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Bookselling

The Economics of Used Books, part 1

December 17th, 2013  |  by  |  published in Blog, Bookselling, Serendipity

bookstore-pic

The first of an infrequent series of bookstore economics

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A couple of years before he died, Peter Howard of Serendipity Books, in Berkeley, was hired to appraise a small, general used bookstore in the greater Bay Area. Peter had appraised other bookstores and liked to use that platform to express his views of bookselling. The result is a rare look inside bookstore economics, with the conclusions and observations of one of the most knowledgeable, respected (yet simultaneously disliked), and successful booksellers in the trade.

The shop in question, which I’ll call Ye Olde Bookshoppe, had been open just over seven years at the time of the appraisal. There were two partners. When Peter visited, the store had 45,000 titles in stock, about evenly divided between hardcovers and paperbacks. What follows are extracts from the analysis section of the final appraisal.

Start Up

The partners had been involved in bookselling in various forms for ten years. Together, they pooled $5000 in cash, plus 15,000 books acquired at an average of $1 per and 10,000 books acquired for $2,000. “20 cents each!!!” writes Peter. So 25,000 starting books acquired for $17,000, mostly at garage and estate sales. Their average retail price was $7.

Walk-in Traffic and Internet Sales

“Ye Olde is a general used book store catering to the walk-in public, humble and modest readers, and scouting dealers,” Peter wrote. “The bookstore is not heavily patronized nor sustained by university faculty or students. There is no separate section for selling rare books or first editions.”

“Ye Olde’s rent increases every year. They are forced to gross more every year, though market conditions for open-premises used bookstores HAVE NEVER BEEN WORSE SINCE THE END OF WORLD WAR TWO” (emphasis in the original), due to the Internet. “More than 50 similar booksellers in the Bay Area have closed recently, only one has opened… Booksellers with 20,000 good and valuable books go home, put them online in one or two years, and average $25,000 or more in profits. No overhead. Ye Olde’s owners cannot go home. One cannot sell $7 books online and earn a living and support two families….Ye Olde serves its local, not very academic, middle-class neighborhood only. At the minimum price of long hours and endless scouting. And they have kids.

“The 3000 books Ye Olde has listed online, selling for an average of $40 (when sold), are locked in the back room, and are falling over somewhat from lack of attention, though they are in numerical order by computer listing, rather than by any other useful order (by subject, by author). They sell only one or two books each day.

“These 3000 books are not available to the public. Ye Olde does not have enough space, money, or staff by which they could both offer books on line and yet house them in a manner so that they are simultaneously available to curious walk-in traffic. It is the worst of possible situations, not the best. [In a random sample], there were cheaper copies online of all but one of the online books surveyed. The time and effort expended in putting these books online resulted in a tremendous waste of money. Moreover, the books online are locked upand cannot be seen by walk-in customers who would happily pay shelf price because most walk-in customers do not comparison shop at used book stores.”

Book Buying

When a partner is not working, “he spends his discretionary time scouting for books that he might sell for more than he pays. There are no other stores that sell for prices averaging less than Ye Olde. Therefore they must scrounge flea markets, benefit auctions, thrift stores, house calls, over the counter purchases. They cannot buy books from other book stores.”

Here are Ye Olde’s financials. All numbers are rounded to the nearest thousand

Year Rent Overhead Books Bought Gross Sales Cost of Goods Sold Ending Inventory Taxable Profit/Partner Actual Take-Home
1 27k 9k 27k 96k 34k 19k 13k 11
2 28 8 31 100 29 23 17.5 15.5
3 29 13 37 123 37 27 22 20
4 30 15 42 140 41 29 27 26
5 32 18 43 156 42 32 32 30.5
6 33 21 60 196 59 33 41.5 41
7 35 26 59 204 57 35 43 42

Note: The actual take home is less than the taxable profits because Ye Olde invested some of its profits to growing its inventory. Actual take-home is per partner, so in year 7, the two partners each made $42,000.

