Rocket Bomber - retail

Bookselling: Not Dead Yet.

filed under , 12 July 2013, 18:31 by

[feeling better] [‘tis only a scratch]

Books are a 27 Billion Dollar business.

That would be a U.S., 2012 number; and even after we exclude the massive K-12 & Collegiate text book business, BookStats calculates the entire U.S. trade book industry (i.e. what you’re buying) is still $15 Billion, up 6.9 percent from 2011. [BookStats estimate for 2012 quoted here]

In parallel, the US Census Bureau reported that Bookstore Retail for 2012 was $13.4B of that total. Obviously there are differences between the two numbers — total Book Retail ≠ Publisher Revenue, not least because there are multiple sales channels, all the annoying non-book product lines invading most bookstores, and of course the fact that publishers sell to retailers wholesale at a discount. These are the numbers, though — and I’ll remind you the Census retail number is for *stores* and does not include online sales.

For comparison:

  • 2012 U.S./Canada Box Office was $10.8 Billion, up 6% compared to $10.2 billion in 2011 [Source: MPAA, pdf]
  • 2012 Consumer Spending on Home Entertainment (DVDs, Blu-rays, and Video On Demand) was $18 Billion [Source: Digital Entertainment Group, pdf]
  • 2012 Television Production (television programming only, excluding broadcast and cable networks, and Movie production) was a $36B business [source: IBISWorld]
  • And lastly: In 2012, the “traditional video game market” (excluding mobile) was $58 Billion [Source: Reuters]
    (also, HA! ‘traditional’ video games! next we’ll be hearing about “artisanal locally-sourced small-batch” video games)

Of course, it is easy to conflate the manufacturing, distribution, and ‘retail’ segments in any content business — the dollars spent in aggregate are no guarantee for anyone of future business, or proof of any particular business model. As much as some people may miss the old Tower Records storefronts (“Tower Records” still exists as a bad website, and as a licensed brand outside the US) the old record store model was not sustainable in a new world of MP3s and streaming digital.

[I might argue that point… but that’d be a different essay]

Anyway, the point we’re starting with is that Billions are made in the manufacture and sales of books — and while $10 Billion can be tucked into Amazon’s revenues and all but disappear, Books Are Not Amazon. Or Dead… Yet… or ever… I hope.


Since at least 1744, there have always been two parallel tracks for book sales: the retail bookseller, and the mail order catalog. If it is not immediately obvious, Amazon is in fact a mail order business, juiced and enabled by the internet but still a very different shopping experience from storefront retail.

Mail order got a big boost in the 1880s when Sears, Roebuck, & Co. leveraged the network [a rail network] to speed up both ordering and fulfillment by an order of magnitude. Amazon is a big damn company, books are a minor sideline these days — but that fraction of Amazon that sells stuff is the heir of Sears & Roebuck, an obvious evolution and not something that is new or revolutionary.

Books by mail became a thing (a massive, popular thing) 70 years before Amazon with the Book of the Month Club: After a couple of false starts, the now-iconic Book of the Month Club was founded in 1926 and by the 40s was (arguably) the nation’s largest bookseller. [I don’t have 1940s book retail numbers in front of me at the moment, hence the qualifier, but in 1949 after a little over 20 years in business, the BotMC shipped it’s 100 Millionth book.]

This history of the Book of the Month Club is incomplete, especially as it seems to stop in 1994, but in addition to the 100-Million factoid above, there are some other great nuggets:

“Although BOMC’s membership continued to grow in the first half of the 1960s, the company’s sales began to stagnate as the impact of increased numbers of retail book stores — many of which sold bestsellers at discount prices — was felt. Another important factor was the rise of paperback books. The proliferation of book clubs and the resulting competition was yet another cause for the slump. Between 1962 and 1963, BOMC saw its sales slip from $19.8 million to $17.6 million. To compensate for the shrinking number of books purchased by members, the company spent more money on promotion to beef up membership.”

Widespread discounting of bestsellers, the popularity of a new format, and newly expanded competing sales channels led to flat growth of an established book seller? You don’t say.

“In the early 1980s the company determined that there was money to be made by publishing books on its own or in cooperation with publishers, rather than only buying the rights from publishers to sell BOMC editions of their books. In 1982 BOMC established its own original publishing division. Its first publishing projects were reprints of such classics as All the King’s Men by Robert Penn Warren (published by BOMC in 1982), William Shirer’s Berlin Diary (published in 1987), and the Revised English Bible (published in 1989). The publishing division then moved on to anthologies and multivolume sets.”

Moving beyond book sales and into publishing? Rescuing forgotten titles and publishing the classics? Why does that sound familiar?

The New York Times reporting in 2001:
“Since the 1980’s, however, the club system has been under duress. National bookstore chains made books more widely available, alleviating the need for mail-order services. Then online retailers began competing to sell books even to the truly isolated or lazy. As a handful of perennial blockbuster authors came to dominate best-seller lists, the club’s management began paying multimillion-dollar contracts for the rights to several of an author’s future books at once.

“Even the idea of a single ‘book of the month’ was becoming obsolete. Computerized databases enabled the club’s managers to tailor the ‘main selection’ each month to the previous buying habits of individual members. A member who responded well to nonfiction would see a steady diet of it as the club’s main selection, while a neighbor might receive only novels.”[/blockquote]

“The Book-of-the-Month Club Tries to Be More Of-the-Moment; New Judges and Niche Marketing Are Part of a Comeback Plan” : David D. Kirkpatrick, NYT, 28 June 2001

Goodness, using computerized inventory and sales history data to individually tailor recommendations.

“There is one kind of book club which could have a bright future: specialist clubs that harness the internet. Two successful new clubs in recent years have been Bertelsmann’s Black Expressions in America, aimed at black women, and Mosaico, a Spanish-language club. For specialist titles, bookstores cannot compete for range with a book club, and the internet lacks the personal touch of a trusted team of editors.”
“Book clubs: The final chapter? The future looks bleak for an archaic corner of old media” : The Economist, 15 May 2008

If someone at The Book of the Month Club had thought to engage their readers/customers on a Goodreads level, the past two decades in book retail would have unfolded very differently. If Goodreads had bought the BotMC in 2008, instead of being acquired themselves by Amazon… well, what-if games are hardly productive and do little to change conditions on the ground.

However: History (in retail or otherwise) is hardly as inevitable as it seems, and the future is more fluid than most realize.


The past 20 years of Books is not the story of The Big Box Bookstore, nor was it all about The Rise of Online Empires.

The success of both the nationwide chains and of Amazon are both aspects of a single phenomenon: The past 20 years of bookselling are best seen as a change in customer demand for books.

There has been a lot of noise and bluster about showrooming, the book discovery “problem”, the merits of book recommendation algorithms, and the shrinking shelfspace allotted to books in stores. In my opinion, way too many of these opinion pieces romanticize bookstores and don’t take into account how everything has changed since 1993. You know, 1993? World Wide Web, you might have heard of it?

Before the web — and web browsers, the now-invisible but indispensable invention — There was no “online”. At least not in the ways we casually assume today…

The conversation began with pulps in the 30s and Zines in the 60s. As in so many other aspects of our modern life, technology took these modest print efforts and dialed it up to 11: more reviews, more posted reading lists, more fan-to-fan conversation, discussion, flame wars, and FAQs: more fan nexus — hell, being able to even find other fans who like what you do — this “book discovery” that was about Individual Enthusiasm and Consistent Effort and Engagement — that had nothing to do with Amazon and everything to do with dial-up BBS, CompuServe forums, Usenet groups, Listserv mailing lists, and all the other proto-Reddits that your Grandma used a long long time before you, youngling, fired up your first Game Boy for the pokemons.

And yes, while my own experience is heavily sci-fi flavoured, the genres/pulps are the industry leaders in publishing: first to paperback, first to e-, first to a self-sustaining internet community telling stories entirely divorced from the publishing treadmill. Evolution, growth, and development take place on the margins, and the fringe.

In 20 years, discovery hasn’t changed: There is nothing Amazon’s user reviews add to the process that wasn’t already there in the letters column of a fan zine. It is all about the dialog, even when (these days) the dialog is with a machine. “What’s Hot, What’s New?”

Anatomy of Book Discovery: A Case Study : Patrick Brown, posted to Goodreads, 14 June 2012

Book Discovery: Give Me Blind Dates With Books Suw Charman-Anderson, Forbes, 28 March 2013. check the update at the bottom of that article; it led directly to the new website

Why online book discovery is broken (and how to fix it) : Laura Hazard Owen, PaidContent, 17 January 2013

The discovery process is the same today as it might have been in 1989. What has changed is the volume of information available to readers. Once, you had the NYT Book Review, the New York Review of Books, a handful of others… now a world of reviews are a Google search away.

The increase in information about books led to a subsequent demand for books: You have no idea how much you want something if haven’t heard of it yet. There has also been an explosion of “broadcast channels” discussing and recommending books; the biggest of these was Oprah (is Oprah? How’s her book club v2.0 working out) but what other individual sites lack in stature, they more than make up for in numbers: 1000s of people with blogs (or tumblrs, or pinterest boards) (or even maybe facebook – I’m not on facebook so I don’t know about book culture there) — tens of thousands of mini-channels, and at least a dozen ‘major’ sites, all discussing books.

The change in customer demand is often referred to today as “The Long Tail”, a term coined (and/or repurposed to describe this phenomenon) by Chris Anderson — don’t get too bogged down in the Wikipedia entry on this one: that was hijacked by some math nerds a few years back — the basics of the long tail is that when customers can find obscure books they are also more likely to buy them. The immediate corollary is that someone, somewhere will buy even the most obscure book but only if they know about it — undiscovered is the same, functionally, as out of print.

Many commentators describe The Long Tail as uniquely an internet phenomenon, something that only came about with the rise of internet retailers. I politely disagree, and if you would care to know why: I invite you to get a job at a big box bookstore. Come work for me for a month. Answer the phones. Deal with the shopping public.

The change in customer demand does not begin and end with a web site and is not limited to online sales. When someone wants a book, they will seek it out from any retailer, and their buying decision is affected not by the discovery process but rather the same mix of price and convenience that backs all of their sales decisions. Say you just heard about the Cotton Malone thriller series from author Steve Berry – you may not have heard of Steve before (he’s a NYT bestselling author now, but also a bit of a b-lister) (sorry, Steve) — but via some mechanism on the internet, like a by-the-way-comment in a tangentially related blog post you suddenly are aware of The Templar Legacy (isbn 9780345476159) and you think, “Hey, maybe I should read that.”

So you pick up the phone, call your local bookstore – they have it, and you buy it over the weekend. You’re out running errands anyway on Saturday, stopping by the bookstore is easy. Convenience is a matter of personal perspective: maybe ordering online is easier, But There Is At Least One Bookstore Chain With 700+ Stores (still out there in July of 2013, even, not dead yet) and for many people it’s easier to buy in stores.

This example is not only hypothetical, but even if I’m right, the story is anecdotal. Online retail is obviously taking over everything. It’s not like I can point to 13 Billion Dollars in store-front retail book sales as reported by the US Census Bureau or 4.5 Billion in retail sales from a major chain — in an economy that may be recovering but still sucks.

…Nobody is going to a book store anymore, obviously.

When we talk about bookselling, we throw around figures in the billions – in the arena of business news, this isn’t enough to register with observers.

We can talk about monthly sales in the hundreds of millions. I can point out that with reported annual book store sales of $13 Billion, that means bookstores bank more than one billion dollars every month — on average, anyway ;) — and I’ll remind you a third time that the US Census reporting on book stores explicitly excludes online sales channels.

An industry that is dying, obviously.


For those who might argue otherwise: That bookselling is in decline, that retail storefronts can in no way compete with the efficiencies of online retailers, or even that no one wants a bookstore any more. Well, that is another topic.

[update 14 July 2013, 5:00pm EST : some sentences were added to clarify my thoughts on how the explosion of information on the internet is what expanded customer demand.]

Let's Talk About The Business, Then.

filed under , 8 May 2013, 22:16 by

Re: Amazon and Monopoly: *I* certainly see this as a distinct possibility, but then I’m just a bookseller and not a fancy Anti-Trust Lawyer working for the Justice Department: apparently they’re cool with how things are going down.

“Number one: Amazon is, by far, the most book-industry-focused company that is actually active in endeavors much larger than the book business. Barnes & Noble and Ingram are just as focused, but they really don’t go beyond the book business. Google and Apple are, like Amazon, leveraging their book activities into other areas and vice-versa, but they have nowhere near the presence in the book business that Amazon does. (Kobo, which is focused on the book business but has just been bought by a much larger Internet retailer, is still a bit of a wild card in this regard.)”

Competing with Amazon is not an easy thing to do : Posted by Mike Shatzkin, 6 December 2011, The Shatzkin Files []

“Amazon’s acquisition of Goodreads is a textbook example of how modern Internet monopolies can be built,” said Scott Turow, Authors Guild president. “The key is to eliminate or absorb competitors before they pose a serious threat. With its 16 million subscribers, Goodreads could easily have become a competing on-line bookseller, or played a role in directing buyers to a site other than Amazon. Instead, Amazon has scuttled that potential and also squelched what was fast becoming the go-to venue for on-line reviews, attracting far more attention than Amazon for those seeking independent assessment and discussion of books. As those in advertising have long known, the key to driving sales is controlling information.”

from an Author’s Guild Editorial : 29 March 2013,

The situation wasn’t always this bleak though – in fact it crept up on us slowly. Fair warning: those of you who love bookstores may get a little depressed reading this.


“In 1994 Americans bought $19 billion worth of books. Barnes & Noble and the Borders Group had by then captured a quarter of the market, with independent stores struggling to make up just over another fifth and a skein of book clubs, supermarkets and other outlets accounting for the rest. That same year, 513 million individual books were sold, and seventeen bestsellers each sold more than 1 million copies. Bezos knew that two national distributors, Ingram Book Group and Baker & Taylor, had warehouses holding about 400,000 titles and in the late 1980s had begun converting their inventory list from microfiche to a digital format accessible by computer.”

