Talk Money with Tony Field – May 11, 2015

  • Breaking
  • 10/05/2015

The recent announcement by Whitcoulls that it was closing its flagship Queen Street store raised fresh questions for many about the state of the New Zealand book industry. It has faced falling sales, shop closures and the downsizing of some publishers.

But data from Nielsen BookScan suggests that after a tough few years, sales are rebounding.

The industry faced a perfect storm from around 2008 onwards. The global financial crisis arrived at the same time as e-readers were gaining popularity. E-books compounded an existing trend where New Zealanders were buying more physical books from overseas websites.

Nielsen BookScan's data shows that book sales fell 15 percent from 2012 to 2013. Around 4.8 million books were sold in stores in 2013, with revenue of $115 million.

But sales have now stabilised. Last year around 4.8 million books were sold and $115 million revenue generated in the shops surveyed by Nielsen BookScan. So far this year sales of books are up 12 percent and revenue has increased by 4.9 percent from the same period a year ago.

Whitcoulls is not surveyed in the Nielsen BookScan numbers, but told me its own numbers are in line with what Nielsen BookScan is seeing. Whitcoulls is owned by James Pascoe Group, which also owns Farmers. It says its decision to close the Queen Street branch was because it believes a Farmers store is a better fit for that large location. But Whitcoulls does have plans for more shops.

Nielsen BookScan's figures indicate that the growth areas are non-fiction and children and teen titles .Cookbooks are popular, so too are teen fiction titles like the Divergent trilogy and John Greens' The Fault In Our Stars. Minecraft books have also given the children's non-fiction category a big lift.

The future for e-books

It is hard to gauge exactly how big an impact e-books are having.

Local publishers estimate that anywhere from 5 to 20 percent of their revenue could be coming from the sale of e-books.

Anecdotally, some are suggesting that international e-book sales are flattening out after several years of growth.

Here's a recent article from Barrons on the US situation. But this January, an article from Publishing Technology told a different story.

Some New Zealand booksellers are also turning the internet to their advantage to sell physical books. Although competition from sites like Amazon and Book Depository is fierce, a growing number of local bookshops are using the web to market themselves and to sell books.

Investment advice

Where do people get their investment advice? Research from Massey University graduate Dr Annie Zhang suggests that the strongest influence comes from the people we are closest to.

She was given access to 600,000 investor accounts from four large KiwiSaver providers and one bank. One of the major conclusions she made was that people living in the same household tend to invest the same way.

"I found that almost two-thirds of people hold the exact same investment fund - and therefore identical asset allocation - as the people they live with. That means that people in the same household are at least two-and-a-half times more likely to hold the same investment fund."

This was something that initially surprised her.

"I'm sure there are many cases of what you could consider the ultimate peer effect - where one member of the household makes investment decisions for others."

The influence of family members can be considered both a good and a bad thing.

"On the one hand, it is good to know that the family and basic human relationships matter and play a significant role in the increasingly complex financial system. On the other hand, however, our reliance on family is problematic because of a real need for considered and educated responses to inform our decision making."

Dr Zhang's research looked specifically at KiwiSaver. But we can assume people let their relatives influence other investment decisions. I can't help but think of the influence family (and friends ) played in the decision many New Zealanders made to invest in finance companies a decade ago. I remember a number of investors I spoke to who had made the decision to invest based on what relatives and friends had told them. Of course there were also a great many who were put into these investments by "professional" advisers.

Dr Zhang found that family members also have quite an effect on people switching from one fund to another.

"On average, investors only switch funds one percent of the time. But if a household member switches, then that likelihood increases to 10 percent for a six-month horizon."

She believes her findings show there is a need for new ways to provide financial advice to people.

"We definitely need what financial institutions are already providing, but there is also scope for new modes of delivering financial literacy that target the spaces between people and work through whānau, friends, co-workers and our communities.

China cuts rates

China's central bank has just cut its benchmark lending rate by 25 basis points to 5.1 percent, as economic growth slows.

China's exports fell an unexpected6.4 percent in April, compared with 12 months before (US$176.3 billion). It's another sign of weakness in the world's second largest economy. The monthly fall was China's third this year.

It was accompanied by a 16.2 percent drop in imports to US$142.2 billion. That is the sixth monthly fall in a row.

The export and import figures for April produced a trade surplus of US$34.1 billion, compared with US$18.5 billion a year ago.

The NZ dollar

The New Zealand dollar starts the week trading at: AU$0.9429, US$0.7489, £0.4845, €0.6685 and ¥89.615.

The kiwi has fallen for three weeks in a row against all of New Zealand's major trading partners. It fell 1.7 percent against the Australian dollar, and 0.7 percent against the US dollar and the euro. The biggest fall was against the British pound - down 2.6 percent for the week (the pound was up against most currencies following the British election result).

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