July 16, 2007
Harry Potter and the Deathly Discounts
The final installation of J.K. Rowling’s Harry Potter series, Harry Potter and the Deathly Hallows, will debut for sale at one minute past midnight on July 21 and retailers are attempting to outdo one another with discounted prices, promotional events, free shipping and other special offers.
Online sites such as Amazon are promoting all things Potter with a complete collection of books, DVDs and other items. Amazon announced it had taken preorders of 1.2 million copies of the book by July 11.
Meijer is running a special “Hallows First” night from 11 pm to 2 am on July 20th. Stores plan to celebrate the event with costume contests, food, prizes, and giveaways, including 10 free books at each location.
Discounting of the book, which has a suggested retail price of $34.99, has been fierce: Overstock.com is coming in with a price of $17.49 ($2.95 standard shipping is extra); Wal-Mart at $17.87; Amazon (free shipping kicks in at $25); and Target at $17.99 for the book. Grocers including Kroger ($21.99) and drugstores including Walgreens ($19.99) have also gotten into the Potter sweepstakes.
With so much discounting taking place, it is clear that retailers are looking for sharp price points to drive traffic with the intention of converting those numbers into sales of other items carrying profitable margins. The question is, will retailers pushing the steepest discounts (possibly even at loss leader prices) find enough in the way of profitable added sales to make it all worthwhile?
|
Harry
Potter and the Deathly Hallows – Retail Pricing |
|
|
Overstock.com
|
$17.49
|
|
Wal-Mart
|
$17.87
|
|
Amazon.com
|
$17.99
|
|
Target
|
$17.99
|
|
Sam’s Club
|
$18.48
|
|
Buy.com
|
$18.88
|
|
Costco
|
$18.99
|
|
Walgreens
|
$19.99
|
|
Toys R Us
|
$19.99
|
|
Barnes & Noble
|
$20.99*
|
|
Borders
|
$20.99
|
|
Kroger
|
$21.99
|
| Source: RetailWire 7/11/07 *Members – $18.99 |
|
Discussion Question: Are retailers shooting themselves in the foot with such
low sale prices on Harry Potter and the Deathly Hallows? What can retailers
without the buying power of Amazon and others do to be successful rolling out
the new Potter book?
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Once everyone else sells Harry Potter as a loss leader, it’s hard to be the retailer who tries to sell it for more. It gives you a bad image. Skillful retailers might use the Harry Potter event to sell more profitable tie-ins and/or generate additional non Harry traffic. It’s the struggle of the profit statement versus the cherry pickers. Generally the cherry pickers win. Bookstores don’t make profits from discounted bestsellers. The profits come from higher margin titles: private-label (in-house publishing); closeouts (remainders); used and out of print books; and full-price “midlist” (non-bestsellers)and “backlist” (bread and butter staple stock titles that were published years ago).
Amazon.com started this heavy discounting on Harry Potter books, but they had a strategy in place. Because they are able to capture all of a customer’s personal data, it was not a loss leader at all. It was, and is a marketing tool. Even if they only earn $.50 per book, they are building a database of customers whom they can contact in the future.
With this in mind, the brick and mortar stores need to have a similar strategy. Many of the stores require a reservation for the Harry Potter book, and if they are smart, and they execute the reservation system well, they should be capturing vital consumer data. If they can make $.50 – $1.00 while doing this, it is not a loss leader at all. It is a great marketing program, with a great potential ROI.
Having a competitive low price is important but I am not sure that Wal-Mart’s 11 cents lower price than Target’s price is so compelling that people will choose Wal-Mart over Target. Having a low price that is competitive makes a difference.
What can other stores do? Having events and other memorabilia be part of the process of getting the book would certainly be attractive to many of the people looking to buy the book. The fun factor could offset the slightly higher price.
This may not answer the question directly (actually, there’s no MAY about it) but…Asda threw a hissy fit because the publisher has upped the price so much over the series and insisted that they will sell for a bigger discount than anyone else and have more copies than anyone else so that they can be seen to be sincere. That was yesterday. Today, the publisher announced that Asda owes them money so they’re not going to sell them any copies. Put that in your pipe and smoke it, fans, and go buy your book somewhere else. One can only think that the publisher will lose in the long run but hey, who knows. A fan is a fan is a fan and will manage to buy their book one way or t’other, hopefully (from the publisher’s point of view) for a higher price.
