2 The Diffusion and Distribution of Books in the Supply Chain
The profession of book distributor is relatively new in Quebec and French Canada. Even in the 1960s, books were circulated by wholesale booksellers mainly in Montreal and Quebec City, which sold books both in their own stores and through other bookstores and institutions. The industry was emerging from a period when printers often became publishers, and booksellers were also publishers, importers, stationers and wholesalers. The few bookstores in the regions were therefore dependent on these businesses to obtain a stock of both Quebec and foreign books, which could lead to conflict, since they were also competitors. They were also often blamed for bypassing local bookstores by serving institutions directly, offering them substantial discounts, before supplying the bookstores. These wholesale bookstores were also in competition among themselves, which led to a race to the lowest price and confusion where the small bookstore usually became the victim. Under such conditions, it was difficult to develop a supply network in the regions.
The 1960s and 1970s brought profound changes to the book trade. Partly thanks to the winds of nationalism and patriotism blowing through both Quebec and the other Francophone communities across Canada, a large number of publishing houses that supported the promotion of local and national literary production were created. However, they were unhappy to find that their books were being sold at different prices depending on the supplier. Wholesale booksellers were gradually replaced by distributors; at that time there were more than 70, 60% of them Quebec-owned. Major French publishers created distribution structures, while new Quebec businesses attempted to win over Quebec and foreign publishers. At the same time appeared the concept of exclusive diffusion rights, which made wholesalers, the non-exclusive distributors, virtually disappear. The new link in the supply chain, the exclusive diffuser/distributor, thus began to expand into what it is today: one of the pillars of the book trade in Quebec and French Canada.
2.1 The distinction between diffusion and distribution
The concepts of book diffusion and distribution are often confused, even by professionals in the sector. This misunderstanding perhaps arises from the fact that the two complementary functions are often carried out by the same business or by associated businesses, or else it could result from the fact that the English term "book distributor" can mean either a book diffuser, a book distributor or a diffuser/ distributor, which might partially explain the confusion surrounding the use of the terms designating these concepts in French.1
The Québec Culture and Communications Activity Classification System (QCCACS) distinguishes three types of establishments whose main activities consist in circulating books between publishers and the various retail outlets: book diffusers, book distributors and book diffuser/ distributors.2
Diffusion involves taking orders from bookstores and other retail outlets through a network of representatives acting on behalf of one or several publishers. Book diffusion may include such things as prospecting clients, representing publishers, canvassing the media, promoting sales, publicity, determining discounts granted to customers, as well as ordering and determining suggested selling prices for imported books. Diffusion could be further divided into two areas of activity: promotion and marketing. Canadian books are most often promoted by the publisher, which attempts to build up public awareness of a publication (usually a new title). Book promotion activities may include review copies, the launch, author tours, publishing of advertisements or inserts, the inclusion of the title in the catalogue or Web site, the production of brochures, posters, bookmarks, etc. Diffusers obtain publishers' permission to act as their exclusive representatives for the marketing of their works in retail trade networks, bookstores, etc., through teams of representatives. For foreign titles, diffusers may take on more duties related to the promotion of titles.
Distribution includes all the logistical tasks related to the physical circulation of books and management of the related financial flows. Distributors initially receive the books, do the système d'officeshipping, process orders, take responsibility for packaging and invoicing, manage and control inventory, warehousing, shipping, returns, credits, etc., for one or more publishers.
Considering the complementary nature of the two functions, they are often grouped within a single firm, referred to as a diffuser/distributor. With these two functions, there can be a variety of business models or cross-sectoral agreements governing the diffusion and distribution of books. As we will see below, certain exclusive diffusers do not do distribution, but rather develop agreements with distributors to manage movement of their books. However, certain distributors will not agree to separate diffusion and distribution and will insist on retaining responsibility for both functions. Except for a few cases of self-distribution, only one firm, Socadis, limits its activities to distributing books and does not have a team of sale representatives for the book trade; it works with exclusive diffusers that may represent several publishers, or else it works directly with publishers that do their own diffusion. As we will also see, certain diffuser/distributors turn the distribution of their catalogue over to other distributors for a specific market, usually the mass-market channel or the academic market. Lastly, there is the category of publisher/diffuser/distributors, which are usually small publishers or educational publishers that do their own diffusion/distribution.
