Borders Closes Stores in 200-Plus Cities: What Lies on the Retail Horizon?
Borders Group's recent bankruptcy filing and announced closing of more than 220 stores nationwide seems to warrant a closer look at trends in book retailing.
"I've been in the business long enough to see very long cycles," notes Jack McKeown, who founded and served as CEO of Perseus Books before joining book marketing agency Verso Advertising as a consultant and director of business operations. Independent bookstores took a big hit in the 1970s with the rise of mall bookstores, McKeown says, only to morph into a new base of well-capitalized, larger "super independent" outlets (Powell's Books, Vroman's Bookstore, etc.) that created the model built out on a huge scale by Barnes & Noble and Borders in the 1990s.
Today, the book superstore model seems poised to go the way of music stores and video rental chains, though the rise of e-commerce may present less of a threat to physical booksellers than it did to music and video retailers and—by unspooling the long tail—may even aid them in some instances.
More Physical for Less
According to Brian Paeper, owner of independent Alias Books in Los Angeles, trends in bookselling, like those in other media markets, have become divorced from economic cycles. "It's a different kind of adjustment," he says. "It has to do with the book industry. It has very little to do with the economy. If you think it's the economy and you are waiting for the book business to come back with the economy …, [you're] sticking your head in the sand."
For Borders, the challenges were both industry-related/situational and Borders-specific, McKeown says. Borders paid the price for top-management turnover, a failure to grasp the power of the Internet and relying too much on music CD sales as part of its business model, he explains, compounding trends that have hurt the bottom line of book superstores generally.
"Ultimately, I feel the day has passed when the 150,000- to 200,000-volume, 25,000-square-foot superstore is the preferred shopping venue for books and creates the sense of discovery that people are looking for," he says. "It was a powerful model in the late '80s and '90s. I don't think it conveys the same advantages it once did, and in certain [areas], in terms of the operating costs and the overhead involved, it provides certain distinct disadvantages in providing a vital bricks-and-mortar retailing experience."
As the largest chains contract and move more fully into e-commerce, McKeown sees opportunity once again for independents.
"I believe the independent can create a more intimate, more robust shopping experience in a much smaller footprint, draw down their costs of overhead, and as a result capitalize on the very substantive part of the market that is still devoted to print sales, even while indies grapple with the need to move into the Internet space more aggressively, selling e-books, etc., and cultivating a more intimate relationship with their customers via online marketing as well as in-store marketing," he says.
A great example of capitalizing on the advantages of a physical location is the independent Harvard Bookstore in Cambridge, Mass., which in 2009 installed an Espresso Book Machine on its sales floor. Owner Jeffery Mayersohn sees a powerful illustration of the changing book landscape simply by standing at his front window and looking across Massachusetts Avenue at Harvard University's Widener Memorial Library.
"About a week or so before we got our machine installed, [the machine's developer] On Demand Books announced a deal they had done with Google, which gave us access to the public domain content of what Google has scanned," he says. "Not everybody can [access] Harvard's Widener Library, but now if they want a book from Widener, all they have to do is go across the street to Harvard Bookstore and print the book, as Harvard is one of the libraries that gave Google access to scan their titles."
Initially, most of the demand on the Espresso Book Machine was for Google-scanned books (sold at first for a flat promotional fee of $8 a book; the store now utilizes page-based pricing). Since then, a large market for printing self-published books has opened up, prompting the creation of a separate section of the store and website dedicated to titles published on the premises. Local customers can order books to be printed and delivered by bicycle, which gets books in their hands faster than Amazon could, and has the added benefit of being eco-conscious.
The machine has been a huge draw—even a tour stop for visiting foreign students—and a marketing tool as well. A contest to name the machine produced the sobriquet Paige M. Gutenborg. "We lovingly refer to her as Paige," Mayersohn says.
John Conley, vice president of publishing at Xerox, which distributes the Espresso Book Machine, says the combination of on-demand, short- and ultra-short run printing is "changing the inventory dynamic" for booksellers.
"With these technologies, publishers have the flexibility to print what they need to meet the demands of booksellers and their customers without creating excess inventory for bookstores with limited space," he says.
As energy prices continue to rise, the savings made possible by reduced shipping and storage demands also benefit retailers, he adds.
"I bought the store with a particular vision, of which Paige is an important component," Mayersohn says. "I began to realize that the digitization of books, which many people argue is a problem for independent bookstores … was going to be an asset for independent bookstores, because all of a sudden we could have an inventory that rivaled the inventory of our largest online competitors. So the day we got Paige, we essentially added 4 million books to our inventory without the associated inventory expense, obviously, and without the requirement to warehouse 4 million books."
Offline-Only = Off Course
Another way to reach new customers is through robust e-commerce. "Any bookseller who is not selling online is almost certainly missing out [on] sales," says Richard Davies, merchandising manager at AbeBooks. "In today's global bookselling market, booksellers should consider selling through as many channels as possible—their own shop, their own website, online marketplaces, book fairs, festivals, etc. There are booksellers who only sell online and there are booksellers who use online sales to complement a robust offline offering. It depends on the books—niche-category books are ideal for the Internet."
Booksellers and publishers of all stripes, from Powell's in Oregon to The Book Depository in the United Kingdom, offer product for sale through AbeBooks, which, unlike parent company Amazon, offers global book sales from a single online database. The ability of a small U.S. bookseller to market books to bibliophiles in Europe or Asia can be a big boon. "That's one of the advantages of working with us," Davies notes.
