Rocket Bomber - article - retail - commentary - Rethinking the Box: *Really* rethinking the box.

Rethinking the Box is a collection of ruminations on retail: a unique combination of sober (and sobering) business analysis mixed with drunken, inflammatory personal invective.

Previously:
Study your History. Recognise your Motives. Know your Customer Base, and your Staff. Find your Niche. Consider your Product Lines, take a second look at What the Customers Want, and then stare again in dismay at the Profit Margins.

I had intended a discussion of Affordable Rents to lead into a column on Location (with considerations of retail & real estate development more generally) (and we’ll get to that) but it seems that at least one reader would like an analysis of predicted profit centers for my Newtype store, and a potential product mix.

Good News, Brian. I do, in fact, take requests — You’ll just have to wade through 3750 words before we get to the answer to your question.

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Even more than the books, though, the modern bookstore sells atmosphere.

It only seems like they give it away: cups of coffee, the occasional newspaper or magazine, and eventually the larger purchase (even if only once or twice a year) pays for the comfy chairs, the music, the knowledgeable staff, and all that reading you sponges do for free while lounging in the aisles, or the inconsiderate louts who tie up all the tables (and outlets) in the cafe with their laptops and accoutrément, and even the people sleeping in the aforementioned comfy chairs.

You don’t get any of that from Amazon.

It’s not like I’m hiding my intentions: that’s from Rethinking the Box, Column One

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Do you know what the number one question in a bookstore is?
The one I answer a couple dozen times each and every day?

Care to hazard a guess?

If you’ve read my previous columns, you likely think I’m about to knock on fans of Oprah (again) or the Seekers of the Book of the Cover of Red (again) (…actually, that’s a decent book title right there) — but no, Oprahites and Idiots are but a scarce minority compared to this group.

The #2 all time question is “Do you work here?”

no, I just have a compulsive need to straighten books and I stole the employee nametag off of a guy who was doing it wrong

As common as that inquiry is, it is only a distant second — and when asked is almost always followed by the #1 All-Time Bookstore Question:

“Where is the restroom?”

There are many variations: some refer to it as a bathroom, even though we don’t have bathing facilities [don’t tell the homeless, some are still under the impression that they can take a bath here] — some will ask ‘where’s the toilet?’ because they’re European and that’s actually what they, and most questers, want; the majority of customers just labour under the usual American prudishness that hides behind an array of euphemisms and code words.

Congratulations! You want to open a bookstore! The shopping masses can always use another public restroom, one without the key attached to a cinder block, or the unreasonable, pejorative restriction of the facilites to actual paying customers — the cheek of some of these retailers!

If, for some reason, your new role as Guardian, Preserver, & Keeper of the Public Toilet chafes a bit, or seems like the least likely and stupidest part of retail to you,

you may not be suited to run a bookstore.

Just sayin’. Sorry. Logic doesn’t play any role here. (like so much of the public’s expectations…) If you sell books, you have a public restroom. Even more than coffee, or books for that matter, this is your calling.

Of course, since a vast majority of bookstores sell coffee [a diuretic] there are certain concomitant needs of the customer base that must be addressed. Abuse of the system is still rampant, though.

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Speaking of Coffee: this is the second biggest part of the ‘atmosphere’ in the quote above. (The biggest part is shelves and shelves full of lovely, lovely books: nothing sells books like more books)

There are two ways to do coffee: If you have time, and can invest some effort, you can go it alone.

If you have money (or want to borrow money to pay for the perceived benefits and security) you can buy into a national brand; or at least, buy a partner and some help:

Seattle’s Best (a wholly-owned subsidiary of Starbucks) is probably the biggest name that is out there and actively recruiting but even a half-hour on the internet will pull up numerous others:

http://www.badasscoffee.com/franchiseinfo.php
http://www.barniescoffee.com/webapp/wcs/stores/servlet/FranchisingView?langId=-1&storeId=10001&catalogId=10101
http://www.beansandbrews.com/franchise.html
http://www.bearcreekcoffee.com/businessopps/index.shtml
http://www.cafesupreme.ca/
http://www.chockfullonuts.com/#/chockCafe
http://www.coffeebeanery.com/information/?page_id=9
http://www.coffeeperks.com/franchise.html
http://www.dailygrindunwind.com/franchise/
http://www.dunnbros.com/franchiseinfo.asp
http://www.forbiddenflavours.com/franchise.htm
http://www.goodearthcafes.com/webpage/1002050/1000405#opportunities
http://www.itsagrind.com/main.php?page=franchise
http://www.javajoes.ca/business.html
http://www.javakai.com/javakai/franchise.htm
http://www.pjscoffee.com/franchise_info.html
http://www.portcityjava.com/franchises.html
http://www.secondcup.com/international/franchising.php
http://www.seekerscoffeehouse.com/v5/4.0.0.php
http://www.sertinoscoffee.com/sertinos-franchising.html
http://www.sonomacoffeecafe.com/franchising/
http://www.vanhoutte.com/us_en/our_coffees/franchise/
http://www.williamscoffeepub.com/content.php?site=1&menuid=2

(quite a few Canadians on the list, eh.)

