Sharing news and commentary about education, careers, investing, and life.

Sharing news and commentary about education, careers, investing, and life.

Monday, August 27, 2007

Do You Pay the "Book Tax"?

Sometimes I save on my reading expenses by occasionally going to the bookstore, grabbing a good book, and paying the book tax. I pay my book tax by buying an overpriced coffee drink as a way to tax my (occasional) squatter reading habit. But how do book stores come out ahead? Do you pay the book tax? And if people are reading books for free, does this mean book stores are generally a poor investment? Well, the occasional super best selling book does seem to help, but that's only a temporary boost. Take note:

Of course, all of these companies reduced prices on Deathly Hallows to lure in customers, hoping that the extra traffic would push more transactions for other items... As I've said before, booksellers don't seem like terribly exciting investments to me right now, given Amazon.com's huge and formidable presence in an already fierce competitive landscape.

Reading a book for free, but still paying the book tax, can lead to a win-win situation. The consumer wins because they pay less than they would buying the book. The company wins because they get the customer in the store (more on this in a second) plus in the book tax situation they're getting higher margins by selling coffee than by selling the book.

Loyal squatters will occasionally actually buy a book or two after also paying their book tax, either because they feel bad or because the book is just that good, and the bookstore gets a nice boost all around. So the ability to get the customer in the store via the right to read for free becomes an important strategy.

Yes, bookstores might have the occasional visitor who reads for free and doesn't pay the book tax, but for the most part consumers either buy books without reading other books in the store or they use the blend approach by paying the book tax and occasionally buying other interesting books. Barnes and Noble sold over 300 million books last year with their retail and internet operations combined and stores represent 96% of their retail sales (according to their website) so they're definitely still moving books.

Searches on Google never led to an official policy from B&N or Border's on book squatters, though Border's does talk about Discovery being one of their values. The reading for free technique still works for the bookstores but not well enough compared to Amazon and other internet book resellers that do not have to deal with the squatter issue. Brick and mortar booksellers provide a great community resource but because of this they're not likely to be a great place to allocate one's investing capital when compared with the internet book resellers.

There are still some lingering questions. What did people do before bookstores began allowing squatters? What would happen if these stores ever stopped allowing reading for free? Would Amazon take away even more of the book retailing market? And how do libraries play into this discussion?

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2 comments:

Anonymous said...

Hahaha this is so what I do!

Jonathan said...

The Georgia Tech Barnes and Noble bookstore now has a sign at the entrance to the Starbuck's there stating that merchandise was not allowed beyond that point. I just saw it this morning and figured ya'll might be interested in knowing that.