The More Things Change the More They Remain the Same
- By Bruce McKinney
Collectors and dealers are uncertain.
By Bruce McKinney
From the first book listings posted on line ten years ago dealers have been anxious that they were,
like Alice in Wonderland, going into a hole with an unknown destination. They were attracted by the
buying opportunities but concerned their customers would find them too and so developed a strategy of
buying on the net while ignoring its existence to their customers. In time dealers started to post
material as the listing sites emerged as significant selling opportunities. By 2000 Abe, the largest
of the used book sites, declared it had 5,700 listing dealers, a number that today is 13,500 to go with
their present estimate of more than 80,000,000 books listed.
In the same year, 2000, eBay the online auction, by then well established but with its explosive growth
ahead, was listing 200,000 books every day and selling half of them every seven days, a percentage that
anecdotally continues to look right even as their listings have grown to 500,000. In just a few years
[1996-1999] these two selling forms emerged as substantial alternatives to the bookstores and mail
order dealers that dominated bookselling for decades. In fact it wasn't only the how and where of
bookselling that was changing. It also became possible to see the number of copies available.
What had been impossible to know now became hard to miss: there was far more inventory than
collectors imagined and asking prices often bore no relationship to rarity. In short: prices were
arbitrary, often illogical, frequently high, their justification illusory.
It also shouldn't have been surprising. Markets are not willingly efficient. They are lions
that respond only to the whip. In the world of printed materials the whip is auctions and their
customer the buyer who has found information inconsistent and sought more efficient ways to buy. The
auction's consignors are collectors and their families now looking to sell, who receiving no
satisfactory offers from dealers, increasingly send material to traditional auctions and post on eBay.
There the new generation of collectors has become their buyers.
It is these unfolding events that now underpin the struggle to define the future form of the market.
It is the "take my word for it" approach of traditional book selling versus the emerging "bid
and ask" model that eBay and traditional auctions are rapidly turning into the principal selling
form in the field.
For traditional auctions AE provides the only comprehensive on line coverage. In 2005 we found that
$439 million of material changed hands and on eBay we estimate $400 million in the category was
transacted. On listing sites that handle old and used material we believe $550 million was sold in
the category: almost $1.4 billion in total.
|
The More Things Change the More They Remain the Same
- By Bruce McKinney
Get on board or be left behind.
eBay's growth in particular suggests the field is entering the third and final stage in its transition
from fixed prices to a market derived bid and ask. Let's look at some numbers to understand where the
market is today and start with this. Over the past six years Abe's growth in the number of listing
dealers and eBay's growth in book lot listings increased by similar percentages: 2.37 times for Abe
and 2.48 times for eBay. To that we add Abe's current published estimate of 20,000 sales a day
annualizing at 7,300,000 items, a heady number that loses some luster when compared to its total
listings of eighty million. This works out to an annual sales rate of 9.125%, nice compensation on a
triple A rated bond but a weak return on material posted to sell. eBay, by comparison based on
anecdotal analysis, seems to be selling about 50% of the books, manuscripts and ephemera posted each
week. Assuming then that its current 528,000 books are typical, that the average auction is 7 days and
the auctions never ending eBay numbers looks like this:
528,000 x 52 weeks x .50 rate of sales = 13,728,000 book lots sold in one year
This is well beyond what Abe is selling. Now let's estimate what the other listing sites are doing. I
assume that 3/4 of the listings on Abe are also listed on other sites and that other sites sell a
similar percentage:
60,000,000 x 9.125% = 5,475,000
I also believe all other sites have in total about 40,000,000 books that Abe does not have and I assume
the same rate of sales for this material: 9.125%:
40,000,000 x 9.125% = 3,650,000
Based on these assumptions the listing sites together are selling:
7,300,000 + 5,475,000 + 3,650,000 = 16,425,000 items
Thus the listing sites remain a larger seller than eBay but not by a significant margin:
16,425,000 items on listing sites versus 13,728,000 on eBay
On an efficiency basis eBay is overwhelmingly superior. Twenty-seven million book lots on eBay quickly
convert into 13,500,000 sales whereas 120,000,000 items on listing sites turn into 16.4 million sales.
So why aren't more dealers listing on eBay? It's simple. The prices are lower, often much lower than
many sellers on listing sites expect based on what they see others asking.
|
The More Things Change the More They Remain the Same
- By Bruce McKinney
Adjust or rust.
The listing sites do not release precise sales data in part because sellers often aren't willing to say
what they accepted. A second reason is that those who list might not like what they saw if they could
see and this probably makes listing sites hesitate to push the issue. The loser no matter what the
reasons is the buyer who faces a wall of asking prices and absolutely no help in figuring out if the
asking prices make sense. They are simply asked to "take my word for it" and respond by looking to
eBay where prices are unmistakably lower and determined through open bidding.
Everyone also understands that attractively priced material should sell quickly and it's
correspondingly obvious that material that sells slowly is probably overpriced. As the theory goes,
if it's a good deal someone will buy it. If they don't, it isn't. Many dealers posting to listing
sites say there aren't enough buyers but eBay is proving this isn't true. It's simply that prices are
too high. The new buyer is simply smarter than the sellers who insist on above-market prices. These
new buyers buy books. In fact they buy hundreds of thousands of them but increasingly buy them in the
more efficient markets.
Thus it is too bad for a spectacular site like Abe which finds itself wedded to a market approach that
in my opinion is going to fail if it is not adjusted. The market is moving into the bid and ask
format, as confirmed by the increasing sales on eBay and at traditional auctions. Sites that provide
only asking prices aren't going to make the cut because the tools to parse auction flow exist and work
well. In the old model of book buying you chose from among the items offered. Today book buyers
screen auction flow and regularly find interesting if unpredictable material. For many collectors this
discovery is a turning point. [See AE's free traditional auction search and eBay's lot search to
confirm this yourself].
Of the thirty million old and used books listed on the web that will sell this year eBay will handle a
remarkable 40 to 45% of them and their share seems to be increasing 5% a year. Today they are
encouraging traditional auctions to list their sales on eBay and are aggressively working to co-opt the
unprotected middle of the market that the listing sites occupy. To do this they offer a variation of
the listing site they call Buy it Now and integrate it into their auction flow. The listing sites
should be happy that eBay hasn't yet figured out how to make this listing service fully effective. In
the meantime they should develop options to compete in what will soon be an efficient bid and ask
market. The listing sites may not win the battle but they should fight the fight. They are a major
asset to collectors but their relevance diminishes as the market transforms. There are interesting
options for them to consider and now is the time to figure them out.
|