Third of Three Rants (for now) on the New Realities of Bookselling.
edit, 26 June: some portions of this essay, as originally posted, have been removed to comply generally with my employer’s media policy, and more specifically with our code of business conduct & ethics
Also, please note: all opinions expressed are my own and both should not and can not be interpreted as an official statement or position of my employer.
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_Long_ boring post, with lots of digressions: I’ll get to the point and give you an escape hatch to the conclusion:
Bookstore customers kind of suck, they unfairly hold bookstores to an impossible standard — a standard of service they don’t even hold internet book retailers to — and I don’t know how to fix it. (This is a rant; what did you expect?)
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So, you sell widgets. We’ll take this as a basic starting point.
You could make the widgets yourself, sell them direct to retailers — or to a distributor of widgets if such exists for your industry. You could sell these widgets on the internet, whether you make them yourself or buy them wholesale, with all the benefits internet sales provides: low start up costs, and minimal overhead past rent on warehouse space and (minimal) payroll and cost of widgets.
As either a manufacturer or ‘net retailer, your primary problem is finding your customers – there is no brand recognition and no visibility: no corner store they drive past every morning, no traffic or synergy generated by neighboring business, no seredipitous discovery by shoppers — not even a centuries-long tradition of Sales of Widgets in the Marketplace (if such exists for your widgets).
Still, internet retail works, and works spectacularly well for some: Ebay, Etsy, et al.
But some widgets can’t be easily or economically sold directly over the internet — cups of coffee, for instance. You can sell coffee by the pound [easily], make arrangements for fair trade coffee to ship direct from bean growers to small-scale craft roasters and then on to hipster caffeine-addicts – you can even sign this customer up for a subscription: so many pounds per month, pre-ground or whole bean, with professionally selected specialty blends that fit a given regional source, or preferred flavor profile.
But a cup of coffee on the way into work? Retail. And a very big retail market at that: not only is there room for a Big Nationwide Chain that I’m sure you’ve heard of, there are at least two smaller chain competitors, at least one local chain that operates just in your city, and room for many smaller independent coffeeshops besides — plus the cup that is available with breakfast at many hotels & restaurants, or to-go with your doughnut or greasy fast food, or from the convenience-store-slash-gas-station — or even ‘free’ at work depending on your office.
Coffee is everywhere. You can even buy it from Amazon. But not only do millions buy a cup from Starbucks every day, they pay a premium to do so.
But forget about coffee — I’ll pull it back in for the conclusion — but many would argue Starbucks and other “consumables” generally aren’t really “retail”, so I’ll circle around the question from a different direction.
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You’ve considered your options, and decided to sell widgets retail. Maybe it’s too expensive to make them yourself, so you buy widgets wholesale and are trying to turn them around, make a profit. Maybe the internet market is too crowded, or has a single, major, insurmountable competitor in our chosen niche.
If your widgets are TV sets, you’re going to buy from just five or six manufacturers, and they’ll each have just two or three product lines — and a variety of screen sizes from 17” up to wall-sized home theaters, but just those few options within the brand-wide line. Let’s assume there are 8 manufacturers you’d consider, each with three product lines, and each product line comes in 40 sizes — out of 960 potential products, you’re going to select and stock what, 100? 200? 500?
Say I’m underselling the available options: Say there are three times as many TV sets. Or five times as many. You’d still only have to consider 5000 or so options, and you’d be able to eliminate whole classes quite easily: based on which manufacturers seem shoddy, or sets that are too small or too big. Even if there were 20,000 options, you’d have little trouble figuring out how to stock your store.
Of course, electronic stores don’t sell just TVs: it’s a department — for a big-box retailer, one of a dozen major departments? so you’d need to take a couple of weeks, or a month, going through catalogs, stocking imaginary shelves, shrinking the floorspace allocated to appliances to make room for more car stereos, or to add a Bose speaker ‘boutique’.