Not everyone is looking to take on new franchisees at the moment (not surprising given the economy) but if I can find a couple dozen potential partners in an afternoon, I think it shows the potential in the market.

(oh, and Really Outside the Box, for my readers in Oz: http://www.jamaicablue.com.au//Get-in-Touch-with-us/default.aspx)

A few deserve special mention:

http://www.biggby.com/franchising/
They’re small, but the name is right; Who do I have to pay (and how much) to get a ‘Biggby’ Wolf logo for my comic-book-adjacent coffee shop?

http://www.woodyshotdogs.com/franchiseopp.php
— cart based, like you see in the lobby of some buildings. Actually, Woody, I’ll take both a B and a C cart, unless you’d care to talk about some new sort of new cafe concept — Oh look, I think you will.

Think Big:

Einstein Bros.
http://web.enbc.com/~admin4/franchising/

Dunkin’ Donuts
http://www.dunkinfranchising.com/aboutus/franchise/franchise-home.html
https://www.dunkinfranchising.com/aboutus/franchise/suggestsite.aspx

Think Really Big:

I live in Atlanta. No one here knows Tim Hortons. Yet.
http://www.timhortons.com/us/en/about/index.html
http://www.timhortons.com/us/en/join/franchising.html

You don’t have to scrape up a half-mil to buy a franchise, though. Just several thousand for the hardware and a couple of hand-shake agreements — if you can identify a boutique coffee roaster and maybe a small (but good) deli chain that already operate in your local market.

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Why bother with coffee at all? Atmosphere, of course, op cit. — but also cold hard cash. I’ll come back to that before the end of the column.

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The entrepreneurial quest begins with irritation at the status quo. When I express some exasperation (in past posts as linked above, with either the customers or with current business models) I was almost always met with resistance — disapprobation, disapproval, and even disgust. Even folks who agree with me on some or all points want more. “What is so different about your dream, smart ass? Why is your bookstore going to suddenly be so hot? Doesn’t seem so different to me; what’s the point?”

This kind of push-back does nothing to dissuade me.

I don’t have a store yet, and perhaps the primary function of this series is not to address your concerns but to address mine. I’m ‘rethinking the box’; if in the end I realize this is a fool’s errand and talk myself out of opening up my own shop, well: that’s a legitimate outcome.

While I’m happy to present opinion veiled as ‘conclusions’ to supposed arguments, I’m also looking seriously at dollars and sense. In the end, I’ll either have to win the lottery or secure a loan — and the lottery ain’t looking so hot so far — so I look at profits, and potential profits, and business models, and a lot of things that have nothing to do with books or profits. I ask questions. —from the last column:

• What are you stocking, and how can you sell it?
• What are your other profit centers?
• (If you haven’t considered alternate profit centers, you should probably forget downtown and start shopping spaces in the warehouse district)
• What’s your niche? What are you offering that Wal-mart isn’t?
• ‘Books’ ain’t a niche: What are you offering that Borders, Books-a-Million, and Barnes & Noble aren’t?
• What can you offer that Amazon isn’t already stocking — shipping within 24 hours, tax free and without shipping charges for orders over 25 bucks?
• If you’re stocking comics, then why not open a comic shop? This is a proven model, the difference between a ‘bookstore’ and a ‘comic shop’ (or between a newsstand and a comic shop) is largely semantic, and a matter of public perception — that and a business relationship with Diamond Comic Distributors. The Local Comic Shop is a proven model. We don’t need to reinvent the wheel.

So, in order:

I’d like to stock full colour, illustrated volumes in a variety of subjects; on top of that, I plan to stock a full and I mean full selection of graphic novels.

I’d also like to sell you a cup of coffee, and a sandwich.

My ‘niche’ is [I hate the term but it fits] Coffee Table Books, and Comics.

I’ll beat BigBoxBooks by having complete series, all volumes, in store and ready for purchase (not just available to order: sitting on the shelf). Similarly, I’ll beat Amazon by having books on shelves, available for customers to browse, to discover without having to read about them on wiki or on blogs or whatever.

Nothing sells books like more books.

