At the São Paulo Iguatemi location of Livraria Cultura. Image: LC
By Porter Anderson, Editor-in-Chief | @Porter_Anderson
‘A Better Future for the Book Market’
A report from the business staff at Exame tells us that Brazilian publishers are meeting this week to discuss the suddenly acute plight of two of the nation’s largest bookstore companies.
The National Syndicate of Book Publishers (SNEl) is looking at how it might intervene as a collective in the challenges faced by Livraria Cultura and Saraiva.
On Wednesday (November 7), publishers looked at reports that Sariava, the largest of the country’s bookstores, has a debt in excess of 485 reais (US$130.1 million). This, in addition to what media reports say is 120 million reais (US$32.1 million) tied up in bank credit lines has prompted the chain to announce the closures of 20 stores.
In the case of Cultura, a court has accepted the store’s request for “judicial recovery”—in essence a “chapter 11” style filing—with a start next month. The company reports having a debt of 92 million reals (US$24.7 million) atop previous debt loads.
Taken together, Cultura and Saraiva are said to have more than 100 retail locations, making them collectively the sales points for as much as 40 percent of books in Brazil.
In order to get a better picture of the situation on the ground, Publishing Perspectives has asked our colleague there, Ricardo Costa, managing director of the Metabooks Brasil platform, to give us some insight on the situation.
We start by asking Costa if he can give us a little context on the stress reported by these retail outlets and the potential effect on the Brazilian market.
Ricardo Costa
Ricardo Costa: Livraria Cultura is one of the top five [book retailers] on the market and, of course, its economic situation comes with hard impact on the market.
The picture points to middle-size and smaller booksellers taking over some share of Livraria Cultura.
My personal view is that Cultura is going to need to have to “run” all over again if it comes out of this situation at some point, just to “catch up” with competitors that, I believe, are going to become bigger and get market share now.
Publishing Perspectives: Our understanding is that Saraiva has already shut down 20 of its stores. Is that in line with reports you’re seeing?
RC: You’re right. Saraiva just closed 20 stores and last week started calling suppliers to renegotiate debts to try to avoid going also to something like Chapter 11.
Saraiva is said to have a debt over 400 million reais. And we’ve just heard yesterday (N0vember 7) that they’re offering a hard negotiation to the publishers. We can only observe, of course, but it’s important to remember that Saraiva is the biggest bookstore chain in the country. It had more than 100 stores in place before the 20 closed last week.
PP: What do you think we can expect from the publishers’ efforts at an intervention? Can they keep these companies afloat?
RC: Publishers are already the real “bank” of the market, as they make all their payments upfront.
It’s important to know that the basis for the book market in Brazil is the consignment system. And that makes publishers invest even more to keep the business running. I don’t know how long publishers can actually keep Cultura and Saraiva going. Here, we’re crossing our fingers that the bookstores find a solution together with the publishers and other suppliers, and that they become stronger, taking the book business in Brazil to a better situation.
The Saraiva ParkShopping location in Canoas. Image: Saraiva
Economic Struggles
PP: We’re noting press reports from Rio and São Paulo that say online retail is a factor, for example, with estimates that Amazon may be accounting for as much as 10 percent of book sales in the country these days. And yet we see some good news, too, in reports from SNEL that sales from January to October rose some 3.65 percent over the same period last year, with an increase of 5.37 percent in revenues.
An average book price is looking to be around 43.24 reals, or some US$11.50. Apparently, these bright spots aren’t at this point enough to turn things around.
From where you sit as a close observer of the market, is it possible to say whether we’re seeing the result of unforeseeable influences (from the country’s economic struggles overall, for example)? Or is there also a question of how these retail operations have been managed?
RC: I believe it’s a little of both. The changes had come, as many predicted in the past. Years ago, when people were worried about digital books “killing” printed books, I use to say that was not going to happen at all, but I believed then that bookstores needed to change the way the work and exist. They should look for other services and diversify, looking to be more a service provider than merely points of sale.
And we also had a huge crisis in the economy and politics of Brazil since 2014, of course, which has affected the market deeply. I don’t think the market was fast enough in reacting to that.
I do believe that crisis is also an opportunity, and I don’t say this as a “self-help guru” would say it. I believe that we’re seeing publishers and smaller booksellers moving fast to take advantage of these opportunities.
According to some observations on the sales results from the last years, apparently we’ve hit bottom and are now preparing our way to the top. It’s going to be a long road, I think, but I do believe in this market.
At the beginning of August, the Brazilian Book Chamber and the publishers union manage to have an important meeting directly with the president of Brazil, Michel Temer, to share their key concerns about the book market in Brazil. Since then, a working group has been established, including people from the government, the ministry of education, the ministry of culture, economists, everyone tasked with working on ways that government and the market can work together to help with this crisis.
So, I believe in a better future for the book market.
More from Publishing Perspectives on Brazil is here, and more on Metabooks Brasil is here.