Even after all this work, after you’ve considered 200,000 or even 300,000 options, you still have to go through and do it again twice a year, as new models come out.
But that’s just electronics – big ticket items selling for hundreds or thousands of dollars. Oh, you carry smaller items, clock radios and blank CDs and maybe movies on Blu-ray — but these are afterthoughts, nice to have, but it’s the big screen TVs that pay the rent.
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Consider instead the supermarket:
Not 1000 or even 5000 SKUs [“Stock Keeping Units”] that you have in-store, the options go from dozens to thousands [38,718 individual items on average] on shelves plus all the specialty departments: Produce, Bakery, Deli, Meat, maybe even a Pharmacy. Sure, you buy from a few Really Big companies: Kraft, P&G, Unilever, PepsiCo, Dole, General Mills — but you also have to source some goods from smaller firms, or direct from farmers, or from specialists (like dairies), or from a local company that just makes the one thing, whether that’s the world’s best barbeque sauce or your customers’ favorite cookies, or Coca-Cola. [hey, here in Atlanta: Coke is just a local brand ;) ]
Of course there’s still room for smaller shops — indivdual bakeries or butchers — and there are other options like the farmer’s market, or a really good corner deli — but most of us spend the vast majority of our food budget at the supermarket. Individual green grocers are all but extinct; the stand-alone drug store is following fast (or has already mutated into a convenience store, that just happens to have a pharmacist on staff)
If one is stocking a grocery store, you have to consider hundreds of thousands of items (verging on one million), attempting to stock 7-foot-high shelves on dozens of aisles on store footprints that can be as large as half a football field.
OK. OK? OK.
Now, consider the book store:
Yes, there are still smaller independents. There are specialists, and those that serve a niche. One might even consider a comic shop to be a small bookstore, which few customers do (and I might be able to count on my fingers the number of comic shop owners who realize they run bookstores).
But just like most folks shop at supermarkets, generally speaking, we spend the majority of our book budgets at major chain bookstores.
Now before someone tells me that I’m wrong, and Amazon is the largest bookseller, and e-books are taking over anyway, and there is no future in physical books — let me show you the numbers:
In 2010, Amazon sold just 15% of trade books. That’s up from 12.5% in 2009, so they’re doing quite well, but it’s only 15%.
Over the same time period, Borders went from selling 14% to 12% — so Amazon overtook Borders, but I might also point out that a company that managed to capture 14% of the trade book business also had to enter bankruptcy. Amazon is hardly the book “winner”, and their current market share does not guarantee they can run this very small portion of their business profitably.
15% of an estimated $11.6 Billion market is just $1.7 Billion. Out of Amazon’s total ‘media’ sales of $6.8 Billion (in North America) and total 2010 revenue of $34 Billion. Amazon is a bookstore? sure, but that’s not all they do and it’s a shrinking business (as a percentage) for them.
E-books? Growing, yes, but using numbers reported from publisher.org, the $432 Million publishers earned on ebooks in 2010 was all of 6% of their total revenue. Even if Amazon sold every ebook (they don’t) that $432 Million would only amount to *1.2 percent* of Amazon’s profits, and 6% of their North American media sales. Hundreds of millions are nothing to sneeze at, and Amazon is smart to persue this business — as are many others — but c’mon.
Back to the Bowker PubTrack numbers: Amazon is 15.1%, combined ‘bookstores’ (B&N, Borders, Books-a-Million, indies) add up to 42.3% — Wal-Mart, Target, and Costco score 11.7% — and 2% of folks pick up a book at the grocery store. Oddly, the PubTrack numbers (as reported) only add up to 70%.
Which means 30% of trade book sales — twice Amazon’s share — sell through some other outlet. How does Bowker classify an “Independent” bookstore anyway? Landmarks like Tattered Cover and Powell’s? Smaller chains like Hastings, Book Off, and Half Price Books? Mom & Pop stores? College bookstores?
