June 2006

Today, the industry is trying to grapple with the potential impacts of ebooks. Everyone is once again jockeying for position, but who will prevail? What are the issues that may not be fully understood and openly discussed? Putting to one side the impact on today’s supply chain, are we now seeing a far more significant potential realignment of the publishing value chain? There are only two players that are essential to the value chain – the author (or creator) and the consumer (or reader). Everyone else exists only if they add or are perceived to add value. The troubadours who read aloud, or the scribes who wrote the manuscripts where effectively removed by the invention of the press. Tomorrow, who will add value and how?

Some ten years ago the publishing industry was caught in what could be best described as a CDRom “feeding frenzy”. Many publishers were convinced that the technology would present a significant revenue opportunity, that the investment was a “must do” and that the alternative internet superhighway, was and would remain, little more than a dirt track. Understandably, few today would talk about the CDRom with the same passion and belief. On reflection, it was a time when many publishers got their fingers burnt and an experience that made many cautious of the digital future.

Since then we have seen ............... the Dotcom boom, bust and recent re-emergence, the impact of P2P services such as Napster and Kazaa on the music industry, the phenomenal take up of broadband services (and rise in both bandwidth and quality), the terminal decline of transient media formats such as VHS, cassettes and CDRom, the IPod “must have” fashion accessory and podcasts, blogs in their many forms, the adoption of “clicks and mortar” by high street retailers, the deployment and take-up of wi-fi connectivity, the morphing of mobile, MPEG, PDA and PC technologies, the emergence of VOIP “free” telephony, digital broadcasting, and much more. We are now truly living in a digital age.

However, ten years on, is what we read and how we read it any different? Has the world of the book changed?

In the journal, academic, reference and professional sectors many would answer “yes”. Here the ability to search, discover, qualify and access nuggets of information was always of high value. Therefore, as it became easier to do it online, so the “tipping point” was arrived at - where it becomes adopted by all - and the standard way was reached.

But fiction is different. We start on page one and read the story through to the end. There is little value to be gained from reading page ninety nine in isolation, or searching for every reference to a word or phrase.

HarperCollins have announced that they will have 10,000 ebook titles available this summer. Nigel Newton, on the recent launch of their Bloomsbury ebook store, speculated that 50% of fiction will be digital by 2016. Irrespective of what we think of the accuracy of this prediction, which is more alarming, the percentage or the date? It is sobering to think that if only 25% of fiction were to migrate in the next ten years, then the impact in the trade would be greater than that of Amazon over the last ten.

Digital content is clearly once again attracting the booktrade’s attention. Today the “noise” is about selling and downloading digital content or ebooks. It is easy to envisage digital audio books being only available as downloads to PCs, MP3 players and mobiles. One of the last pieces of this mobile jigsaw will happen when the large car retail companies improve their in-car specifications and make MP3 and GPS technology a standard within all cars. It is also relatively easy to envisage all pre-1920 literature becoming truly “public domain” and freely available in digital format as never before. Mobibook.com sells 1000 classics downloadable for $23.99 (including VAT).

But do we believe that things are radically changing with the book itself?

The “killer” ebook reader that we all so eagerly awaited continues to be much talked about. Today we see the technology being presented on the TV News. Philips, Sony, Xerox, IBM and many others believe they have the answers and it is merely refinement, packaging and marketing. However, is the ideal ebook reader the key, or are there other issues that are more compelling to the consumer? It is often the case, as with the much cited Betamax versus VHS technology battle, that due to other issues, the inferior technology prevails.

As the industry continues to grapple with the inefficiencies of its physical supply chain we now have the emergence of a virtual one. Do we honestly believe that the same value chain that underpins all from the author to the reader will remain as it is today? Once we remove the physical product do we then also remove the existing physical store? Does the consumer expect the selling of the digital download to be the same experience as the physical book? The internet will be integral to ebook sales' and delivery.

Content or Context?

We find Amazon now joined by what may appear to many as an unlikely book loving group; Google, Yahoo and Microsoft. They all have different book market approaches and all are there for different reasons, but inherently these companies want as much digital content as they can get, for as little as they need to pay, or ideally for free and they will all make money from it differently.

Google wants to index and organise the world’s information and make it universally accessible and useful. Perfectly laudable, and if through their Google Book Search initiative consumers find what they want, then they will be connected to a number of choices. But Google's perceived “scan first and consider copyright issues after” approach has rightly worried many and any serious book buyer would be far from impressed by their initial search service.

What has to be remembered is that Google is not just a search engine but more of an advertising placement agency. It makes money out of connecting buyers to sellers and if sellers want clear visibility it is available, albeit at a price.

So working on the premise that advertising revenue pays their wages, how will it work within the book-trade? Who will “pay to be seen” and sell the download? How will the many potential rights issues be resolved?

Yahoo and Microsoft have similar desires. Yahoo has launched its own Open Content Alliance, a consortium which, in conjunction with Hewlett Packard, the UK's National Archive, and the university libraries in California and Toronto, aims to digitise 18,000 classic works of American literature and develop this to include a wide range of historical fiction, children's books through to specialised technical papers. Microsoft and The British Library formed a strategic alliance in 2005. Their aim was to digitise 100,000 out-of-copyright books, make them searchable via MSN Book Search and also available over the Internet.

Amazon thought that it had stolen the high ground with its “search inside” programme. However, it may be overtaken by others who have a stronger internet brand.

The search engines are all potentially raising the bibliographic bar to a new height, where digital content itself is used to support the search and the qualification. Irrespective of the many questions about rights, how is the trade going to respond to the demands for more and more contextual information? As the definition of digital content and context blurs, who will provide the information? We have already seen that these new entrants are capable of making their own. It is sobering to remember that not so long ago the digital jacket images we now expect as standard were scarce and the only access to rich and accurate bibliographic information was through an agency.

Publishers who create digital impressions of their titles and who also have rich bibliographic information and the ability to export it digitally are well positioned. They can provide as little or as much as they believe is appropriate to whomever is capable of taking it and in doing so ensure that any representation is via their content and consent. Other than the potential richness of the information, this is no different to today. However, we know that many struggle to meet today’s - or even yesterday’s - demands. It is therefore important that someone steps up to this service opportunity and that the vision is not restricted to pure context and is affordable to all.

The capacity of the DVD has created an opportunity for film producers to add many unique extras such as outtakes, director’s comments, screen tests, trailers etc. Does the ebook become significantly different to the physical book, or are we merely replacing the jacket?

Whose sale is it anyway?

Once we have the capability to satisfy the emerging search and qualification demands, we need to sell the book. It is highly unlikely to expect download buyers to make their purchase any other way than over the web. They may also want to buy a physical book or have the choice of both. Amazon is well positioned to meet these demands and has recently announced its “Amazon Upgrade” service, whereby individual consumers will be able to 'upgrade' their purchase of a physical book on Amazon.com to include complete on-line access.

In the last ten years Amazon has created a global online consumer book brand built on range, service and convenience. It has killed off many pretenders and, together with the likes of ABE, redefined the market blurring old and new, used and mint. It has developed affiliate programmes to service many authors, publishers and retailers. It is now truly multimedia and there is little to doubt its ability to service books in whatever form.

There are many collaborative industry ventures such as the German Borsenverein's “Volltextsuche” project, the Swedish “Elib AB” initiative, the French “Cyberlibris” and ”Cairn” projects and the EU Library initiative. Many academic publishers such as Thomson, Wiley, McGraw Hill, Taylor and Francis, CUP etc have initiated digital sales and marketing strategies. Players such as DPS (Digital Publishing Solutions) not only create digital typeset content and convert it to the various digital formats, but also host publisher web ebookstores for their clients. Macmillan have recently launched their “Bookstore” project aimed at delivering various digital formats via multiple channels.

Research such as that by CACI and YouGov suggests, “as many retailers are finding it increasingly difficult to achieve like for like growth on the High Street, double digit growth is becoming the norm for internet retailers”. This was referring to sales of the same physical product , but in publishing we are potentially also changing the product and with the exception of kiosks, it will be only available through one channel.