The Amazon Empire: How the Online Colossus Snuffed Out Competitors and Their Next Battle for Publishing : Steve Wasserman, 3 June 2012, The Nation article reposted at

The Wasserman piece linked above is a long read, but a good one. Please note that in 1994, if the figures/fractions quoted above are correct, then in the year Amazon launched 55% of the total book market was selling outside of bookstores! – we have short memories, it seems, and a long list of assumptions to work through when it comes to book retail. If Amazon were merely displacing book-of-the-month clubs and hoovering up the book retail that (in the 1980s) was happening in grocery stores and newsstands (newsstands! remember those?) then their stratospheric growth has a ready explanation that doesn’t involve the death of book stores.

In 1994 the big-box-bookstores were just getting started: Borders & Waldenbooks were still owned by K-Mart (yes) and hadn’t been spun-off yet, that division consisted of 1,102 mall stores and just 75 Big Boxes; B&N had 268 stores alongside 698 (B. Dalton) mall locations.

(Remember mall bookstores? I used to buy books there every weekend. The local mall had two bookstores in it. Good times, good times.)

“Back in 1994, Jeff Bezos was a young senior vice president on the rise at a thriving Wall Street hedge fund. But when the explosive growth of the World Wide Web caught his eye, he saw an even bigger opportunity: online commerce. Two years later Bezos, CEO of the Internet bookstore, is one of a crew of young entrepreneurs using cyberspace technology to steal real-world customers from traditional businesses with strong consumer and industrial franchises.”

The Next Big Thing: A Bookstore? is leading a wave of digital shops out to invade established industries. : Michael H. Martin, 9 December 1996, Fortune Magazine archived at

“There are successful people who are just lucky in their investments and successful people who would have done well no matter what. How do you distinguish the lucky investors from the Warren Buffetts and the David Shaws? It’s mathematically impossible to tell the two apart. You have to do it by understanding the people and their strategies and blah, blah, blah. But the longer the period of time they are successful, the easier it is to differentiate: The number of people who can be lucky for a year is large; the number of people who can be lucky for five years is smaller, but it’s still pretty big. The number of people who can be lucky for 30 years, like Warren Buffett, is really small.”

How much of a role has luck played in Amazon’s trajectory?

“Huge. Huge. I believe that all startup companies need a huge amount of luck.”

Bezos himself, in an interview with Wired editors, “We interrupt this issue to remind you that the Internet is big. Catching up with Jeff Bezos on, Oprah, and why it’s still Day One…” : Wired Magazine, July 2000 [many thanks to Conde Nast and the fine folks at for having a searchable archive.]

What did the bookstore ecosystem look like by 1998?

Borders, 1998 [source]
“At March 21, 1999, the Company operated 256 superstores under the Borders name, including one in Singapore, one in Australia, and three in the United Kingdom, 885 mall-based and other bookstores primarily under the Waldenbooks name and 26 bookstores under the Books etc. name in the United Kingdom. The Company also operates an Internet commerce site under the name Borders is one of the nation’s largest specialty coffee retailers with cafe operations in nearly all of its superstores. The Company had consolidated net sales of approximately $2.6 billion in 1998 and $2.3 billion in 1997.”

Borders had yet to cede its website operations to Amazon (tragic, that, in hindsight) and was busy expanding internationally. Note that the mall locations are already starting to close (885, down from 1,102 above)

B&N, 1998 [source, pdf]
“Barnes & Noble, Inc. (Barnes & Noble or the Company), the world’s largest bookseller(*), as of January 30, 1999 operated 1,009 bookstores. Of these 1,009 stores, 520 operate under the Barnes & Noble Booksellers, Bookstop and Bookstar trade names, (50 of which were opened in fiscal 1998), and 489 operate under the B. Dalton Booksellers, Doubleday Book Shops and Scribner’s Bookstore trade names. Through its fifty percent interest in llc (, the Company is also the world’s largest bookseller on the World Wide Web ( and the exclusive bookseller on America Online (keyword: bn). Barnes & Noble publishes books under its own imprint for exclusive sale through its retail stores, mail-order catalogs and During fiscal 1998, the Company’s share of the consumer book market was approximately 15%. … The Company’s sales increased 7.5% during fiscal 1998 to $3.006 billion from $2.797 billion during fiscal 1997. The Company’s retail business reported an operating profit of $188.6 million, up 16.0% from last year’s operating profit of $162.7 million.”

that asterisk is “* Based upon information reported in trade publications and public filings.” The claim to the title was a “thing” at the time. We can also see a different mix than Borders: More big boxes and a lot more brands (Bookstop, Bookstar, Doubleday, Scribner’s) showing how B&N was growing via acquisitions, not just new store openings.

Amazon, 1998 [source, pdf]
$609 Million in sales in 1998.

$609 Million, Compared to the $2.6 Billion for Borders and $3 Billion scored by B&N. Oh, and that was up from $147 Million in 1997 (and just $15 million in 1996).

“I have seen the future of, and it looks like Wal-Mart. This may come as a surprise to those who are accustomed to thinking of as a bookstore. After all, books are what the company is known for, and promotes itself as ‘Earth’s biggest bookstore.’ But books are just the tip of the iceberg. It’s widely known that founder and CEO Jeff Bezos, when he was starting out, made a list of products that would be well-suited to Web sales. Books topped that list — but they’re clearly not the only things on it. In fact,’s recent acquisition of Junglee Corp. (announced as this column went to press) confirms the bookseller’s intention of getting into a broader retail market: Junglee makes software agents that facilitate online shopping. Why do you think Bezos chose a generic name like ‘Amazon’ anyhow? It’s sheer size that Bezos cares about, not just books.”

No mere bookstore, wants to be an online retail giant : Dylan Tweney, 10 August 1998, Net Prophet []

Also in 1998: Apple’s big product was the iMac (the iPod didn’t follow until 2001). Google got started as a company in September of 1998, following the domain name registration of in 1997, and its origins as a research project of a couple of grad students in 1996.


Lawsuits and acquisitions aren’t new:

“In what one legal expert characterized as a victory for and, the online retailers have settled their legal dispute with Wal-Mart without having to abide by any court injunctions. The retail giant had sued the two online ventures, accusing them of recruiting Wal-Mart execs in order to steal trade secrets.”, Wal-Mart settle lawsuit : Troy Wolverton, 5 April 1999, c|net News

“The move also suggests that has decided against acquiring Baker & Taylor of Charlotte, N.C., the No. 2 book distributor. Interest in Baker & Taylor rose after Amazon’s main competitor in on-line book sales, Barnes & Noble, said in November that it would buy the biggest book distributor, Ingram Book Group of Nashville, for $600 million.” Is Adding A Warehouse : David Cay Johnston, 8 January 1999, The New York Times

note: the B&N buyout of Ingram in 1999 obviously didn’t go through. This is a reminder, though, of what-might-have-been. more background:

“For the past ten years, Baker & Taylor in relation to Ingram has looked remarkably similar to Borders in relation to Barnes & Noble. Ingram and B&N are family-owned companies (although B&N has the very significant complication of being publicly traded which, with Ron Burkle as a publicly disaffected shareholder, has been well-reported lately) while B&T and Borders are highly leveraged and controlled by private equity. Ingram and B&N with their long-view management styles have made significant infrastructure investments that the always-looking-for-an-exit B&T and Borders ownerships haven’t matched”

Baker & Taylor has the next big thing in ebooks. Really! : Mike Shatzkin on December 8, 2009, The Shatzkin Files []

“Ingram, the book distributor that Barnes & Noble acquired last week, supplies, a competing online bookseller, with nearly 60 percent of its books, a regulatory filing disclosed today.

“Barnes & Noble and Ingram have said that the merger will not affect Ingram’s relationships with its customers, including Amazon. But in Amazon’s quarterly 10-Q filing with the Securities and Exchange Commission, the company notes that it ‘does not have long-term contracts or arrangements with most of its vendors guaranteeing the availability of merchandise,’ and that ‘there can be no assurance that the company’s current vendors will continue to sell merchandise to the company on current terms, or that the company will be able to establish new or extend current vendor relationships.’”
Ingram dominates Amazon supply : Jeff Pelline, 13 November 1998, c|net News

Let’s go through that again: In November of 1998, B&N had their own website, 15% of the book market, was looking to buy Ingram — the company supplying Amazon with more than half of their inventory at that point — and was being run by a driven, ruthless bastard whose modus operandi was buying up companies to either consolidate operations or just get bigger. Can I remind you that at that point (1999) Riggio had also bought Babbages, Software Etc., and GameStop and had built up this sideline into a chain of 500+ stores?

This raised all-kinds of antitrust flags, apparently, so it’s no wonder the B&N/Ingram merger didn’t go through. I think when the deal went sour, Riggio took a step back to reappraise strategy. GameStop was spun-off into its own company. B&N built a massive warehouse of their own, and took up in-house distribution and logistics like a new religion. This quiet and behind-the-scenes stuff isn’t as flashy as mergers or new store openings, but the efficiences B&N built over the 2000s are part of the reason they’re still open today, after 4 years of recession and shrinking consumer demand.

Amazon borrowed a billion dollars (no exaggeration: they were carrying $1.4 Billion in debt by 1999) to build up the infrastructure they needed following this close call — 15 years ago the market changed, more distribution and warehousing was brought in-house and verticals were built. You might also be forgiven if you pointed to 1999 as the year Amazon changed strategic focus: from building a website and sales portal to building a business.

I find it amazing that in 1999, the owner of a physical, brick-and-mortar bookstore chain was precluded from purchasing a book distributor (even when neither was the only player in their individual markets, and on the cusp of market changes already in motion and being trumpeted by both online-sales advocates and voices in the business press) — and the same sort of monopoly-building in 2012 is not just condoned by the state, but is being actively supported so long as some Justice Department lawyer can buy his ebooks for $9.99 instead of $14.

It is said Amazon has 30% of physical book sales and 60-70% of all e-book sales. 15 years ago, Barnes & Noble was blocked on anti-trust grounds when they had only 15% of the book market. I find this fascinating.


Ingram hasn’t been standing still:

“Ingram has long been thought of as the book industry’s quintessential middleman, distributing publishers’ books and other products to thousands of accounts. But over the past five to 10 years, the company has invested tens of millions of dollars to become what Skip Prichard, president and CEO of the Ingram Content Group, called the ‘centerspoke’ of an industry in transition. To meet its mission statement of ‘helping content reach its destination,’ Ingram’s strategy is to offer publishers whatever services they need to operate more efficiently.”

Not Your Father’s Ingram: The Ingram Content Group moves beyond traditional wholesaling : Jim Milliot, 27 September 2010, Publishers Weekly

[I still can’t help but daydream a little bit about the B&N-Ingram-hookup, what might have been. Damn.]

Ingram is probably the only major player who really could give Amazon a run for its money in the CreateSpace/Kindle Direct/alternative-and-self-publishing market — but Ingram isn’t pushing its luck or its advantage yet. In fact, it seems that Ingram is willing to work with established market players, quietly becoming everyone’s back end: “print shop to the world”, a corporate-scale Kinko’s.


“I wish we could keep bookstores for cultural reasons, but they are businesses after all. Even if Barnes & Noble (NYSE: BKS) stays in business, there is no guarantee that the physical stores will remain.”

Retailers: The Search to Buy, Not Buy From : Nihar Patel, 20 March 2013, Motley Fool

“This value—this unique something, that physical bookstores provide—may not be sufficient in itself to support a viable business model for more than a handful of a bricks-and-mortar business (as many people believe). But it may provide the key to a online retail experience–one that doesn’t compete with Amazon but provides a real alternative.”

The End of the Beginning of the Future of Bookstores : Peter Turner, 25 July 2012, Ampersand

So. Let’s talk about the business.


Rage Fuel:

“That’s because Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers. The shareholders put up the equity, and instead of owning a claim on a steady stream of fat profits, they get a claim on a mighty engine of consumer surplus. Amazon sells things to people at prices that seem impossible because it actually is impossible to make money that way.”

Amazon Profits Fall 45 Percent, Still the Most Amazing Company in the World : Matthew Yglesias, 29 January 2013, Slate MoneyBox


1. Borders.

Dear Motley Fool bloggers, other tech press, pundits, (and the occasional customer in my store),

Please stop throwing Borders in my face as “proof” that physical bookstores are already dead, and are just staggering around a bit (fatally wounded) before the Final Fall.

Do your research:

Borders Group was formed when K-Mart (yes, let me stress that again: K-Mart) bought the family-owned Borders chain and forcibly merged it with Waldenbooks, instituting an instant culture-clash between the two divisions that in many ways persisted right up until the end. The company most of us were familiar with as “Borders” was spun off in an IPO in 1995; the IPO netted $567 Million but K-Mart still booked a loss of $185 Million, “the difference between what it paid for and invested in the Borders chains and what it was getting for them” [NYT, 26 May 1995]. After a wobbly start, BGP went through 6 CEOs in 10 years, over-extended (including internationally) by taking on debt, and basically surfed the big-box wave instead of innovating or making smart decisions: Things were going fine as long as the retail business was growing, but Borders wasn’t in a position to survive the great recession, let alone compete after. Borders’ last-ditch “digital initiative” was an investment in an ongoing (Canadian) operation, Kobo: not an organically developed add-on for their business, and not ready to go head-to-head in an e-reader (let alone tablet) war.

Borders went down. It was a sort of close thing, there at the end, but without a deep-pocketed buyer or a concession from the publishers (who would’ve hardly been able to absorb it) Borders was doomed.

Borders is hardly proof that the bookstore business is doomed, though. Every business segment has businesses that are either run poorly, or (being generous) at least being run sub-optimally. And books are different: you can’t just hire a “retail” guy with experience in grocery stores and expect him to know anything about books. (I think it’s telling that the best qualified CEO Borders ever hired, Philip M. Pfeffer, former CEO of Random House and a former executive at Ingram, resigned after only 5 months. That was back in 1999.)

2. Amazon.

There is a long history of delivering books – specific titles requested and delivered on demand right to the customer. There was The Book of the Month Club [1926], B&N’s mail-order catalog [acquired in 1979 along with Marboro Books], and even Benjamin Franklin’s book catalog in 1744nothing new about ordering or delivering books.