Because consumers will be looking for the new Harry Potter book, retailers need to stock it. Having it at a non-competitive price is a big disadvantage. Making the introduction of the book a celebration of sorts can add some excitement to retailing.
From my observation there is also a lot of competition from online retailers who are trying to offer the best deal, often with free delivery. And that can make consumers very satisfied! There are numerous ways to promote selling other items for cross merchandising.
By jacking the cover price to $34.95, the publisher and the retail world are inviting price competition. It’s no surprise that the competitive “out the door” price (at least for the introduction) is at or below $19.99. Mass merchants need to be competitive on an item like this to be in the game, and they can hope that at least some of the customers buying the book will fill their carts with something else.
As for “pure play” book retailers (from Amazon to Barnes & Noble), they can’t be perceived as the guy with the wrong price on the #1 book of the year, even if the customer that day buys nothing else. It’s as much about market share as about the profit (or loss) made on one book.
Harry Potter is the definition of a loss leader and it’s up to the retailer to add up-sell opportunities. Here in Canada, my wife (who is an admitted Harry Potter Groupie) ordered the book from Indigo.ca and they are providing a ‘magic’ gift card with anywhere from $5 to $500. This is a good strategy because it almost guarantees a return visit by the customer.
Other retail observations are huge merchandise (toys) displays associated with the book. The tie-ins and cross-sell opportunities are virtually limitless with Harry Potter. Heck, stick a cardboard display with all the DVDs beside the book displayer and you’ll sell the movies without a problem.
As one of the biggest book titles to come out this year, it’s really up to the store to take advantage of the hype and capitalize on the frenzy customers have for Harry Potter. Whatever gets the kids reading works for me.
Harry Potter IS the ultimate loss leader. Of course there are cross merchandising opportunities (although much more of this stuff and I’ll choke). I started rooting for Voldemort three books ago.
What a loss leader…what happens if the consumer doesn’t buy some items that are more profitable? What happens when publishers and manufacturers set minimum prices as a result of the recent Supreme Court decision? What is the purpose of suggested retail price? Is it just to see how much of a discount the consumer can get? Will the manufacturers set prices to save the retailers from themselves?
What choice do brick and mortar retailers have? The online sites are willing to lose money in exchange for mindshare and/or customer information/demographics. If the stores don’t sell it for a competitive price, they just won’t sell it at all. So they have to cut their price too, and hope for the best in terms of customers buying other things.
I understand that ASDA (Wal-Mart in the UK) has been denied copies of the book to sell because the publisher doesn’t like the criticism that each book has gone up in retail price, as it rolled out. Having authored a book published by a division of Random House, I learned something about the publishing business. It is second only to the Government in inefficiency. I received hundreds of calls from consumers who heard or saw publicity about the book. But they couldn’t get it because the retail stores which had received it couldn’t find it and wouldn’t order it for the customer “because we have some in stock!” So they wrote or called me for a book. Fortunately there isn’t the same problem with Harry Potter, but to increase the price each time with the newest book, the suggested retail has gotten out of hand. I really doubt that many consumers–even those with the mania shown over this whole phenomenon–will be happy with having to purchase it at full price. So discounting it to bring the retail down is good merchandising for the stores which could, otherwise, be stuck with ordered copies that won’t move out after the “bloom is off the rose.” The initial surge is a lot of hype–but reality is likely to set in when faced with a $35.00 purchase if retail is maintained.
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Once everyone else sells Harry Potter as a loss leader, it’s hard to be the retailer who tries to sell it for more. It gives you a bad image. Skillful retailers might use the Harry Potter event to sell more profitable tie-ins and/or generate additional non Harry traffic. It’s the struggle of the profit statement versus the cherry pickers. Generally the cherry pickers win. Bookstores don’t make profits from discounted bestsellers. The profits come from higher margin titles: private-label (in-house publishing); closeouts (remainders); used and out of print books; and full-price “midlist” (non-bestsellers)and “backlist” (bread and butter staple stock titles that were published years ago).
Amazon.com started this heavy discounting on Harry Potter books, but they had a strategy in place. Because they are able to capture all of a customer’s personal data, it was not a loss leader at all. It was, and is a marketing tool. Even if they only earn $.50 per book, they are building a database of customers whom they can contact in the future.
With this in mind, the brick and mortar stores need to have a similar strategy. Many of the stores require a reservation for the Harry Potter book, and if they are smart, and they execute the reservation system well, they should be capturing vital consumer data. If they can make $.50 – $1.00 while doing this, it is not a loss leader at all. It is a great marketing program, with a great potential ROI.
