only mainstream topics and publishers. Their very impressive growth has been based on a computer system that keeps track of the performance of hundreds of thousands of titles divided into 3,000 categories and subcategories. Borders keeps track of how well each of those 3,000 categories performs in each of the many hundreds of Borders stores. Without deep selection, there would be nothing to distinguish Borders from Milly’s BookNook.

 

Building on the Bananas Model

But to succeed at Borders in the future, small presses will have to be able to convince better-informed category buyers that a particular title has something new to offer and that it has an audience. They will have to do a very careful analysis of competing titles to make that case. They will need to understand that in crowded categories a new title will have to push an older one off the shelf, and that therefore “Me Too books,” no matter how well packaged, will not make the cut.

Think again about bananas. Really well-run chain grocery stores in cities with a sizable Hispanic population now have a fabulous selection of them: many colors, sizes, textures, and tastes. But even the best stores offer only one choice for those little red ones.

Curt Matthews is CEO of Independent Publishers Group and Chicago Review Press.

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