As for the Local Comic Shop: I can’t beat them on back issues, or on collectibles. I can’t steal away the Wednesday crowds, and I don’t want to try.

As for the Comic Shop cum Hobby Shop, or Games Shop, or the Purveyor of Trading Card Games, high-end figures, RPG suppliments of every stripe, toys, used books, sports cards, …pogs

yes, this is one path, but I feel it goes too far in the wrong direction. It’s the 90s fallacy of comics as collectible, the myth of the secondary market. If that is your assumption, then any other sort of collectible or trend or fad seems like a likely and complementary product line to carry. As I’ve stated before: this is a legitate business model — for E-bay.

Let’s say that instead of the “comics” of the past few decades, your background was books. You might realize that Comics are, in fact, books — particularly the collected editions in either hardcover or fat paperbacks — but even the 32 page standard model with staples in the spine has a lot more in common with vellum and papyrus than with card stock, foil, and holograms. Think back centuries, not a scant few years, or decades.

It’s such a small thing: this mindset of comics vs books. (And I might need two whole future columns to finally untangle the two.) A number of quality comic shops agree with me (in this small way) and depend on graphic novel collected editions for a goodly chunk of their sales, as opposed to the periodical comics.

Not that I’d abandon floppies; I’m just advocating a different stocking strategy. So I guess this is where we start:

Since this is a thought piece and I don’t have the limitations of an actual store (only so much room available once you commit to a lease) I can indulge in the luxury of hypothetical shelves in a limitless space and look at a sort of ‘ideal’ store with no other basis than what I’d like to stock.

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So:

[graphic novels will be listed last]

Art Technique:
(how to draw and the like)

These tend to be thinner (1/3 to 1/2 inch) and paperback, and while the ‘how to draw manga/comics’ line seems most likely, and would be included, I’d rather stock drawing anatomy books, pose reference books, classics like Jack Hamm’s Drawing the Head and Figure, or the Famous Artist School series. Cookie-cutter books from how-to-draw-manga or fantasy-art lines would surely comprise a chunk, (and actually, the “How to Draw Manga” series from Graphic-Sha/Japanime is pretty good, with some exceptions) but our goal is to stock shelves, not pass judgement.

500 titles at $20 avg per title = $10,000 of stock. sales of 1/2 volume per annum = contribution to sales of $5000.

—

Art Surveys and Collections:

From Art Nouveau to Street Graffiti, there is a world of art that needs documentation that will be of interest to both the comic artist aspirant and the general public

500 titles at $40 per = $20,000 of stock. 1/2 vol per annum = contrib. of $10,000.

I’d be willing to stretch that to 1000 titles, but I’m not sure 1000 suitable titles are out there.

—

Architecture:

One of my many majors in college was Architecture; some of my most prized volumes, to this day, are the books of Ching (Form, Space, & Order, A Global History of Architecture, Building Construction Illustrated)

Past that (though I’d love to read Scott McCloud’s yet-to-be-written review of the works of Francis Ching — can I mail you the books, Scott?) there is literally a whole world of architecture that I should be stocking.

500 titles at $40 per, etc. etc. for the same $10,000 in annual sales.

—

Artists:

Significant books about the works of significant artists.

1000 books. Yes, that’s a lot. That’s more than I think any current store (outside of New York) has on their shelves. Still and all; I’d love to have a category like this in my store. And 1000 books might fit rather comfortably on 5 [tall] bookcases.

1000 titles at $40 per, 1/2 vol per annum = $20,000 in annual sales

—

Graphic Design:

Color Theory, typefaces, layout — hell, let’s add in a few titles about package design, sculpture, and art business. Why not? It’s my final art category, so we’ll make it a catch-all:

250 titles at $30 per, 1/2 vol per annum = $3750 in yearly sales.

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Travel:

with the assumption of unlimited space — and the need to pay the rent — I fall back almost immediately to travel ‘coffee table books’ as an obvious add-on to my Illustrated Empire: 50 states, 50 large US cites, another 100 international metropolises, 100 countries and another 200 provinces & regions of note:

Just one book for each already scores another 500 titles. $40 per and a turn of .5 nets another $10,000 in sales.

If the business is worth pursuing, I could see devoting double the space — particularly if the turn rate is much closer to (or exceeds) one.

—

Fashion:

Not just cosplay (though the cosplay books are out there) but there might be another couple hundred books worth stocking. Say 250 vols @ $30 per, at 1/2 vol per annum just $3750 in annual sales but worth it for the outreach to this side of the fanbase.

—

Photography:

Not just the work of LaChapelle and Newton — or going old school, Adams and Daguerre — there is something to be said for visual work in the most ‘faithful’ of visual media, and photo essay books [at least the books with nudes in them] are extremely popular in my bookstore. I might find room for 250 volumes, at $40 each, and a turn rate of .5, for a contribution of $5000 to annual sales.