Having a competitive low price is important but I am not sure that Wal-Mart’s 11 cents lower price than Target’s price is so compelling that people will choose Wal-Mart over Target. Having a low price that is competitive makes a difference.
What can other stores do? Having events and other memorabilia be part of the process of getting the book would certainly be attractive to many of the people looking to buy the book. The fun factor could offset the slightly higher price.
This may not answer the question directly (actually, there’s no MAY about it) but…Asda threw a hissy fit because the publisher has upped the price so much over the series and insisted that they will sell for a bigger discount than anyone else and have more copies than anyone else so that they can be seen to be sincere. That was yesterday. Today, the publisher announced that Asda owes them money so they’re not going to sell them any copies. Put that in your pipe and smoke it, fans, and go buy your book somewhere else. One can only think that the publisher will lose in the long run but hey, who knows. A fan is a fan is a fan and will manage to buy their book one way or t’other, hopefully (from the publisher’s point of view) for a higher price.
Because consumers will be looking for the new Harry Potter book, retailers need to stock it. Having it at a non-competitive price is a big disadvantage. Making the introduction of the book a celebration of sorts can add some excitement to retailing.
From my observation there is also a lot of competition from online retailers who are trying to offer the best deal, often with free delivery. And that can make consumers very satisfied! There are numerous ways to promote selling other items for cross merchandising.
By jacking the cover price to $34.95, the publisher and the retail world are inviting price competition. It’s no surprise that the competitive “out the door” price (at least for the introduction) is at or below $19.99. Mass merchants need to be competitive on an item like this to be in the game, and they can hope that at least some of the customers buying the book will fill their carts with something else.
As for “pure play” book retailers (from Amazon to Barnes & Noble), they can’t be perceived as the guy with the wrong price on the #1 book of the year, even if the customer that day buys nothing else. It’s as much about market share as about the profit (or loss) made on one book.
Harry Potter is the definition of a loss leader and it’s up to the retailer to add up-sell opportunities. Here in Canada, my wife (who is an admitted Harry Potter Groupie) ordered the book from Indigo.ca and they are providing a ‘magic’ gift card with anywhere from $5 to $500. This is a good strategy because it almost guarantees a return visit by the customer.
Other retail observations are huge merchandise (toys) displays associated with the book. The tie-ins and cross-sell opportunities are virtually limitless with Harry Potter. Heck, stick a cardboard display with all the DVDs beside the book displayer and you’ll sell the movies without a problem.
As one of the biggest book titles to come out this year, it’s really up to the store to take advantage of the hype and capitalize on the frenzy customers have for Harry Potter. Whatever gets the kids reading works for me.
Harry Potter IS the ultimate loss leader. Of course there are cross merchandising opportunities (although much more of this stuff and I’ll choke). I started rooting for Voldemort three books ago.
What a loss leader…what happens if the consumer doesn’t buy some items that are more profitable? What happens when publishers and manufacturers set minimum prices as a result of the recent Supreme Court decision? What is the purpose of suggested retail price? Is it just to see how much of a discount the consumer can get? Will the manufacturers set prices to save the retailers from themselves?
What choice do brick and mortar retailers have? The online sites are willing to lose money in exchange for mindshare and/or customer information/demographics. If the stores don’t sell it for a competitive price, they just won’t sell it at all. So they have to cut their price too, and hope for the best in terms of customers buying other things.
I understand that ASDA (Wal-Mart in the UK) has been denied copies of the book to sell because the publisher doesn’t like the criticism that each book has gone up in retail price, as it rolled out. Having authored a book published by a division of Random House, I learned something about the publishing business. It is second only to the Government in inefficiency. I received hundreds of calls from consumers who heard or saw publicity about the book. But they couldn’t get it because the retail stores which had received it couldn’t find it and wouldn’t order it for the customer “because we have some in stock!” So they wrote or called me for a book. Fortunately there isn’t the same problem with Harry Potter, but to increase the price each time with the newest book, the suggested retail has gotten out of hand. I really doubt that many consumers–even those with the mania shown over this whole phenomenon–will be happy with having to purchase it at full price. So discounting it to bring the retail down is good merchandising for the stores which could, otherwise, be stuck with ordered copies that won’t move out after the “bloom is off the rose.” The initial surge is a lot of hype–but reality is likely to set in when faced with a $35.00 purchase if retail is maintained.