Chain Reaction

Philip Sansone, CEO of Book People, Austin's largest indie bookstore photograph by Walt Stoneham

In Fahrenheit 451, Ray Bradbury depicts a future world where the written word has been banned and the state is dedicated to rounding up and burning all contraband literature. Our access to literature may indeed be in danger, and in the near future, at that. But the threat isn't coming from an oppressive government that dispatches "firemen" to our homes to seize our books and toss them onto a bonfire. Nothing so dramatic. The threat lies in commerce and the drive to turn books into just another product to be bought and sold like shower curtains. The threat lies in the death of the independent bookstore.

"What's happening to bookstores is what's been happening to independently owned retailers throughout the retail sector, regardless if it's books, toys, clothes, or whatever," says Michael Donahue, an Austin-based publishers representative who handles accounts for Wertman, Andrews McNeil, Henry Holt, and several other publishing houses. "There's a great homogenization of retail in this country, from sea to shining sea. You go to New York and you see The Gap, The Container Store, Banana Republic, and Barnes & Noble, just as if you're in San Francisco or Birmingham, Alabama. It's about clout and power, and the consolidation of retail under one roof.

"What makes books stand apart -- so far as the threat -- is the control of information, the product itself. That's what should concern people," says Donahue. "It's arguable that we're better or worse off by virtue of not having a choice of flannel shirts or stereos or whatever. But it's a different thing entirely when you're talking about consolidation of power in regards to what we read or what's available to read. That's what's happening."

Today, independent bookstores across the country are failing in large numbers. According to the September 18, 1995, issue of Publishers Weekly, "hardly a week goes by without a sales report of a store going out of business or about to do so." The publication also showed how the indies' share of the market has declined over the past 20 years, from an estimated 58% in 1972 to 19% in 1994.

"I would say that in the last five years, any general bookstore in the country that's gone out of business, the odds are that it went out of business due to... the encroachment of the chains," says Donahue, who has 26 years of experience in the book business, including a stint as manager of the now defunct Garner & Smith bookstore on the Drag. "There are fewer independents in every city that I call on than there were when I started the business."

The chains causing the most damage are Barnes & Noble and Borders. New York-based Barnes & Noble, the older and larger of the two, also owns Bookstop, Bookstar, Scribner's Bookstores,
B. Dalton Bookseller, and a large number of college bookstores. Ann Arbor-based Borders also owns Waldenbooks. Each chain has over 1,000 stores across the country and is expanding rapidly. They often appear in the same city -- usually within a few blocks of each other -- at the same time.

"We try not to step on the independents as much as possible," says Annemarie McCracken, community relations coordinator at Borders Books and Music in Austin. (McCracken is leaving Borders to take a new PR job for the Special Olympics next week).

"We try not to harbor any ill feelings toward any of the independents. We don't want to be seen as the corporate bad guy. We want to come in and be a part of the community," McCracken adds. "I think that there are enough people in Austin to buy books from all the [chain] bookstores and all the independents. I think the whole idea of a book war is kind of silly."

But in the September 3 issue of The Wall Street Journal, the corporate leaders of the two majors made no bones about it: They are at war with each other. And the independent bookseller is feeling the fallout. "It's very bloody, but I'm still hanging in there -- by my fingernails, I might add," says Susan Novotny, owner of the Book House of Stuyvesant Plaza, an independent bookstore in Albany, N.Y.

Since the arrival of the chains, five independent bookstores in Albany have folded, Novotny says. "There was an immediate drop in our sales activity, very immediate. Over the course of the first 18 months up against them, the Book House sustained about a 27% decrease in sales volume at the register."

The same is true all over New York state, she says. "In Rochester, Syracuse, Buffalo -- all of them have had an influx of Borders and Barnes & Noble. They're cannibalizing each other, which is just fine with me except that there are too many of us independents that are caught in the crossfire."

As for Texas, Houston has no independent general bookseller. Taylor's, the last indie general bookstore in Dallas, closed the last of its 10 stores earlier this year, converting a few to ProTech Books, which specializes in computer books, CD-ROMs, and software. San Antonio has one major independent general bookstore left, The Twig, and it recently closed its children's store.

The Local Scene

In the past two years, Austin lost two general bookstores, Europa Books and Deep Eddy Books. Last June, the University Co-op Bookstore sold out to Barnes & Noble. That leaves Congress Avenue Booksellers, which carries both new and used books, and Book People as the remaining two independent general bookstores in the Austin area. While there are some 70 bookstores in town, including the chains, most of the locally owned stores deal exclusively in used books or specialize in a specific genre.

"The main way to survive, apparently, as an independent is to be a niche store," says James Rost, assistant manager of Congress Avenue Booksellers. "This is a general bookstore, that's about the worst way to go when you're out there and have to compete with Barnes & Noble. That makes it super tough. If you select a niche or a category, you have a much better chance."

