Evolve or Die: Why Reinvent Independent Bookstores?

A year ago we visited San Francisco’s new California Academy of Sciences in Golden Gate Park.  This is one of the city’s new cultural hot spots.  As we walked among the high-tech exhibits on the natural world, we came across a 20-foot long quote written in giant yellow letters attributed to Charles Darwin: "It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change."  We had just passed our one year anniversary of assuming ownership of the Booksmith and had been compulsively analyzing all aspects of our new vocation.  Our conversation turned towards the state of independent booksellers and whether the theory of evolution applied to independent bookstores as a species.  You might guess our conclusion.

Independent bookstores are heading towards extinction

Just in case you have been hibernating the past fifteen years and missed all the stories of independent bookstores closing, owners blaming Amazon, and newspapers complaining that people don’t read, here is what the hard numbers on the state of independent booksellers look like.  In 1993, the American Booksellers Association (ABA) had 4,700 member stores.  By the start of 2009, the number had fallen to 1,600.  We are seeing an average of about 200 independent bookstores close every year.

The financial health of independent bookstores back up this dismal picture.  According to ABA’s Abacus survey, about a third of all bookstores are profitable with average profit margins of less than 5%, another third are breaking even, and another third are already losing money.  Add in e-books, add in increasing discounts at Amazon, add in a slow economic recovery, and you can see where this is going.  You don’t need to be a rocket scientist to draw a straight line through the declining numbers of bookstores and conclude that in another 5 to 7 years finding a bookstore would become similar to finding a needle in a haystack. 

So, what the hell happened?

In our last blog post, we made the case that good independent bookstores are more than a place to buy a book.  So, you might ask, if independent bookstores do all these wonderful things like being “a cultural experience,” “an author incubator” and “a community leader”, then why are they heading towards extinction.  The answer is rather simple.  Doing wonderful things doesn’t grant us immunity from competition, nor does it stop our habitat, the bookselling market, from evolving.  These are forces beyond our individual control.

Soon after stumbling onto Darwin’s quote, we took a couple days off for a strategy retreat.  We had the inside experience of owning and managing an independent bookstore, and it was time to act like our own consultants and ask some hard hitting questions about our business and strategy.  Top of the list was the evergreen question that had never failed to throw the most organized clients (in our previous consulting careers) into utter confusion and chaos.  Who is your competition?  This seemingly simple question requires people to incessantly debate: What business are we in? Who is our customer? and What are we competing for?

Using the whiteboard in our living room (yes, there is one) we started to list everyone we were competing with.  We ran out of space because the whiteboard wasn’t big enough.  At the broadest level we consider ourselves to be providers of a cultural experience, and therefore we are competing for mindshare of customers and joining us in the fray are museums, exhibitions, arts and lecture venues, movies, concerts, etc, etc.  At the narrowest level, we consider ourselves simply booksellers, and therefore we are competing for sales of books with everyone from WalMart and Target to the more than one million individuals selling books on Amazon’s marketplace.  Even the taxpayer-funded San Francisco public library now sells books it receives for free as donations. 

Amidst this explosion of cultural and book buying choices for consumers, the independent bookstore has been caught as the proverbial deer in the headlights.  Nothing paints this picture more starkly than the failure of independent bookstores to take advantage of the internet.  Independent bookstores account for 10% of the total retail market for books, but on the internet our combined market share is less than a tenth of 1%.  In terms of cultural experiences, authors who previously launched their books at readings in independent bookstores, often command fat fees for appearing at big venues funded by deep pocketed foundations and wealthy non-profit organizations.  In San Francisco, bookstores are competing for author events with the well-endowed City Arts & Lectures and even the local Jewish Community Center.

The bottom-line is that the market, the competition, and consumer tastes are all evolving rapidly while independent booksellers are stuck somewhere circa 1975 with our DOS based inventory systems, creaky floors, chipping paint on the walls, and dusty books.

But wait, the game isn’t over yet

So far, you haven’t heard anything new.  We believe this is a time of great opportunity for independent bookstores.  What?  Go back and read that again.  Wait a minute, didn’t we just write the obituary of the independent bookstore.