A diffuser/ distributor is distinguished from a wholesaler by the fact that it holds an exclusive right to represent a publisher's titles to retailers. A wholesaler is a non-exclusive intermediary between a diffuser/distributor (or a publisher that carries out these functions itself) and certain categories of purchasers, whether institutional or themselves retailers. A wholesaler usually specializes in a specific market (libraries, mass market, etc.). It provides titles from several publishers and offers customers a single supplier for all their supplies. It can also provide its customers with related services, such as collection management and cataloguing, title searches and importing, etc. Under the regulations pursuant to the Act respecting the development of Quebec firms in the book industry (commonly called Bill 51) in Quebec, no wholesaler may serve institutions. Similarly, certain mass-market channels have attempted to force suppliers to deal with a single wholesaler for all of Quebec, as is often the practice in English Canada, but this strategy has been rejected by distributors. For these reasons in particular, wholesalers are virtually absent from the book trade in Quebec and French Canada, except for providing French-language books to English-language customers outside Quebec.
2.2 Characteristics of book distribution
The distribution of books is very different from the other sectors of the book trade, particularly with regard to the economic model that governs its activities. In order to better comprehend the realities specific to diffuser/ distributors, we would like to mention certain characteristic specific to book distribution.
- Barriers to entry: Not just anyone can become a distributor. The barriers to entry are imposing, mainly because of the costs related to warehousing titles and the growing technological requirements. Diffusion also requires a substantial team of representatives who must continually visit each part of the territory, which can be very expensive. Diffusion/distribution requires a critical mass not available to a new business. The situation is different for publishers and booksellers, which, even though they have to attain a level of activity sufficient to enjoy a certain degree of influence or gain access to governmental support, are able to build up their business gradually, and we are constantly seeing new entrants.
- Limited number of players: Given the barriers to entry, it is not surprising that the diffusion, and especially the distribution, sector includes few players, especially few new players. According to the Annuaire de l'édition au Québec et au Canada français 2007-2008 [Directory of publishing in Quebec and French Canada 2007-2008], published by Livre d'ici, only four distributors have been established since 2000, including one specialized in comics books and two that do mainly self-distribution.
- Technical expertise: Unlike the other sectors in the book trade, book distribution requires a technical labour force, and its operations are mainly industrial. [translation] "This is the only sector in the network where all operations can truly be quantified and predicted, an essential precondition for any effort to reduce inefficiencies."3
- Little or no influence over supply: Distributors, and even diffusers, generally have little say regarding the titles assigned to them. They reach many agreements with publishers according to their field of publication, catalogue and reputation, but they are unaware of their upcoming production, which can, however, have a substantial impact on the profitability of their activities. Unlike publishers, they have no influence over the titles they will have to represent, even if they can attempt to influence the production of their publisher partners, or even terminate agreements with publishers that no longer comply with their professional policies.
- Little influence over how titles are promoted: Generally, at least for Canadian titles, it is the publisher that is responsible for activities to publicize titles: the production and distribution of brochures, review copies, publicity, etc. The publisher thus attempts to directly influence the reader and encourage retailers to provide more space for its title in bookstores. However, the diffuser and the distributor are dependent on the publisher's level of investment in a title, and it is difficult for them to demand a publisher to ramp up its efforts.
- Little or no influence over price: Just as with editorial content and promotion efforts, the distributor has little influence over the price that will be set for the title — at least for Canadian titles — even though its revenue will generally depend on the fixed selling price.
- Ownership of the product: Unlike the publisher or the bookstore, the distributor does not own its product, since it is only warehoused on the premises.
- Brand image: Unlike the publisher and the bookstore, the public has little or no familiarity with the diffuser/ distributor's brand image, which can influence only book-industry professionals.
- Government support: Diffusion/distribution is one of the few links in the supply chain that does not enjoy direct government (financial or legislative) support.
1 ADELF, Vocabulaire de la diffusion et de la distribution du livre [Vocabulary of book promotion and distribution], Office québécois de la langue française, 2005.
2 Québec Culture and Communications Activity Classification System (QCCACS), Observatoire de la culture et des communications du Québec, 2004, p. 48-49. [Available in English at: http://www.stat.gouv.qc.ca/observatoire/scaccq/principale_en.htm — Tr.]
3 Marc Ménard and Benoît Allaire, "La distribution de livres au Québec," in État des lieux du livre et des bibliothèques, Observatoire de la culture et des communications du Québec, p. 141.
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