And online shopping?
that’s almost quaint.

[hat tip to Laughing Squid for the video]

Amazon had three things going for it in the early days (four, if you count the drive and ambition of Bezos): Books already had a computerized database (since 1986 in fact), Books already had a nation-wide distribution network built to service bookstores (Ingram et al., op. cit.), and one of those book warehouses (one of the largest) was just six hours away in Oregon.

Amazon’s twist on book delivery is the cash conversion cycle: they sell you a book, then they buy it and ship it, then they charge your card, and only at some later date do they lazily get around to paying their source for the book.

[standard payment terms on books used to be 90 days – plenty of time to deliver book, claim payment, and then sit on that cash or park it in a short-term CD.]

Amazon didn’t even need a lot of inventory to launch (they used a garage) because of this neat trick — and of course I know they do things differently now, with distribution centers all over the place and same-day delivery in some markets (integrated verticals are more efficient, and cost effective) — but this is how they built an empire on nothing. Well, not nothing nothing, I mean: Bezos was a former investment banker (presumably not worrying about rent or groceries) and was able to tap his Dad for a quarter million. (well, that’s not quite true: $100,000 came from his dad, the other $145,000 came from his father’s trust fund — the more I dig into this the more it spikes my blood pressure)

So Amazon was a truly Great idea (though not 100% original) and had some really great implementation — but the ‘great idea’ wasn’t the website or the back-end software or servers, or even the product.

Amazon succeeded because of timing, luck, starting with “a” (a big deal in the pre-Google Yahoo Directory days), and most importantly: because of creative accounting. Amazon was not launched by a genius and engineeer who invented something amazing — Amazon was not a new iteration of an old service, computer-aided and internet-enabled, to add value to an older sales model — Amazon was not the obvious and organic outreach of a bookseller determined to reach all readers, no matter how isolated —

Amazon was the brainchild of a banker, and exists to make money. (Extra points go to Bezos for figuring out how to make money without returning any to his shareholders.)

3. Physical Bookstores.

Many point to the expense of maintaining a nation-wide chain of actual bookstores as the albatros hanging around Barnes & Noble’s neck — and to a lesser extent, also a handicap of all bookstores, but B&N as the market leader and biggest target gets most of the flack for this.

My personal experience is only as one physical location — a fair-sized bookstore at the center of a top 30 market — but only the one store: On a random Tuesday, we’ll have at least 20 customers in the store at all times, starting at 10am, averaging about 30 and peaking at 50-60 during the lunch and 5-6pm rushes. On a Tuesday. We’ll take between 20 and 60 phone calls an hour — these interactions are typically short, but there are times when all 4 phone lines are ringing at once. Oh, you might not have realized: we have 4 phone lines, and a daily call volume that averages around 500. Some of those calls are, “So where exactly are you located?” or “How late are you open?” but even those calls support eventual sales, and most phone calls are a customer looking for a particular book. They may even have found the book online – but they take the time to find our phone number and call us anyway. At any given time, we’ll have two to three hundred books on hold, waiting for customer pickup: some of these are special orders but about half are books that we already had on the shelf and pulled the same day.

A big box bookstore can gross between $2 and $20 Million a year, depending on location, size, and the overall economy. Some bookstores will close, but not all. At least one independent analyst points out that retail book sales (as reported by the US Census Bureau) peaked in 2005, three years before the peak in the number of big box bookstores in 2008 — and that the late 1990s and early aughts in fact represented a big-box-book-store-bubble. If there were only 500 B&N stores (as is perhaps projected) that puts us at 1998 levels, back when B&N was doing $3 Billion a year – $3 Billion that at that date did not include the college bookstore division or any of the Nook-stuff launched since.

Sounds good to me.

In fact: If I told you I had a startup that engaged at least 1000 users every day, that provided a free product but had a built in solution for add-on sales, that was easily scalable past my current single-site implementation, and that I was making $1,000,000 a year off of $5,000,000 in gross receipts, that might sound like decent business. If I told you the costs (physical plant, payroll, inventory) were both fixed and known, and out primary struggle was figuring out how to monetize all the traffic using our site for free, you might be forgiven for thinking I was talking about a web site.

20% is a decent margin, and close to retail average (Wal-Mart is at 22%, if I recall correctly). I can’t divulge acutal numbers; I might mention that I know at least one bookstore that does more than $5 Million a year, even in a recession. And I’m dead serious: we need to figure out how to “monetize our traffic” past selling them some coffee.

I have to employ multiple booksellers to work a collective 20 hours every night just to reshelve books, clean up after our beloved, much-valued patrons and reset the whole store to ‘normal’ — or at least normal enough to do business. That doesn’t include the amount I pay for janitorial services (horror stories about publicly accessable bathrooms is its own post) or the payroll we use to sort and shelve new product: it takes an-average-of-five booksellers working 4-hours-apiece every night just to *recover* the store.

Call this the “social cost” of running a bookstore. The social cost would also include – damaged product (the victims of both spilled coffee and free-range toddlers) – shop wear (books are physical objects subject to the Second Law of Thermodynamics) – outright theft (the bane of all physical retailers), and – being vulnerable to actual social interactions with customers, and having to become the de facto referee or cop for all the unanticipated interactions between customers

Payroll costs aside (I’d estimate this social cost at $90,000 per year, per store) there is also the question of customer experience: If you left early because a smelly homeless person was camped out in the sci-fi corner of your favorite bookstore, how will that affect your decision to return? Do you return?

All bookselling is local: in fact, it can be hyper-local. In the internet age, do you brave in-city traffic and spend a whole 20 minutes in your car to go to the bookstore, or do you just order online? I’ve been told over the phone that a customer “would never” drive to my store, even though the distance (in this case) was a quarter mile. If someone can solve the calculus—where your local bookstore need be no farther than your local Starbucks, and yet still stock everything—that person will make lots and lots of money.


4. Ebooks

First assertion – If digital-is-all, and cheaper besides, and kills all physical formats: why do people still go to concerts? Why do they buy vinyl?


so does the ‘physical’ version offer something not found in digital transcriptions? Please at least acknowledge the persistance of both concerts and vinyl in what is, in 2013, a completely digital music market in any argument you’re about to throw at me about e- vs. physical books.

Second assertion: ebooks are merely, merely, the New Pulp.

…and that’s fantastic — I’ll explain — but ebooks are not the death-knell of physical books nor the publishers who print them, nor of the bookstores who sell them.

“Paperbacks were and weren’t radical:

“Yes, they were cheaper. While initially introduced as value editions of the classics and bestsellers, soon the lower costs of manufacture induced some publishers to create new works (and whole genres) to take advantage of the format. Stories which might never have seen print due to either ‘lurid’ content or lack of a ‘literary’ appeal suddenly found a new home, and mountains of books were printed to feed the pulp market. Some of these were reprints of material previously available in fiction anthology magazines — a format that is, sadly, mostly extinct — the magazines fed a fan base that later bought the books, and the magazines were a crucible that forged not just the fans of the works but also their creators. Mystery, Romance, and Sci-fi all exist today as genres — popular genres that support their own hardcover releases — because of the decades of pulps… but that would be another essay.

“A paperback book has a floppy cover, but was still recognizable as a book. If one weren’t hung up on the literary ‘value’ and ‘merit’ of a Book-as-object, then the opportunity to buy one at a cheaper price because you want to, you know, enjoy it is a no-brainer. Here was the first movement toward books as popular entertainment, and also provided a way ‘in’, to merge centuries of Pop Culture Trash back into the literary tradition.

“And that was a good thing.

“Shakespeare was once pop entertainment for the masses — not a printed story but one meant to be performed before a crowd, with ribald (read: sexy & suggestive) jokes and bloodshed and body counts and important commentaries on class, authority, race, religion, and — if one can adjust slightly to the Elizabethan world view — also insightful looks into gender equity and relations.

“Nowadays it’s literature; back then it was equivalent to sweeps-week TV sensationalism.

“Later generations will cherry-pick the best of romance, mystery, and sci-fi and hold them up as Fine Literature — while either ignoring their base roots as pulp genres printed by the bushel to feed a near-insatiable market, or romanticizing their ‘common’ roots and attempting to make hay out of the fact that previous critics ignored or dismissed them.”

source: “Form, Content, Copies, Rights, and Plato” : Matt Blind, 17 November 2009, RocketBomber [heh.]

I wrote that in 2009, two years before 50 Shades of Grey — can I call them, or what? Also from 2009:

“The new digital methods and methodologies mean that anyone with a computer, printer, and appropriate software (the cost of core equipment and a nominal set-up fee) is now a ‘printer’ and publisher; in fact, one can publish direct to the web without dirtying a single thin slab of pressed wood pulp. The equivalent of the whole of Gutenberg’s shop will fit on my desk, and I can print copies of the bible faster.

“Where will the new ‘press’ take us?

“Ask me in 400 years.”

Let me describe one of the favorite volumes on my bookshelves: it’s a leather-bound, gilt-edge printing of all 5 Douglas Adams Hitchhiker’s Guide novels in a slightly oversize, all-in-one edition. It’s gorgeous and superfluous, and didn’t even exist until 1997. (a similar edition with only 4 novels was published in 1986.) Is this how I first encountered Douglas Adams? Hell, no: I read the first couple of books from the library, and eventually bought the set in paperback. After reading Hitchhiker’s Guide, I happened upon the Radio Scripts (in a bookstore, isbn 9780330419574) and bought and gobbled those up too. Only later did I find out about the TV show, and eventual movie, and after many years I was also able to listen to the original BBC broadcasts. Amazing, all of it. Do I need to own (or even read) the all-in-one edition, considering my exposure and familiarity with the original? Of course not.

In fact, the very existance of a leather-bound gilt-edged Hitchhiker’s ‘bible’ is part of the joke, and still makes me smile.

Fritz Leiber, Doc Smith, Philip José Farmer, Le Guin, Butler, Campbell, Wolfe, Delany, Asimov — for every author that gets a paperback reprint there are three hundred or more that were almost as good and their books will disappear sooner rather than later.

As an author you’ll get maybe two years after you publish (hardcover or paperback, doesn’t matter) and then you’re consigned to back shelves, dusty corners, and used book stores. If you aren’t putting out a new book every 9 months, you just go there faster — if you can’t keep up (or if you died for some inexcusable reason) then baring a lottery-winning-type “discovery” of your books: your whole back catalogue has probably already been pulped.

The time frame has contracted slightly over the past two decades — most authors were OK if they could manage a book every other year. That said:

The whole book business is and always has been ephemeral. Your eventual fate has always been Out-Of-Print and only your hard work (while you’re still alive) keeps you and your books from sliding into the dark depths of forgotten memory.

E-books are great — and have some built-in cost savings and are ready-built to take advantage of internet multipliers — but are still books, and will eventually suffer the same fate. Forgotten. Unsought for. The files exist, but the links and even the primary sources will succumb to bit rot and you will be just as bloody out-of-print at that point as everyone else: papyrus, parchment, vellum, rag paper, pulp paper, bits — hell, to date the most durable system is cuneifrom; write it out on clay tablets, kiln-fire them, and bury them in the desert.

The other most-durable method has been to gain fame and get everyone to repeat your words. Oddly, this is now frowned upon (“piracy”) so I, for one, am moving out west and buying a kiln.

What do millenia-old clay tablets have to do with e-books and bookstores? Everything.

There have always been three impulses of the author:

first, to be heard (publish!, find and engage the reader)
second, to be remembered (word of mouth, engage more readers, build a readership)
third, get paid (historically: very difficult)

A bard might recite in a tavern for tips or free drinks; a renaissance poet might seek out a patron; a victorian novelist might serialize a novel in installments to subscribers; a 1940s pulp writer might churn out 180-page novels as fast as the typewritter allows.

E- makes all of this “easier” in a way – but you still have to work it. It’s not enough to merely upload a file and wait — and since you’ve killed off traditional publishing [thanks, guys] and traditional bookstores [thanks, Amazon] you no longer have the option of seeking out a publisher and having them do all this hard work for you.

Paperback books—especially mass-market pulp paperbacks—expanded the availability of books, lowered prices, radically changed what was considered ‘economical’, and pushed books into new markets, new genres, new business models, and out to new readers. E-books are already doing the same. Excuse me if I’m not surprised. “It’s a whole new ball game” but from my seat: the game in 2015 is the same as it was a century past.

E-books are books. Your ability as an author (or marketer – are there e-book marketers yet? no? …give it time) is to engage readers with the hope that each engagement leads to sales. Reader engagement can take many forms: direct contact (via author signings, email, facebook, twitter), reviews (great if you have them), online reviews (not so good: most are only seen after a customer has already sought out your book, found it themselves – at best nothing happens, at worst an online review dissuades a purchase), or direct advertising: you could always pay a site (amazon or otherwise) to promote your book for you.

Man, this is hard.

If only we could set up some kind of independent marketplace, where titles could be discovered independently and judged on factors that the author and publisher has control over—-like the actual book cover and dust-jacket copy—and where similar titles are lumped together on a virtual ‘bookshelf’.


5. Aside from their size, Amazon has no “special sauce” or secret formula to online retail.

How to beat Amazon? Customer engagement, including serving niche markets — product knowledge, especially for the niche — and after-sale engagement.

Everyone buys geek/joke/novelty t-shirts off of the internet — honestly, these things are everywhere. Everyone has at least one, I have two favorites. But I’d be willing to bet there are more Comics/PopCulture/Crapware (and copy-cat) t-shirts sold off the rack at Target than are sold on So here’s a question for the Amazon-loyalists: why doesn’t Amazon sell more t-shirts? Why isn’t Amazon known for t-shirt sales and noted in the business press on how effectively they’re outselling and closing down online t-shirt sites?

[to spell it out for you: in the same way Amazon is always mentioned re: bookstores]

I suppose t-shirts are a dynamic market that requires creative inputs, is subject to unpredictable whims of the market, also requires active curation, a buck a shirt isn’t a margin worth bothering with, and there is no single “standardized” geek t-shirt: there are thousands — far from the dry, boring job of listing things for sale elsewhere and undercutting the price by 15¢.

