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Evolve or Die: Why Reinvent Independent Bookstores?

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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?

______________________________________________________________________________

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!

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