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Periodicals (non-‘comic’)

From Wired to Shonen Jump, from Otaku USA to Yen+, from Wizard (so long as they still publish) to Playstation the Magazine, there are a number of periodicals that are worth stocking that have nothing to do with DC and Marvel.

I can find room for 100 of these titles in my store, I’m sure. It’d be a magazine rack about 12 feet long, with nine shelves. No matter how many of each title I stock, assuming I could sell just one of each every month, at $4 per these shelves would generate $4800 in sales. Obviously, we’d be looking to sell more than one copy of SJ and ¥+ each month.

—

Periodicals (comics)

I’d be tempted to just match the magazines, but let’s say we double them: 200 titles at $3 at one copy (average, per title stocked) per month = $7200 a year, gross.

That’s as much gray-matter as I feel like spending on the floppies, actually. I’m sure I could find 50 titles a week in Previews; I don’t know that it matters which 50 I’d pick. One presents the comics to the customer base; either customers request something else (which will change the order next month) or they buy what you’ve got. There’s a learning curve out there and I hope I have enough cash reserves (or other sales) that I can afford to teach myself this business.

But as stated, it’s not about chasing or appeasing the Wednesday crowd; there’s the LCS for that, after all. Just a good mix of generally well-known subjects and perenials (Simpsons, Archie, Spider-Man, Batman, + whatever Hollywood is making a movie of) and I know this is the cretin’s path, devoid of any love for the medium and strictly mercenary, asking first ‘what sells’ and screwing the rest.

But in my mind, the love and dedication to the artwork are what the collected trades (and trade paperback originals) are for. I’m not going to save the industry with floppies.

In a bookstore of the size imagined to date: 24 feet of floor space for a couple hundred comics — I’d plan to set aside 10 times that for seating and tables; so I’m sure we can spare a pretty large corner for a comics rack. It may be a loss. But that’s Fine. Newspapers are also a loss-leader; you don’t stop selling newspapers just because you can’t make money on them.

[well… we haven’t stopped selling them yet]

Part of the stocking strategy is the Face you present to the Public, and for a ‘graphic novel bookstore’ some portion of the public will expect the monthlies — they like to see them, even if they’re buying the trades.

For the current math problem, I’ll assume one sale a month on each of 200 comics titles (or 0 sales of everything else but 200 sales of an Obama cover; whichever, whatever) — so, a contribution of $7200 a year from ‘comic books’.

—

Graphic Novels:

And here we go.

This is what I mean by a graphic novel bookstore:

3 copies each of at least 20,000 graphic novels. Are there 20,000 graphic novels? Actually, I hope there are 30k; if not now, than soon. Amazon lists 100,000, but so many of those are false hits and errors it gives me a headache—on a weekly basis—when I look at Amazon and try to compile the aggregate sales rankings.

A lot of these you stock just to have a complete run of a series, or a complete catalogue of a particular publisher. Nothing wrong with that, and the investment is hardly wasted: nothing sells books like more books.

60,000 volumes at a turn rate of .25 at an average price of $10 = $150,000 in annual sales.

I’m betting the actual turn rate (and $ value) (and stock count, eventually) will be much higher. But for tonight we’ll consider this lo-ball estimate: sales of one book in four, an avg. price of a scant $10, multiple volumes stocked of a backlist of only 20,000 titles.

Using the same sort of estimates from the last post (a 50-50 mix of manga and slimmer, conventional GNs) and running things through an abacus, we can assume 120 or so bookcases of graphic novels — actually, not that much more than the 96 bookcases from the imaginary bookstore I’d previously put forth. —that’s before the other book lines, though.

##

Anyway…

Pre-coffee income estimates:

Non-comic periodicals: $4800, 2%
Comic periodicals: $7200, 3%
Graphic Novels: $150,000, 65%
Other trade books: $67,500, 29%

Brian Hibbs (and I’m not picking on Brian by any means, he’s just the guy who dares to engage me on the topic, arguing from his base while I attempt to defend from mine — and so, we end up having this conversation) asks one obvious question, with a few obvious follow-ups:

But can you give a rough outline of how you see revenue breaking down?

I mean like 30% cafe, 50% GNs, 20% books-that-relate, or something different?

Maybe more than anything in this long post THIS is the question I’d like to see you tackle in a full post.

