I’ve reproduced the article I wrote for the Australian Booksellers Association magazine on the subject of what you have to do to set up an ebook store. This is truly a moving feast but the article below should give you some insight into what’s involved right now.

From the August 2010 iss ue of News on Bookselling: The Official Journal of the Australian Booksellers Association.

By Martin Taylor

Most booksellers I speak to are keen, or anxious, to get into the ebook market. So how do you do it? Here’s a quick guide to the issues and challenges you’ll face today as you set up your online ebook store. As you’ll see, it’s no walk in the park and you’ll have to get technical. It will certainly get easier as time goes by but the trade-off, of course, is that the easier it gets, the more competitors will jump into the game.

The website

Booksellers’ natural inclination is to add ebooks to their existing website. This might be right, especially if your current web operation is very successful. But there are fewer things in common between print and ebook sales than you might think so consider starting with a clean slate.

The first place to start in either case is with the user experience. If your site has printed books as well as ebooks, mixing them up can leave ebook buyers sifting through irrelevant listings and search results. Cross-selling from your printed book site should be done carefully and its value not overplayed. If it’s a combined site, it should still have a distinct ebook section with separate stock items for ebook editions (and separate ISBNs for each digital format), and it must have its own merchandising. Ebook bestsellers and attractive offers won’t always match their print stablemates and you’ll almost certainly find the profile of your online shopper is different from your in-store shopper profile.

Ebook buyers will increasingly buy ebooks using mobile devices rather than PCs so your site should work on smaller screens: browsing, searching and buying on an iPhone or ebook reader can be frustrating on websites designed for a big PC screen. The way to do this is with a range of style sheets tuned to the different browsers.

A very important issue is the online payment process. This is often overlooked but a poorly executed check-out will make it hard to draw users away from the top sites. While a PC user might put up with a clunky payment system and extensive form-filling, mobile users will abandon sales at the checkout and be reluctant to return to your site. Amazon has patented the ‘1-Click’ ordering technology behind its check out (and Apple, whose own online payment systems are legendary, has licensed it.) You’ll need to compete with this but help is on the way through companies like PayPal whose payment technologies are becoming simpler to use.

Finally, your website is just a part of your total online marketing programme. You’ll have to get really good at internet marketing to succeed with ebooks. The good news: it won’t be wasted, you’ll need to be really good at internet marketing to sell printed books too.

Getting ebooks to sell

The website is only a part of the business of selling ebooks online. One of the trickiest aspects today is acquiring rights to the ebooks themselves so that you’ll have a meaningful collection to sell. Since the ebook is a file that can be endlessly copied without trace, publishers understandably keep a tight rein on them. With printed books, if you sell one, you have to reorder it from the publisher before you can sell another but not so with digital files. So when you try to acquire inventory for your ebook store, you’ll be confronted with lengthy and onerous contracts. Typical matters covered will be:

Security. You’ll need to satisfy nervous publishers that the physical and IT security measures you’ve taken will stop any hacking or break-in that could see master files stolen.

Audit. You’ll also have to satisfy publishers that you’re honest and competent by agreeing to a random audit. Among other things, this shows publishers that you’re meticulously recording, and paying for, every ebook downloaded.

Restrictions on sale and use. There are few restrictions publishers can place on how and to whom you can sell a printed book. But ebooks are not sold, they’re licensed for use and the terms of usage are controlled through contract by the publisher. The bookseller must adhere to these terms. If you can’t, or are less than scrupulous in following them, it won’t be long before your ebook supply dries up.

Territorial restrictions. For the foreseeable future, you can throw away those notions that an ebook store will open up your neighbourhood bookshop to the world. You’ll have to follow the territorial restrictions imposed by publishers, most of whom won’t grant worldwide rights. This often frustrates consumers and will certainly add a pile of complexity to your own budding ebook operation. But rather than curse it, keep in mind that if the industry can make it stick, it’s likely to be one of the best tools to help the survival of local independents against the forces of global megasites.

Customer restrictions. Unless you can make special arrangements with publishers, your retail customers will be restricted to buying (actually, licensing) their ebooks for personal, non-commercial use. In particular, libraries will be excluded from your customer base since terms will generally restrict the lending, transfer or resale of ebooks. Your website’s terms of sale must make these restrictions clear to customers at the time of purchase.