Commenting on Ye Olde’s financials, Peter noted that bookselling is a “trade that takes a lifetime in which to master little, suffer much, and on the average, earn less than any union laborer.”

Cost of Goods Sold

“The only variable in an honest book business is the estimated cost of books sold,” proclaimed Peter at the top of the section on inventory. “Cost of books sold is computed either by the coding and recording of the cost of every single book (Serendipity’s method) or by equating the cost of books purchased with the cost of books sold in a fiscal year. Ye Olde records the cost of books sold on an annual basis as the amount of money spent on books that year, and report that figure annually on federal tax returns, to the truth of which they swear. This method is allowed by the IRS, especially when the average price realized is small and steady records are maintained of checks written, deposits made, bills paid. Their manual bookkeeping is extremely hard and time-consuming work.”

Ye Olde had a very low cost of inventory, averaging just 29% of sales for the first seven years.

Profits and Margins

“The more expensive the book, the greater the profit in absolute dollars, if not the greater ratio of cost to selling price. Ye Olde pays 29% for books sold (less the cost of books UNSOLD). Simply enough, they make $7 on a $10 sale, before overhead. But dealers who pay 80% instead of 30% and who average $50 a sale, instead of $10 per sale, make $10 profit. Most antiquarian booksellers average 60% for cost of books sold, making $20 gross profit on a $50 sale.

“Ye Olde is at the very bottom of the food chain that is the book business. They sell the cheapest, least profitable type of book, and only that type of book, and have absolutely no means by which to get ahead, except by inching forward, their success depending entirely upon long hours (read: good health, lifetime commitment); the willingness of others to sell them books at the cheapest values in the book business; a rent that does not interfere with their ability to pay based on their gross; yet a large enough space to contain an endlessly growing stock.

“Almost all dealers leave a portion of their profits within their business, in order for their businesses to grow. Ye Olde struggles to increase their inventory a bit every year. This means taking less money out of the business. If the business does not grow and the inventory increase, Ye Olde will fail.”

“Inventory is the stock of material for sale, and the cost to the bookseller of that stock. Ye Olde buys books by check and with cash…. Ye Olde records sales with a cash register and in a salebook daily under lock and key, entering by day and summarizing by month, distinguishing between taxable and non-taxable (dealer) sales. The account book is maintained in pencil and appears absolutely straightforward. Single entry bookkeeping, manual. Currently $200,000 in annual sales. Two employees gross $100,000 per annum each.

Each partner works an average of 3.5 days per week in the store, often until three or four hours after closing.

Bottom Line

Peter’s conclusion, at the end of the appraisal: the store is worth $35,000 – the value of its inventory, at cost, even “though it is worth less than its cost….The cost of used goods does NOT REFLECT the value, as COST is likely to be too generous, and does not take into account the number of books residual in inventory that have declined in value, and have been repeatedly de-selected as candidate purchases by customers. Ye Olde must constantly remove books for which they paid money because they have not sold, making room for new arrivals that might have a better chance of selling. Yet booksellers’ stocks, so long as they remain on the shelves, may not be depreciated, legally.

“A business may have goodwill of value, calculated by the cost of replacement to the relevant community: e.g., a new barbershop (find one that will give you a shave with a straight razor!!) or a new hair salon. There are startup costs to recover, there is value in having “good deed” foot traffic (sponsoring ball team, donating to local fundraising auctions, internships underwritten). Dentists and veterinarians sell their practices and get a little more extra for the good will of their good name and their patient lists in the community. The notion of good will having value is NOT APPLICABLE when the good will is dependent upon “key man” personality or depth of friendly knowledge, or in the circumstance that the businesses has no likely future beyond the present owner. Used bookstores are always representative of and extensions of their independent owners’ personalities and utterly dependent upon their specific knowledge, non-transferable, earned over a lifetime.”

Next up (when I have time!), some comments on the conclusions herein.

