The Shatzkin Files


Can the chains provide us with better small bookstores?


There is considerable concern among the trade publishing establishment about the future of brick-and-mortar stores. As well there should be. Retail stores provide the most efficient promotion opportunities for books: putting them in front of people poised to buy. They give clear signals about sales appeal by positioning and piles of stock of varying sizes; they make it possible to “look inside” of illustrated books in ways that no online presentation can match; they enable discovery through serendipity; and they put more different book choices in front of any person faster and more efficiently than any web page or smart phone screen possibly can.

But they’re troubled. Same store sales, or what the Brits call “like-for-like”, have been declining. That may be partly due to the recession, but it is also due to factors that won’t go away: shifts of sales to the Internet, to ebooks, and perhaps to substitutes in other media and the Web.

The magic that grew Barnes & Noble and Borders into behemoths was large store size and title selection. My first experience with this effect was a lesson from my father, Leonard Shatzkin. He took over executive responsibility for the Brentano’s bookstore chain as a vice-president of Crowell-Collier (later called Macmillan, a company subsequently bought by Simon & Schuster and not connected to the company now called Macmillan) in the early 1960s. The store in that chain that was doing least well was in Short Hills, New Jersey. They doubled the number of titles the store carried and it soon was the best-performing store in the chain.

But the “size as a magnet” concept took a back seat to mall store expansion by Walden and B. Dalton in the 1970s. As shopping centers were built across the country, the mall developers favored national chains, which were “bankable”, for their leases. Walden and Dalton rode that wave and added hundreds of stores. Meanwhile, partly assisted by the expanding wholesaling services offered by Ingram, independent stores thrived and grew their title selections beyond what the space-challenged mall stores could offer.

In the late 1980s, Bookstop, a discount chain in Texas, pioneered the “superstore” concept: a massive selection of 100,000 or more titles under one roof. This was the Brentano’s Short Hills effect writ large. By that time, Borders and Barnes & Noble, which already had larger stores than the mall stores, had bought Walden and B. Dalton, respectively, giving them critical mass to support robust central operations and provide leverage in their relationships with publishers. The new superstore concept suited Wall Street, and the two big chains were bankrolled to roll out superstores nationwide.

This was great for everybody except some of the larger independents which, up to that time, had the large title selection field to themselves. For publishers, it meant lots of additional shelf space for their backlist. For consumers, it meant a large increase in choice at hundreds of locations around the country. The attraction of 100,000 or more titles under one roof was compelling; these superstores didn’t need malls to bring them traffic. They were destinations worth traveling to on their own.

But then came the Internet, and Amazon. As we used to remind ourselves quite often ten years ago, “the Internet changes everything.”

And what the Internet did was to seriously dilute the attraction of so many titles under one roof. Now “unlimited” choice was available online: not a hundred thousand titles, but millions. Not just the books presented by active publishers and chosen by buyers, but all the books, in or out of print.

By the turn of the 21st century, it seemed to me that the powerful attraction inherent in the massive superstore selection was muted. I advised a client to “leverage your infrastructure to figure out how to make the small store work.”

But, by that time, both the big chains were phasing out their mall stores. This was not entirely a matter of store size, although it might have been seen that way. The malls the stores were in were often in suburbs from which prosperity had moved on. The effect of the Internet wasn’t just being felt by bookstores, but also by department stores, which were the “anchors” that brought traffic to the malls. So footfall at the mall stores fell, quite aside from any negative impact of a limited title selection.

In 2009, the mall store era has officially come to an end. First Barnes & Noble announced it was closing all the remaining B. Dalton stores. Then, this week, Borders announced it is shuttering more than half of the remaining Walden stores, which will leave only 130 operating, in January.

Meanwhile, it only takes a visit to a B&N or Borders store today to see that they are hardly stuffed with books; the ones I’ve been in lately appear to have more space than they need, and this is when stores are relatively full of merchandise.

Of course, larger stores can be more cost-effective than smaller ones for other reasons beyond the attraction of the title selection, even if that attraction is working well. There are per-store costs, of store management and central management attention, that don’t readily reduce with store size. And while the effect of a massive title selection at a retail location might not be what it was 20 or 40 years ago, more titles will certainly attract more traffic than fewer.

Meanwhile, the other big change in the book retailing scene in the past 20 years has been the growth in sales at mass merchants: Wal-mart, Costco, and the price clubs and supermarkets. These stores leverage existing traffic (one would think that few, if any, customers go there for the books) and deep discounting to make significant book sales with a very limited selection of titles, usually well under 5,000. They’ve been part of the problem for full line book retailers. Their pricing and ubiquity bleed off sales of the highest-profile bestsellers. In the 1970s, bestsellers pulled people into bookstores where they might buy lower-profile books. Today bestsellers are presented to the public at cut prices where people buy their groceries or school supplies, leaving the bookstores with the customers who still consider them a “destination.”

Both of the big bookstore chains, but particularly Barnes & Noble, own unmatched infrastructures to deliver a curated selection of books to dispersed retail locations. They found it impossible to make the small stores they owned in the mall locations profitable, even with those capabilities. (In fact, Borders, which doesn’t have a supply chain to match B&N’s, outsourced some of its shelf-stocking at Walden to wholesalers in recent years. It is inconceivable that B&N would ever do something like that.)

But bookstores are going to be getting smaller; we know that intuitively and the stock we see in the current superstores confirms it. And smaller bookstores, if they were planned to be smaller, would require less space, less traffic, and less sales to be viable.

