SPECIAL REPORT: The Transforming Booksellers’ Landscape
The biggest news in book retailing so far this year may be Borders’ opening its first “concept store,” a new generation of superstores unveiled in February in the company’s hometown of Ann Arbor, Mich. At 28,900 square feet, the new store—the first of 14 planned to open this year—does not skimp on size, and a lot of that space is taken up by innovative features: shop-within-a-shop “destination zones” for travel, cooking, wellness, graphic novels and children’s categories; bold, new architectural designs; and a “digital center” offering services ranging from book downloading to self-publishing.
“Our mission is to be a headquarters for knowledge and entertainment. As you can see, this mission is much broader than saying that we are simply a bookseller, and it opens up what we do with our stores to a wider range of possibilities,” says Anne Roman, director of corporate affairs at Borders Group Inc. “We seek to offer customers an experience that they cannot get elsewhere ….”
The new configuration points to an important development in the book retail market. With “nontraditional” book retailers such as Costco and Wal-Mart finding success by focusing on best-sellers, and popular and seasonal categories with more mainstream appeal, traditional booksellers are designing layouts to take advantage of buyer impulses. Roman says Borders seeks to “stake out” popular categories with expanded selection, clear signage, and décor features that demarcate special in-store destinations.
“For example,” she says, “in ‘travel,’ not only do we have a thoughtful and wide selection of books, but we also have a computer kiosk … where customers can research trips, get specific trip recommendations, view expert video commentaries on travel, and even book a full trip right there in our store.”
In many ways, the Borders makeover seems to mirror a multimedia Web experience, and it’s no coincidence that the new stores are opening in concert with a redesigned Web site, currently in beta (BordersStores.com), which features original content interspersed with an expanded shopping experience.
“Many retailers have their physical stores and an e-commerce Web site, and the two experiences are quite different, or at least not maximized in the way they could be by being more integrated,” Roman says. “When we launch [the Web site] this spring, we will not only have two channels—physical store and online store—but we [will] have the unique opportunity to marry the two in ways that will truly add dimension to the customer experience ….”
Connecting with consumers on multiple levels has become essential to brick-and-mortar and online retailing, with both platforms offering distinct opportunities for engagement. Traditional booksellers, for instance, have sought to make their stores community gathering spots: Barnes & Noble boasts of being the nation’s second-largest coffeehouse, while Borders is designing its new stores to better accommodate book clubs, live music and author signings.
The most important elements in online sales, of course, are availability and price—most clearly in the ability of sites like Amazon, AbeBooks, Powell’s Books and Alibris to offer a variety of new and used copies of the same title.
“It pays to sell through as many channels as possible, so the switched-on bookseller these days will sell through Amazon, eBay and Alibris, and go on to overseas markets,” says Richard Davies, AbeBooks’ publicity manager.
AbeBooks runs an online marketplace that allows thousands of independent bookstores to sell their books online. The Victoria, B.C.-based company has enjoyed healthy growth in recent years, seeing $190 million worth of books sold through its site in 2007, up from $170 million in 2006.
With music and movies a recent venture for Alibris (primarily an online marketplace provider for independent booksellers), the company’s 30-percent increase in sales last year came almost entirely from books, says Brian Elliot, president and CEO. Other media, he says, “are still a single-digit percentage of our business … [but] we think multiple media will help bring back buyers to our sellers, and our partners increasingly agree—especially [in regard] to used and harder-to-find DVDs.”
An expansion of offerings has also worked well for Amazon, which, according to a company press release, saw net sales increase 39 percent in 2007 compared with 2006. (Net sales in 2006 increased 26 percent over the previous year.)
“Amazon’s challenge is to continue to offer our customers the best price, selection and convenience. We are always looking for ways to expand our selection and enhance the customer shopping experience with easier discoverability,” according to a company statement sent to Book Business.
Customer Service at Your Service
Brick-and-mortar stores are meeting the challenge posed by online retailing in various ways. In its new concept stores, Borders has brought the multimedia experience onto the physical plane, with the added benefit of knowledgeable staff ready to assist those who desire personalized service.
The “digital center” allows customers to download music and books, burn custom CDs, create photo books, engage in personal publishing projects and search their ancestry. “We know our customers are interested in doing these things,” Roman says, “but some of them lack the computer expertise to do them—we are there to help. Our digital centers are staffed by experienced people who make it comfortable for even complete computer novices to come in and use this technology.”
Barnes & Noble has focused on customers’ in-store experience, through features such as its coffeehouse, but has also found creative ways to compete on the pricing front. As noted by industry analyst and Book Business columnist Thomas Woll, the company has managed, through self-publishing ventures, to bring price points down without sacrificing profit.
“Their publishing program allows them to have greater margins on what they offer, through [the Barnes & Noble Classic line], SparkNotes and all of that,” Woll says. “They’ve gone vertical in terms of their integration, which I think is a good idea.”
Woll believes, however, that Internet competition has and will continue to put the superstore concept under strain.