Barbara Thomas, co-owner of Toad Hall and president of the American Booksellers Association, has followed the trend. "I see across the country the ones that seem to get hit first when a large corporate store opens in a town," she says. "The general store seems to go out of business first. The specialty stores, whether it's children or cookbook or mystery or whatever, seem to be able to hold on."

James Rost, assistant manager of Congress Avenue Booksellsers photograph by Laura Skelding

However, the niche stores aren't immune. Willie Siros, owner-manager of Adventures in Crime and Space, says a focus on mysteries and science fiction brings in both loyal customers and readers who aren't able to find titles at the superstores, but sales haven't been great in the two years his book shop has been open. "We're still not even profitable yet," says Siros. "I can't continue to lose money."

Philip Sansone, president and CEO of Book People, says his store is holding its own against the chains. "Our sales have not gone down, but they have not gone up as fast as we thought they would go up," he says. Book People offers some 300,000 titles, making it one of the largest bookstores in the country, so its size and selection is certainly a factor. Its dedication to a mission also is one of its strengths. Book People, appropriately, takes its name from Bradbury's Fahrenheit 451. In the novel, the "book people" were those who took to the hills and dedicated their lives to memorizing books so literature would not be lost.

"I don't really care who picks out my shower curtains for me and whether Wal-Mart comes in and says, `Here are the 10 shower curtains you can buy in this market.' That's fine; I really don't want to see more than 10 shower curtains," Sansone says. "But books are not shower curtains. Books, in our society, have always had a different value than a product. Our First Amendment guarantees freedom of speech and freedom of the press. It's an extremely vital part of our society. It's information, it's knowledge."

Chained to Fewer Choices

Barnes & Noble and Borders are in the business of selling books, not banning or burning them. They both have very large, very nice bookstores boasting some 150,000 titles each, not to mention compact discs, videos, and CD-ROMs. They both offer coffee and a place to sit and read for a while. They sponsor community events and often have famous authors in-store for book signings. Would it be that bad if our only choices were Barnes & Noble or Borders?

"If we look at the publishing and TV industries as a parallel -- because Americans know television really, really well -- would Americans stand for having only two or three channels pumped into their homes? No, they would not stand for it," Sansone says. "If someone said, `Cable is outlawed, you get ABC, NBC, and CBS, period,' you would have riots in the streets. But in city after city, in state after state, you have Barnes & Noble and you have Borders -- two `networks,' in effect, supplying books to those communities. And there's not a peep out of anybody."

Chain stores are able to offer lower prices by buying in bulk and centralizing their purchasing functions at corporate offices that supply outlets across the nation. "You must take into consideration that there's a handful of people making the judgments on what's sold and not sold," says Donahue. "In the Barnes & Noble organization, there's a hardcover fiction buyer and he or she is really the gatekeeper to all those locations, and what's picked to be sold and what you, as a consumer, have available in the marketplace. I'm not attributing any particular malice or intent to them. All I'm saying is that when there were many more choosers, our options were enhanced. When you had more independent retailers, there was a greater variety."

McCracken counters that the local Borders store has some say in what books it sells. "Ann Arbor is not going to know that J. Frank Dobie is really an important thing and we should have a lot of that in the store, but they give us enough latitude to get that in the local stores," she says.

Pressure on the Publisher

Novotny, who worked several years for a New York publishing company before buying her bookstore in Albany, says publishers are becoming more cautious as to what books are printed, and less willing to take a chance on a new author. "You have the shift of dollars away from independents in all those little venues across the nation," Novotny says. "If you're a publisher, like Simon & Schuster or Random House, the tail now wags the dog. You now have two huge companies that are publicly traded, dictating what books are going to be published."

In order to survive, many manufacturers cater to the whims of the large discount store chains. But that scenario has just recently started to hit home in publishing, and Donahue says many publishers are now falling under the thumb of the chain bookstores. Several publishers now are asking the chains if they will carry a title before deciding whether to publish the book. Isn't that de facto censorship?

"It's not necessarily about stormtroopers burning books in the courtyard," Donahue says. "It can be insidious and even more vile, in that it's unintended."

The chains are more interested in turning a profit than protecting freedom of the press. "Barnes & Noble is a publicly traded company," Donahue says. "Publicly traded companies in the retail sector are held accountable, and don't care if you're in books or whatever. The stock market wants return on equity. You have to turn your inventory... If you're sitting on an inventory that's not turning sufficiently fast, you scale it back to what sells the quickest. And that's what's happening with the chains because they have to please their stockholders."