[*ahem*]. “But just like most folks shop at supermarkets, generally speaking, we spend the majority of our book budgets at major chain bookstores.”
Maybe I should have said, the major chains sell 3 times as many books as Amazon, 8 times as many as Wal-Mart, and roughly 25 times as many books as sell off of the rack at grocery stores.
Borders isn’t going out of business because they sell books — Borders had $2.2 Billion in sales in 2010 — Borders is going out of business because they incurred too much debt expanding internationally, because on a store-by-store basis they took on higher rents for ‘landmark’ locations (and signed leases that obligated them for 10 years or more), and because the economy tanked.
A firm without the same debts, and which didn’t over-extend during the 90s, would still be operating. Borders also made a fatal mistake in 2001, turning their online business over to Amazon. It’s not even the loss of online sales which hurt, it was abandoning that portion of their relationship with customers that made the difference.
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I didn’t mean to turn this into an analysis of the book trade, I was trying to make a point about running retail stores:
So, for a boutique — very niche, very local, very quaint, very twee — you might stock at most 1000 different SKUs, and maybe 4 or 5 of each. An inventory of $50,000 to $100,000. Maybe $200,000 if you’re a ‘name-label’ fashion boutique.
An electronics retailer would have 10,000 SKUs at vastly different price points, from $4.99 DVDs in a grab-and-go at the register to $14,000 high-end theater systems. Your inventory (in store) runs into the millions, but those are concentrated in a handful of SKUs (300 at most) and that 300 is your balwark against going out of business. [yes, I’m making a Miller reference here.] Managing this business is about managing and selling those 300 SKUs, because the price point is ridiculously high.
A grocery store has upwards of 40,000 SKUs and is harder to stock and manage, as some products will spoil before they can sell, and the price points are much lower, $.59 for a can of beans up to $29 for a prepackaged Filet Mignon, but nothing much higher. That’s why you’ll often see small appliances and cookware at the supermarket: a coffee maker or fry pan has a better margin and no expiration date.
A Super Target or Wal-Mart that combines groceries with a department store might have 100,000 SKUs, and overall inventory worth $8 Million or so — but each Wal-Mart storefront apparently clears at least $100 Million each — that’s $100 Million times 3700 or so stores. Walmart is as far from other retail, as retail is from the internet. Apples to oranges to baseballs.
All that said, and different retail models fully considered:
Your average Big Box Bookstore stocks at least 80,000 SKUs – 100,000 to 200,000 books, CDs, DVDs, and assorted crap [excuse me: stationary, greeting cards, board games, stuffed toys, bookmarks, reading lights, journals, scrap books, jigsaw puzzles, and other assorted crap]. At Least 80,000, and the average is higher: ballpark numbers? 140,000 separate SKUs of which at least 95% are books, and $2 Million or so in total inventory.
And to stock our shelves, we select 100,000 or so books out of at least 2 million available SKUs — there are between 2 and 6 million books in print, depending on how one treats vanity publishers and print-on-demand. If you expand your stock past “in print” to used books and all POD titles you’re looking at 12 Million different SKUs. It may be as many as 15 million. Aside from me bringing it up just now, no one else has thought to ask the question and there is no source I can link to.
In stocking a store for every type of retail but books: yes, there are hundreds of thousands of items to choose from but you can discard whole classes of items out of hand, as you just don’t sell those, it’s not your business and most if not all other goods are fungible: you don’t need to carry every clock radio or canned soup; just two or three brands at most, and customers will choose the one that best fits.
Books are not fungible, in that I can’t substitute one book for another — even if they are in the same genre or same general category, or in fact cover the exact same topic: someone looking for “Bookselling for Dummies” will only grudgingly accept “The Complete Idiot’s Guide to Bookselling” – and more often will insist I order the Dummies Guide because that’s what they are familiar with, or what Oprah recommended, or what the internet said was best.