So why doesn’t Amazon stock the cool stuff first? They have the money and resources – do they just not care?

I’m not complaining: I love ThinkGeek, Rightstuf, J-list, Threadless and the many others that make up the geeky side of internet retail. I’m just pointing out that if Amazon can kill off a bookstore: a small online retailer is not just toast, they’re an appetizing slice of toast already topped and set up on Amazon’s tapas and crudité platter for snacking.

In a way, we are lucky because Amazon is lazy, and set up for the lazy.

Amazon is easy, so easy at this point, that most don’t realize that 1. there are cheaper sources or hell, 2. there are in fact other sources. This is exactly where Amazon wanted to be, in fact: Amazon works damn hard at it. BUT: that doesn’t absolve you of being lazy. Amazon knows you’re lazy. They bank on it.

Amazon is not inevitable — “Online” isn’t inevitable either.

Let’s go back to t-shirts. Amazon sells books.

…This isn’t the non-sequitur you think it is.

Amazon sells books, and not only are books set up with unique identifiers: every book publisher buys into that database and there is an independent broker that not only maintains the database, they’re committed to ISO standards and openness so everyone, Amazon included, gets to use the ISBN database. There is a parallel standard of UPC codes and, where applicable, Amazon also uses those for their product descriptions.

Amazon fails in two particulars, however: There are a number of books (CreateSpace & Kindle titles) that have no ISBN (just an Amazon ID or ASIN), and so not only can’t be ordered from other stores, they also aren’t catalogued anywhere but Amazon. For a majority of sources (not just Bowker, but libraries up to and including The Library of Congress) the book might as well not exist. The second major Amazon fail: if there isn’t a handy ISBN or UPC for an item (etsy crafts, say, or geek-oriented t-shirts) they won’t list it.

While simultaneously making it harder for other sites to list their closed-ecosystem books, Amazon refuses to list items unless they they have a barcode and conform to industry standards.

All that cool stuff on Etsy? Amazon can’t compete because they won’t list it. Kickstarter? Amazon can’t compete because they won’t list it (though Amazon does take a chunk because Kickstarter uses Amazon Payments. Bastards.) And of course there are multiple discussion threads about how to get Non-Amazon ebooks on a Kindle


Other reading and references:

“Over the past few decades there has been a lot of speculation about the demise of the American bookstore and some of it may not be entirely unfounded. As big names like Borders fall under the weight of online retailers, e-books, and electronic forms of entertainment, how can small independent bookstores hope to survive? While things aren’t great for bookstores in America today, they also aren’t quite as bad as they seem.”

12 Stats on the State of Bookstores in America Today : 29 October 2012, Open Education Database

“The book industry is going through changes, influenced by trends like the transition from print to digital. And it looks like no part of this industry is being influenced like bookstores. From independent bookstores to the big chains like B&N and Borders – no one seems to be immune to these changes.”

The Future of Bookstores : 12 October 2012,

“Zipp credits the fall of Borders and the rise of the ‘buy local’ movement as the two major reasons business has improved for indies. Other advantages independent bookstores hold over their competitors include summer camps, improved websites, and physical expansions.”

Independent bookstores doing better than ever in 2012 : Kirsten Reach, 19 March 2013, Melville House

“We can spare a little thought for Borders. It has a particular relevance for American small towns and suburbs that isn’t apparent in urban centres. In the latter, the chain bookstores are the impersonal monoliths that destroyed small independents by undercutting them on prices. But elsewhere, the arrival of a Borders would mean that a town was finally getting a bookstore, rather than a rack of paperbacks and Sudoku books at the supermarket. (Similarly, while Starbucks might have hurt local coffeeshops in, for example, New York, in rural America it has achieved its stated goal of creating a ‘third space’.)”

Beyond Borders : “E.G.”, 21 March 2011, The Economist

“That community support is by no means unique to Bank Square Books, and it may be the secret ingredient behind a quiet resurgence of independent bookstores, which were supposed to go the way of the stone tablet – done in first by the national chains, then Amazon, and then e-books.

“A funny thing happened on the way to the funeral.

“While beloved bookstores still close down every year, sales at independent bookstores overall are rising, established independents are expanding, and new ones are popping up from Brooklyn to Big Stone Gap, Va. Bookstore owners credit the modest increases to everything from the shuttering of Borders to the rise of the ‘buy local’ movement to a get-‘er-done outlook among the indies that would shame Larry the Cable Guy. If they have to sell cheesecake or run a summer camp to survive, add it to the to-do list.” [/blockquote]

The novel resurgence of independent bookstores : Yvonne Zipp, 17 March 2013, Christian Science Monitor

“EBay Inc. is aiming to nearly double the active-user count on its marketplace over the next three years, as well as the volume of payments processed by its PayPal unit. … EBay expects to report between $21.5 billion and $23.5 billion in revenue for 2015, compared with $14 billion last year.”

eBay Says It Is “Now Playing Offense” : Greg Bensinger, 28 March 2013, Wall Street Journal article teased at All Things D [owned by the same company, and of course the WSJ is behind a paywall]


I’ve made some accusations about Amazon’s mercenary sales efforts to date; I’ve linked to original sources where possible, but I might be wrong…

I’ll gladly post a retraction&correction if Amazon would care to comment: as to whether CreateSpace and/or KDP titles are in fact submitted to the Library of Congress, when they plan to acquire a block of ISBNs to accomodate KDP digital-first authors who wish to sell their wares on other platforms (or even into bookstores), when Amazon will fully participate in industry-standard systems for all their associates (after drawing so much value from these open, industry-standard systems), and whether their commitment to sales over digital publishing platforms is matched by an equal commitment to open digital formats, the public domain, and non-profit archiving efforts similar to but not limited to

Amazon: State of the Art for 1913

filed under , 21 March 2013, 01:02 by

So I was working on a follow-up to a 2011 post I’d titled “Amazonification”. (most of that post is still valid – you don’t have to read it but I’d humbly submit that if you have the time: it’s a good read)

I’ve been having trouble stringing all these loose thoughts together — the essay I want to write is eluding me. So instead I’m going to try something a little different, and see if the links I was planning to use as references can speak for themselves.


“This isn’t just tossed-off; it’s direct from founder and CEO Jeff Bezos: ‘our physical book sales experienced the lowest December growth rate in our 17 years as a book seller, up just 5 percent.’ This is Amazon’s original business, for years its core in digital retail, and brick-and-mortar bookstores across the country are shutting down. Amazon’s growth in this market was only 5 percent? And Jeff Bezos is pleased with this?”

Amazon’s digital metamorphosis: ebooks up 70 percent, video spikes as print books flatten : Tim Carmody, 29 January 2013, The Verge
Amazon rides a razor-thin wave back to profit in first full quarter of new Kindles : Tim Carmody, 29 January 2013, The Verge

“Not having to sweat a constant onslaught of new competitors is really underrated. You can allocate your best employees to explore new lines of business, you can count on a consistent flow of cash from your more mature product or service lines, and you can focus your management team on offense. In contrast, most technology companies live in constant fear that they’ll be disrupted with every product or service refresh. The slightest misstep can turn a stock market darling into a company struggling for its very existence.

“Amazon’s core retail business is, I’d argue, still very secure. I can’t think of a tech retail competitor that is a legitimate threat to Amazon in selling most physical goods. Where Amazon is most vulnerable in retail is those areas where the game shifted on them, and that’s in the media lines where physical books, CDs, and DVDs are being digitized. Since no physical product must be transported through a distribution system, Amazon’s operational efficiency advantages there are less effective against competition. But in the arena of buying something online and having a box delivered to your doorstep, who really scares Amazon?’ [/blockquote]

Amazon, Apple, and the beauty of low margins : 13 December 2012, Remains of the Day [blog],

“When I shop on Amazon, I tend to check price first, then reviews, then whether the thing I want to buy is eligible for Prime. Only then do I tend to check the actual seller, which Amazon lists below whether the item is in stock. From the success of third-party sales on Amazon, I’m clearly not the only person indifferent to who has title to the merchandise I’m buying. If it’s on Amazon, I tend to think of it as from Amazon.

“That might not always be wise, since third-party sellers might, for instance, have a different return policy than Amazon’s standard guidelines. But that kind of variation seems less and less likely as Amazon makes standardization the most appealing option.” [/blockquote]

Amazon’s Future Is Not in Selling Stuff — And That’s a Good Thing : Marcus Wohlsen, 31 January 2013, Wired Business

“The time was 2004. Amazon already had cutting edge tech. ‘Amazon is a high tech company that just looks like it sells books,’ he laughs. The powers that be wanted to somehow make money on their IT.”

Amazon’s Game-Changing Cloud Was Built By Some Guys In South Africa : Julie Bort, 28 March 2012, Business Insider

AWS has dropped prices 23 times since 2006. Jassy attributed the price drops to what he sees as a virtuous circle that has emerged as AWS has expanded. More customers leads to more AWS usage, which fuels the need for more infrastructure. As more is added, AWS gets economies of scale in lower infrastructure costs and, as a result, can lower prices.”

Amazon Web Services Drops S3 Storage Service Pricing About 25% : Alex Williams, 28 November 2012, TechCrunch

“In Bezos’ mind, we’re in the midst of a land grab for the future of retail and computing. Building and owning a market is more important than collecting profits from it. At least for now.”

Amazon Web Services Hits $3.8 Billion Revenue – But Can It Capture The Enterprise? : Matt Asay, 14 January 2013, ReadWrite

“Part of the challenge here is that the obvious long-term strategy for Amazon — drive all rivals out of business with ultra-low margins, then exploit some barrier to entry to hike prices and earn monopoly profits — is probably illegal, so you can’t articulate it publicly.”

The Peculiar Genius of Jeff Bezos : Matthew Yglesias, 30 January 2013, Slate Moneybox


from Amazon’s own SEC filing, form 10-K, 30 January 2013
“We offer programs that enable sellers to sell their products on our websites and their own branded websites and to fulfill orders through us. We are not the seller of record in these transactions, but instead earn fixed fees, revenue share fees, per-unit activity fees, or some combination thereof. We serve developers and enterprises of all sizes through Amazon Web Services (“AWS”), which provides access to technology infrastructure that enables virtually any type of business.”

In 2012, Amazon made $2.5 Billion selling services and charging fees — now that’s only around 4% of their total revenue ($61.1 Billion in net sales) but it’s a business that is growing for them — and I think we can agree that charging fees is an easier business than shipping books and toasters (to say nothing of the differences in cost, and margin)

What is the Amazon Marketplace? Let’s take a look at Amazon’s own pages on it:
Selling on Amazon
Fulfillment by Amazon
Webstore by Amazon

“With all the buzz in 2009 about the big social networking sites such as Twitter and Facebook, I’d like to give a plug to one of my favorite social networking sites. I know, I know. Most people don’t consider Amazon to be social networking. It’s shopping, right? Don’t overlook the incredible communities that thrive on sites like Amazon, where customer reviews, profiles of those customer reviewers, author profiles and user conversations take place every day.” [emphasis in original]

Amazon as social networking : David Meerman Scott, 22 December 2009, WebInkNow

“Facebook knows who your friends are. Google knows what you’re interested in finding on the internet. Amazon knows what you’ve bought, and has a pretty good idea of what you might want to buy next. If you were an advertiser, which company’s data sounds most valuable to you? If you had a product you wanted to sell, which of those things would you most want to know? In a digital economy where some of the internet’s biggest companies and the country’s richest people have built their fortunes on the ability to more precisely target ads, one company sits on a trove of data it has barely started to exploit”

Amazon’s Next Big Business Is Selling You : Marcus Wohlsen, 16 October 2012, Wired

Amazon as a Social Network! : audio at link : Michelle Vandepas, September 2012, Talking Books TV

“So Amazon turned to third party sellers to escape the confines of the four walls; to expand its item catalog. These sellers are a motley crew of merchants, ranging from established store-front retailers to product manufacturers; from grizzly wholesalers to small-time entrepreneurs. They bring their wares to this marketplace to gain access to some 200 million customer accounts Amazon offers. And, in return, Amazon gets to embellish its catalog with the additional selection, all of which comes at no direct inventory cost to the web giant.”

Third Party Sellers and Amazon’s Drive for Universal Selection : Paul Dryden, 6 September 2012, Understanding Amazon [blog],

“Although Amazon declined to provide hard figures, it says that sellers’ sales were up 40 percent year-over-year from 2011, and that sellers on Amazon sold ‘hundreds of millions of units worth tens of billions of dollars.’

“The Amazon Marketplace allows business customers to sell on Amazon, tapping into the e-commerce giant’s worldwide reach for a monthly subscription fee plus a selling fee when the item is purchased. According to today’s release, there are now over 2 million of these third-party sellers on Amazon, reaching the company’s 188 million active customers around the world, including the 50 U.S. states.” [/blockquote]

Amazon’s Record Holiday Season Boosted Its Third-Party Sellers Marketplace, Too: Sales Up 40% Year-Over-Year : Sarah Perez, 2 January 2013, TechCrunch


What about AWS?

“Wang argues that Amazon is not a commerce company at all. It’s a big data company that has developed a cloud infrastructure that is profitable and subsidizes its retail operations. It has the mobile devices and content that it can spread through a network of users who pay to get it.”

Amazon Is Not A Commerce Company : Alex Williams, 30 December 2012, TechCrunch

“For Amazon Web Services Chief Data Scientist Matt Wood, the day isn’t filled performing data alchemy on behalf of his employer; he’s entertaining its customers. Wood helps AWS users build big data architectures that use the company’s cloud computing resources, and then take what he learns about those users’ needs and turn them into products — such as the Data Pipeline Service and Redshift data warehouse AWS announced this week.”