Search and discovery is no longer necessarily tied to fulfilment. Indeed once readers have found their title linking to a different site to buy and download, it is natural and should be a “click away”. But who owns the consumer? Who is able to leverage the relationship?

We are clearly moving from mass to the market of one. Direct marketing is enabled via the web, but who is geared to manage this today? The book clubs who were best positioned at the start clearly lost ground on the internet. Many publishers have outsourced this function to specialist mailing houses. If publishers are serious about new channels and direct marketing, do they have the skills and capability effectively to respond?

Pricing

Will the ebook digital download be cheaper, the same, or more expensive? Early adopters appear to have taken different routes. What impact will it have on the VAT and taxation of the physical book? The sunk cost of digital production is minuscule compared to the production, inventory and distribution costs. In the world of the internet the user is very cost sensitive. Dan Brown is widely available to download for $6.99 list.

Another further point is that the ebook has to compete alongside other digital media which has learnt the hard way what the market will and won’t tolerate. An interesting side effect in the music world is the impact its transition has had on lowering physical prices.

Authors

What will it mean to the publisher / author relationship? Will the recent music experience of “finding” the likes of The Artic Monkeys be repeated in discovering new authors? As publishers cut back on their physical titles should they consider expanding their virtual one and using the ebook as their test bed?

There are many questions on contracts, permissions, subsidiary rights and royalties.
How will rights and royalties evolve in the digital world? For example, could authors find themselves “locked into” the virtual state of being “never out of print” and their rights never revert? How, and by whom, will the royalty % due be calculated?

The Value Chain

As demonstrated by many, the ability to grow quickly and respond to change is important in the virtual world. It is wrong to assume that there will always be a place for everyone at tomorrow’s table. This does not mean that they become redundant, but it means that they must change, adapt and recognise where they can add value.

In conclusion, the times are certainly changing and the impact of digital content is potentially as great as the impact of the invention of the printing press itself.

Martyn Daniels
Bibliophile Booksellers and Opus 57

SOCIETY OPPOSES MORE CARS ON ROYAL CRESCENT

Kindly reproduced with kind permissions of www.thisisbath.com (The Bath Chronicle)

BY EMMA COONEY

11:00 - 20 September 2005
Residents of Bath's best- known address claim it is in danger of being turned into a car park. They fear the number of spaces in front of the Royal Crescent will double and say the imposing Georgian street should be protected from too much traffic.

Council officials have proposed increasing the number of spaces in response to demands for more parking facilities.

But campaigners say it would be nonsensical at a time when work to restore the street and features, such as the ha-ha wall, to their former glory is under way.

At yesterday's launch of the new website www.royalcrescentbath.com, which is dedicated to the famous landmark, residents told of their parking fears.

Website editor Martyn Daniels said: "We had an 18-year battle to ban open top buses and do not want the crescent turned into a car park now.

"The work we are doing to repair railings and the pavement, and look after the ha-ha, is a nonsense in light of allowing more cars."

He said more parking would mean more traffic as people searched for a space, and more damage to the historic street.

The society has written a letter of objection to Bath and North East Somerset Council after a poll of its members showed three to one opposition to the plans.

B &NES' executive member for transport and highways, Cllr Sir Elgar Jenkins, who was at the launch, confirmed parking spaces would double if the plans went ahead, and said the request had come from some of the residents themselves.

"Residents have asked for more parking and the council is suggesting ways they could have it."

At the moment, one side of the street is for residents and other central zone permit holders, with a few pay-and-display spaces. Most of the other side has a single yellow line, which bans cars parking there from 8am-6pm Monday to Saturday. This would become a mix of pay and display and residents' spaces.

A decision is expected to be made next month.

The Royal Crescent Society's project with the council's parks department and the National Heritage Lottery Fund to restore the railings and ha-ha - the wall dividing the grassy area reserved for residents from the main green - to their former glory was also celebrated.

Work is due to start early next year at a cost of £120,000, of which £30,000 was raised by crescent residents.

To create www.royalcrescentbath.com, the society looked back at more than 200 years of history and opened up its archive of 30 years of printed newsletters, which cover its history and achievements.

The Bath Preservation Trust, which has its office above the museum at No 1, and which has a long and strong association with the society, has helped by granting access to its archives and materials.

Included on the website is the 1945 Plan For Bath, which proposed moving council offices to the crescent and building an extended civic centre behind it, and an 1850 plan to turn the lawn into a mini-Versailles complete with two water fountains.

The crescent was described by historian Walter Ison as "the greatest single achievement in the field of urban architecture."

e.cooney@bathchron.co.uk

Who is the weakest Link?

Publishing News, 25th April, 2003 

Martyn Daniels takes a robust view of developments - or lack of them - since KPMG's ground-breaking review of the book industry supply chain

It is now five years since KPMG delivered its review of the UK Supply Chain. Many changes have happened during those years and many of their recommendations have been pursued by the industry. We have seen an increase in electronic transactions, the improvement in price and availability information through the successful BIC Tick accreditation programme, the emergence of new Internet services such as PubEasy and batch.co.uk, the returns initiative and the development of new standards such as ONIX. The effort has certainly been expended both by the admiral work by bodies such as BIC and the considerable time and effort invested by major players.

However, some feel that the goals of the review have failed to live up to their full expectations and the failure of others to implement the recommendations has cast doubt on its relevence to their working lives. Is it surprising that many smaller players today hold this view and that the supply chain euphoria of yesterday seems to have waned?

Within supply chains, things often only happen when inspired and dogged individuals make them - or someone waves a big stick. The US adoption of ONIX is clearly gathering pace and is , for example, being driven by the likes of Amazon and Barnes and Noble. But who is the UK's supply chain champion?

As we all know a very small number of titles make the vast majority of income and of sales volume, but as we move closer to every Christmas we see the huge bets placed on what the music industry coverts as "The Christmas No. 1". Blockbusters are fired out of the publisher's gattling guns into the market. Some succeed, but many more fail. We are awash with stock which will inevitably be seen, for a fraction of the price, in an adjacent bargin store. Also we see those copies that had to be stocked to promote the title, to fill the shelf and that will probably sell - albeit over time.

Mass Production?

We often talk about the number of new titles published each year, the number of titles still in print and on the increasing backlist, but is this a problem by itself or are the number of units produced the reat issue? It would be interesting to compare the number of titles published, units produced and the number of units sold, i.e. the number of units shipped to merely wallpaper the latest megastore versus the number of units actually sold and their turn rate achieved. One major trade house that i spoke too had consciously reduced the number of new titles, but when asked was still producing about the same number of units across the reduced number of titles.

Irrespective, there are too many units clogging up the arteries of the supply chain and which are all too often going nowhere. We have to ask ourselves why?

Imagine placing an order expecting to recieve one discount and finding on receipt you had the wrong price and were given the wrong discount. Some will say it seldom happens today and is not an issue. Although the exchange of price and availability information has significantly helped reduce the issue over recent years, the majority of customer service queries are still over price and availability.

Back to basics

Uncertainty is the mother of waste. It will invariably end up feeding poor decisions. What percentage of today's invoices are in query? Which of these are genuine and how many result in protracted queries and delays while raising credit notes? The answer will fluctuate widely but given Julian Rivers' comment that Bertrams recieved 80,000 books over three months that they didn't order and that they had an issue with 600 academic books that were priced 300% greater than the publisher's file price, it's safe to say, no one is immune. One major distributor soken to quoted 60% of invoice queries raised were with respect to quantity, 30% price and discount and 10% quality control. Another talked about the issue of validating special discounts given by representatives of third party publishers and the protracted chain of communication to reslove them. They also intimated that 5% of invoices generated queries. Some would argue that the cost to the industry is around 50 pence for every credit note. Others would say considerably more when they look at the phone calls, postage and time incurred by both parties.

The reality check

One major distributor stated that a significant number of clients were routinely requesting copy invoices. Some suppliers and services such as batch.co.uk are making copy ivoices available by automated request and download over the internet. But is this treating the symptom or the cause? Why is the volume of copy invoices raised so high?