We believe that independent bookstores can have a great future and we are betting our careers on it.  What makes us optimistic in the face of all the doom and gloom surrounding independent bookstores?  New opportunities that can help independent bookstores reinvent and reinvigorate their businesses.  New opportunities being made possible by a publishing industry in turmoil, new opportunities being served up by new technologies, new opportunities we can identify if we pay attention to the unmet needs of our customers.  Here is a short list of five such new opportunities we see:

Literary Community Building:  Technology is enabling more and more people to work from home and shop from home and in the process creating a huge unmet need for people to find venues where they can meet and talk with other people.  We are social animals and all of us crave meaningful social interaction.  Independent bookstores should find new ways to bring people together to talk about books and ideas.

Author Services:  Publishers are abandoning the work they used to do to market and promote authors and in the process creating an opportunity for independent bookstores to step in and fill this gap.  Independent bookstores should partner with their local authors in new and creative ways to promote their books and they will have their loyalty and goodwill for years to come.

Enhancing the Browsing Experience:  Despite all innovations in technology, no website still comes close to the actual experience of browsing in a well-curated bookstore.  Browsing is not about the hurried search for a book you already know you want, but instead a search for something new, it’s about the discovery and surprise, it’s about letting yourself explore new uncharted territory.  The last big innovation in improving the browsing experience in bookstores was when stores put in cafes and seating to let customers sit down and enjoy their picks.  What’s the next innovation that will enrich and enhance the browsing experience?

Print on Demand: Over half the cost in the supply chain for books goes towards moving books around from warehouses to warehouses, from warehouses to stores, from back offices to shelving carts to shelves, and so on.  The inevitable digitization of books coupled with availability of affordable print on demand solutions at the retail level has the potential to be a game changer in favor of brick and mortar bookstores. Not only can print on demand dramatically increase the selection of books we can make available to our customers, but it’s also an environmentally sound solution and can help reduce cost of carrying large stock of books.

New Markets:  Only half of adult Americans read books.  What about the other half?  Television service reaches 97% of Americans, and over 75% use the internet.  Why have we, as an industry, settled for only 50% penetration.  While WalMart and Amazon drive each others profits down by engaging in price wars for bestsellers, we should be focusing on developing the next generation of readers and bringing books to those who haven’t discovered them yet.  Introduce someone to a book they really love and they will come back for more.  Who’s our competition here?  We have smart kids working in our bookstores who can provide better book recommendations after six months of work experience than Amazon has been able to generate after fifteen years of tweaking it’s recommendation algorithms.

Call to Action

Evolve or Die!  The writing is clear on the wall.  The book business is going through a phase of massive disruption.  We have to prepare ourselves for a future in which bookstores won’t need large inventory of paper books, in fact we might not even need paper books at all, and we might not need expensive retail spaces.  This future is going to look very different than what the book market looks like today.  It’s already happened in the music business.  Survival will require adapting and evolving to this new environment.  We must explore new services, experiment with new revenue models, and evangelize our value to our communities.  We have a few years to build a new business model that will enable us to continue spreading the love of long-form reading and critical thinking to people.  We must not obsess about the fake battle between print and e-books, but focus instead on literacy, diversity, dialog, and community engagement – all of which are real issues despite all the advancements in technology.  This is not about being pro or anti technology, this is about embracing technology to solve real problems.  This is not about being pro or anti corporations, this is about using the best the corporate world has to offer to build strong local communities built around real people interacting with other real people.  Independent bookstores must view themselves as start-ups in a world full of opportunity.  Sure, we are having an existential crisis right now.  But remember we are fighting the thousand year war against ignorance, closed minds, and a homogenized culture.  The war will be only be over when we stop fighting.

In our next blog post…

We will discuss our progress in building the independent bookstore for the 21st century at the Booksmith in San Francisco.  Join us to learn about the aha moments and oh-shit moments we have had as we jumped into a business we knew nothing about.

In the meantime, let’s discuss…

What new opportunities do you see for independent bookstores?

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Post Scriptum:  As we were doing our fact checking for this article, we found that the quote so famously and widely attributed to Darwin apparently does not come from him.  Here is an article in the Guardian about people misquoting Darwin.  Talk about spreading misinformation.  Even the California Academy of Sciences screwed up!