Each of those 12 million books needs to be considered and potentially stocked, if they’re available. 12 Million is _a lot_ — more than you can stock and shelve, more than you can think of, six times more than the books actually in print. No bookstore could actually keep up, but every book store—new or used—is expected to.
Most often, customers come in and demand this book and only this book because, well, because —
“What, why are you asking? Give me my book. I’m shocked and appalled that you’re not stocking it, or that it’s sold out — you didn’t order enough of this book that I hadn’t even heard of myself until this morning? — I’m fully aghast, and I plan to write a very irate letter of umbrage to your corporate office at my earliest opportunity!” [book lovers have a big vocabulary]
This is a phenomenon I’ve described in some detail as amazonification. It makes my job difficult. Despite the fact that there are many many good books, and I sell them, suddenly both my store and myself are worthless because we don’t stock one, specific title that may in fact be crap but neither you or I know that because the media/internet buzz hasn’t died down yet and there is no objective review available.
It’s not enough that I stock tens of thousands of individual books, more than one person could read in a lifetime. It’s not enough that we [and by “we” I mean publishers, librarians, and retailers] have classified and defined nearly all books (millions, to date) into thousands of categories and tens of thousands of specific sub-categories, in a process that started before Amazon showed up, and which Amazon adopted, and a system that will continue even if Amazon goes out of business (or abandons books for more profitable streaming online media and other goods). It’s not enough that I buy, stock, sort, shelve, and sell books: I have to do so at ever shrinking margins because “it should be on sale” and “it’s cheaper online.”
Let me put that thought, “it’s cheaper online” to one side as well, next to your cup of coffee, and go on one more digression before I get to my conclusions.
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Insert yesterday’s rant about the damn telephone calls here – Key point: “No one calls Amazon — what, are you kidding? They’re online. No, even if I’m going to buy it from Amazon anyway the first thing you do, obviously, is call the bookstore.”
Let me see if I can state this a bit more clearly than I did yesterday:
There are advantages to having a physical storefront — primarily advantages for the customer as we are open all day, have items available to take home today, have associates you can talk to over the phone or ask for help if and when you do come into the store, but all of these *extras* also carry extra costs.
So. Conclusions:
First up, cups of coffee.
You can make a cup of coffee at home.
But when you’re out and about, perhaps you buy coffee from a shop: maybe it’s a better cuppa, maybe it’s just convenient. Maybe you plan your morning commute based on which coffee shop is on the way; maybe you even wake up earlier so you can be sure to get your fix.
You can shop for books from home, too. Many of my customers advise me of this reality several times a day.
But the bookstore is open – and just like the barista at Starbucks may in fact make a better cup of coffee than the preground-drip that you can make at home, perhaps the professionals who stock, know, and love books can ‘brew up’ a better book recommendation than an online book sales site.
Second point:
Books are not retail.
Yes, I sell books. Yes, the physical act of sales — exchanging goods or services for money — is colloquially called “retail” and defined as such in dictionaries and on Wikipedia.
But no retailer stocks a hundred thousand SKUs — or twice that, or even half that — because it’s plainly *nuts*. And no retailer provides the services we do at a bookstore, for free, and with no contract or cover charge or expectation of payment.
A bookstore is like a grocery store that runs a free cafeteria, because the customers demanded it:
“What, you sell food and I can’t try any? There’s no way I’d buy food to take home unless you serve it to me first – how do I know if it’s any good? And what do you mean I can’t come in everyday and try something new – you have so many options, *of course* I’m going to need to come in *at least* every weekend just to keep up. Can you bring that to my table? I’m plugged in with my laptop over next to the windows. OK? Thanks.”
Bookstores didn’t used to be this way. And customers weren’t always so… demanding. But in the 20 years since the ‘big boxes’ transformed your book options from a dozen bookcases of paperbacks in a mall store or a legacy-town-square-bookshop, to a multi-storied building downtown or vast big-box-book utopia [with free parking] out by the mall — expectations now easily exceed what can be done profitably, or even on a cost basis.