Merely posting any transaction to a trading partner electronically just means that it gets there quicker. As demonstrated in many other industry sectors, the real opportunity to reduce cost and waste requires an effective, "open" exchange and sharing of information between trading partners. This is possible between larger players but becomes harder to achieve with smaller organisations who often can't justify the investment.

Supply Chain Management is achievable within the large player to large player environment. However, in this environment, it is often easy to gain consensus to a vision and then retreat to work on individual projects and agendas. What this often delivers is fustration, apathy and poor return on investment for all. The role of BIC can be critical to achieving co-operation as with the returns initative or stimulating activity as with the BIC Tick programme.

It is good to see a number of the larger companies are now starting to jointly plan their projects and co-ordinate their activities in greater detail, based on the common standards and processes agreed within the industry. This is not just about sharing cost but recognising their collective ability to maximise benefit. Unfortunately the co-operation is often not across the chain but usually at one end of it.

Eighty per cent of the supply chain generates 20% of the value; however, it incurs a disproportionate cost to service. Here we need to find one cheap and effective key that unlocks the door to mass adoption. Small publishers need to be ONIX enabled. Small retailers and other small traders such as schools need an effective end to end transaction service from ordering through error handling and payment reconciliation to payment. Some may say it exists today, others that there is a patchwork quilt of potential solutions fromdifferent suppliers. There is little benefit of having five different ways and services to find a book, three more to order it, two that process the errors and three ways to pay for it. Each duplicate service, each broken link incurs cost to all.

At the tailend, can the supply chain afford more than one service and can the supply chain afford an inefficient tail end?

Copyright© all rights reserved Publishing News Limited 2003

Daniels sets up consultancy

The Bookseller, 15th Febuary,2002

MARTYN DANIELS, Vista strategic director, is to leave the US-based publishing systems provider to set up his own consultancy company.

Mr. Daniels said the new operation, Opus 57, would offer, "independant strategic advice on IT and customer relations management, supply chain issues and bibliographic data management". It will not provide business solutions, but offer "a range of services that can help deliver the right solution".

Mr Daniels, who has worked at Vista for six years on projects such as PubEasy and Batch.co.uk, will continue to work with the company in an advisory role.

"I will offer strategic advice to Vista, but essenttially I want to work with everybody," he said. " Idon't want to get too close to one company as that would impede my independence. There are few consultants who have my publishing systems experience."

A Vista spokesperson said: "We have a great relationship."

More information can be had at www.opus57.co.uk

© 2002 Bookseller Publications
VNU Entertaiment Media Uk Ltd,

E-services in focus as Daniels leaves Vista

Publishing news, 15th Febuary,2002

MARTYN DANIELS, WHO has played a key role at Vista in the development of e-services for the book trade, including PubEasy and Batch, has left the company to set up his own consultancy practice.
For the past six years Daniels has been the firm’s Strategic Development Director, a role that has put him at the sharp end of the drive to achieve greater efficiencies through new technology for such vital functions as ordering and payment services.
The parting appears to have been an amicable one, and Daniels will continue to work for Vista in a consultancy role through his new company, Opus 57. The BA’s Chief Executive Tim Godfray, was among those to recognize Daniels’ contribution: “Martyn has been immensely supportive to Batch from the earliest days,” he said.
However his departure comes at a time when a number of the major players in the e-commerce field are jostling for position in what has become a highly competitive market where innovative products require heavy investment.
PubEasy is owned by Vista but relies in part on bibliographic data from Whitaker, with whom it continues to have a service agreement. Such is the labyrinthine nature of the trade’s information technology systems, however, that Whitaker has itself recently launched Whitaker Web, an ordering service which the company says is targeted at the small bookseller. In that respect it may be aiming at a somewhat different market: PubEasy captures information from the major distributors, allowing booksellers to check availability, dues and accounts as well as ordering, but there is bound to be a competitive element between the two. Nevertheless Paul Pounsford, MD, Whitaker Information Services, told PN this week: “Although we have our own Whitaker Web product now, there is no reason why we should not continue to supply our data to PubEasy.com, which we will do.”
The three major wholesalers of course operate their own ordering systems, adding to the electronic array, but here as elsewhere the competition has undoubtedly worked to the advantage of the users. Meanwhile Book Data, another major player, is reporting good progress from its web-based Ist Exchange. This service, developed following Book Data’s buy-out of the Vista share of First Edition last year, enables large book purchasers to communicate with smaller publishers, and which has the advantage of offering a low entry level.
The company has also announced an integrated selection, cataloguing and web-based ordering service for the library market, and is set to extend this to the general UK and international trade, adding further to the range of bookseller choice and — of course — to the competition.
Undoubtedly web-based developments have the possibility of offering a more attractive solution to many services. Batch, which allows booksellers to pay their suppliers electronically through the Internet, is a prime example, and has drawn support from major publishers and distributors such as Macmillan, HarperCollins, OUP and THE, with STL, TBS and John Wiley about to join.
Booksellers using batch. co.uk need go online only when they want to make payments. Book ordering and stock availability systems ideally require the user to be online throughout the working day; the currently high costs of online access through BT is probably the major reason why trade take-up of web-based systems has not been as rapid as their operators might have hoped, but these costs are coming down, and will no doubt reach a level that will enable a bookseller to accommodate the cost of staying online during working hours.

Copyright© all rights reserved Publishing News Limited 2002

CRM: Profiting from Today's Customers

UKSG Serials Journal, November 2001

CRM is a fundamental cornerstone of any business strategy and is cross-functional in its impact. Technology by itself is only an enabler. CRM is not an IT project, but a business strategy that affects business processes and culture.

CRM has the potential to increase revenues by enabling a business to better understand its customers and then use this information to serve them better. It can identify which customers and customer groups are the most fruitful targets and seek to increase the value and frequency of purchases among the most profitable of their customer groups. Effective CRM implementation should also decrease the investment in marketing to and servicing unprofitable types of customers.

However, increasing revenue, if it brings with it a disproportionate increase in cost, does not deliver increased profit.

Who is the Customer?

The identity of the reader is not often known to anyone in the supply chain. When it is known, this information is rarely shared. Some publishers believe that directly servicing the needs of the ultimate customer, the reader, is both a desirable and achievable objective.

The role of intermediaries has obscured publishers’ understanding of their library customers. The identity of the institution subscribing to journals may be known but the presence of Subscription Agents has made it extremely difficult to distinguish real subscription churn from the background noise generated by libraries simply switching agents.

The academic book and journal buyer is typically institutional rather than individual – and the holder of the budget is often only tangentially involved in the purchasing decision. The target of promotional activity is the individual end user, although end user behavior has been little understood by either publisher or library. This complicates the measurement of direct marketing effectiveness. One major academic publisher stated,

"Targeting down the channel with a view to applying direct pressure back up the channel does not always work within an institutional environment."

Authors are not just Authors

One problem with using the acronym “CRM” in this paper is that the term "Customer" is wrong. It is confusing to partners in the supply chain, it is confusing to the ultimate customer, the researcher or undergraduate. In serial publishing it is also confusing to the author, who is also the publisher's customer. “Contact” Relationship Management would be more appropriate.

The author relationship is perhaps the key customer relationship for many publishers. One major academic publisher said that they are trying to build a "club " where authors can access pertinent information and build a stronger relationship with their publisher. This publisher believes that authors can reasonably "expect to be recognized and receive service."

Another major academic publisher reported that they recognize the author relationship as spanning the entire publishing lifecycle: "They are authors, but also can be reviewers, sit on editorial boards, could be on a library committee, be buyers and ultimately are our readers. However we only see them as authors."

It is clear that an important aspect of any effective CRM solution for publishers should be to recognize that customers will be different things at different times and at different points in the publishing lifecycle.

Do we really know our customers?

Information we receive is usually about historic performance. It does not tell us with any certainty how a customer will react to any future initiative. It often can tell us little about the customer’s price elasticity, propensity to be cross sold, or responsiveness to marketing campaigns.

