Nimble operators adjust to cityscape.
by: Matthew Flamm
Borders, the No. 2 brick-and-mortar bookstore chain, is teetering on the verge of bankruptcy, hammered by online discounting and the explosive growth of e-books. Barnes & Noble, the biggest chain, is so focused on digital expansion that last month it fired many of its top executives who dealt with physical books.
But all is not lost in the world of traditional bookselling. In retailing's version of a David and Goliath story, the independent bookstore is making a comeback in New York.
That's right: in the land of crushing rents. Over the past couple of years, more than half a dozen indie bookshops have opened around the city, from Greenlight Bookstore in Fort Greene, Brooklyn, to Book Culture on upper Broadway. (Another independent store may soon appear in midtown Manhattan.) The shops have been launched by both first-timers and veteran entrepreneurs, and though their long-term survival is far from assured, the new businesses are succeeding, thanks to smart merchandising and carefully chosen locations.
Their presence is not just good for publishers who rely on the indies' 10% market share to help launch new writers. They're also a sign of a larger truth in business: that nimble operators can adjust to a changed landscape better than some bigger players.
“If you do your numbers right, it can work out,” said Robert Fader, who runs Posman Books in Grand Central Terminal.
The bookseller added a second location, at Chelsea Market, in September 2009. Sales at the new 2,000-square-foot store were up 22% in January year-over-year, despite last month's snows. First-year revenue came to more than $1 million, or good enough that the bookseller and its landlord are putting final touches on a 10-year lease.
Mr. Fader adds that he's planning to renovate the store in March, and is close to signing with another landlord for a smaller space in midtown.
By contrast, at Posman's 5,000-square-foot Grand Central shop, sales have been declining since late 2008, when Lehman Bros. collapsed and e-books took off. Hardcover best-sellers, a longtime favorite of commuters, have been among the reading categories hit hardest by digital publishing.
Selling more than books
Mr. Fader said the new store owes its growth to a customer base that includes local residents, tourists and people who work in the building, like the Food Network staffers who buy from the strong selection of cookbooks.
Like other indies, Posman also has also been experimenting with its merchandise mix. The new shop draws only 75% of its revenue from books, and much of the rest from such things as $6 handcrafted greeting cards.
Booksellers say they need to hedge against the temptation for even loyal customers to pay less on Amazon.
“Part of the success of the store is creating an atmosphere for buying things that are not just books,” said Chris Doeblin, who opened Book Culture, an 1,800-square-foot shop on Broadway and 114th Street, in November 2009. The store's inventory includes hand-carved chess sets from India.
The location broke even in its first year, grossing around $750,000, Mr. Doeblin reports. December and January's sales were up 30% from a year ago, and he's hoping to top $1 million in revenue in 2011. At his much larger, scholarly bookstore two blocks away, sales have fallen 25% over the past five years.
Despite the success of these new indies, physical bookstores remain an endangered species. Some analysts expect digital book sales to account for 50% of the market within five years, up from the current 10%. That would make survival nearly impossible—even with the help of the e-bookstores that many independents have launched on their websites in partnership with Google.
“The new indies are tilting at windmills,” said Albert Greco, a Fordham University professor who studies the book industry.
In the short run, however, Mr. Greco believes some independents will pick up business if Borders closes stores. And the American Booksellers Association, the indies' trade group, argues that the tide has turned, noting that its membership grew slightly in 2010 after declining steadily for a decade.
ABA Chief Executive Oren Teicher credits the new owners' business smarts and the backing of communities that value local shops.
The founders of Greenlight Bookstore, on Fulton Street in Brooklyn, have certainly benefited from the support of their literary neighborhood: $70,000 of their $345,000 in startup costs came from a community lender program.
“Human scale”
Open since October 2009, the store turned a profit in its first year on $1.1 million in sales, according to owners Jessica Stockton Bagnulo and Rebecca Fitting. The two first-time entrepreneurs have also found that carrying 25,000 titles—a quarter of the selection at a superstore—can be enough.
“If you have a wall of text, you can't see any of it,” said Ms. Fitting, a former Random House sales rep. “We narrow it down to human scale.”
Correction: Greenlight Bookstore's name was misstated in an earlier version of this article, which was originally published online Feb. 6. 2011.
from: Crain's New York
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