 


Serendipity Books Sale Schedule

October 26th, 2013  |  by  |  published in Bookselling, Serendipity

NOVEMBER 15 UPDATE: SALE IS OVER. ALL MERCHANDISE IS SOLD

Eureka Books  has acquired the closing inventory of Serendipity Books, in Berkeley. Serendipity was one of the great antiquarian bookstore on the West Coast for 50 years (established in 1963) [read the New York Times’ obit for the store]. Over five weekends in November and December, we will be selling the remaining books – at least 60,000 titles left over from countless great libraries.

Serendipity specialized in modern first editions – twentieth century literature – but bought good books in all fields. The late owner, Peter Howard, was a great supporter of booksellers and frequently gave them better discounts that anyone. While the final closing of this literary landmark is a sad event, we want to continue Peter’s generosity, by offering wonderful books at wonderful prices, starting at $5 per book and dropping from there.

[NOTE: The poetry, drama, and Canadian sections have been sold in their entirety]

Here’s what a professional book scout (someone who makes his living buying books to sell to other booksellers), who we enlisted to help organize the books, has to say about the books included in this sale:

“I’ve been helping out at Serendipity, sorting and offering opinion. I wish [people] would recognize that [Eureka Books] doesn’t have the time or space to cart away all the “good books”… There will be thousands of $100+ books, hundreds of authors’ first books, great bibliography, etc. at (at first) $5 a pop. There are great bargains to be had and anyone thinking that this is something other than an extraordinary buying opportunity is missing the boat.

Follow the sale on Facebook for the latest information

We will also be selling book cases, metal library shelving, desks, book ends, at least 100 pieces of art, prints, broadsides, ephemera (particularly related to printing and poetry), finely bound sets, reference books too numerous to count, rugs and carpets, etc.


Peter B. Howard on Bookselling

October 22nd, 2013  |  by  |  published in Bookselling, Serendipity

Peter Howard was one of the top antiquarian booksellers in the United States, with a heyday in the 1990s, when his firm, Serendipity Books in Berkeley, frequently grossed more than $2 million per year with just four or five employees. As we have been packing up the store, we have come across some of Peter’s observations on bookselling:

“There is no possible, rational prediction that a given used or antiquarian book will sell for a given or specific price in a specific period of time.”

“A large collection of used books is difficult and often impossible to sell at a predictable or desired price.”

“Booksellers are entrepreneurs. The success of their business depends primarily (or entirely?) upon acumen honed over time; their special knowledge (absorbed over years), and their force of will. None of these elements is transferable; none can be bought and sold; occasionally they can be hired. Such entrepreneurs are vulnerable to illness, uncontrollable social or personal vicissitudes, changes in economies of scale, and bad judgment.”

“In a downward, declining or changing market, ownership of one’s building is an absolute guarantee of survival… The book market place is changing utterly, more so than in any time in history, this hour, this day, this month, this year.”


Never Be a Bookseller

October 17th, 2013  |  by  |  published in Bookselling, Serendipity

photo(61)

 

 

Perhaps my favorite book so far, found on the Serendipity shelves. Alfred Knopf published it in an edition of 2000 copies (none for sale) in 1929. This charming pamphlet begins: “Never try to write, but above all never have anything to do with publishing or the book trade”; this is the only parental advice I can remember.

Garnett, remembered perhaps most today for his novel Lady Into Fox, republished by McSweeney’s, also owned a second-hand and antiquarian book shop and was a partner in the Nonesuch Press.

Garnett concludes with advice for his sons, ” ‘Above all, never be a bookseller. That is the worst of all: the hardest work and the worst paid. ‘ Yet sometimes I wish I were back in the shop….”