Customer profitability and sales history does not by itself give much indication of the future behavior of a customer.

If the information that is held about a “customer” relates entirely to financial transactions, then that will provide the entire depiction of the relationship. The business misses all the other interactions that make that relationship what it is and enable it to be fully leveraged.

Everything can be tracked. The question is what data creates knowledge and what is "noise."

Marketing Amnesia

From the customer’s viewpoint, separate customer databases can result in a service that appears to have forgotten who they are, what business they have done, when they last contacted us, the nature of our commercial relationship, the names of our contacts.

This condition might be called "Marketing Amnesia"; when seen from a customer perspective, such a condition will ultimately prove fatal to any organization.

Customers will not behave the same online

As the customer migrates online their behavior will change. The product and navigation will not be limited by the constraints of the physical product. This is perhaps most obvious for the academic, who may be simultaneously a researcher, teacher and student; their patterns of behavior may prove incomprehensible if there is a failure to grasp this simple fact.

When the customer goes online, their behavior will change and they will want this to be recognized.

Communicating with the customer

As with other sectors, academic book publishers are concerned about upsetting existing supply chain relationships and therefore are careful to offer traditional retailers (often with their own high quality differentiated customer lists) cooperative marketing opportunities. This has not, though, stopped online retailers becoming extremely significant suppliers in the academic market.
Journal publishers have been much less careful about their relationship with subscription agents (whose “marketing” impact they have always considered to be insignificant). As journals have moved increasingly to online delivery, and as online “deals” have become more individualized, journal publishers have been employing active sales forces for the first time in decades.

Academic and information publishing content is quickly migrating online and the user has long been connected, making the human interaction harder to control and maintain. As a result, email-marketing and Telesales are now quickly becoming the channels of preference.

One information publisher, heavily reliant on cross selling to their customers every time they call, told us they now find a significant number of customers buying over the Web, direct. They have "lost" the relationship as the customer now logs on, buys and logs off. This publisher is now looking at technology that can interpret behavior while the customer is logged on and generate an interactive "Web chat" communication with a Customer Services rep online, reestablishing the personal relationship and the opportunity for cross selling.

As more business migrates to the Web, managing the relationship may become more cost effective but there is a danger that personal contact could be lost and with it considerable customer value.

Permission Marketing

A major UK STM publisher told us that they were using email to distribute tables of contents. Another publisher, recognizing the importance of email communication, reported that they were currently investigating Artificial Intelligence technology to analyze and manage email alerts, based on a customer’s previous activities and known purchasing patterns.

However, capturing, validating and maintaining email addresses is not easy. People have different addresses and their structure can defy all logic. Permission marketing at a basic level provides either "opt-in " or "opt-out" choices, but it can be less binary: the customer can be given various options on the basis of their individual interests, which in turn provides more information about them, allowing better targeting of marketing information.

The academic environment provides a number of lessons about identification of users and privacy that may be equally significant in other sectors as online offerings mature. Users are unwilling to take on the burden of authentication through multiple password systems, and may prefer the anonymity of IP-address identification (even at the expense of some convenience). In corporate use, such anonymity is seen as commercially essential.

The issues of privacy may reinforce the role of the intermediary and enable them to work as a "trusted" information broker.

The Service Culture

Which is moving faster – the digital content revolution or the demands of the customer?

Increasingly customer's expectations are not driven by their best publishing experience but by their best service experience anywhere. In some publishing sectors they are beginning to "pull" content down the supply chain.

New personalized models of information acquisition and consumption are clearly on the increase and can be expected to dominate over the coming decade. Although readers may remain reluctant to purchase information on a pay per view basis, they are also becoming increasingly dissatisfied with having to purchase their information in bundles predefined by the publisher – whether these bundles are “books” or “journal subscriptions”.

The new "service" culture means that suppliers need to put themselves in the shoes of the customer, understand their perspective and recognize that "the customer may not always be right but is still the customer."

Identifying CRM Components

The Database

If CRM is to present a consistent customer interface, it is important that all customer data is consolidated. This does not mean that everyone will automatically have access to everything nor be presented with much greater detail than necessary.

To consolidate customer information, the entities and relationships involved must be mapped, incorporating any relevant commercial or industry standards. Data sources – and their validity, accuracy and timeliness—must be understood. Once underpinned with this fundamental architecture, it is possible to consolidate data, identify the most authoritative source, implement controlled maintenance processes, and eliminate duplication, re-keying, uncertainty and inconsistency.

The data model and database need to be specifically "publishing-centric"; a generalist approach to customer data is sure to prove ineffective and inefficient.

One academic publisher commented, "We need to recognize that addresses are temporary and roles [assigned to individuals] can be temporary." Taking name and address data from myriad diverse sources, cleaning it up, putting it into a database and then tying it up with historic transaction records does not solve the problem -- it merely provides a temporary fix, which will need to be repeated.

The lack of a standard address structure significantly complicates the ability to de-duplicate customers. This is further compounded as lists in certain sectors are frequently purchased and cannot be effectively automatically imported and integrated. Removing duplication and verifying data at source must be the goal. As long as customer data is not properly integrated duplication will occur.

Several publishers we talked to extract customer data from various systems, clean it and deposit it into a database. But few feed the clean data back into the source systems. One commented, "It's a waste of time taking clean data and putting it back into an uncontrolled environment."

Unless all customer data environments become controlled, the clean up and merge operation will have to be continually repeated.

Operational and Analytical Applications

"Operational" CRM means using customer data to process transactions or accessing data in order to perform a focused task centered on an individual customer. This applies to processes associated with customer contact such as sales force automation, telesales, call center management, sales campaign management and mailings.

“Analytical” CRM means leveraging historic customer information, collected from operational applications, to gain an understanding of trends and behavior which provides a basis for the strengthening of relationships with customers and ultimately the generation of new revenue streams (or a reduction in customer management costs).

Used together, publishers can create a cycle that improves business tracking activities, improves analysis of trends and performance, seeks new ways of modeling decisions and as a result modifies actions such as changes to pricing or the launch of promotional campaigns to restart the cycle.

Implementation and Approach

CRM is not a panacea

To gain advantage from a CRM implementation, the entire organization must embrace CRM as the way of doing business. The real drivers of CRM are cultural, commercial and strategic. Gerald Shields CTO of Lifeway Christian Resources encapsulated this,

"Implementing CRM tools is like buying an exercise bike. It doesn't make you fit,
[ it simply declares an intent and provides a mechanism.]"

It is of at least equal importance to ask the question: “What will be the added value of this investment from the customer perspective?” We have found that the benefit is nearly always viewed from the investor's perspective.

"Big bang" versus a phased approach

Any CRM strategy in publishing must take into account the uniqueness of the industry and the particular business. Few publishers would be able to cost-justify the “big bang” approach to CRM. However, there is much to be said for taking a modular approach to CRM, tackling priority tasks first. If properly planned, CRM can be implemented in many small steps.

One international academic publisher told us they were looking at CRM as "a focused evolution." Another US academic publisher said that they had dismissed ERP vendors who appeared to be "looking at the issue [of CRM] as secondary to supporting their core." A US information publisher commented that they had looked hard at the CRM marketplace and believe what many vendors offer today is "vaporware" and are also "cynical of the maturity of the CRM environment."

A Recommended Approach

The following steps are recommended to any publisher moving forward with a CRM initiative.

1. Gain corporate commitment.
2. Identify costs and benefits. Focus on the areas that will create the most value for the business.
3. Establish business processes and metrics. All business initiatives must understand from where they will start, the planned path and how performance is to be measured
4. Close the marketing loop. Create processes that improve the business by tracking activities, analyzing trends and performance, modeling options and as a result adjusting actions.
5. Data authority and adequacy. Data is the key corporate asset. While good data cannot ensure good decisions; bad data can certainly contribute to bad decisions.

Blinded by the e-light?

The Bookseler, January 26, 2001

Martyn Daniels of VISTA suggests seven e-principles for doing business in an unpredictable future.