Of course, smaller stores wouldn’t be a magnet for traffic; that’s what turned the Short Hills Brentano’s around and that’s what fed the whole superstore revolution.

So it would seem the combination for the future might be a B&N or Borders mini-store inside another large retailer. Remember, many other retailers are going to be having the same problem; figuring out to deal with having too much space, so there should be potential collaborators on the other side of the partnership. This will require a different kind of inventory management than the chains exercise now; more of a rack-jobbing approach. But their capabilities: to source books, select books, organize books for presentation, and to deliver books all over the United States, will have more consumer demand than they’ll be able to satisfy with only their own very large stores.

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  • Thomas Adler

    Paperbackswap.com is a site where people can do what the name of the site implies. The site maintains a list of the top 50 books swapped. Currently the top book on the list is The Memory Keeper's Daughter and it has been traded on the site 5,193 times. The 50th most traded book is “Loved Walked in” and it has been swaped 1779 times. The top 50 books have been traded 135,000 times on the site.

    If every book trade was the loss of a sale there would be 135,000 sales that did not happen for these 50 books. Clearly not every trade is someone that would have purchased the book anyway; but even if we half the number it still is large. A potential of 60,000 sales lost for these 50 books. Other than the origianl purchase of the book the author and the publisher are not earning any money on these 135,000 transactions.

    A few observations:

    These transactions were not free. To get a book on Paperbackswap you have to mail someone a book so that you have a credit to swap with. Sending a book media mail cost around $3 when you include postage and packaging. Credits can also be purchased at the website for $3.45 if you want to get a book but do not have a book to swap. At least $405,000 were spent to move these 135,000 copies around the country. I think this has an implication for ebooks. The users of Paperbackswap are not complete freeloaders. They have pay at least $3 to get a book. If these top 50 traded books were available as $3 ebooks that were readily available and people had ebook readers would there have been 135,000 sales?

    What can publishers do to get in on this action? They could lobby congress to end the “First Sale” doctrine. This doctrine allows for the resale/trade of books without compensating the copyright holder after the first sale. When you buy a new book in the U.S. the author/publisher makes money on the first sale of a book but if that particular copy ends up on the used book market no additional money can be earned. It is very unlikely that congress would mess with the “First Sale” doctrine so we can dismiss this idea.

    Another solution would be to get used copies of books off the market. How could that be done? Make every book a coupon for a discount on your next book purchase. These coupons would probably have to be publisher specific. If you had a Penguin paperback you would get a dollar off another penguin if you traded your copy in. Clearly not eveyone would trade in their books to get a dollar off but they might be less likely to swap them. If you didn't want to use a book as a coupon you would likely be keeping the book and this would keep the book out of the secondary market.

    This would also be good for bookstores. Because if physical bookstores were the place that you could use books as coupons you have an incentive to go to your local bookstore to buy books.

    • /blog Mike Shatzkin

      Thomas, although I agree and have said many times that the facilitation of
      used book transactions through the Internet is a factor reducing book sales,
      I think it would be a non-starter to repeal first sale of a physical item.
      However, some sort of registry where used book sales were “taxed” and money
      divided among authors and publlishers whose books were sold — mediated by
      the CCC or the Book Rights Registry, for example — might be beneficial.
      However, it would be also be nigh on impossible to get legislated, I'm
      afraid.

      Mike

      • David

        Why not put a Paperback Swap Shop (or something similar) in the B&N, with all that excess space? Some of my most treasured books were bought at used bookstores. I think they serve a real and worthwhile purpose, and I'm speaking as someone who used to own a new bookstore and who is now a publisher.

      • /blog Mike Shatzkin

        David,

        I quite agree that used books in some fashion become part of the new book
        store before very long. The Powells model will rule.

        But it's complicated for a chain to process that kind of a business. I think
        it will happen, but the management planning and workflow creation
        requirements are pretty difficult.

        Mike

  • timbrandhorst

    Mike, thanks for the brief historical perspective–very interesting.

    I think a smaller store COULD be a traffic magnet–but only if the store ignored the usual large bookstore inventory model and instead offered a “curated” selection of titles and paid attention to the entire aesthetic experience of shopping in the store. I think this could work a couple different ways–either the inventory reflects the surrounding community intensely (extensive gay line in gay neighborhood, vast collection of Judaica in Jewish neighborhood, etc.) or the inventory is curated so well that people travel farther distances just to see the inventory (art and architecture, Civil Way history titles, graphic, etc). Admittedly these work well in urban areas, probably not so well in suburbs or rural areas. In either case, if the entire shopping experience reinforces the curated product line people will visit frequently.

    You've written previously about this idea of the “curated” bookstore; don't think it follows that a well-curated store can be a destination in and of itself?

    • /blog Mike Shatzkin

      Tim, you're proposing a version of curation that is vertical and yes, that's
      exactly what the formula should be for the store that wants to succeed in
      the future. Doing that will not only make them a brick-and-mortar
      destination but, perhaps more important, can make them a highly-discoverable
      online destination. You suggest people might come from far and wide to see
      the inventory, which is absolutely true, but the knowledge accretion and
      interactions that are necessary to *create* such an inventory might have
      even broader application, and attraction, on the Web.

      We agree.

      Mike

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  • http://www.mbopmegashop.com Online Shopping Mall

    I agree with Tim, specialising is the key to small bookshops surviving.

    • /blog Mike Shatzkin

      Ah, the Wonderful World of the Web!!! When a conversation thread can be
      picked up a mere 8 months later!

      Mike

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