Michael Donahue, publishers representative photograph by Laura Skelding

But Donahue says the chains are scaling back on their inventory. For example, he questions the claims that the superstores offer over 150,000 titles. "That's bullshit; go out there and count them yourself," Donahue says. "Whose word are we taking on this? It's an advertising claim, it's a marketing ploy." Perhaps, he says, the superstores inflate their claims by having dozens of copies of the latest Tom Clancy bestseller instead of books by dozens of different authors.

However, Shobhan Connolly, corporate communications assistant with Barnes & Noble's corporate headquarters in New York, denies that multiple copies of the same book would count as more than one title. She stands by the chain's claim that it offers 150,000 titles, although she would not say how many of those titles are books as opposed to compact disks, CD-ROMS, and videos. While Borders touts 200,000 titles, only about 132,000 of those represent books, McCracken says.

Sansone points out another effect of filling the ever-expanding number of chain store shelves: Publishers are having to print more copies of each book to keep up with the break-neck expansion. But if those books don't sell, many copies will be returned to the publishers, who will have to bear that cost. That, he says, could sink some small publishing houses.

Donahue says many publishers are being "flooded with returns," a statement supported by the June 15 issue of Publishers Weekly, which reads: "Higher returns than usual this year are wreaking havoc on the balance sheets of many publishers..." The article states that Ten Speed Press had returns of 26% of its books in the first quarter of 1996 -- a 73% increase over the same period last year. Atrium had a 30% return rate -- up 50% from last year.

A Level Playing Field?

Size and wealth have enabled chain stores to bargain for preferential treatment from publishers. For example, the chains are able to bill publishing houses for a portion of newspaper advertisements that feature that publisher's books. According to the May issue of American Bookseller, chains have been "reaping millions of dollars each year" by charging publishers more than the actual cost of the ads. The chains also get money from publishers for placing certain books at prominent locations in their stores, a practice that costs the chains nothing. And several publishers offer subsidies to the chains, allowing them to offer bigger discounts than the independents.

While co-op advertising is available to independents, "the total amounts available to even larger independents were always relatively small, and obtaining them required persistence and perseverance in the face of a barrage of publisher `red tape,' which, while ostensibly for administrative requirements, additionally had the effect of discouraging applications," the American Bookseller article states. Sansone says, for example, that he is still waiting for a response from a co-op bill he sent to a publisher in January.

Thomas, president of the American Booksellers Association, says her organization filed a class action suit against six publishers in 1994 seeking equal treatment. She says the ABA has settled with five out of the six and is still negotiating with Random House. "It's a much more level playing field than it was two years ago," Thomas says. "Publishers have been working to [ensure] that whatever terms are available will be available to everyone and not just certain people. That was part of the lawsuit, so that was part of our settlement agreement... The first year was difficult because it is a practice that's gone on a lot."

It's a common pattern in retailing for chains to seek deals from manufacturers in exchange for their business. The bigger the buyer, the better the deal. Publishers apparently were not aware of the effect this dealmaking was having on independent bookstores, Donahue says.

"Publishing houses are not marketing entities," he says. "Even the best of them remain more editorial driven than market driven, so they've really distanced themselves from the market place. They have philosophically seen it as something that happens apart from what they do, as opposed to being integral to what they do."

Profit Margin Problem

Donahue says the main obstacle facing bookstores is that the prices are fixed by the publishers and printed on the books. Other retailers, whether they sell cars or candy bars, set prices for their market, figuring in a percentage over the actual cost of an item to cover business expenses and to provide a profit margin.

Bookstores don't have that option; they have to sell the book for what's marked on the cover -- or less, since readers have come to expect discounts on bestsellers. The wholesale price of a book generally is 40% below the suggested retail price, so a bookstore makes about $8 off a $20 book. That $8 has to pay the store's lease or mortgage, utilities, wages, and other overhead.

"Even in the best of times, even when I didn't have those chain stores breathing down my neck, it was a very hard business to make money in," Novotny says. "Now it's virtually impossible. All of our margins have been shot to hell in the past three years, dropping from an average of about 4% profit margin to about 1%. We don't make a living at it any more. There's a lot of duct tape and brown rice around this place. But we do love what we do."

Brad Bankston, manager of the comics and science fiction specialty store, Austin Books, says that local independent stores, aside from offering more individual attention to customers than the chains ever could, help make Austin the city it is. He says it would be a shame to lose those unique businesses to the same stores you find in every other city.

"Personally, I don't shop at Best Buy, Wal-Mart, Blockbuster, or any of the big stores. If I want to buy new CDs, I go to Waterloo. If I want used CDs, I go over to Duval Discs," Bankston says. "When I moved to Austin I was roommates with a guy who made it out like it was a rule. [He told me] `You don't eat at Subway, you eat at Thundercloud. You don't go to Blockbuster, you go to Vulcan Video. This is the way it is in Austin.'"