Imagine rabbits crossing the road. Suddenly they hear an oncoming car and see the bright lights. Uncertain what to do and too frightened to move, they are transfixed.

We can all relate to the driver, but we now have to relate to the rabbit as well. We are caught in the glare of the e-light of the e-revolutions that are bearing down on us at an alarming rate. What is certain is that we cannot expect this vehicle to brake and give us time to move.

The developments taking place within publishing today are significant. The big players are getting larger and are changing the economies of scale and scope; vertical integration is blurring roles within the supply chain; media convergence is introducing new players and new threats; and globalization is challenging many of the traditional publishing "rules".

One has only to compare current coverage in the trade press of "e" related matters to that of earlier last year (not to mention 1999) to see the e-impact and, importantly, the speed and momentum of change. The Bookseller covers digital and e-publishing subjects in a monthly column and regularly runs features devoted to this area. The book business press has certainly switched on the e-lights and is further fuelling the impact of e-business.

In many cases we are not dealing with a future we can predict or control. Publishers will find it difficult to adopt a wait-and-see policy. If they do, they may not have the competencies to compete and may well find others sitting at their table and eating their dinner.
A recent editorial in Wired pointed out that technology is now outstripping Moore's Law, which to date has accurately predicted the exponential rise in computing processing power. That change is happening should not be doubted; and change costs money.

Publishers need to equip themselves to meet the conflicting requirements of physical and digital products, local and global markets, consolidated and fragmented content, and of physical inventory and print-on-demand. However, we also have to remember that for some time to come the traditional print environment will be the main revenue generator for many and will still require support and investment. Publishers will therefore be subject to continuing and further pressure on margins.

They still have to drive down the cost of supporting the physical product overhead with declining revenues while, at the other end, needing to invest heavily to make the e-publishing transition in order to realize the new potential revenues. They are now also having to re-examine their market position on a host of issues and ask themselves: What is happening in the market? Where exactly are we? Where do we want to go and in what time frame? And, what are the associated investment requirements, actions and risks?
We must stop thinking that e-business is different. It is business. This seems a simple statement, but in practice, means some radical changes in the ways we have come to think of e-business and its role in our organizations.

Every player in publishing is finding that they must step back and re-evaluate how they do business, the marketplace in which they do business, the partners they do business with, and their competitors. These are not IT or logistics issues. They are corporate issues, and demand strategic vision, corporate consensus and corporate commitment and action. Piecemeal approaches, solutions and technology that do not seamlessly communicate are no longer acceptable.

Below, I propose seven principles of e-business that I believe publishers should consider when formulating or reviewing their corporate support strategy. They are not comprehensive; neither are they mandatory. They just make sense in this brave new world.

1. Focus on core competencies
2. Focus on integration, not replication
3. Focus on a standard interface
4. Focus on core relationships across the value chain
5. Focus on different user/community perspectives
6. Focus on everybody, not the few
7. Focus on Web access

1 Focus on core competencies Publishers must recognize their core competencies and be able to differentiate between the varying requirements of Content, the product in digital, physical or any combination of media; Context, the bibliographic information that describes the product; and Commerce, the trading rules and processes, including customer information. Just as within any environment, all are essential within the e-business world. Two out of three will not do. All three are linked, regardless of whether you are selling virtual or physical product or servicing customers on the Internet.

The key question for publishers to ask themselves is where their core competency lies. Where do they add value in the evolving value chain and proposition? Some may believe that they provide added value and competitive advantage by managing all three, content, context and commerce, themselves, and that they have the competencies and skills to be truly self-sufficient. But is this so in all cases? For example, a publisher may develop and publish content, but is it capable of providing it in every format, every type of e-book, digitally distributed, provided on demand and effectively "never out of print"? Or is it necessary to recognize the competency of others and outsource some of those tasks?

Publishers should consider the multitude of new players in the field of publishing who deal with content and need to be evaluated, understood and positioned. Many of these new content aggregators and distributors will fail, but what is certain is that a number will succeed and will radically alter aspects of publishing as we know them today.

Only a few years ago Amazon was dismissed by many, but look at its position today. All major trade publishers now have a clear vested interest in Amazon's continued growth and success. Failure of some of the publishing industry's dotcoms could have a fatal impact on some publishers.

What is the role of the wholesaler in today's market? Many are clearly repositioning themselves for tomorrow. They are embracing digital distribution, providing total Web fulfillment services to bookstores and drop shipment; they might even be regarded by some as distributors. We need now to ask ourselves what will be the core competencies of tomorrow's wholesalers and their position in tomorrow's publishing marketplace.

2 Focus on integration, not replication When it comes to online fulfillment publishers have a clear choice: to replicate their commercial systems online or to integrate their e-business activity seamlessly with their existing systems and existing information. Unfortunately, many publishers have learned the hard way. The complexity and skills required to integrate e-business activity with existing systems are quite different from those required to design their own Web pages. And as e-business often means taking on dotcom partners, publishers cannot always tell which will succeed and which can be depended upon as business partners.

By keeping core functions, such as fulfillment and customer and product databases, centralized and by adopting an integrated approach, publishers ensure that they can adapt to changes in the market and are able to interface with any new players. This approach is simpler, cost efficient, recognizes the core competencies of those involved and is consistent with physical fulfillment.

There are many people with whom we now have to interface. We need to think about how we interface. Integration not replication is the answer. Many of those who adopt a replication route will fail, not because their choice of digital warehouse was wrong but because they introduced the risks and costs of duplicating business systems when this could have been avoided.

3 Focus on a standard interface Many believe that the ability to process a credit card transition is all that is required today and that business-to-business (B2B) and business-to-consumer (B2C) operations are completely separate. However, the demands of servicing even the B2C markets will become increasingly complex. Customers will be more demanding and their needs will be driven not by what publishers can provide but by the publishers' total e-experience.

The desirability of a single solution, of managing all customers, B2B and B2C, through a standard interface is compelling. It offers standardization, commercial flexibility, development economics and effective customer service.

4 Focus on core relationships across the value chain It is important that all information is viewed consistently by everyone across the value chain and the publishing life cycle.
As illustrated by initiatives such as ONIX (International Online Information Exchange) and the earlier BIC Basic, product information does not just materialize when the product hits the warehouse, neither does it stop there. The demand for product information is exploding. After all, if you cannot find it you cannot value it and you cannot buy it.

Today all major chains, e-tailers and wholesalers have book-in-hand processes. Collectively this is a huge cost to them. Its primary focus is to collect rich information which is often not available any other way. The problem is that this is too late in the lifecycle. More than 60% of customer service calls are still about basic information, "Is it available? What's the price?" Inconsistent and inaccurate information is costing this industry millions and also losing sales.

The question is not so much who will provide the information for the marketplace, but how publishers will produce and provide the information in a timely manner. To survive in this new environment, all publishers now need a rich product database, with full export capability to other databases, services, business partners and even customers, as much as they need a customer database and fulfillment system.

5 Focus on the different user/community perspectives Traditionally we have built different systems for different user groups and even different networks. We all have close relatives and friends with whom we share close information (our Intranet); more distant relatives and friends we see less frequently and share less information with (our Extranet); and, finally, relatives and people we only see at births, marriages and deaths and share little information with (our Internet). Yet we have all three types within the same user groups and their individual closeness will vary over time, so publishers must have the flexibility to adapt to these changes in relationships.

In addition, we also have to recognize that the difference between the information required by one group of customers and that required by another group may vary by as little as 5%. There is often more commonality than we think.

There are many community builders out there. Some want to own their community, others only wish to be service providers. Publishers must ensure that these intermediaries do not lock publishers out from knowing who their customers are and how to service their needs. Sharing information with your customers, and understanding their behavior, become critical business factors. If publishers are not careful and give these factors away in the belief that they are growing the business, they could be giving away their future.

6 Focus on servicing everybody, not the just the few Although it is relatively easy for large publishers to trade electronically with large booksellers directly, this is often restricted to base transactions and rarely filters down to the 80% of customers that account for 20% of value and volume, but at a high cost of service. Here we see traditional communications such as fax, phone and even post being used.