 

Follow Praveen Madan on Twitter: www.twitter.com/pmadan

Comments

[FaePublishing]

I believe that now is the time for Indie Publishers and Bookstores to come into their own. To do this, both will need to embrace the technology that is out there. If either is to make it in todays world, then Indie Publishers and Bookstores will need to show the ability to be nimble and change with the market. In many ways this may only be accomplished by creating a brand new Business Matrix, that will not be based on the tried and true Brick and Mortar publishing and bookselling.
The advantages of both types of Indies is their size, and manueverability. Look outiside the standard way of doing things, think revenue sharing, POD, E-Books and accept that technology is here and will only get more prevelant in the business world of entertainment.

[Honorah ONeill]

With regard to new markets, part of that is pursuing CHILDREN. Every independent bookstore should carry at least some children's books because it helps ensure success for years to come. You're laying the foundation for your business, 5, 10, 20 years down the road.

One of the keys to literacy is simply access to books. Even adults that don't read will often buy books for their kids because they believe their kids SHOULD read. And those kids are your future customers. Neglect them and in few years, you'll be lamenting why less than half of all adults read. They never got in the habit when they were young. Make it easy for adults to buy them books, and you'll lay the ground work for long term success.

I have a nice article over on Book Shop Blog on why encouraging literacy should be part of an independent book store's long term strategic planning:
http://bookshopblog.com/2009/05/09/why-encouraging-literacy-should-be-part-of-your-business-plan/

Kid's books are my forth most popular category at my independent store by volumes sold, 7th by dollar value. They don't generate as much cash as other categories, but they fuel the sales of other categories. And I am clearly bucking the trend on indie as 2009 is on track to be the most profitable year on record for us.

[Thucydides Jr.]

As a used & rare bookseller I think that stock is a key ingredient in getting word of mouth about your shop and in defining who you are and where you fit in the book world.

Espresso book machines are all well and good. Even a real espresso machine is a boon. However, if all shops have Espresso machines squared, what is unique about your shop? All kinds of shops sell coffee, and good coffee at that. Likewise, if all bookshops have Espresso machines, why go to that indy across town when I can pop into a local chain or Walmart and get the same?

The quote, "Keep my eyes clear and hit 'em where they ain't" is a good strategy. Many indies relied on bestsellers to bring people in - not anymore. So don't fight it. There are hundreds of excellent, interesting touching that don't get promoted. Books that sell at prices more competitive with any other venue. But you need to know what they are, why you like them, and how to find others who will like them as well.

Find a specialty. Stock the titles in depth. Go to lengths to get them, even if you import a few. Get the "I have never seen that book before" experience, rather than the "Ahh yes, I know that book" that is far too common. Don't ONLY carry that subject (or subjects is you have more than one specialty) but you should have enough to be thought of before

[jessiaia]

I bought a failing used bookstore six months ago. I agree with your suggestions for making indie bookstores more competitive. Especially print on demand.

I think in some markets, specializing in one area and having a mix of new and used titles within the chosen topic might work better than trying to carry a little bit of everything. I carry some new titles in my store but I've limited it to local history and local authors (we're in the Hudson Valley).

I'm looking forward to your future posts.

[pipster13]

I'm not positive that anyone has properly addressed the shift in the way people approach books. Books are no longer "resources" or works. Most general information can be procured via the internet (for better or worse) as well as notes for most works of literary note. The aesthetic of books is intact, but the point is that society no longer communicates this way.

[Praveen Madan - Huffpost Blogger]

There is definitely some truth to what you are saying - especially when one looks at what's happened to computer books, dictionaries, and reference books. But there are many other categories of books that have not been as impacted by the internet - fiction, children's books, art and photography books, etc. I don't think long form reading is going away anytime soon. Over a long period of time, people will probably adapt to reading long form on computing devices, but who cares whether they read on a screen or paper, as long as they are reading.

[drvittoriarepetto]

Please check out Bluestockings Bookstore here in NYC: they host readings, workshops, performances, discussions and films almost every night.
www.bluestockings.com

[Praveen Madan - Huffpost Blogger]

Thanks for pointing out Bluestockings Bookstore. I love activist bookstores - they always have unique personality, collection, and events. Will check it out in person next time I am in NYC.