“Basically, I think the trend seems to be that, while the superstore concept in and of itself makes a good deal of sense, trying be all things to all people from an inventory and cash-flow standpoint doesn’t seem to make as much sense and, to a large extent, over time, has proven to be somewhat unwieldy,” he says. “You’re basically stocking a lot of inventory by choice that’s not moving.”
Niche Bookstore Revival?
One solution, Woll notes, is a re-embracing of the older concept of smaller stores pitching targeted titles. “This is coming to fruition with Borders Express, which is an offshoot of the old Waldenbooks days, the old mall days,” he says.
While Barnes & Noble spokesperson Carolyn Brown says the company has no plans to open anymore of its smaller-format B. Dalton stores, opening smaller stores has become a core business strategy for Chicago-based Barbara’s Books, which has its roots as a neighborhood bookstore in the city’s Oak Park section.
“I think that the reasoning behind [opening smaller stores] is, if the customer is not coming to you, you have to come to the customer,” says David Schwartz, general manager at Barbara’s Books. “Our formula for success is to open small, footprint-type stores in high foot-traffic areas.”
In addition to its neighborhood branches, Barbara’s operates stores at South Station in Boston, in Macy’s department stores in Chicago and Minneapolis, at Northwestern Hospital and the Sears Tower in Chicago, and at O’Hare and Philadelphia international airports. These smaller stores range in size from 700 square feet (Boston) to 2,800 square feet (Macy’s).
“These types of stores keep our business solvent, quite honestly,” Schwartz says. “We have a smaller footprint, so the inventory investment and overhead is smaller.” Net sales for the chain have been flat for the last three years, he reports, although the company expects a big jump in revenue this year with the opening of six new stores at O’Hare.
The agreement with Macy’s dates from when the department store was known as Marshall Field’s and owned by Target Corp., which offered retail space to the bookseller as part of an effort to partner with local businesses, Schwartz says. The venture has proven successful enough to carry over under new ownership and the Macy’s brand.
Barbara’s also supplies books for Macy’s stores around the country, which the latter sells in its children’s and men’s departments—part of a growing trend of nontraditional book retailers, such as Wal-Mart, Target, Kroger and Costco, making a significant dent in the book market.
“I think we’re becoming important,” says Bob Nelson, vice president of finance and operations at Costco. “We are carrying the best-sellers, and we do a lot of volume in the books we carry. We’re not everything to everybody—we offer mainstream popular authors and carry these books at a great price ….”
Nelson says Costco focuses on categories such as cooking, religion, self-help, fiction and coffee-table books. “We offer many different types of books, but are not real deep in any one category,” he says.
None of which is to say that the superstore concept will go away anytime soon, as evidenced by Powell’s Books, whose continued expansion has been driven by a focus on the fundamentals of customer service and a rewarding in-store experience, according to Dave Weich, director of marketing and development. Plans call for the flagship store—Portland’s second-largest indoor tourist attraction—to grow to 80,000 square feet by 2010.
The store pioneered, in physical form, what has become the Internet standard of offering used and new books side by side, and the store’s Web site is essentially an online extension of its brick-and-mortar parent (which operates six stores nationwide, as well as five warehouses).
“From the start, our role has been to give the customer as much choice as possible, and in some respects that has led to expansion after expansion of the downtown store,” Weich says. “We are devoting most of our time and energy to optimizing the experience for local people. We added in-store pickups so people could order online and pick up at stores. We are also currently working on applications for mobile phones so people can search our inventory by store … or look up their friend’s wish list on their mobile phone, so if they are in the store and want to buy a gift, they can get it right there.”
“We are, I think, in the same way as Barnes & Noble, a manifestation of who we are and what we believe in, and what we think a bookstore should be,” adds Weich. “When you operate 1,000 stores around the country, you think with a different criteria. We can be more nimble, more personable, because we are smaller and are closer to the action that way.”
Given the small profit margin of books, however, Weich says it’s difficult for Powell’s to devote time and resources to creating the online “bells and whistles” needed to compete with the likes of Amazon. Plus, the growth of e-books reader may eventually squeeze retailers even further, he says.
“I think it is inevitable that e-books will take over a certain portion of the market, though it’s going to take a better device than the 1.0 [Amazon] Kindle,” he says. “It might be the 2.0 Kindle.”
The key question, he says, is: What percentage of readers will switch over to the device? “… 2 percent, 5 percent? Most bookstores cannot afford to give up a large percentage of their audience.”
Alibris’ Elliot agrees that the impact of e-books must be assessed over time. “I may be a Luddite, but I don’t see the Sony Reader or Kindle having a large impact in the near term,” he says. “E-books will, over time, grow and expand—over what period of time and with what pricing models being the key question. In the meantime, if they generate some consumer interest in reading overall, it can’t hurt.”
- Alibris Elliot
- Amazon s Director of Digital Text Laura Porco
- Anne Roman
- B. Dalton
- Bob Nelson
- Brian Elliot
- Carolyn Brown
- Cliff Green
- Dave Weich
- David Schwartz
- James Sturdivant
- Marshall Field
- Michael Healy
- Mike Shatzkin
- Peter Beisser
- Phil Ollila
- Richard Davies
- Thomas Woll
- Valerie Motis