And herein lies a problem: electronic data interchange (EDI) works best for large publishers to communicate with large booksellers and wholesalers; it is complex and costly to set up and does not deal with customer service queries effectively. The smaller market, representing that 20%, does not have the means to set up EDI, leaving it with no choice but to use the older traditional methods, which add to the expense of order processing. So doing business with the smaller customers is costly for large publishers.

Another issue that publishers must consider when servicing everybody and not just the few is that they now operate within a global environment. Globalization, a definite result of the reach of the Internet, presents publishers with an opportunity to increase their customer base worldwide, without the traditionally high customer service costs associated with international customers. The global economy, comprising customers and partners, demands around-the-clock access to information and the ability to trade both efficiently and effectively. Viable e-business options exist today to meet the mandates of global trading.

7 Focus on Web access In yesterday's market, business users wanted an integrated desktop from which they could access information in a consistent manner. Today is no different, except that this desktop should no longer be restricted to the confines of the local environment. Publishing has a global marketplace and, more importantly, customers want to see and have access to their world. Users want "My Web", identification, personalization and consistency from anywhere at anytime. E-business is about providing solutions to all parties inside and outside the organization.

These seven principles are not fixed, they are fluid and will evolve. They do not address all the issues that all publishers will face in the coming years. However, the technology exists; the opportunities exist. What is now required is a broad e-business vision, corporate strategy and the business commitment to make it happen.

We need to cross the road, recognize the opportunities, actions and risks, and avoid being caught in the glare of the e-light.

____________________________________

The above is an edited version of the keynote speech by Martyn Daniels, VISTA International's strategic development director, at the International Distribution and Supply Chain Specialists Forum at the Frankfurt Book Fair, 2000.

© 2001 Bookseller Publications
12 Dyott Street London WC1A 1DF

Tea and biscuits and a cosy chat?

Publishing News, 23rd April, 1999

Martyn Daniels assesses the changing role of the rep in today’s increasingly cost-conscious environment.

Yesterday’s trade field representative was focused on “selling in”, getting the product on the shelf, pre-selling the front fist and promoting the brand and, of course, on service. Sounds both logical and necessary in a market where there are so many new titles competing for the same space and where getting that space and visibility can make all the difference. However, we must recognise that we should view these not as sales but loans. Some are now recognising that "sell through" will be more mutually rewarding to both trading partners than the sell in approach, with its potential for poor space allocation and high return risk. Purchasers are buying increasingly in binary, and that means one at a time or none! Obviously, as with any supply chain perspective, sell through will impact on the initial order volumes of some titles and demand improved "quick response" service for replenishment. Sell through will impact on trading relationships and will necessitate greater sharing of information. It will call into question the cost effectiveness and performance of sales representatives in both their traditional role and in the new environment. Ideally, everyone is looking for "sell out'.

It is instructive to look at the industry's marketing focus. One would assume it would be on the consumer, creating a demand and awareness that will in turn fuel retail demand and pull through sales However, we see that the majority of effort, resources and information are aimed squarely at the retailer, the trading partner. The field sales representative is one important aspect of this "internal" marketing and sales environment.

The various sectors and supply channels differ in how they are serviced, and in the role that the sales representative performs. Both the US and UK trade markets have witnessed a significant reduction in field sales forces in recent years, though this has been less prevalent in the professional and academic sectors, where large numbers of customers need to be serviced and the consolidation of the customer base has been less marked. What is clear in the trade environment is that the relationship between sales representative and bookseller is moving from the cosy chat over tea and biscuits on to a far more time critical, cost conscious and demanding basis. Often, this forces the publisher to review the cost effectiveness of the use of a rep within individual accounts. Inevitably, this results in some cases in the withdrawal of rep services.

The challenge

In these cost conscious times, it's easy to see the field sales force effort being focused on the larger chains and accounts where a greater return in volume and value can be achieved. Increasingly, the smaller accounts are receiving less attention from publishers and are serviced by the wholesaler or are buying on their judgement and knowledge of what is available. Large accounts such as book chains tend to buy centrally and therefore reduce the need for store visits. However, this is not always the case and certainly not across the total range of titles published. Thus, even in the chain environment, the individual book store could fail to "make the grade" required for a visit from a sales representative.

Overheads are ever increasing, for both publisher and retailer. Every minute the retailer spends with a representative they have to balance against time spent selling and servicing the customer. A store has to balance buying time and effort against merchandising and selling time, and the knowledge gained in buying has to be used to sell. How many visits can a bookseller effectively use? The dilemma facing every publisher is the cost incurred by each rep's store visit. Every penny of a publisher's cost has to be balanced against the revenue achieved.

Service over the phone

The US has witnessed the emergence of a new breed of rep, the telesales representative. US publishers such as Random House, which has a telephone sales department of 24, is embracing the concept. This route has an understandable appeal to publishers in that it can generate orders, maintain customer dialogue and, most importantly, provide a cost effective service for smaller accounts. If the face to face sale could be achieved cost effectively there would be no need to adopt approaches such as telesales. The reality is that the representative is just not cost effective in many smaller accounts, especially in the US where geography means further costs. However, telesales doesn't always satisfy the need of the bookseller to see and feel the quality or presentation of the product.

Catch 22

While publishers view some independent book stores as not being cost effective to be serviced by a sales representative, the question inevitably remains: would such outlets generate more business if they did receive attention? Telesales could be one answer, but the telephone is very restrictive in that both parties have to be there at the same time and all you can exchange are words!

In order properly to service an account it first must be profiled. What does it buy? What doesn't it buy? What's the rate of return, the mix of front and back fist? And how do publishers profile stores? If it is by sales performance history, does this tell them what wasn't bought and why, or just what was sold? If tides are bought via a wholesaler does the publisher even know? Do the retailers input or verify their profiles, and if not is there a gap between what the publisher believes is needed and what the retailer actually needs? All too readily, we assume we know the needs of others but we don't often verify our assumptions and, as a result, never understand the gap, between what is provided and what is required.

If the primary role of the representative is to service the account, supplying information that is relevant to the store's buying decisions and which enables them to sell, how can this be improved? Surely, the representative is the ideal conduit?

The laptop system

Many publishers have developed a laptop representative system. Some of these have been successful but many have failed to live up to expectations. The answer to the question "does the representative take the system into the store?" varies according to whom you talk to. True, the professional sector has little problem taking the technology to the customer but trade publishers appear to. For a whole lot of reasons the system is used the night before and in the car between visits. In some cases, it is no more than a glorified email system. So how do we resolve this issue, or more importantly provide bookshops with the information they need?

Yesterday's representative PCs often failed in that they tried to replicate the rep's car boot or suitcase and thereby attempted to put everything on the system. This made them expensive, complex and unfriendly. A major US legal publisher is embarking on developing the next generation of rep system to service not one but a number of divisions. The problems they face are timeliness and accuracy of information. and the logistical difficulties of accommodating increasingly complex downloads of data top individual systems.

The questions remain: So what? What's new? How can we do things differently? What options do we have? The representative is an increasingly expensive option. Telesales work sometimes, but not at all with visual product. How do publishers provide the best service to each and every account? If ignored, booksellers will be driven to rely even further on wholesalers or other intermediaries.

A fresh approach

Today, publishers are investing heavily in producing marketing websites. They often fail as consumer sites, for the consumer doesn't know they exist and if he did, he would probably want an aggregated one-stop service such as Amazon. However, these are often rich sites filled with jackets, blurbs, author notes, reviews, first chapters and the like. In fact, only cost and effort restricts the information that can be posted and, in reality, everything produced to support a title or an author can be made available. All publishers gather masses of information that supports the title through its development and it can be reused to support its sale. Rather than provide a token website, the publisher should be collating this information and making it available for free over the Web. It is clear that the bibliographic service agents are desperately trying to enrich their product but are often limited both by what's available to them and the CD Rom technology that still prevails. In the US, book stores have been logging on to Amazon and Barnes & Noble to get better product information for free, and new bibliographic aggregators such as MUZE are now setting new standards.