Why Amazon thinks big data was made for the cloud : Derrick Harris, 30 November 2012, GigaOm

“The chart below shows Amazon Inc.’s “other” revenue — which includes AWS — since AWS launched in 2006. From this, you can extrapolate that AWS is now a $2.2 billion-a-year business. How profitable it is remains an open question but it’s clear that Amazon CEO Jeff Bezos is always ready to sacrifice margin for volume business. And that has to worry the legacy IT incumbents.”

out of respect for GigaOm, I won’t embed their chart – it’s at the link : This year in cloud: Amazon-almost-all-the-time and the other 5 top stories of 2012 : Barb Darrow, 30 December 2012, GigaOm


“By contrast, Amazon has derived most of its recent growth from big ticket items in the ‘electronics and general merchandise’ category. Here, Amazon’s cost advantages are minimal or non-existent. Costco’s bare-bones warehouse model has the lowest expenses of any retailer, and this allows the company to frequently beat Amazon’s prices. In recent years, Costco has posted operating expenses around 10% of sales or less; less than half of Amazon’s costs.

“The other retailers have cost structures that are similar to Amazon’s. Wal-Mart’s operating expenses have averaged between 19% and 20% of sales, Target’s operating expenses have been somewhat higher at 24-25% of sales, and Best Buy’s operating expenses have hovered very close to 20% of sales. Thus, of four major retailers (which together have annual sales around $700 billion), only Target operates at a cost disadvantage vis-a-vis Amazon. Amazon’s expenses may decline in the future if strong revenue growth allows the company to better leverage fixed costs. However, it will always remain far behind Costco’s cost structure, and will also struggle to generate a meaningful cost advantage over Wal-Mart and Best Buy.” [/blockquote]

Two Big Myths About : Adam Levine-Weinberg, 14 January 2013, Motley Fool

“Still, although Amazon recommendations are cited by many company observers as a killer feature, analysts believe there’s a lot of room for growth. ‘There’s a collective belief within the e-commerce industry that Amazon’s recommendation engine is a suboptimal solution,’ says Mulpuru. Trisha Dill, a Well’s Fargo analyst, says it’s hard to fault Amazon for their recommendations, but she also says the company has a lot of work to do in offering users items more relevant to them. As an example, she points to a targeted email she received pushing a chainsaw carrying case. (She doesn’t own a chainsaw.)”

Amazon’s recommendation secret : JP Mangalindan, 30 July 2012, Fortune/CNN Money

“‘In California, Texas and Pennsylvania where recently started collecting tax, it is very early, but Best Buy has seen a 4 to 6 percent increase in online sales observed in aggregate versus the rest of the chain,’ spokeswoman Amy von Walter wrote in an email to Reuters. …

“Big retailers hope the requirement to collect sales tax will reduce Amazon’s price advantage and help them recoup some sales that lost to the Internet retailer. Best Buy also saw an increase of 6 percent to 9 percent in online orders that are picked up in its stores in those three states compared with the rest of its chain, von Walter said.”[/blockquote]

Best Buy online sales rise as Amazon collects sales tax : Reporting By Alistair Barr; Editing by Leslie Adler and Andre Grenon for Reuters, 10 January 2013, Yahoo! Finance

“Indeed, one of the consistent stories in the media regarding Best Buy is how it’s being used for showrooming physical products. Best Buy’s customers are supposedly going to the stores to check out the products, and then order them online (presumably for a lower cost). This has led Best Buy to price-match during the holidays. At the same price, Best Buy has the advantage of service and ease of returns over”

Best Buy’s Performance Is Relevant, And Negative, For : Paulo Santos, 11 January 2013, Seeking Alpha

“With the advent of today’s on-demand culture, Google is betting that it no longer matters who actually sells the product. Consumers are squarely in control and Google will increasingly help them find that product they are looking for, and do so at the right location for the right price. This was traditionally the role of ecommerce players like Amazon and massive offline retailers like Wal-Mart and Target.

“However, with the growth of Google Shopping and the integration of those results into its core search engine, Google is quickly becoming the “digital store shelf” that it had always promised.” [/blockquote]

Google’s plan to eat Amazon’s lunch and dominate retailing : Jason Lehmbeck, 24 February 2013, GigaOm

“Google’s increasingly aggressive effort to steal online retail from Amazon is turning into one of the most intriguing business battles of the year, and not just because of the sight of two behemoths pounding on each other. Google’s unique position in the internet’s infrastructure means that it can count on more than its own resources to take on Amazon. The search giant also serves as the platform from which everyone else trying to beat Amazon can use to fire their salvos. It’s a pretty high perch from which to take aim.”

Amazon May Seem Unstoppable, But Google Is Powering the Counterattack : Marcus Wohlsen, 25 February 2013, Wired Business

“But eBay is also catering to its most active sellers — those that list hundreds (or thousands) of items every month — with a slew of changes it claims will largely eliminate upfront costs. In doing so, the company is aiming to pull merchants away from Amazon (and hold onto its existing users) with new eBay Store subscriptions that offer up to 2,500 free listings monthly. Note that those paying in yearly installments will save a bit compared to month-to-month rates. For these customers, eBay says final value fees will vary between four and nine percent, again topping out at $250.”

eBay to overhaul fees this spring in bid to keep sellers away from Amazon : Chris Welch, 19 March 2013, The Verge

“Meanwhile, some sellers are disgruntled over reported changes to Amazon’s fee structure. The company doesn’t publicize its “take,” that is, the cut it gets when third-party sellers make a sale on Amazon. But a Reuters report says fee hikes over the past year-and-a-half are leading some sellers to consider abandoning the site, despite the access it gives them to Amazon’s 200 million customers.”

Turns Out Some People Do Hate Amazon : Marcus Wohlsen, 19 March 2013, Wired Business

“Forget next-day delivery. The standard in online shopping is rapidly approaching next-hour delivery. Retail giants Walmart, Amazon, and eBay, and a few nimble startups, are testing same-day services, bringing whatever you desire — ice cream, toothpaste, a new TV — to your door, right now. To make it happen, the sellers are revving up supply chains that rely on algorithms of military-grade complexity and workers (human and robot) who roam vast distribution centers 24/7. The trillion-dollar online shopping economy is about to get bigger — and a lot faster.”

Faster Than Overnight: How Etailers Get You Stuff the Same Day You Ordered It : Marcus Wohlsen, 19 March 2013, Wired Business

“For eBay right now, sellers turn out to matter more than ever. Because just as eBay is trying to be more like Amazon, Amazon is trying to be more like eBay. Well over one-third of what Amazon sells isn’t actually being sold by Amazon, and the rate keeps growing. Many analysts suspect that Amazon makes higher margins on the sale of other people’s inventory than on its own.”

EBay Could Steal Amazon’s Most Important Customers (They Aren’t Who You Think) : Marcus Wohlsen, 20 March 2013, Wired Business


Still with me? Good.

So my impression (after reading all that, while also competing with Amazon on a day-to-day basis) is that Amazon wants to be the new shopping mall landlord — or whatever the online equivalent to that looks like.

Instead of taking the risks or expending effort to think up and stock for every market category, just set up shop and let others ‘rent’ from you, collecting a modest fee and a cut of every sale. Amazon gets to charge some sellers again, for stocking the item in Amazon’s warehouses and shipping it out to customers. Amazon has nothing invested in actual inventory [in this one case] and actually makes money off of stuff just sitting on shelves. This is kind of a great deal.

Amazon is leveraging its three main assets: the computer infrastructure, the (expanding) base of fulfillment centers that it built to serve its own needs, and most importantly: you. The 200 million or so people who can be considered Amazon’s “install base”, or its social network, or its biggest fans — however you’d care to class them (or how you’d characterize yourself) in many ways the only thing that differentiates Amazon from also-rans is the fact that so many people actually use it — and on a damn near daily basis, too.

Amazon can make money on you three times: Once, when you buy something; a second time, by selling advertisements on its own pages to hawk related items to you while you shop; and a third time by collecting a fee from the 3rd-party seller who actually had your item and is in fact the person/company/mom-n-pop-shop who ships it to you.

Looking to the future, I’d say Amazon would also be perfectly willing to set up and host a web store for you, one not branded “amazon” in any way at all — but which used Amazon’s servers, payment services, hosting and storage via AWS, Fulfillment By Amazon to warehouse and ship the product for you, and sales analytics that will tell you how well your various product lines are doing on a monthly, weekly, or even daily basis. You could be snowed in, running your “shop” using nothing but Amazon services from a computer in a log cabin outside of Anchorage in January. It might cost you a sizable chunk of your operating margin, but this is theoretically possible _now_.

At least until you get too good at what you do, and Amazon muscles in on your turf:

“The Wall Street Journal is reporting today that some retailers in Amazon’s Marketplace have witnessed the online company examining which products they sell that are popular, and then offering them itself to the detriment of those merchants.

“The Journal spoke with one retailer, Jeff Peterson of Collectible Supplies, who sold as many as 100 Pillow Pets a day. After continued success, he claims Amazon started selling the stuffed-animal pillows, which are made to look like NFL mascots. Soon after, Peterson’s sales plummeted by as much as 80 percent,” [/blockquote]

Amazon Marketplace merchants complain of competition with… Amazon? : Don Reisinger, 27 June 2012 : c|net
I’m linking to c|net because of the WSJ paywall, but here’s the original link: WSJ Technology, 27 June 2012

No matter how much money Amazon makes off of their “other customers”, the Marketplace sellers, I know they’ll hang onto some businesses themselves. Amazon will always sell books, as books are a perenial draw and a popular market. Sadly, I know they will always sell books either at cost or at a loss — because books are the loss leader. This is part of Amazon’s DNA: they will game the system, delay payments to both marketplace sellers and book publishers until long after they themselves ‘bank’ the sale, and use the ‘negative cash cycle’ that results to further push down margins and sell even cheaper.

If you’re not familiar with the cash conversion cycle, Forbes has an excellent primer on just what it is and how money can be made, seemingly out of thin air.


Nothing Amazon is doing is new, by the way.

Amazon, at the start of the 21st Century, is only following a well-trod path, a trail originally blazed by Sears, Roebuck, and Co. at the start of the 20th.

Sears started as a catalog. Well, to be a bit more precise, in 1886 the man named Richard Sears got his start selling watches: a refused shipment ended up at his Minnesota train station, and instead of sending it back to Chicago — Sears worked out a deal. He sold watches to his fellow telegraph operators, who in turn were also selling them over the counter at train stations across the Midwest.

By 1888 Sears had moved the nascent business to Chicago, taken a partner, printed a general merchandise catalog, and was doing gangbusters business. Orders were placed through the mail, which may seem (to modern eyes) both quaint and slow: but the rail network of the 1880s and 1890s was already sophisticated enough that the US Mail was faster than ever — and the same rail network expedited delivery of goods to the customer.

The retail ecosystem prior to Sears was grim, and very basic: most of the population lived outside of cities, made a living in agriculture, and only made it into ‘town’ a couple of times a year — and likely only made major purchases once each year, right after the crops came in and were sold. The option for a 1870s farmer was the general store, which carried a little bit of everything — but emphasis on the “little” part of that, and also at markup.

The Sears Catalog was a window on the world to the farmer or small town resident of 1890: everything, everything was available to order and at prices so low it made the local general store look like a price-gouging opportunist. By 1910, the Sears Catalog included appliances, sporting goods, toys, automobiles, and even whole houses — shipped flat-packed on rail cars like a Little-House-On-The-Prairie precursor to Ikea.

Here, see for yourself: the Internet Archive ( has the 1912 Sears Catalog online for your edification and amusement.

Sears leveraged the rail network in the same way Amazon leveraged the internet 106 years later. When I call Amazon a “glorified mail order catalog” — which I have done, on at least two occasions — I’m merely pointing out the obvious. Amazon isn’t new: Amazon is big, and they were ‘first’, and they are ruthless — but there is no secret sauce. Any company with enough money and enough will (Apple, Google, Samsung, Facebook, or Microsoft) could replicate at least part of Amazon’s success, by either concentrating on a niche market (as Apple has done with iTunes) or by leveraging similar assets (Google has the infrastructure, Facebook the user base) to make a move on Amazon.

And for those who say, “Amazon’s success is because of their great customer service and their commitment to the most competitive pricing,” I’d only ask: how’s that kool-aid taste? Price is the easiest thing to match — and “customer service” via web site is easy. Come work in my store, and I’ll be happy to teach you how hard Customer Service is when you have the guts to do it in person.

In 1913 – Sears was still “online only” with just the catalog, mail order, and a state-of-the-art fulfillment center in Chicago.

I’d argue that Amazon is in exactly the same position today. But Sears had to change — and so will Amazon.

Sears didn’t open up their first store front until 1925. Sears was the clear market leader and held a position that seemed unassailable, though of course other retailers managed to gain footholds in local markets, and in specific niches [see LL Bean, Montgomery Ward, JC Penney, and of course The Book of the Month Club].

As the market changed, though, so did Sears — to the point where Sears was in fact developing the 1960s version of the Amazon Marketplace: from 1959 to 1995 Sears owned and operated the Homart Development Company — which developed at least 80 regional shopping malls, many of which were built just so Sears could move in as the anchor tenant; in 1994 (the year before Sears sold off the division) Homart was the still the landlord for 36 of the malls they had built.

Larger societal change meant the end of Sears hegemony, and well before the internet: by 1993 Sears had already stopped producing its seminal catalog. Wal-Mart was started in 1962 (by a former JC Penney’s employee!) and the first Target ‘discount store’ was opened by the Dayton Company in the same year. Best Buy followed in 1966, Home Depot in 1978 — and Toys R Us dates back to 1948. All these ‘category killers’ and the rest of Big Box retail didn’t hit their stride until the late 80s, but the seeds were there decades prior.

What does this mean for Amazon?
Not much, but also everything.

Amazon’s competitors are already in place — and no, I’m not talking about Barnes & Noble. The companies that can displace Amazon have been online for years and some of them are even older, and craftier, than Amazon and Bezos. Like Sears, Amazon is the pioneer and clear market leader — but also like 20th Century Sears, just because one is first to national-scale in a market doesn’t guarantee future success.

Amazon also relies on perception more than most retailers — right now they are the darling of the internet-shopping public, but should public sentiment turn against them: is Amazon really unique enough to survive on merit, without the mystique?