Not quite there yet: I’ve outlined a partial breakdown, of the books. Let’s look at the coffee

I can’t tell you what my company earns on coffee, per bookstore — as I’m still employed there and I haven’t won the lottery yet — so I have to go the long way ‘round to independently ‘discover’ and verify the numbers:

A cursory look at Starbucks Annual Reports shows that 85% of net income comes from approximately 10,000 company owned stores, said revenue generating net earnings of $673MM in a good year (2007) and $315MM in a bad year (2008) — and they had more stores in 2008 than in ’07, but 10,000 is such a nice round number we’ll keep it for this bar-napkin calculation —

In very lean times, and on average, a single Starbucks can be counted on for $31,500 in profit. My quick-and-dirty analysis based on SBUX annual reports shows revenues of $88,400 per store (so the 31.5K profit is at a margin of 35%) from operations — and this is at the biggest coffee house out there.

The fact to bring home is that a Starbucks-like operation generates $80K gross off of a 600sq.ft. footprint.

I can’t match Starbucks. I have dreams (who knows how a Tim Horton’s would perform?) but $20,000 annual gross off of a cafe operation is $20K you didn’t bank on yet.

Adding that $20K into the mix, the percentages fall out this way:

Magazines (comics and otherwise): 5%
Graphic Novels: 60%
Other trade books: 27%
Cafe: 8%

That’s $20K annual gross from coffee. $55 bucks a day: only 20 cups of coffee. No cake, no sandwiches, no bottled water, no sodas, no flavoured shots or faux-italianate names, and just 3 or 4 gallons of coffee. The Coffee & Cafe business is different; different enough that it can be run on it’s own and will provide plenty of headaches. The only reason to attempt it in conjunction with a bookstore is that the two business are complementary: if you have decent chairs and shelves full of books, people will hang out all day drinking coffee, maybe even buying lunch. If you have coffee, people will be predisposed to spending all day reading books.

IF you can make the cafe work for you, how much effort will it be to go from 55 dollars a day to $100, or $200?

$200 a day in coffee and cake. It might be a tough mark to reach, since you don’t know coffee [yet] and didn’t spend 6 months finding the best location for a coffee shop (let alone a coffee shop and bookstore) before signing a lease — which is why we’ll have that column about retail and real estate sooner rather than later; what you can ‘afford’ takes on many different meanings — but even a small bookshop on a quiet town square might average $100 of coffee et al. each day. It’d have to be the county seat, and that town square might have to include both City Hall and the county courthouse… but maybe you can see the advantages to a coffee add-on business even in something-less-that-urban-or-suburban markets.

I like that $200 daily target. I like it as the lower mark to hit, as well. (there are economies of scale to consider — and investments in espresso machines and the like) and I’ll just point out here that $75,000 is nothing compared to reported sales at Starbucks outlets (in 2006, mind you, but good times will return) of One Million Dollars. Per Storefront. Each Year. I’ll be more than happy with an eighth of that, or a twelfth, or as much as I can claw my way up to.

With estimates of Book sales at $229,500 and cafe sales of $75,000, the percentages fall out this way:

Magazines (comics & otherwise) 4% [300 monthly titles]
Graphic Novels 50% [60,000 volumes, 20,000 titles, $150,000 in projected sales]
Other trade books 22% [3750 volumes, apparently (by the estimates above) but at higher price points; $67,500 in projected sales]
Coffee et al. 24% [projected sales of $75,000]

Reality check:

I’ve outlined $130,000 in non-comics book stock and $600,000 to $1.2 Million in graphic novels, and we haven’t even paid for fixtures, comfy chairs, and the fancy cafe equipment yet. Even with deep discounts provided by buying inventory on a non-returnable basis — This is a big business for one half-drunk, half-delusional guy to tackle on his own.

There’s a stupid quote: “Shoot for the moon and if you miss you will still be among the stars.” [Les Brown] — Knowing what I do about the space program, I might paraphase that as “shoot for the moon and maybe you’ll end up with the patent to Velcro™” but it’s still about impossible goals and big dreams.

And I can put my job in [minor] jeopardy by pointing out that the newsstand at most BigBoxBooks might actually account for [if I had to make a guess] 8% of the business — but we wouldn’t be stocking the same kind of selection at a comic-book/graphic-novel/non-prose bookstore — and

ballpark average, completely off the top of my head, no prior knowledge about the business assumed or implied

A single outlet of BigBoxBooks will gross somewhere between 2 and 10 million each year — and put the average per box a bit lower, actually, at 4 or 5 million.

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Yes, there are bookstores clearing multiple millions of dollars each year. Yes, these bookstores are, more than likely, already in your neighborhood. We can’t compete toe-to-toe, but in our niche we can make a fight of it. I’m assuming sales for my hypothetical store of only a third of a million.

Actually, I may not be aiming high enough.