The Internet can provide a common solution to the many and various issues raised. If we look at services such BookEasyTM we see a service designed to give bookshops common access and navigation to perform inquiries and place orders. The service is now starting to be linked to publishers' marketing websites to provide enriched information. What we are seeing is a store looking at publishers' information from their own perspective. It is not difficult to see this same information being presented slightly differently to accommodate the representatives' perspective.

The information doesn't change, just the perspective. In order to satisfy the representatives' and booksellers' needs, additional new information and functions will be required. But it's not rocket science!

Some bookshops could get an electronic, 'my representative" service. The stores would even profile themselves and ensure that they can be proactively made aware of any relevant new information. Today a number of publishers regularly fax stores with what some would regard junk mail. Surely, it would be more productive to target those booksellers that want information with the information they want, when they want it and in a standard format that can be easily reviewed and acted upon.

Publishers must recognise that a good representative is a good representative. All the systems and information available can't replace their enthusiasm and transform a bad representative. Information that is targeted and delivered proactively can make a difference, but information that is sprayed across the market may be inneffective and uneconomic.

And don't forget, all representatives, telesales and customer service staff go home at five. On the Internet, the publisher's information and service stays out all night and can be accessed at any time from anywhere. Tea and biscuits no longer required!

Hey! They've Found a Way to Herd Cats

Daily Telegragh, 18th December, 1998 

Trading in, trading up

The Bookseller, 1998

As the trade wide initiative on the supply chain delivers its initial findings, Martyn Daniels of Vista challenges the trade to think outside the box and not just to settle for quick wins

For the players in an entire industry sector to decide to stop competing and begin cooperating even in a limited sphere of activity requires unusual preconditions. There may be an overwhelming business case that works to everyone's advantage, or it may be that the entire sector is under a structural threat whereby individual companies recognise that they must co operate to survive.

Many commentators argue that both these preconditions can now be found in the UK book trade. The amount of stock held across the trade, for example, far exceeds unit sales for many titles, there are appallingly low levels of stock turn, and there is a questionable return on investment. Indeed, the current Publishers Association/ Booksellers Association supply chain initiative is aimed at addressing these issues, and it is hard to imagine that it would have been established in the absence of both opportunity and need.

However, these circumstances are not peculiar to the UK market; they are international. The symptoms and even some of the causes may be different but, in an increasingly global market, the potential consequences are universal.

What are these symptoms, what are the causes and, above all, which are the real issues that need to be addressed?

If the supply chain were a car, some people in the trade would argue that it would only be necessary to change the tyres, since the vehicle itself is still mechanically sound. Others would say that a new engine is required but that the bodywork is good for another 100,000 miles or more. However, 1 am convinced that as the 21st century approaches, the road ahead is going to be radically different from the one in use today and that a radically different mode of transport will be needed.

Quick wins versus the long term

Those who approach the supply chain from a logistics perspective highlight excess physical stock movement, double handling and duplication of effort. The only player to gain from these inefficiencies is the carrier. The argument suggests that the problems can be solved by addressing these "physical' issues. This perspective is predictable in its viewpoint and in its solutions. Although such solutions may provide some quick wins, they tend to be short term, parochial and aimed at treating the symptoms, not the causes.

Others seek a more sophisticated explanation. They contend that the problem lies in the "broken information chain". This is where a lack of co operation between trading partners results, for example, in the players at one end not knowing what is selling, and the players at the other not knowing what is available. Until this problem is properly addressed, it is argued, the situation will not improve. This approach offers much greater opportunities.

However, the achievement of lasting benefits requires real co operation, trust and a willingness to recognise the value others bring to the chain.

In the search for answers, it might be tempting to look to other commercial sectors for solutions. Such proposals are focused primarily on improving inventory management across the chain: quick response, just in time, vendor managed inventory, push distribution and so on. These have all worked in other commercial environments, and all have proved capable of creating opportunities to improve profitability under appropriate conditions. However, such solutions appear to work best in a consolidated market where a dominant play exists that can take control of a situation and create opportunities.

Where the outcome of any such proposals is perhaps less certain is in a many to many supply chain, in which the players may have hundreds or even thousands of customers or suppliers. In the book trade, the challenge is further compounded by the tens of thousands of new products launched every year. Each one has an enormous unpredictability in terms of sales, resulting in substantial volatility in demand down the line.

Supply chain gurus from other commercial sectors would find the challenges of the book trade colossal in comparison to their own.

Beware the simple transplant

There are those in the UK book trade who look enviously at other book markets and advocate the adoption of their supply models. Consolidated operations such as Centraal Boekliuis in the Netherlands are often cited as demonstrating best practice. However, it is easy to overlook the fact that models of this kind often do not travel well. Cultural differences, market forces and industry structure are areas of difference that should not be ignored in any analysis.

There are some signs of growth in the UK market, but is this real growth or merely an increase in demand from retailers, fuelled by the latest retail "space wars" and the resultant new store openings? It is easy for publishers to believe that orders from retailers represent consumer demand, only to find that their books are merely wallpapering a new book superstore. This is one example of how lack of information and poor communication in the trade leads to inefficiencies.

Rather than attempt partial solutions, it is essential to look at the overall supply process and information chain in the trade. The view should not be from warehouse to consumer, nor even from printer to consumer, but from author to reader. This "life cycle" perspective looks at some of the real causes of the supply chain problems, and offers an understanding of where some of the biggest opportunities and benefits may lie.

However, it is questionable whether a life cycle perspective can be adopted in an environment that still refers to publishers as having a "front" office (all the pre production processes that go into the development of a book) and a "back" office (everything post production such as warehousing, distribution and fulfilment). Decisions that are made in the front office can be conveniently forgotten after publication. Their consequences, such as a log jam of unwanted copies in the warehouse, are blamed on the more visible "physical" problems in the supply chain rather than on the over enthusiastic initial print order.

If this life cycle perspective were to be adopted, how would the trade move forward to make the necessary changes that would obviate what looks certain to be a long, slow and painful squeeze on everyone's bottom line? How is it possible to distinguish those activities that can benefit from collaboration across the chain from those that produce the greatest benefits when left to competitive forces? How is it possible to create a "win win" environment that will improve profitability for all in the short term, while positioning and arming the market for the changes that lie ahead?

First, the surplus volume of stock that clogs up the supply chain has to be removed, as it adds no value, only expense. To achieve this goal it is necessary to establish a well informed process for making decisions on both pricing and manufacturing. This needs to focus on minimising risk, providing an ability to respond quickly to demand and reducing the temptation to push stock blindly into the pipeline.

Secondly, it must be recognised that the economy is increasingly global: geography is disappearing. About 40% of our product is exported, and that means 40% of the challenge involves issues outside the UK.

The efficiency and effectiveness of US retailers and wholesalers impacts directly on the UK market as never before. It remains to be seen how many of these companies establish a physical presence in the UK, but the economies of scale and scope they achieve in their domestic market are clear.

In addition, there is also the Internet, which does not respect territorial pricing, rights or distribution. If the UK marketplace is looked at in isolation by the trade it will be at great risk to its future. Dialogue must be opened with potential entrants to the UK market, and they must be seen as part of an overall long term solution, not as a threat.

Thirdly, it needs to be recognised that there are differences between the supply chains of different market sectors within the book trade, such as general and academic, and differences within these sectors themselves.

The 80:20 rule

It is a generally accepted principle that 20% of trading partners generate 80% of value and volume; conversely, 80% of trading partners generate only 20% of value and volume, alongside disproportionate administration and service costs.

The profile of the top 20% shows that there is high volume across a relatively narrow range of product, consolidated shipment, a high risk of returns, considerable price sensitivity, complex commercial demands and at a unit sale level, at least low margin. Profitability is dependent on economics of scale. Looking at the other 80% of trading partners, there is a marked difference: low volumes across a wide range of titles, low volume shipments, high variability in demand, low risk of returns, simple transactions and, at unit sale level, high margin. Profitability is dependent on minimising administrative costs.