Rocket Bomber Special: 2012 Holiday Gift Guide!

filed under , 17 December 2012, 13:11 by

PLEASE do me a favor: DON'T pick out any gifts for your loved ones. Don't buy the book you know they'll love, DON'T get that one gadget you know they've been droping hints about for the last six months, DON'T even bother with gift cards.

You’re going to pick wrong.

I absolutely guarantee you’re going to pick wrong — just like you did last year, just like you’ve done for many, many years. Everyone has just been too polite to say anything.

And then I have to spend days of my life, after the holidays, doing nothing but processing returns. At least once an hour I’ll be asked, “Can’t I just get cash back?”

And sadly, the answer is no.

So let’s all agree: The Perfect Gift Is an Envelope Full of Cash.

I’d love to get cash. Anyone aged 14-28 would definitely prefer cash. Do a gut check: what do you want? Sure, that surprise gift, the exact right thing is great when it comes from the one person in your life (spouse, partner, boyfriend, girlfriend) but for everyone else?

I say: If you’re not sleeping with them, they just get cash.

[If you are sleeping with them, this seems appropriate]

Imagine the time you’ll save. Imagine the lack of stress. If you think cash is too impersonal, put the cash envelope inside of a tin of home-made cookies. That would be fantastic because, c’mon, *cookies* AND *cash*! That would be a holiday gift I’d be talking about for decades. The folks in the retirement home will be sick of hearing about it.

[cash is even traditional in some cultures]

So do yourself a favor. Do your loved ones a favor. Most Importantly, take the pressure and the hassle away from the poor retail clerks who have to process all those damn returns for clothes and other crap gifts: Just give cash this holiday.

Thank you for you time and polite consideration. And I’ll be back in 2013 to repeat this message in RocketBomber’s next Holiday Gift Guide!


image credits:

Ebook sales projection, 2012, second update.

filed under , 12 December 2012, 16:04 by

So long as the data can be found (sadly, the AAP no longer does their own press releases; thankfully, other sources with access to BookStats do post the monthly ebook numbers) I’ll continue to update the graph.

I’d also like to remind the folks at AAP/BISG/ that posts to are available freely under a Non-commercial CC license: they are welcome to include my analysis (or adaptations of my analysis) in their own reports. I’ll even waive the non-commercial requirement (which would be a sticking point, since they charge big bucks for the data now) so long as they still include an attribution. You share with us, I share with you, new things get created, new analysis and viewpoints proliferate: internet!

Those of you new to this blog should check out:

The Original Projection: June 2011

And Update 1: September 2012


The formula for the sales projection curve is

ebook(t) = k * (1 + tanh(-π+((π/80)t)))

Where t is the time variable, counted by months, and k is a constant one selects out of one’s ass (a surprising number of scientific constants work that way) equal in this case to $130 Million. The constant k is also the assumed value of ebook sales at the inflection point in the graph.

Using fractions of pi — (π/80) above — is how we “stretch” the s-curve to match the observed growth over time. My first projection used (π/60), an assumed dynamic growth phase of about 120 months. To get the projected graph to match reported sales, however, I had to slow things down a bit — (π/80) translates to a “dynamic” phase of 160 months, about 13 years. For the graph below, our starting point (t=0) is the month of August, 2005.

This also means we hit the inflection point back in May, 6 months ago.


My [*] on the Projected Sales is the same disclaimer as last time:

  • The only data available to me are ebook sales as reported by the Association of American Publishers: so these correspond only to US ebook sales from established publishing houses and does not include self-published ebooks.
  • Merely looking at a dollar sales figure (again, the only data available) glosses over the fact that ebooks are sold at lower price points: unit sales of books will be higher than the dollar figure might suggest
  • My projection is not the only interpretation – but I’ve tried some other models and ebooks sure look like they’re following a fairly common sigmoid growth curve
  • …however, if ebooks do not merely cannibalize sales of other formats but instead push books into new genres, new business models, new retail channels, and effectively blow up books as we know them: why sure, I guess there’s no upper limit & my projection is wrong. You can make any assumptions you like along those lines. My graph represents a fairly short future time frame (3-5 years out) and a relatively stable publishing industry. (Well, stable other than the disruption currently happening due to ebooks.)

As data becomes available, I’m happy to post future updates. I think the next e-book sales projection will be after the Jan-Feb ebooks sales numbers go public — covering this fall plus the post-holiday-ereaders-given-as-gifts bump we’ve seen in years past. I’m guessing that will be in May, about 5-6 months from now.

Making it rain.

filed under , 24 September 2012, 11:52 by

Corporate retail sucks.

And I’m not just talking about the way most corporate overlords treat their part-time hourly employees.

Let’s say you’re the store manager: salaried, bonus-eligible, supposedly given a great deal of responsibility. It should be easy, right? Or at least easier than grinding out a minimum wage shift at a register, standing on your feet for hours and hours and asking the same stupid three questions of a constant parade of customers who don’t care, and often can’t be bothered to stop talking on the phone long enough to acknowledge you as an actual person.

If Only I were the boss,” our hypothetical employee says to herself, “then we could actual change things in the store, respond to our customers, make this a decent place to work and shop”


Merely being the store manager is not being the boss. Corporate makes sure of that.

Corporate Question Number One: “So, what are you doing to increase sales?”

To respond to this question, a store manager is required to come up with some bullshit with the right-sounding phrases (whatever jargon is in vogue at corporate offices this year) and to come up with ‘action plans’ and ‘employee incentives’ and ‘store initiatives’ and all kinds of other crap that has the same net effect as shuffling deck chairs on the Titanic after the iceberg hits.

At the store level: we didn’t steer the ship into an iceberg. Expecting us to magically fix it at the store level is intentionally blind, callously negligent, or possibly both.

Retail locations are dependent on customer traffic. I can’t drive traffic into my store any more than I can make it rain. At the store level, the most I can do is keep the doors open, hire more staff to make the most of any traffic that does come in the door, train staff to be courteous and helpful and then also ensure we are scheduling enough people to work to keep up with sales volume.

Tired and harried staff can only do so much. Cutting back on payroll only limits your total potential sales. If you want to increase sales, let me add staff the store to increase employee interactions with customers. These conversations lead to a better understanding of what the customer needs, to personalized recommendations, and more sales.

Corporate Question Number Two: “Sales are down so we need to minimize our expenses; what are you doing to meet the new payroll target?”

I’m paraphrasing but this is fairly close to the actual weasel words used: They don’t tell me to fire people, or to cut a part-timer from 20hrs a week down to 12. They don’t tell me to make customers wait for 5 minutes instead of 2 minutes, or 10 minutes instead of 5. They don’t tell me to pull someone off of customer service for restocking or merchandising. They never ask me to pull the kids specialist out of her department to cover breaks at the register, leaving one of our stronger departments unstaffed for hours a day — when, once again, if there were an employee there to talk and listen to customers we just might see a sales bump that would justify adding one extra person to each shift.

“What are you doing to make your payroll number?” This thinking doesn’t even consider what the costs of cutting payroll are:

Sure, you save the $9.25 an hour you’d be paying someone — but your customers have to wait. Your employees are overworked, leading to more sick days, more grumbling, fewer smiles, and no matter how saint-like they are and how hard they try, will also lead to ever-so-slightly worse customer service.

Customers who have bad experiences or who just have to wait one extra minute also leave the store thinking to themselves, well, I’m never shopping there again.

Cutting back payroll means spending community goodwill. It’s not a savings, it’s a cost. And community goodwill is only earned slowly, over years. It’s not like you’re going to get it back even if corporate comes to its senses and lets store managers add staff.


Sales are down. You can sit in your executive suite, stare at spreadsheets, lean on your COO, who leans on a SVP, who leans on a junior VP, who leans on regional staff, who send out emails to all the store managers, “So, what *are* you doing to increase sales?”

It’s like asking farmers in a drought to make it rain.

Here’s what can be done: Advertise nationally to drive traffic into stores. Spend years building up a reputation for knowledgeable, helpful service, quality products, and prices that are in-line with the quality and service offered. [One does not have to be the cheapest to be well thought of by our customers; ask Apple.] Build the brand to drive traffic into stores, and then make sure there are enough positive employee-customer interactions to convert that traffic into sales.

My experience is in book sales; our chosen retail niche has a unique service component not shared with other retailers — but some of this has to be universal.

The one thing that could be addressed at a store level, increasing staff, I’m not allowed to do.

The one thing that would actually drive more traffic into stores, national and consistent advertising in major media, is deemed by corporate to be too expensive.

Ask Coke how much they spend on ads. Or Budweiser. Or McDonalds.

Until someone at our corporate offices catches a clue, I guess I’ll go back to shuffling deck chairs and ignoring the iceberg.

Ebook sales projection, 2012 edition

filed under , 30 August 2012, 14:38 by

Yes, ebooks are a disruptive force in book retail and publishing.
Yes, ebooks represent a new distribution model with many new benefits and advantages.

But: ebooks are not going to replace all books.


It’s been a little over a year since I last looked at the numbers:
Ebooks, predictions, math that lies. : 24 June 2011

Since then, another whole year of data is available, including both the holidays and the post holiday ebook binge associated with recipients filling newly-gifted gadgets with content.

Of course, this kind of analysis has certain limitations:

  • The only data available to me are ebook sales as reported by the Association of American Publishers: so these correspond only to US ebook sales from established publishing houses and does not include self-published ebooks.
  • Merely looking at a dollar sales figure (again, the only data available) glosses over the fact that ebooks are sold at lower price points: unit sales of books will be higher than the dollar figure might suggest
  • My projection is not the only interpretation – but I’ve tried some other models and ebooks sure look like they’re following a fairly common sigmoid growth curve
  • …however, if ebooks do not merely cannibalize sales of other formats but instead push books into new genres, new business models, new retail channels, and effectively blow up books as we know them: why sure, I guess there’s no upper limit & my projection is wrong. You can make any assumptions you like along those lines. My graph represents a fairly short future time frame (3-5 years out) and a relatively stable publishing industry. (Well, stable other than the disruption currently happening due to ebooks.)

Let’s look at the numbers anyway:

This graph is a little different from the one I posted last year, even though it looks similar. Growth is occuring more slowly than I assumed last year, so I had to “stretch” my graph a bit to fit. (Instead of a ten year overall time frame, this one is twelve years.) The other adjustment was more surprising: the estimate for where monthly ebook sales will eventually ‘top out’ and reach equilibrium went down by about $50 Million.

If the new projection is more accurate, we’ll see average monthly ebook sales of $250 Million rather than $300 Million – and we’ll hit the midpoint of the sigmoid curve before the end of the year.

This isn’t a tipping point in quite the way you think. Growth is still going to be quite dramatic through 2013 and 2014, and the data is messy enough that even as we approach equilibirum in mid-2015, it’s still going to look like growth.

But I see a light at the end of the tunnel.

A new business model, growing beyond the Big Box Bookstore

filed under , 25 August 2012, 15:08 by

An index of my previous columns can be found at


Three threads:

  • Bookstore Tourism is Up. (For some the news really is: Bookstore Tourism is A Thing.) [wikipedia, see also GalleyCat,, Travel Between The Pages]

  • Total Book Sales Are Steady. The Association of American Publishers reported that, even through the recession, their members’ sales were up from 2008-2010 [New Publishing Industry Survey Details Strong Three-Year Growth in Net Revenue, Units, 9 Aug 2011 – sadly, there isn’t a similar year-in-review post for 2011, as the AAP and the Book Industry Study Group are wrapping this data into a product called BookStats and hiding it behind a paywall. A $1000-a-year-or-so paywall. yep.]

  • The Bookstore Is Still a Gathering Place. [a “third place”, previously cited – see the listing at Google Books.] In fact, many of my complaints about working at a bookstore stem from the constant traffic we receive, and the volume of phone calls, all of which have to be treated as customer interactions even if [especially if?] they do not result in an actual sale — or at least, not one I can bank at the bookstore. See also, Yahoo Answers, Personality Cafe,“Dream Palaces — Bookstores”,, “Hanging out in bookstores: How quaint”, Jane Genova, 23 Aug 2010, “Bookstores— Headed for Extinction?”, Books & Such Between the Lines, 11 Nov 2011, and Ron Yacovetti, stand-up comedy on YouTube, posted 22 Nov 2011, see embeded video below [stand up that includes NSFW language, so excercise care]


    If you’re an entrepreneurial sort with a small stack of cash and are looking to open a small business: Start a restaurant. Train as a plumber. Get a lawnmower and start going door to door. There are a lot of options, but service, skilled trades, or food are the better bet — anything and I mean damn near anything but retail. You are competing not just with other shops but with gigantic multinational corporations that will always beat you on price. You can compete on quality or service (especially when it comes to food) but if you sell shirts or toasters? That’s hard.

    If you just run the numbers, attempting to make money at retail is an awful, soul-crushing thing to even contemplate, let alone attempt. And if you want to sell books? Online retail is so efficient there’s no need or little want for a bookstore, or even a non-Amazon online store: One site to rule them all, one site to find them, one site to bring them all and in the darkness bind them.

    Why fight it?

    Well, part of it is that I love bookstores. I love them so much, if I win the lottery I’m opening my own [& also working very hard to do so anyway even without a jackpot] and I don’t plan to retire at all, ever. When I leave this world, you’re going to have to carry my rapidly cooling corpse feet first out the door of a bookstore.

    I love books and live a life filled with books. If the last remaining big-box chain bookstores went out of business I guess I’d content myself with whatever option was available — after all, I grew up with mall bookshops that rarely topped 2000sq.ft. I also used to bike to my local library as a kid and teen twice a week (at minimum) and pretty much started at one end of the first shelf on the first bookcase & read damn near everything.

    Still, when the really big bookstores opened (in my neck of the woods it was 1993, while I was in my second year of college) it was a revelation. Marvellous temples built for books, and built even out in the suburbs – not just the city center.