The New Market of "Hybrid" Readers
Bob Ticehurst is a bookstore owner who appreciates his Kindle. The founder and president of the Used Book Superstore, which has five locations in Massachusetts and New Hampshire, owns and enjoys the e-reading device. "I hate to admit it … but there are certain things I'm going to read on that and certain things I am not," he says. "On a flight this week, I was reading a book on my Kindle, and I got tired of that and switched to a hardcover book that I was also reading. … When I go to the gym, I Iike using a Kindle. I think a lot of people are like that—they don't just choose one or the other."
Research backs up the idea that consumers do not want to buy books in just one format. A study conducted by Verso in partnership with the American Booksellers Association, the "2010 Survey of Book-Buying Behavior," identifies a new "hybrid market" of avid readers who split their purchase behaviors between electronic and print books.
"People will not be dictated to," McKeown says. "They appreciate both formats. For reasons of convenience, they may be buying certain categories exclusively in e-books, but for titles they want to have in their homes, keepsakes or books they want to come back to, where the physical, tactile sense of the book is important—they are continuing to buy those books in print.
"… We're seeing no direct evidence—except with the top-line, most commercial bestsellers—of any real cannibalization going on universally as a result of e-books cutting into print book sales," he adds.
Still, e-books present perhaps the biggest challenge to traditional booksellers, with companies like Barnes & Noble staking their futures on drawing the e-book consumer into their brand universe with e-reader devices and e-bookstores.
Books-A-Million, which has partnered with Barnes & Noble (B&N) to offer B&N's Nook e-reader, and Borders, with its Kobo reading device (it also sells the color Micro Cruz tablet), have followed Amazon into the e-reader space, though B&N has arguably done the most of the "big three" (B&N, Borders and Books-a-Million) to integrate e-books into its retail sales and marketing strategy. With the Nook Color, B&N hopes to capture the growing children's e-book space that Amazon currently does not occupy. The company also continues to add content to the Nook, such as magazines, and, like Amazon, has struck exclusive e-book deals with publishers.
'Ad' It Up
A new tactic for Amazon, however, has been its recent venture into the ad-supported book space. Its Kindle with Special Offers, launched in April, shaves $25 off the price of the device for consumers willing to accept advertising along with their literature. Rumors continue to fly about if and when Amazon will release a color Kindle.
Lessons from the 'Big-Box' Retailers
The bestseller market remains the most contested, with swiftly expanding e-book and online sales competing for consumers' dollars with old-line book retailers and newer, non-traditional booksellers like Costco and Wal-mart. McKeown, who also owns and manages a branch of the indie bookstore chain, Books & Books, says these big-box retailers offer lessons for independent booksellers about how they can—and cannot—compete.
"They are really defining the cutting-edge of commercial bestsellerdom," he says of the big-box chains. "We would love to have people coming into our stores and buying the next John Grisham or Patricia Cornwell, but we know, given the deep discounting and behavior patterns that have people convinced they get better value for those kinds of books at a Target or Wal-mart, we will not be able to compete on that playing field on a price-point basis. So we try to cultivate a market that is deeper, more midlist-driven and backlist-driven."
The top seller at his Westhampton, N.Y. store last summer was a literary commercial novel, "One Day," that required hand-selling. "We sold hundreds of this book, and that was the result of our tapping into a market that is a fairly sophisticated reader, who reads the book reviews, likes to be recommended to and is always looking for something new that is a good beach read, and yet does not insult their intelligence," McKeown says.
It is this ability of independent stores to gauge their markets that gives them an advantage, he adds, as well as provide a rewarding browsing experience.
The "Neighborhood Bookstore Development Bank"
McKeown believes shrinking book superstores have opened up a window for independent booksellers able to capitalize on the opportunity. "The Borders phenomena has created a sense of urgency about this," he says. "Hundreds of markets are potentially without a bookstore for the first time in 40 or 50 years." In an essay written with Don Linn, "Will Independent Bookstores Seize the Day?", he proposed a financing entity modeled after recent initiatives to fund neighborhood grocery stores, a Neighborhood Bookstore Development Bank (NBDB). McKeown and Linn believe such an entity could provide capital to a "new generation" of bookstore owners, as well as those looking to expand existing operations, and call on organizations such as the American Booksellers Association, Ingram and Baker & Taylor to support the effort.
"In this supply vacuum, the demand is not going away, but it won't be there forever before people migrate in frustration [with the disappearance of local options] to [online options]," permanently shifting their purchasing habits, he says. He looks to 2012 as a critical year to secure financing and launch the NBDB.
Other reasons may exist for booksellers' urgency. The avid reader population, which Verso defines as buyers of 10 or more books a year, is getting older: People 45 years of age and older account for 70 percent of all consumer book purchases. "That percentage is likely to increase as boomers downshift into retirement or flex work, and have more time for reading and discretionary income. All that is a propellent for demographically based phenomena," McKeown reports.
Of course, the future of book retailing will not hinge on any one factor, whether economic, technologic or demographic. All parties seem to agree there is room for a variety of players in a multiplatform future. "People assume the book-buying experience has become a commodity experience and is [only] about price," Mayersohn says. "But I think people appreciate the experience of going in a brick-and-mortar store … [where] we provide a curated selection of books." Other consumers appreciate the convenience of an online order or instant download, or a used bookstore's thrill of the hunt.
As McKeown says, "It's all about gauging and serving a market." BB