100 years ago, if you didn’t live in a city you’d count yourself lucky to be able to buy dime novels at the general store. 80 years ago you could join a book club and get new books in the mail; 70 years ago you’d have been able to pick up a cheap paperback version of many of the same books at the train station newsstand.
Paperbacks moved from news stands into spinner racks at the local drugstore or grocery. The popularity of the format (read: low price) also made it a staple of many of the small, independent booksellers — and 50 years ago the model became established: first a hardcover edition for the libraries, collectors, snooty book critics in New York, and the handful of capital-B Bookstores in the urban centres — and then if it proves popular, you go back to presses for a Book-of-the-Month Club edition, or auction off the paperback publishing rights to the highest bidder.
Oh, yeah… this was before media consolidation so as a publisher you likely wouldn’t have capabilities to do the paperback version yourself. There was something of a hedgerow between the “mass market” and any self-respecting literary publisher.
40 years ago the “chains” started moving into the then-new shopping malls (with such success that by 1978, as cited in the Time Magazine article, Waldenbooks was the nation’s largest bookseller) — offering much the same mix of product as the local storefront bookstores on main street but buying in bulk, and with nationwide sales data to pull from, able to find and invest in popular, bestselling titles.
And starting 15 to 20 years ago, the independents (and Waldenbooks and B. Dalton, too) were about to discover what a major chain really is: while a number of firms (Crown, Powell’s, BookStop, even Barnes & Noble at the time) were opening up ‘discount’ bookstores — warehouse stores full of current bestsellers on sale, remainders, and other discounted titles — this isn’t necessarily what the public wanted; or rather, not everything we wanted. B&N took the downtown New York bookstore and cloned it, throwing up huge boxes in suburbs and smaller cities across the U.S., selling us books and coffee and CDs and most importantly: atmosphere. Other chains quickly followed suit, re-purposing old brand names and converting the discount store of the 80s into the Book SuperStore of today.
[source]
Bookstores are evolving, the Books Themselves are evolving, and we’re well past a Main Street storefront or Mom and Pop shop.
I hesitate to call it a profession, like accounting, or dentistry, or the practice of law — and lawyers have it easy: they carry no inventory and get to apply logic to their job, and I can’t.
Bookselling is not retail. Bookselling has evolved into it’s own thing; if Amazon doesn’t kill off my chosen profession and libraries both in the next five years, I’d love to see how the industry continues to change and adapt.
Third point:
“Oh, but it’s cheaper online”.
So is your damn cup of coffee. You pay $4 for 50¢ of caffeine and dirty water because of the convenience, and atmosphere, and a place to sit, and free wifi, and everything else.
Everything is cheaper if you have it shipped. An internet retailer doesn’t pay rent on neighborhood storefronts, or stock items for sale in hundreds of these neighborhood storefronts, or manage inventory for thousands of items in hundreds of stores, and stay open for 14 or 15 hours a day so you can buy one of these items today.
Final point:
An internet retailer doesn’t have someone to answer the phone.
Or: it never occurs to you folks to abuse use Amazon’s phone line [they have one: 1.800.201.7575] but everyone calls the bookstore — even if it’s not about books, even if they are already looking at a book website, even if they are looking at Amazon’s website. In addition to paying rent, and the additional cost of stocking books in local stores all across the country, as a bookseller I also have to carry whatever Amazon’s costs should be to answer their customers’ questions. If Amazon actually had to staff a call center to answer every book question [and book-related questions, and non-book questions] that now comes into bookstores, they would not be cheaper. Even if they outsource it offshore.
Now, over the course of the past two weeks, writing this massive three-part rant, I have thought quite a bit about how to build a bookstore to partially address these issues, but nothing is a real solution.
(That post will follow, and it’s going to be a hell of a lot shorter.)
This is my job, and my job kinda sucks.