Pricing. The usual process is to set a wholesale price based on a discount off the suggested retail price of the ebook or the printed book equivalent (expect smaller discounts than you’re used to). Retailers then set their own selling prices. This well-trodden system was recently complicated by the arrival in some markets of the so-called agency model. So far, it’s being trialled by a handful of major publishers who enforce fixed retail prices and pay the retailer a commission. As the name implies, the retailer doesn’t make the sale, the publisher does for which the retailer receives a commission. If it takes root and spreads to this part of the world, it will create its own issues for budding ebook retailers, not just by restricting their ability to set selling prices and margins but by greatly complicating operations so that sales, taxes etc can be attributed directly to publishers.

On this face of it, the agency model seems to be unfriendly to retailers, removing a key competitive tool. But, like territorial restrictions, it could lead to a much more diverse marketplace by ensuring that a handful of global giants can’t use deep discounting to squeeze smaller retailers out of the market.

Digital Rights Management (DRM). The retailer is generally responsible for encrypting files with DRM before they are delivered to the consumer. You’ll have to offer this service, either directly or through a trusted third party supplier (if you can find one) since most major publishers require it. Several online retailers have developed their own DRM systems but it’s not for the small or faint-hearted. For the rest of us, an increasingly popular solution is Adobe’s Content Server 4 (ACS4). Anyone can purchase a license for this system but again, installing and operating the service is not for the faint-hearted. One problem: there’s still no freely-available ebook reading app for smartphones and the iPad to read the Adobe-encrypted files. For the foreseeable future, though, you won’t get into the game without it.

Metadata. While the ebooks get the attention, expect to spend a lot of time acquiring and massaging the metadata that surrounds them. This includes the basic bibliographic data but extends well beyond it to include information about ebook usage and terms (geographical restrictions, DRM requirements, etc) and, most importantly, comprehensive selling information, an essential part of any online store and a key competitive issue.

Distributors and turnkey hosted systems

Like its print equivalent, the digital world is seeing the emergence of wholesale aggregators. They can simplify the job of connecting a diverse group of digital publishers to an increasingly diverse group of retailers. Distributors offer a fairly large range of ebooks, though not enough to match any of the large, dedicated ebook retailers such as Amazon or Kobo. Be aware that their quoted ebook numbers are frequently inflated by inclusion of ebooks in legacy formats that are irrelevant in new markets such as Australia and New Zealand. And at this time they offer minimal coverage of local titles.

If by now you’re despairing at the scale of the project to assemble a well-stocked, competitive ebook retailer, help may be at hand. Many of these distributors can supply not just a collection of ebooks but a customised website, payment system and DRM to get those ebooks to your customers. With a turnkey, hosted service you’re effectively acting as a shopfront for the distributor’s ebook collection. And there’s room to customise the look and feel of the hosted service so that visitors will think they are still on your site.

This comes at a cost that can still be quite steep, especially if you want extensive personalisation. But it’s a way to dip a toe in the digital water. Some drawbacks include dependence on a single distributor’s limited ebook range and dependence on them for feature upgrades. This can be especially vexing for customers in smaller markets whose local needs are low priority. Among the established names offering turnkey services are US companies Overdrive, Ingram Digital, and Libre Digital.

The elephant in the room in this space is Google which has been leaking scant details of its planned Google Editions ebook store. Unlike Amazon, Apple and other major retailers, Google plans to provide a wholesale option as well as selling directly. If it delivers good technology, and a substantial catalogue of commercial ebooks, it could change the landscape for booksellers. At the time of writing, Google Editions’ detailed capabilities and roll-out dates were still to be announced.

Is it worth it?

For a lot of booksellers, especially indies but also many chains, my guess is the answer to this should be, “No”. It’s tempting to think that, if you’re in the business of selling books, then selling ebooks is a natural extension and an essential one at that. But the reality is that there are probably more differences than similarities between traditional bricks and mortar book retailing and ebook e-tailing. It’s really a new business. Given the challenges today of starting and operating a credible ebook operation, it’s legitimate to ask whether that stretched cashflow and those hard-earned reserves should be applied to ebook retailing or invested somewhere else where the return might be better, including your bricks and mortar bookstores.

Another option to consider is picking a niche rather than trying to compete on a broad range. Even some of the big ebook retailers can be fairly sparse in their offerings as you drill down. We’ve yet to see solid bookseller (as opposed to publisher) examples of this strategy but there’s plenty of smart opinion favouring this route.

My advice is that, if you’re getting into the market reluctantly as a defensive strategy, you’ll probably do it badly and are better off skipping ebooks and doing a great job in bricks and mortar. On the other hand, if you’re serious about getting a stake in this market, you should tackle the challenges head on and get started soon.

- By Martin Taylor. Blog: activitypress.com/ereport; Twitter @nztaylor

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