1.


“There are two kinds of companies—those that work to raise prices and those that work to lower them.” -Jeff Bezos, founder and CEO of Amazon.com

On the morning of February 11th, 2011, few were surprised by the news Borders had filed for bankruptcy. The second largest retail bookseller in the U.S. had already started to delay payments to publishers, desperate to maintain their cash-flow after the traditional crest from retail sales during the holiday season. Every day brings new developments as the company establishes bridge financing to allow the company to emerge from Chapter 11 status, bankruptcy trustees complaining about the fees paid to lawyers and executives, and 238 stores across the country go through the proceed of liquidation. Unfortunately, this was not a singular event.

Bookstores around the country are suffering from the same fate as the Ann Arbor based big box outlet. A few days before Borders’ bankruptcy announcement, Portland-based indie stalwart Powell’s Books announced they were laying off 31 people or 7% of their workforce. The regional bookseller Joseph-Beth Booksellers entered bankruptcy with nine stores and emerged with five stores spread among three owners. If we used Publisher’s Lunch as the newsletter of record, we’d find a total of 18 bookstores that closed, went bankrupt, or were in search of a new owner since the Borders entered bankruptcy in February, when compared to just four stores in the same six-week period last year.

As you read through the various reasons for closures, technology undoubtedly receives part, if not, all of the blame the general demise of bookselling. Amazon has long been the villain that has disrupted bookselling. But now, tens of millions of tablets in the marketplace, readers are choosing to buy more and more of their books digitally. Bookscan reported that print books sales are down 7% in 2011 compared to 2010 while most alternate indicators like the ebook sales report from American Association of Publishers show ebook sales growing substantially, now accounting for more than 30% of sales. Publishers like Sourcebooks and Bloomsbury USA have reported even higher percentages.

Given these realities, how can retail booksellers continue to stay in business? Empty bromides like “Work Harder!” and “Do Something Different!” fray the nerves of those working at bookstores around the country. Maybe things would be different if we could clearly see how to be different.

2.


“CSV-5 has better throughput, but Cal-12 has better pavement. That is typical—Fairlanes roads emphasize getting you there, for Type A drivers, and Cruiseways emphasize the enjoyment of the ride for Type B drivers.” -Neal Stephenson in Snowcrash

Kevin Maney, the longtime technology writer for USA Today, has a theory that businesses have one of two options when they compete. The first option is to compete on convenience—make a simple to use product, make it widely available, and charge the lowest possible price. Oreo cookies and Netflix come to mind.

The second option is to pursue fidelity: produce a high-resolution experience which the customer values for its uniqueness. My mother’s homemade Grand Champion chocolate chip cookies and Avatar in IMAX 3-D contrast well to the convenient alternatives.

Maney says when Amazon introduced the Kindle they pursued the fidelity side of the continuum. If you go back and read the interviews with CEO Jeff Bezos he talked about the importance of emulating the experience you get when you read a book—the size of the screen, the weight of the object. Bezos even mentioned how the product team studied the book’s vanilla-like scent and considered how they could include that in the device. The entire approach left the market confused. Amazon was a company that for their entire existence had pursued one goal: make buying things more convenient with their hallmarks were low prices, infinite shelf space, and quick delivery.

With the introduction of Kindle 2 in 2009, Amazon changed their messaging. “Books in 60 seconds” was the new tagline and everything we have seen since in Amazon’s marketing and PR has been about convenience. Every chance they get the retailer announces how ebooks sales are overtaking some form of print book (using very subjective statistics). Every week in the New York Times Book Review, the full-page ad that sits opposite from the week’s bestseller lists telling readers how easily they can download any of the popular titles from Amazon. Convenience has come in the form of lower and lower prices, most recent being the addition of an ad-supported Kindle that costs $114.

Ebooks and the myriad of devices people will use read books play directly to the market of convenience, a market that retail storefronts selling “pbooks” will never be able to properly satisfy.

3.


“Bookselling was and is for me a cultural and political expression, an expression of progressive change, of a challenge to oppressive authority, of a search for a community of values which can act as an underpinning of a better world. The true profit in bookselling is the social profit; the bottom line, the measure of the impact of the bookshop on the community.” -A. David Schwartz (1938-2004)

The news of the passing of Seattle bookseller Kim Ricketts caused me to stop and reflect on what she accomplished and what it means more broadly to retail segment of book publishing. Anyone in bookselling knows the story of Kim’s migration from the University of Washington bookstore in Seattle to her own business creating events that sold books. I was fortunate to be a beneficiary of her efforts firsthand during the launch of The 100 Best Business Books of All Time in 2009. At corporate events, like the one I spoke at, as well as her other events, Kim brought together wonderful groups of people who shared curiosities and passions. And while it is important for me to pay tribute Kim and the business she built, it is even more important for all of us to understand what Kim Ricketts Book Events exemplifies for the future of bookselling.

What too few booksellers understand is that the only strategic play for this entire retail segment is on the fidelity side of the continuum. Kim understood this in spades. She found great success in her Cooks & Books event, which attracted the country’s top chefs to share a meal and tell stories to those gathered from the foodie community of Seattle. Each attending member of the tribe went home with latest cookbook from that celebrity and a collection of wonderful memories. For that privilege, attendees paid two to four times the cover price of the book.

800-CEO-READ, the book retailer in Milwaukee where I spent six years, is certainly a niche player with their specialty in business books, but that fails to fully explain their completely different approach to fidelity. The entire book retail distribution system is designed to get a single book into the hands of an individual. Rather than selling one book at a time, 800-CEO-READ sells tens or hundreds of books at a time to organizations that use books for meetings, training, or large industry events. While the revenue and the margins are markedly better, these orders generate a different set of costs from the need for a call center to manage the unique requirements of corporate sales to a shipping department that understands global logistics. It is hard to call this bookselling by standards we are all familiar with.

And look at Powell’s Books. They have created a Disneyland-like destination in their City of Books location and I don’t mean in the costumed characters sense (though you can get a green-screened photo of yourself in front of the store printed on a t-shirt). The store stocks over one million new and used copies of books, an order of magnitude larger than what you would find in amy Barnes & Noble. Like Ameoba Records in Hollywood, CA, Powell’s has created a high definition experience making the store a destination for any book lover.

Epilogue


Kevin Maney offers a final caution worth noting. The nirvana of offering both convenience and fidelity is strategic mirage where customers increasingly understand less and less why they need your products. Starbucks doesn’t want to admit that as a 17,000 store global chain they are a convenience play (and the reason VIA “Ready Brew” is successful is because of that). The US Post Office lives in the dying space between the next day fidelity of FedEx and the convenience of text messages. Do you need to talk about 35mm film?

Booksellers need to start seeing that Amazon is not their competition; convenience is. Retail booksellers need to answer “What can I do different?” by providing higher fidelity experiences for their customers. Or put another way: the book is the start and not the end to the experience customers want to have.