[Andy Laties]

The greatest innovation in bookselling that I have encountered in the past five years is the use of youth as employees: kids who have been dealing with the juvenile justice system and kids who are aging out of the foster care system. More Than Words, in Waltham, MA -- www.mtwyouth.org -- has 25 teens at a time employed for several hours per week apiece. These young people are in their first job -- and the adult, professional staff at More Than Words trains them in basic job skills, online-bookselling skills (posting books and fulfilling orders), and bookdrive management skills (all the books sold are used, and are donated to the bookstore during outreach campaigns). The store has a cafe, and a performance series, and exhibits art made by teens. The adult management staff has developed relationships with hotels, banks and restaurants which companies serve as the hosts for second jobs for the newly-trained teens -- to help them launch their work-lives after their stints in the bookstore.

More Than Words has been so impressive to foundations and corporations that they have raised hundreds of thousands of dollars in grants: for Job Training, Workforce Development, Youth Development and Community Development. More Than Words even has a line in the Massachusetts State budget.

More Than Words model is a harbinger of the future role of all bookstores. The "payroll" line in our budgets will stop being an expense, and start being an Income line.

[Praveen Madan - Huffpost Blogger]

Andy, what a truly wonderful idea. Are you involved with More Than Words in anyway? I would love to know more about what they are doing and how they are doing it.

[Andy Laties]

I'm friends with them.
What they are doing: Their mission is to serve troubled teens. Their bookstore is the means by which they accomplish this mission. This is smart from my perspective (as a bookseller) because it frankly positions the act of bookselling inside of an additional community-centric mission, BEYOND advancing literacy and literary culture, although entirely inclusive of those more common bookstore missions. This essentially doubles their stakeholder base.

How they are doing it: They are structured as a non-profit. They have a management staff trained in education and social work, and in working with troubled youth and the juvenile justice system. They maintain a double-identity: as a Social Service Agency and also as a bookstore/cafe. This is smart from my bookselling-business perspective because it amplifies their funding base. Social Service Agencies are underwritten in an entirely different manner from bookstores. The fact that this Social Service Agency has a for-profit income stream has been of enormous interest to foundations seeking to fund organizations that are pro-actively trying to achieve a measure of financial sustainability.

[BlackJAC]

Plot Hole abound:
* Even the big chain stores like Barnes & Noble and Borders have scaled back their inventories.
* Indie bookstores have this nasty habit of shoving everything into the two general categories of Fiction and Nonfiction, which makes finding stuff harder. And under those circumstances, the selection is akin to what you'd find at Target. Even the hole-in-the-wall used book stores I've gone to take the time to delineate their inventory more clearly than that.
* Between Big Oil raping us at the pump just because they can and state sales taxes sliding upwards, paying full manufacturer's suggested retail price would be insane. Indie stores tend to sell at MSRP.
* "Print-on-demand" translates to "we don't have any hardcopies on hand" to some people, who just want to get in, get the stuff, and get out. Even if the book in question isn't something you'd like to keep to yourself, by the time the machine finishes making it (assuming no breakdowns, malfunctions, or running empty on appropriate supplies) you could've driven to another store and checked their shelves for an existing hardcopy.

Bottom line: indie bookstores need a reason for people to come to them beyond "we're not a chain store yet are a slave to trends."

[Praveen Madan - Huffpost Blogger]

I couldn't agree more on the need to provide a positive and unique experience (a reason). Print on demand has come a long way and at the retail level the machines can now produce a perfectly bound 300 page paperback in under 5 minutes (with color covers).

[BlackJAC]

Said machines also cost $75,000 a copy. I have a sneaking suspicion that the usual small business loan request to start a bookstore is less than that.

[TrueSmallCaps]

What new opportunities do you see for independent bookstores?

The obvious answer is to install an Espresso Book Machine. Offer your customers a choice of a million titles onsite. That trumps 2-day delivery for internet bookstores.

[BlackJAC]

Assuming the book machine doesn't break down, or malfunction, or run out of the requisite supplies midway.

[Praveen Madan - Huffpost Blogger]

I agree Espresso has a lot of potential. Their catalog needs to get better - especially on front-list titles where surprisingly publishers still keep making mistakes and occasionally run out of copies of hot books. It doesn't make any sense for a publisher to be a out of a book.

[BlackJAC]

Reasons For A Publisher To Be Out Of A Book:
1) The presses broke down
2) They're waiting on a resupply of paper and ink
3) The most recent print run sold out fast and they need time to make more
4) Some other project came up that is tying up the presses so they can make more
5) There wasn't enough interest in it in the first place to justify making more