The walls are indeed high and hard to climb for readers living in the ebook retail walled gardens of Kindle, Nook and iBooks, according to new data from Codex Group, a New York-based book industry research firm.
According to a November survey of 2,042 ebook buyers, 86% buy ebooks from only one retailer, most likely Kindle, iBooks and Nook, Codex Group president Peter Hildick-Smith told me.
What this data point implies is that the vast majority of ebook retail activity in the U.S. is happening in so-called “walled gardens” — digital content ecosystems run by companies like Amazon and Apple that keep consumers searching, discovering, buying and consuming all or most of their ebooks, songs and movies in one place. If a reader has an Amazon account and has bought Kindle ebooks, they are very likely to continue doing just that.
For the big retailers with significant market share in the U.S., this is good news: Their current customers are mostly loyal.
The news isn’t so good for the smaller ebook retail operations run by Sony, Google, Kobo, Samsung and others. The majority of these retailers’ sales happened within the 14% of ebook buyers who bought from more than one retailer — and, even worse news for that group, 32% of unit sales among that group were Kindle ebooks.
Translation: Customers of those smaller retailers were much more likely to go elsewhere to buy more ebooks and the most likely place for them to go was Amazon.
The implications of this data are fairly clear:
1. The big ebook retailers that have created fairly seamless reading, buying and storing experiences have loyal customers who will continue to buy ebooks from them. So, these retailers probably don’t have to do all that much to keep these customers save for continue to do what they’ve been doing.
2. The smaller ebook retailers have an uphill battle to fight when it comes to not only attracting new readers but keeping old ones. And their biggest foe in that fight is Amazon, which is the most successful ebook retailer when it comes to luring rivals’ customers — likely through price promotions, exclusive content and ubiquity.
For the big retailers, I think the recommendation is very clear — and perhaps counter to trends we’ve recently witnessed: It pays to offer price promotions in select efforts to attract new customers but perhaps not to cater to old ones; that the price wars we’ve witnessed in the ebook world likely haven’t done very much for the retailers engaging in them aside from help them lose a lot of money. Due to high customer loyalty, a returning reader is very likely to buy an ebook offered by Kindle, say, almost no matter the price — so why sell to them below cost?
The trick for these retailers over the next year or two will be to balance income-generating sales to loyal customers and money-losing efforts to attract new customers.
For the small retailers, the picture is fairly bleak. It’s clear, though, that they need to think of ways to keep their small customer bases more loyal, perhaps through better sales and marketing of dedicated e-reading devices or promotions that reward loyalty.
Related: Peter Hildick-Smith of Codex Group presented cutting edge consumer data at Digital Book World 2014. Make sure to be there next year when more of the latest data and insights are presented at DBW 2015. Register now for the lowest possible prices!