    I think many of us either weren’t old enough or have since forgotten what the bookselling landscape was like before Borders & B&N. Yes, there were many fine bookstores but nowhere near the selection — and I don’t think anyone sold a cup of coffee. [This was the topic & source of inspiration for my very first “Rethinking the Box” column]

    In 1993 the first major chain big-box outposts were opening. In 1993, the internet was also born — exact date debatable but the first graphical browser was in 1993 and that’s where a large chunk of the whole mess we now call “the internet” started. It’s not even that I’m going to pull the tired “born with the seeds of its own distruction” cliché — odds are good you first learned HTML or Java or C from a book you purchased at a chain bookstore. DOS for Dummies” came out in 1991 — no way in hell you bought that from Amazon. The big-box bookstore, with it’s large computer book section and consistent, relatively quick ordering procedures is no doubt the way the first of us became the net-literate, and it would take some very creative restructuring of facts and timelines to argue otherwise.

    [Oh, I suppose you could have learned it in college instead of teaching yourself from books. I did. Or at least, that’s where I learned the basics, back in ’92: But your college had all online materials and no bookstore? Really?]

    It was at least six years (1994-2000) before we began to pare back the number of computer books stocked in our bookstore, and even then, it was more a matter of purging old volumes (& whole categories) to keep up with the sheer numbers of new books and accelerating growth in tech topics. I think 2002 was when we finally pulled back, stocking mostly general knowledge & major OS books for the mainstream reader, as opposed to all the technical books. It didn’t stop people from asking for the books, but as soon as they heard our prices they almost always ordered online at that point anyway.

    I take some small pride in the fact that Amazon wouldn’t exist if their initial programmers hadn’t been able to learn from books bought at a bookstore — likely a local Seattle Borders, come to think of it. Sweet, bitter, bilesome irony.


    Most Wall Street analysis misses the point: bookselling is not retail. Yes, Amazon does “bookselling” “better”, but only because they are an internet-boosted mail order catalog, customers approach Amazon with a completely different set of expectations, and in no way should a website actually be equated with the poor retailers who have to make rent, payroll, insurance payments — and, if they are a nation-wide retailer: 100 or 200 or 800 sets of duplicate inventory and just as many public bathrooms that have to be cleaned on a daily basis.

    The Physicality of bookstores is actually an advantage, not a liability — and I know you doubt that — but for right now let me just state that I see not just a place for bookstores in our future, but a genuine opportunity. I don’t need a red-power-tie-wearing eastern seaboard profit-sucker to tell me that my business model is wrong. I don’t need an open-color western seaboard new-media-type to tell me that old business models are broken. I don’t need a corporate suit telling me I’m ‘wasting’ payroll and we need to ‘right-size’ our inventory.

    Screw ‘em. Screw ‘em all.

    People come into my store every day. They hang out for hours. My phone is practically ringing off the hook. With a major competitor suddenly leaving the market last year, we’re busier than ever. Even if the first question every person asks when they walk in the door is, “Where is your bathroom?” and only 1 customer in 10 is buying anything: that is still more traffic than 80% of other retailers ever get and hell: My only problem is how to monetize that traffic. [That sounds oddly familiar for some reason.] And one in ten is a hell of a conversion rate — One in one hundred is a hell of a conversion rate.

    Keep in mind my three threads from the top — Bookstore Tourism is up, Total Book Sales are steady, the bookstore is still a Gathering Place — and let me add two additional points.

    The bookstore chains are too big.
    …while the actual bookstores themselves are too small.

    A nation-wide chain of 200-and-on-up-to-1000 bookstores, with at least one store in all of the top 200 markets and as many as 30 outposts apiece to cover each of the 10 biggest CMSAs seems like a worthy goal — indeed, the very definition of business ‘success’ — but only, I think, for traditional retail.

    “Traditional” retail is getting harder to define though. It used to mean five-and-dimes, general stores, mom-and-pop town-square or main-street storefronts, with only a few department stores in major urban downtowns. Then it meant a mall-unit-sized storefront rented, well, out at a mall. Now, “traditional” retail means Target and Wal-Mart, while the even older models are “boutique” retail, or “specialty” shops. More often than not, traditional is used merely to differentiate physical shops from online retail.

    Even considering just the major players in retail, there are a lot of different models: “Retail” by itself isn’t enough to define your business. IKEA seems to get by with just 38 US stores, but there are more than 3,000 Wal-Mart Supercenters. Several regional & national chains operate tens of thousands of supermarkets & grocery stores (of all sizes) and if we define a convenience store to include the type of snack-and-sundry shops attached to filling stations then there are at least 120,000 in the US, and likely many, many more. Retail is a box Wall Street types like to dump companies into (usually companies they want to ignore) because retail is not sexy, it’s not “growth” or “potential” or “e” or “net” or trendy.

    It might be better to forget everything you think you know about retail & admit that not all ‘retail’ stores will fit in the same mould. [The number of executives brought in to run Borders that only had grocery/supermarket store experience is telling, and one of the things that contributed to its downfall]

    Part of it is a matter of scale:

    If you only had to stock 5000 or 15,000 or 40,000 SKUs [Stock Keeping Units, individual items with their own barcodes] you could afford to keep the exact same inventory at every location. Your largest supermarket, all those aisles of cans, boxes, bags, and packs (…and the produce codes — the sticker on your banana …and the generated codes for items from the deli, bakery, and butcher) — all those things at the nice big Supermarket add up to about 40,000 units. The weekly grocery shopping trip is an hour-long tour up and down every aisle, stopping, comparing, filling a huge cart, and then schlepping it all home. Supermarkets are huge and they stock 40,000 different items. Home Depot & similar warehouse-style home improvement centers also stock about 40,000 different items per store, it’s just that sheetrock & 2×12s take up more space then celery & cream of mushroom. Similar business, though it requires the larger footprint.

    A Walmart Supercenter is even bigger, combining the grocery with a general discount retailer. Supercenters average 142,000 SKUs, obviously some are even bigger… up to 175,000 SKUs on just as many square feet — Walmart is the really big monster of retail

    I’m belabouring the point because I’m trying to give you a sense of the scale of bookselling: most folks, when they think of the bookstore at all, it’s only for a magazine, the occasional bestseller, and the coffee — and in the view of the customer that’s just three items.

    In a bookstore, out of about 12 to 15 million SKUs [in the book biz we call ‘em ISBNs] we can only manage to stock up to 200,000 or so, on the same footprint as your larger supermarkets — about half a football field or so.

    No matter how many books I manage to stock, I still get compared to that 15 million number: As a (national chain big box) bookseller it is assumed by nearly everyone that I stock *all* books. If your local bookstore only stocks 100,000 books, you likely think of them as chintzy and small. A bookstore that only stocks as many items as a Whole Foods gets written off as a “mom n’ pop” indy.

    Did I mention that my (rough) estimate of 15 Million or more books likely under-estimates the number of self-published, print-on-demand, and e-books, and there are also an unknown number of out-of-print-but-still-available-used books — I haven’t seen an estimate for books-in-print that includes all these new and old categories so the total may be more than 15 Million. And I can only stock a fraction of those.

    The closest analogy I can think of is trying to find one particular resident of Ohio or Michigan during the annual UM/OSU game — and 200,000 is twice the seating capacity of either stadium.

    The enormity of the task is lost on my customers. Especially when my computer says there is a single copy of a book, “Your computer says you have it; Where is it?” [*impatient foottap*]

    We’re trying to locate one fan out of 200,000 and he’s not in the seat listed on his ticket — hell, he may still be tailgating in the parking lot. What more can I do?


    As stated, despite the glories of a Big-Box Bookstore [I’d have killed for one anywhere near my hometown in 1986] if we’re only stocking 100,000 books, the store is too small.

    Back in July I wrote a column outlining a new bookstore model: A small sales floor with a warehouse attached, basically a book distributor hiding behind a retail store front.

    Let’s do one better:

    Consider your customer base, how they currently use your space, what they actually want, and then serve those interests while running your shop and investigating other income opportunities.

    That statement is vague enough to be useless — so let me break it down.

    What is the social purpose of bookstores? Why, *why* do people hang out in bookstores? Why do we get more foot traffic? Why do people kill time in bookstores? Why do some people come inside just to make a phone call on their mobile when in most other instances they would step outside to do the same?

    We get used and abused — much moreso than any other retailer: do people take their shoes off and settle in on the floor in any other shop? Do you hang out for hours in a Best Buy? Do you bring a lunch and your textbook into the local deli? Do you ask your bartender where you can plug in your laptop? [actually, you do and I have – but if you’re not drinking & paying your freight: your bartender will tell you to move on.]

    Entrepreneurs in Africa make money off of charging cell phones; I’m expected to provide outlets for free to non-paying customers for the same service.

    I don’t actually need to answer any of those questions: It’s enough that people do. I, as a bookseller, have more foot traffic than any other retailer: my aisles on a Saturday in July look like other stores in December.

    Over time, a short dozen years or so, the [national chain big box] Bookstore has replaced a number of other social spaces: I hear kids under six refer to our store as ‘the library’ — only to be corrected by parents, “No, at this library we have to pay for books to take home” [I’ll give you a minute to let that sink in…] — and I have a feeling in another 3-4 years the youngest kids won’t even know there was a difference. Instead of meeting at an office, applicants meet employers at a bookstore. Instead of meeting at an individual’s home, book clubs come to the bookstore, knitting circles come to the book store, study groups come to the bookstore — instead of meeting at a bar or restaurant, friends meet at the bookstore, before the movie, before bar hopping, before the game — it’s where some blind dates start and where some former lovers meet to end it.

    I didn’t ask for this. In fact, when I first applied for a job at the bookstore, silly me, I thought I’d be selling books. Instead I’ve become a concierge, a research fellow, an academic advisor, a business consultant; at times I have to be a referee or a cop. At bookstores that run a coffee shop, we’re also baristas & waitstaff. If occasionally I lament, on this blog or other platforms, that customers suck, mostly it’s because I have to run a frickin’ community center, for free – when all I really wanted to do was sell books.

    I’ve expended a lot of mental effort, thought long and hard, on just what it is that makes bookselling so very ‘special’ and the only thing I’ve been able to come up with is seating. Tables & Chairs. Not a theater [chairs only] and not a restaurant [where you only keep a table while you’re running a tab] — at the bookstore we put in chairs, and as soon as we added the coffee shop, we also added a mess of tables.

    Since it’s been this way since the big-box expansion of the mid-90s, customers now expect seating. They demand it from the bookstore, along with a ready electrical outlet. Even though, when we were opening stores 15 years ago there was no way to anticipate that customers would demand a way to recharge phones and run laptops, logic doesn’t play and we’re held in contempt because we didn’t install a service that didn’t even exist a decade ago.

    And yes, while I can think of an easy response to your question, “Where can I plug in my laptop?” I’m not allowed to employ sarcasm at work.

    Also, I’d be more than happy to point out that there is no where to sit because we sell books, not furniture, but again: I’m not allowed to employ sarcasm at work. (we have chairs; the fact that other sponges are hogging all the chairs is not my fault, and don’t come to the desk expecting me to immediately fix it.)

    Suddenly, despite the existence of numerous very fine cafés, libraries, student unions, public parks, museums, churches, community centers, small theatres — and of course, all the bars, pubs, taverns, and restaurants — suddenly in 2012, we find the bookstore is the only public place people can hang out in.

    It’s preposterous on its face, but that’s how our customers treat us. Instead of complaining about it and continuing to fight it, I say:

    Accept it.

    But we’re going to need a bigger bookstore.

    Many places are “public” — parks, for example. Or museums. Or even government buildings, like the town hall or courthouse — but many public buildings have specific uses, and unless you have business there you never actually go, no matter how nice the lobby is. There are very few public spaces that are also social spaces: the library, obviously, and those few actual Community Centers that exist. But for whatever reason (are they too square? terminally unhip?) many of the citizens these facilities were set up to serve wouldn’t ever be caught dead going there. Social space is not the same as public space —

    Doing a quick mental survey [from my past architecture studies] I find myself coming up with very few analogues that also provide social space, besides the bookstore: some “lounges” and pubs, hotel lobbies, casinos, country clubs, and the shopping mall.

    The shopping mall food court is the best model: open seating [& seating in quantity] surrounded by retail and food. Oddly, even though food courts certainly get their fair share of use, they are not the ‘hang out’ that the bookstore is. (maybe it’s because we supply reading material.) Which is odd; I mean, a few of the local malls in my hometown have even added wifi. Maybe it’s because most food courts are designed to encourage turn-over on tables, just like a restaurant. Cheap-feeling chairs, wobbly tables, hard tile floors & echoing spaces: no one wants to hang out here. Compare that to a casino, for example: even the layout is vaguely similar (food service & small shops surrounding a central area) but the focus is different as the owners want you to sit down and never leave. It’s not about table turnover but stickiness: come and stay awhile. Can I bring you a drink?

    Have you ever thought about hotel lobbies? I’m guessing no. But perhaps (given the assumed proclivities of my reader base) you have been to a sci-fi, comic book, or fan convention. While the very largest cons take place in convention centers (another social space, but the worst model I can think of) smaller cons are held in a single hotel. There are conference rooms, a few restaurants, a decent bar (if you’re lucky; though the drinks are still overpriced) but there is also something fairly unique to hotels: the public lobby. Hotel lobbies are just transitional spaces, like airport terminals or train stations — one is meant to pass through, the lobby is not the destination. But despite that, and because of their long experience in the business, the lobby is also a space to temporarily stop and rest. Most have chairs & sofas that put my bookstore chairs to shame, and often these are grouped into smaller, semi-private spaces where small groups can gather, rather like a living room.

    The lobby has nothing to do with the economic activity of the hotel — but the restaurants & bars do. And when a hotel hosts a conference or fan convention, the lobby is the major public and social space.

    What does any of this have to do with bookselling? Stick with me for a bit longer: IF the bookstore is a social space AND our sales depend, at least in part, on foot traffic in stores AND we have to put up with all you people anyway: why not go with it? Make the bookstore a destination — not an errand but a day-trip. Capitalize on what people are already doing, increase our site traffic, make a major impression on public consciousness — and then innovate to make the most of each customer, and each customer visit.

