Magic or madness? Harry Potter's final instalment

Anticipation surrounding Harry Potter and the Deathly Hallows has reached fever pitch. It is not just fans of the boy wizard who are gearing up for the final instalment, booksellers have been preparing their presentation of JK Rowling's latest offering for months, with many planning midnight store openings complete with magic shows.

However, when big bucks are at stake there are bound to be disputes. Everyone wants a piece of the pie, and larger booksellers and supermarkets are prepared to offer the book at a loss-making half price to tempt customers.

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This week, the supermarket Asda accused the publisher of "blatant profiteering" and "holding children to ransom" by setting a recommended retail price of £17.99, more than 30 per cent higher than the cost of the first book. Bloomsbury retaliated and said it would not provide Asda with its order of 500,000 books if it did not pay an unsettled bill. The dispute was resolved yesterday after the supermarket issued an unreserved apology for its comments.

Independent retailers have entered the fray with complaints that they cannot compete with the discounting at supermarkets and larger chains. Some even say they will purchase stock from supermarkets rather than wholesalers and claim that nobody is making any money out of the distribution of Harry Potter.

The Harry Potter phenomenon has highlighted the changing ways people consume books and thrown into focus the plight of smaller independents in the face of competition from the supermarkets and online retailers, such as Amazon.

Tim Godfray, chief executive of the Booksellers Association (BA), which represents 4,400 outlets including chains and independents, said by law the BA cannot interfere in the price books are set at. "The publisher sets a Recommended Retail Price and it is up to the individual retailer to decide on the selling price," he said. "Booksellers want to ensure that they provide their customers with value, whether it be by putting on an event, say, at midnight, or offering keen prices."

However, he adds that the deep discounting of Harry Potter "is so prevalent and the price competition between retailers so intense that there are many retailers who will be using this as a loss leader rather than looking to make millions".

"There is something crazy here and book industry has been considerable weakened by this deep discounting," he said. "Harry Potter has worked its magic on children around the world. The contribution the books have made in making reading among children 'cool' is huge - the spell has not yet been written to reverse the damage this discounting has had on the bookselling industry."

Charles Walker, Conservative MP for Broxbourne, who has called for an Office of Fair Trading inquiry over the issue, said: "This price war takes away the oxygen of economic survival from the smaller businesses, making it difficult for them to remain viable."

If consumers can source the book they want more cheaply online and buy the latest bestseller half price from the supermarket, do independent booksellers still have a place, or indeed, a future in the post-Harry Potter world?

Fran Crumpton, customer manager of the Book Partnership and localbookshops.co.uk, which represents almost 600 small retailers, agreed that independents are suffering from a lack of support from publishers and wholesalers combined with competition from supermarkets and online. However, she points out that local bookshops will survive due to their breadth and depth of knowledge and the flexibility they offer. Independents are willing to look beyond the more readily available books and show a greater understanding of customers' needs, which leads them to source from a wider range of titles than seem initially available, she says. Excellent service and the ability to sort out problems efficiently are key, along with the personality of the bookseller, which she says is "undoubtedly a factor in many customers' patronage".

"From the very essence of being 'local' and 'independent' to quirky stock selection and background music, a range of characteristics have defined the local bookseller and kept it ahead of newer competition," she said.

She added that although independents cannot compete on pricing through bulk buying, they remain competitive by agreeing discounts with wholesalers away from the front-list titles and by a willingness to undertake special orders.

Roy Butlin, manager of Dulwich Books in south-east London, said the independent sector is still relatively successful. "People like the way independents operate with their local touch, the friendliness and the way they don't change all the time," he said. "They have an expertise and enthusiasm. One of the most common things for us is people asking what we think they would like to read."

Mr Butlin said he used to manage stores that belonged to large chains but prefers life in an independent as he enjoys "handling the books and talking to people abut books".

Gerry Johnson, managing director of Waterstone's, which merged with Ottakar's last year to become the UK's largest bookstore chain, said the outlook for the specialist remains positive. The market has changed over due to increased competition, he said, but "the challenge for the specialist is to adjust in that space. It is our job to find a new role."

Waterstone's has done this in part by launching its website to complement the stores, where consumers can check stock supply or look up in-store events, such as author signings, he said. But it is also about the added value that booksellers can bring, for example, by putting on a show and "creating theatre" around an event. Most of Waterstone's 330 stores will be opening at midnight on Friday, with Harry Potter on sale at half-price, ready to spread the magic to fans.

"We want to show people how good it is to shop in a specialist bookshop," Mr Johnson said. "I just can't think of another event that would get a quarter to half a million people into the shops at midnight. I think we should be celebrating that fact."

Independents fight to keep up with supermarket discounts

Sarah Bond took over the running of her bookshop Bonds Books in Harborne, Birmingham, four years ago, but she admits it has been a struggle. "Unless something changes dramatically I am not sure whether I will continue when my lease is up in two years' time," she says.

Ms Bond said it is not that people are reading any less; the key issue is the competition from online retailers and supermarkets. Her shop is also located just two doors down from a WH Smith.

She said the pricing issue around Harry Potter is "madness", and to compete with the discounts that other retailers are offering she would have to sell the Potter books at a loss.

However, she points out that independent retailers can offer a personal service and expertise that is lacking in the supermarkets. "Independent booksellers thrive on word of mouth," she says. "We can order obscure books in quickly. Customers show a lot of appreciation when we get hard to come by books. We have some customers who are very loyal."

The discounting of popular books and the "three for two" offers in the major retail chains also mean that "a lot of really good books never come to light," she adds.

Karen Attwood