That was just the beginning.
Hours later, Amazon matched the $10 price, squaring off in a battle for low-price and e-commerce leadership heading into the crucial holiday shopping season. Wal-Mart soon fired back with a promise to drop its prices to $9 by Friday morning -- and made good on that vow by early evening Thursday.Wal-Mart said the splashy move to discount pre-orders of popular books such as Stephen King's "Under the Dome" and Sarah Palin's "Going Rogue" was part of a larger strategy to establish Walmart.com as the biggest and cheapest online retailer.
Going rouge cheap.
"If there is going to be a 'Wal-Mart of the Web,' it is going to be Walmart.com," said Walmart.com CEO Raul Vazquez in an interview. "Our goal is to be the biggest and most visited retail Web site."
Walmart has such a strong capital base that its website will do the same to e-commerce as it did to commerce.
Wal-Mart's $10 promotion applies to the top 10 books coming out in November but the company is also selling 200 best-sellers for 50% of their list price.
Who eats that 50% discount? Consumers get lower prices, someone doesn't get that revenue (or profit).
The price war sent shivers through the publishing world. Wal-Mart's move, and similarly low prices for electronic books, may ultimately condition consumers to expect new titles to cost $10, a price that would force the publishing industry to re-scale its entire business, including the advances paid to writers.
"The endgame is rather scary for authors," said one book executive.
Publishing is the latest industry to be forced to change, rather than to decide how to change.
Some big authors, however, are looking on the bright side. Dean Koontz, whose soon-to-be released novel "Breathless" is being discounted to $10 from $28, said that he thinks the discounting may prove a good thing for the authors involved.
"Any time people are fighting over your work it's a good thing, especially when you've worked all those years hoping it would be fought over," he said. "I don't think this is going to be a long-term thing. Rather, it sounds like a promotional strategy designed to call attention to Wal-Mart's decision to enter the digital marketplace more heartily than in the past."
Perhaps. But expecting discounting becomes an ingrained shopping expectation.
Mr. Koontz said that Crown Books Corp., a now-defunct book chain that grew to 170 stores in only seven years after launching in 1977, paved the way for book discounting. "They're no longer with us, and perhaps that tells us something, but after they started to discount books hardcover sales simply exploded."
Fascinating point, and logical: lower prices stimulate shopping.
Mr. Koontz said he's more worried about the independent bookstores. Although most limit their stock of best-sellers, a price war on the most popular books may hurt.
James Patterson, whose coming novel, "I, Alex Cross," is being discounted from $27.99 to $10, said he was happy to be in Wal-Mart's top 10. However, he warned any industry that sets low price points may later have a difficult time re-establishing those prices. "Obviously e-books have gotten this thing going," said Mr. Patterson. "E-books are terrific and here to stay. But I think that people need to think through the repercussions....But I'm not taking sides....I'm not the endangered species here."
No, Patterson is not endangered. His new book has 516 holds on first copy returned of 1 copy (ISBN 9780316018784, 179 on order), and 145 holds on first copy returned of 1 copy (ISBN 9780316043731, 14 on order) in the Nassau County OPAC (excluding Great Neck, which has 48 holds on 1 copy, and 14 copies on order, and Syosset, which has 86 holds on 1 copy, and 10 on order: these two libraries have independent OPACs).
Wal-Mart said it wasn't trying to match the price of electronic books. Still, the $10 price tag coincides with the $9.99 that Amazon.com charges for its Kindle e-reader best-sellers.
Coincidence?
Wal-Mart declined to discuss whether it was losing money on the $10 book promotion, which includes free shipping. But the answer is almost certainly yes. Retailers traditionally pay half the list price for a hardcover book. Assuming that's the case with Wal-Mart, its $10 sale price on "Under the Dome" represents a 71% discount of the $35 cover price, which suggests the discounter will lose $7 to $7.50 on every copy it sells.
Loss leader to establish its e-commerce site.
Ten dollars for a hardcover book is a slashing of margins to the bone," said Richard Curtis, a New York literary agent and e-book publisher.
And into the bone, as it were.
Diana Abbott, manager of the Bookworm, an independent bookstore in Omaha, Neb., said that some independents will likely lose some business on the titles involved. "We've been fighting deep discounting for a long time, although $10 is obviously an extreme," said Ms. Abbott. "But there is a strong element of loyalty to independents....We'll survive this."
There is loyalty, but, will it be sufficient?
Wal-Mart is far and away the planet's largest mass merchant with annual sales topping $400 billion. It doesn't release its on-line sales, but analysts say they trail those of Amazon, which notched $19.2 billion in sales last fiscal year, a 29% increase.
Well put: the planet's largest.
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