    Sure, we currently run a café (can’t sell books without coffee these days) but the cafe shouldn’t be just a sideline — or more accurately, it won’t be the only sideline. Our coffee shop would stand to one side of the main seating area, now a spacious lobby: a nirvana of tables with outlets built into each column, a brace of comfy chairs on the inside wall, a row of patio tables just inside (and perhaps also just outside) the sunny windows, with a semi-detached space that just might be configured for an impromptu class or book group — and a separate 2nd floor lounge that would be even better for both. Set up the social space first, and put it in the center of your retail empire.

    Immediately adjacent to the central seating [I could call it a ‘food court’ — ‘cause that’s what it is — but I hope the customers don’t dismiss it as such] in addition to the de rigueur coffee shop, we’d have a quick lunch counter, or maybe 2-3 concessionaires: Subway? Bagels? Ice cream? Starbucks or Dunkin’, even, instead of in-house coffee? (If I win the lottery, I’m setting aside a couple million to entice Tim Horton.) I’m proposing a monstrous bookstore with daily traffic that is going to exceed all-but-December-retail numbers, and our December is going to be absolutely nuts. As a landlord, I could make a nice chunk on rent.

    Just off the central seating area, we’d have a full service restaurant & a first rate pub. These also directly support our ‘social space’ nexus: come in for a quick nosh and check your email while you wait for friends to get off of work, and then transition to the bar or to a table for dinner. Once again, we could run these ourselves or rent out the space; either works, and depends on how you want to collect your profits: guaranteed rent, or less reliable profits-from-food-service operations.

    — I’ll understand if you’re not really comfortable with either. It’s a rare bookseller who has experience in facilities management AND hospitality & bar operations. Why, I think there may only be one person with this particular skill set. [*smirk*]

    Keeping with the ‘mall food court’ model: once we’re past scone-throwing-distance from the coffee shop and our central seating area, well, that’s where the rest of our retail operation goes.

    In this case, the rest of the retail operation is a big effing bookstore.

    Now, let’s just assume for a moment that the commercial real estate market is so depressed that not only are a number of shopping malls all-but-closed, they’re even available for purchase — with no current tenants, falling into disrepair as we speak, and ripe for radical remodeling.

    [I know: so unlikely, if it weren’t actually true. Once in a lifetime opportunity here]

    We could buy a small regional mall — special bonus: the older and smaller malls are all closer to city centers, not further out in the suburbs — close down half of it to use as our warehouse/book distributor space, and reallocate the rest, building out from the food court, to sell books.

    The wonderful thing (from the booksellers’ point of view) is that we could set up a window where 50% of our customers could just walk up and ask for, oh I don’t know, Organic Ostrich Farming, and then we go back into the stacks, find it, and hand it to them. We’ll set up this special order window with its own [small] seating space and register — yes, you can look at the book, but unless you buy it you’re not leaving this lounge. Make it comfortable. Special lighting, extra comfy chairs, an assigned cashier — maybe even a cash bar — and a really big bruiser of a bouncer. Thank you, we have exactly the expensive medical textbook you want, you can even browse it, but no way in hell are you stealing it. Most customers would never know: we have a book, we hand it to you, you buy it. But for an extra special subset of our customers: yes, we get it, we’re onto you and don’t come back.

    Past this order window, we’d have the sales floor. Yes, I’m advocating that we separate “the stacks” from “the sales floor” — as 50% of our paying customers and 98% of the rest are either browsing bestsellers, browsing a specific genre [& we can accommodate that], or just hanging out for the free wifi and reading magazines. There is no need to make every shelf in every category available to the public. If the customers who already know the title and will buy it (if we have it in stock) can just walk up to the register closest to the main entrance and do so — that is a win-win-win. This call-ahead and pick-up may in fact be more than 50% of our business. We can stock as many titles as we can get our hands on, put them ‘in the back’ where they are immediately ready for sale, even if they aren’t necessarily ‘on the shelf’. We can take that part of the business and really streamline it.

    What about the folks who don’t or won’t buy books? Well, we’ve already set aside quite a bit of dedicated space for social butterflies & campers — and this space will pay for itself with food service, I think.

    And what about the grazers & browsers — who love to linger over tables & displays, and want to see what’s new – the readers, the book lovers — The other half of my book-buying customer base?

    That’s the whole point of the bookstore. And now we look at how to really run a bookstore:

    If I were in fact repurposing a shopping mall, then one “storefront” would be a newsstand with newspapers & magazines. Another might be a newsstand with comics. One storefront could easily be turned over to just the New York Times bestsellers & other mass market paperbacks — the direct equivalent of an airport bookstore. These could easily be the closest “stores” to our central-seating-area-slash-lobby-slash-food-court and there’s little thought or bookselling expertise required here, past keeping shelves full. We’re just meeting demand.

    Just past the obvious though: If I can hire someone who loves romance novels, why not give her 3000sq.ft. and full reign to order in titles, stock shelves, merchandise tables, and above all sell books. We can keep the overstock in our warehouse [adjacent, on site] and face out a full “bookstore’s” worth of genre titles.

    And do the same for mystery

    And the same for sci-fi

    And the same for history

    And the same for biography [say, does A&E want to do a co-branded bookstore, with DVDs?]

    And the same for design, or architecture, or gardening(from May-Sept), or cookbooks, or travel, or all of the above and more…

    And most specifically, for kids: in the less-and-less-hypothetical case where I was taking over a shopping mall, put the kids shop [picture books, beginning reader, plush, games, et al.] in the last remaining ‘anchor’ location and put both Young Reader [10-12] and Teen Lit [12-16] in the two locations just outside – close enough that kids can wander away from parents but far enough so neither set has to shop the ‘kids’ dept. [*ack*, gag me]

    [And even if it’s also in the teen section, there’s a chunk of ‘YA’ & ‘Teen’ lit that needs to be mixed in with the adult stuff – easy to hand, no judgements, cash at the register, thank you]

    While I’ve used the shopping mall as my touchstone [as that is what I, as a child of the 80s, am familiar with] [and damn but the commercial real estate market is depressed: I’ve run numbers. I think I could actually buy a mall] this Concept would work even better with repurposed industrial or office space. I can only imagine what DC’s Old Post Office or an art space like Le Lieu Unique (in Nantes, France) would look like if they were turned over to books.


    The future of retail depends on managing inventory, especially in the face of internet competition. Still, it is easy to open a huge bookstore that doubles as a distribution center; in fact, with a little advance planning you could open up a very small chain that covers hundreds of millions. […which I’ve already posted]

    There are are at least two ways to flatten verticals in retail: Amazon figured out one – sell direct from a warehouse & ship it. You cut out two layers—distributors & retailers—and make it possible to sell direct to customers from a massive inventory.

    IKEA has figured out a second path: sell direct from your warehouse to visiting customers. This also cuts out two layers — a distributor/warehouse (as the store is your warehouse) and shipping via post or parcel service. Amazon’s model is not the only way to lower costs. From point of manufacture to customer fulfillment: physical retail space is not the only or even obvious thing to cut.

    At IKEA, customers go home today with fine, flatpacked Scandinavian designed furniture & housewares. IKEA does so well with this model that their web site, actually (and intentionally) kind of sucks – and more often than not sends you into the store to buy.

    Let me go back to the “massive inventory available direct to customers” part – Chris Anderson called this The Long Tail and characterizes it as an internet phenomenon. However, the long tail is a change not in available books but in customer demand – this new demand is enabled by internet search but not restricted to internet retail. If I, as a retailer, can meet that demand today, then there is no need for a customer to order from the internet. So we need a bigger storefront. Or even a warehouse. This is a logistics problem, and one I can solve.

    Of course, someone is going to come at me with ebooks. You know, I’ve already done that math, and ebooks are great but they’re going to top out at around 50% of the book industry and that still leaves a lot of Billions to be made in retail.

    Further reading and references:

    Wikipedia: Old Post Office, Washington DC
    Wikipedia: Le Lieu unique, Nantes, France
    Wikipedia: Food court

    Reading and Readership in South Korea, 9 Jun 2011: Kyobo Bookstore

    Jonah Lehrer, Wired, 31 Mar 2012: The Psychology of Casinos
    How odd, Jonah Lehrer, The New Yorker, 26 Mar 2012: on casinos – Here’s a recap of the New Yorker article, in case you run into their paywall.
    Alexander Styhre & Tobias Enberg – Spaces of Consumption: From Margin to Centre [pdf]
    The New York Times’ Room for Debate blog: 101 Uses for a Deserted Mall
    Christina DiMartino, Retail Traffic magazine, 1 Mar 2001 – Retail Architecture: Delicious Design
    Mike Janssen, Retail Traffic magazine, 14 Jan 2010: Mall Owners Are Giving Food Courts and Common Areas a Facelift
    Robert Lillegard, QSR Magazine Dec 2011: The New Food Court
    architectkidd, 17 Sep 2011: A Different Kind of Food Court
    Baltimore Sun, 29 Aug 1996 – New ‘town squares’: From senior ‘powerwalks’ to traveling shows, malls fill broad role.


    Can a truly massive bookstore become not only a retailer but a Destination? Or even a Tourist Attraction? How big a bookstore do we need?

Stop adopting orphans.

filed under , 14 August 2012, 20:53 by

An index of my previous columns can be found at


Let me start with one of my personal pet peeves: calendars. A calendar is so utilitarian and boring, it must be hard for you to imagine that anyone could possible harbor a deep-seated hatred of the damn things.

Allow me to educate you:

First, to make room for calendars, I have to take books off of the sales floor. Most often, the books removed will be those missed least, so as directed by my benevolent corporate overlords, I remove anywhere from a sixth to a third of my bargain department [&while the price points are lower, the margins are actually better] [and I’ll also note here that quite a lot of what my customers like to call ‘coffee table books’ are classed as bargain titles, at least that’s how things stand currently]

So right before my biggest sales season starts I have to remove somewhere in the neighborhood of $60,000 worth of merchandise just to make room for a seasonal product. The only reason the trade-off makes sense is that the price points are vaguely similar: about $15. The calendars are thinner, but they don’t stack nearly as well. Call it an even swap —

Though of course this neglects the payroll to remove the books, replace the fixtures, receive & display the calendars, and then go back and unwind the whole mess each February.

Add on to that the customers who do not & will not pay full price for a calendar, and habitually & perpetually wait not just for our annual clearance but for the very last days of our annual clearance so they can buy the calendar for just two bucks.

And that’s fair; everyone is entitled to save money. However, if you wait months after the calendars initially go out, you are not entitled to complain about our selection. We do not stock for the clearance; instead we’re optimizing our selection and merchandising for sales at full price. If you wait, well, you’re taking a chance. (But don’t tell me that ‘in the past’ I’ve had more to choose from – - you’re only pointing out that we used to lose a lot of money, and while as a customer you might want to ‘blame’ us for a perceived lack, we’re doing what we have to… to stay open, among other things.)

While I’m ranting, let me also point out that corporate has me putting out calendars starting in late July and I then have to keep up with the damn things for 7 months and then they go on clearance — and after all that, by the 3rd week of February I don’t particularly feel sympathetic when customers respond, “what, already?” when I tell them we’re sold out.

Calendars are just the tip of the iceberg; let me add onto that journals & blank books, booklights, bookplates, bookmarks, stationary, greeting cards, and “little gifts” — it’s all crap. When customers ask me for them, I personally feel a bit of resentment.

It’s not enough that I stock & sell books. Thousands of books. Hundreds of thousands of books. No.

“Excuse me, where are the cards?”

Oh, I don’t know, maybe a Hallmark store? Why do I have to carry them? Why do you assume I carry them?

OK, so, um books are printed on paper and so are calendars and greeting cards. Fine.

But what about board games? Or jigsaw puzzles? It’s not that I don’t have them, but when people ask, there is never a hint of doubt in their voice, it’s more of an accusation, and the unstated sentiment “I know you are stocking them, book-slave, where are you hiding them?”

Past cards, journals, and games: There are the magazines, the CDs, the DVDs.

The news agent [or newsstand, depending on which version of English one favours] used to be a free-standing, self supporting business. Now, the bookstore is expected to not only adopt this orphan, but to spend more money on the same business, to stock more magazines and more special issues and hang onto them longer and to let any and all customers just hang out and read them for free — because we are a bookstore and that’s what we do.

Record stores used to sell vinyl and tapes and CDs: yet another free-standing and self-supporting business. But now, with all chains and most indies closed, the bookstore is supposed to take up all that slack, and have listening stations in store to let our customers sample albums for free. Because, c’mon, why bother to stock the discs if customers can’t sample them. That’s basic.

The video stores [both sales and rental] used to be stand-alone, self-supporting businesses. Customers might lament that there are so few options left, but it doesn’t stop them from attempting to haggle on price: “$80 for an HBO box set! That’s Robbery!” – yeah, I get the sentiment: I’d love to own that series, too. But the prices are set by HBO, not here in the store, and nothing about “customer service” requires me to take a loss.

From thank you notes to electronic dictionaries to DVD box sets to portable CD players — there is nothing to tie these products [and product lines, and more] to the “bookstore” but that doesn’t stop my customers. “Where are your calendars?” – when asked of me in March – is enough to spike my blood pressure and shave another 2 minutes off of my life expectancy.

It doesn’t stop there. Customers ask me how much it costs just to rent the book. They ask, not if it just might be possible to make photocopies, but rather with every expectation “So where’s your copy machine?” or, one bridge too far, “I need you to notarize this.”

Really? I mean, Really?


One could say that this is ‘my’ fault [in that it is a continuation of trends begun by my corporate overlords long before I began working for them]. I present it to you as an object lesson, a cautionary parable: don’t adopt orphans.

An enthusiastic associate comes to you with a business idea: A new product line. The margins are good, the floorspace required is minimal, we might have to buy in bulk, and on non-returnable terms, but the items are ‘in demand’, ‘sure sellers’, ‘obvious extensions of our core business’

…and stop right there.

Our core business is books and should always be books. If we have space for new product it should always be used for more books and if we figure out how to shoe-horn another fixture onto our sales floor, dammit that had better be another damn bookcase that holds more books.

No one goes to the Strand in New York for the tote bags.

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