These two groups cannot be managed in the same way. They have different service requirements and commercial profiles. The top 20% require an emphasis on supply chain efficiency, while the 80% require an emphasis on administration and service efficiency However, both require an open exchange of trading information across the supply chain about, for example, availability of stock or sales levels.

Fourthly, before existing problems can be tackled, it is necessary to understand complex supply chain processes and to share that understanding between trading partners.

This means sharing information and even, where appropriate, risk. How long have booksellers tried to do business with one arm tied behind their backs, not knowing whether stock will be available to fulfil reorders? In some cases they have not been able to find an accurate price for a title. How long have publishers regarded order demand from their customers as representative of sales demand? How long can publishers afford to be ignorant of true sales levels for a given title and of demand and stock movements across the chain?

The information flow

The electronic exchange of information does not solve problems such as these, although it does assist in delivering information more accurately. Equally, sales data, such as those provided by BookTrack, do not provide an answer by themselves, but they do at least start to offer a hitherto elusive sales perspective. Price and availability information can be exchanged easily today, but few have invested in the systems that can make this happen.

Sales and service opportunities that are afforded by direct, interactive, open access to online information must also be considered. The Internet offers the potential for customers to access information for themselves, 24 hours a day. Home banking is just one example of this self service environment; account details can be had without the need of an intermediary.

The Internet is establishing itself as a significant force for conducting electronic commerce more economically. It enables even the smallest of trading partners to "serve themselves" and communicate more effectively. It also enables the physically and geographically small to be virtually and globally big. It is the great leveller.

Fifthly, some difficult decisions on partners need to be taken, particularly concerning roles and responsibilities across the life cycle as a whole. There are those who advocate the disintermediation of others in the supply chain. Distributors, for example, are known to feel that wholesalers are surplus to requirements. They argue that further consolidation would remove duplication and offer economies of both scale and scope.

Is such a quick win possible? Does it stem from a biased or blinkered perspective on the value added activities in the supply chain? Is it failing to look forward to the potential challenges, threats and opportunities that will make up the book trade of tomorrow?

What of the role and value associated with a wholesaler? The publisher may see the wholesaler as just another customer, while a distributor may see it as a direct competitor. A large chain retailer may see it as a potential supplier, and a small independent as a critical one stop shop for all its immediate needs. The UK wholesaler market has seen considerable consolidation but what about new entrants such as Ingrams or Baker & Taylor from the US? Could they reshape the market in the near future? Is the consolidation role of the wholesaler pivotal to independent booksellers or merely an added layer of duplication?

What role do distributors play? Large publishers may see them as unnecessary players and believe that they can do the job better themselves. Other publishers may view them as critical consolidators, offering economies of scale and scope in customer service as well as physical distribution. Wholesalers will see them as direct competitors, large chain retailers as important trading partners, and small independents as irrelevant.

Consolidation in the supply chain, such as reducing the number of distributors, could reduce short term costs, while the growth of retail space by the largest bookselling chains could increase sales. However, in the longer term such consolidation may increase publishers' exposure and risk as their business is placed in the hands of fewer and fewer commercial partners.

A common understanding of the value added by all the intermediaries within the chain must be sought.

At the beginning of the 21st century it would be dangerous to fall into the trap of "correcting" supply chain processes today based on perceptions of yesterday.

When we think of supply chains we inevitably think of things such as warehouses, trucks and parcels. We think of physical geography: the US, UK, Europe. This is changing: we are at the threshold of the "virtual" world. The physical boundaries that constrained our thinking have gone.

We have to consider electronic content and electronic delivery. We have to consider distributed physical printing of electronic content on demand not just at the printer or at the warehouse but also in the bookshop or maybe even in the home.

Getting smarter

Last year Ingrams launched its Lightning Print "one book at a time" service in the US, and in doing so took one small step down the virtual road. The service has a digital library and prints on demand for the retailer copies of books that may otherwise be out of print. The service aims to extend the life of books while at the same time removing inventory, handling and print set up costs. Ingrams also recently launched its "Green Light" drop shipment service, which offers delivery not just to bookstores but also to customers' homes.

Bringing such new thinking to traditional problems offers previously unimagined opportunities to change the processes and relationships to make the supply chain smarter, more responsive and, as a result, more profitable for all.

If solutions to the supply chain are found that are based only on perceptions of the book trade today, opportunities will be missed. And it is these opportunities that will be exploited by others.

Martyn Daniels is director of strategic development at Vista Computer Services, and has supply chain management, business systems and retail experience gained from working in other commercial sectors.

Book Publishing, a difficult trade to EDIfy

Electronic Trader, July / August 1994

The Supply Chain is complex, covering what can be viewed as several discreet markets: trade, library/academic and international, with often more than one intermediary handling the product between the distributor and the consumer. In addition it can be affected by: • The high number of publishers, (over 4,000 in the UK alone) and their ownership and control of the distribution of their individual titles. • The high number of small retailers and library outlets, (over 2,000 UK retailers). • The high volume and diversity of books available for order, (2 million available books). • The volume of new products and increasing width and depth of subject range, (60,000 new titles a year). • The usage and potential erosion of the Net Book Agreement to control retail price. The widespread practice of "Sale or Return". • Forty per cent of the industry in the UK is international.

We believe that the industry has many areas of opportunity for EDI within its Supply Chain, to overcome some of the industry's complexities, and its current rather archaic practices.

Availability of Product

The availability of individual titles to meet an individual order is not known at the time of its placement. The title may be low in stock, out of stock and scheduled for reprint or out of stock with no commitment to reprint. The sender of the order is unaware of these facts until he either receives an acknowledgement report or delivery note. This can also result in lost sales.

Accuracy of Delivery Invoice Information

Most publishers have adopted a pre-invoice process where the Delivery Note and Invoice are produced with the Pick document before picking. Any “scratches" on the pick process are not therefore reflected on either the Delivery Note or the Invoice. However, whilst the quantity delivered remains a variable, the electronic trading benefits of automating pre staging receipt and invoice reconciliation cannot be fully realised.

Returns A significant percentage of product, which can be as high as 20% for paperbacks, is returned through the Supply Chain unsold. In addition , the percentage of product not ordered and held as excess stock at the Distributor is not known. Although the returns process provides the publisher with product visibility in the marketplace, it does introduce significant cost into the chain in terms of excess; stock, space, handling, carriage, financial reconciliation and administration.

The majority of product is returned to the publisher. This is due to the Net Book Agreement (the price maintenance mechanism which has operated in the UK for many years), the calculation of royalty and the need for the Publisher to ensure that the credit given equals the price paid, which may have changed since purchase.

Lack of Sales and Stock Information The Publisher is aware of stock movements out of his distribution centre, but unaware of actual stock sold and stock held within the chain. Through use of sales representatives he can establish a feel of the rate of sale and by tight control on returns, make a judgement on the status of the product within its life cycle.

However, the increased presence of the wholesalers and their high service levels has introduced a further step within the chain and as a result raised the risk of judgement error by the Publisher on stock transfers, holding and reprints.

Payment A number of factors make the payment process complex; orders being split into multiple deliveries and invoices, the volume of claims raised against the pre invoice and returns processes, the potential number of accounts and the special deals struck by the sales representatives. As a result the sector tends to reconcile invoices and credits and pay against monthly statement. Debit Note claims are raised at the same time as a return request. In reconciling the statement, the retailer will deduct any debits claimed irrespective of whether a credit has been received and pay on the net value. This obviously makes payment reconciliation more difficult.

Orders Due Retailers are increasingly requesting that non availabie order lines are not placed on an Orders Due file. They choose instead to repeat the order as a chaser.

The immediacy and accuracy of EDI would give all parts of the book publishing supply chain the management data to solve these problems, and put management back in control. The industry has yet to develop such solutions.

Martyn Daniels is an Independent Consultant, currently on assignment to First Edition, studying the book industry’s supply chain. He was previously Systems Manager of B&Q, where he drove the company to be one of the most sophisticated users in the UK. He was also Chairman of the Tradanet User Group, the largest user group in Europe.