For the complete Serendipity Chronicles, visit http://eurekabooksellers.com/serendipity/


Serendipity Books

October 5th, 2013  |  by  |  published in Blog, Bookselling, Feature, Serendipity

serendipity-iron

SALE IS OVER. ALL MERCHANDISE IS SOLD

It’s official now, we are the final custodians of Serendipity Books, in Berkeley, one of the great bookstores on the West Coast. After a series of auctions, shelf sales, and wholesale sell-offs, we recently negotiated the purchase of the remaining contents (probably more books than can be currently found inside the four walls of Eureka Books).

NOVEMBER 15 UPDATE: SALE IS OVER. ALL MERCHANDISE IS SOLD

Follow the sale on Facebook for the latest information

For all the posts about Serendipity, visit http://eurekabooksellers.com/serendipity/

Serendipity’s iconoclastic owner, Peter B. Howard, predicted this end to the store more than a decade ago.

Talking to Nicholas Basbanes, who was working on the book Patience and Fortitude, Peter said that “ultimately he would like to see the business pass on to a trusted colleague, but if that possibility does not develop, then he is confident that ‘the books will be liquidated in ways customary to the book business…’ Bookstores, he said, ‘are extremely fragile things, and are almost always one-generational, at least in the United States. They reflect the personality of the founder. I have made my business so big and so complex that no one in their right mind but me would ever want to take the responsibility for it.'”

In the end, no one bookseller did take over the business, but many of Peter’s close colleagues in the rare book trade took on pieces of his legacy, and we’re glad we were able to be part of that.


Now Hiring: Assistant Manager, Used Books

August 13th, 2013  |  by  |  published in Bookselling, Feature

help-wanted-sign

Open Position: Assistant Manager, Used Books

The primary responsibility of this position will be supervising the used book division of the store, including buying used books, cataloging, Internet sales, packing and shipping. This is in addition to the sorts of work we all do: customer service, cashier duties, and general bookstore maintenance, such as shelving and organizing.

Applicants should have bookstore or closely related experience. We are especially hoping to find someone familiar with the buying and selling of used books, but people with experience regularly selling anything on eBay, Etsy, the flea market, or similar venues are encouraged to apply.

To apply (and this is the first test for the position), drop off or mail in a resume and cover letter. The cover letter should provide a summary of your experience and qualifications for the job. We’re in the book business and that means paper. Electronically submitted resumes will get about as much attention as e-books, which is to say the delete key is just one index finger away.

Please don’t spend much time telling us how much you love books or how you’ve always longed to work in a bookstore. We’ll assume that’s the case, otherwise you’d be applying to work at BevMo. If you are also applying to work at BevMo, good luck. Let us know if they carry Cocchi Americano because we can’t get it in Humboldt County. But we’re not looking for someone who is simply looking for yet another retail job.

This is not a cush job, but it is an interesting one (we think). We work hard, all day. You will not have any time to read on the job (a common misconception about bookstores), though we expect you to be the sort of person who reads a lot in your off hours. You will also not have time to be bored. You will be challenged constantly and faced with surprisingly complex problems that need to be solved on the fly. On the same day, you may interact with a homeless person, an avid reader looking for advice choosing a title for a book club, a teenager trying to decide what to read after The Hunger Games, the curator of a prestigious library, and the odd billionaire (and aren’t they all odd?).

As the person overseeing used books, you will negotiate the purchase of used books, which often means house calls. A valid CA driver’s license and insurance are required. You will also need the ability to select the books the store needs and calculate a fair price for them without access to any tool other than your brain (training will be provided). You should feel comfortable negotiating deals and working by yourself, at someone else’s house. (We never carry cash and take prudent precautions, but that kind of work is not for everyone.)

You will be expected to work at least one weekend day as well as some evenings during tourist season and between Thanksgiving and Christmas.

The position starts at $12 per hour, full time plus bronze-level health benefits beginning in January 2014. (This benefit package is part of ObamaCare. If you oppose that, please understand that if you are hired, you may find yourself compromising your principles). Like most bookstores, we trend liberal but we are a store and by definition, capitalist, so we actually make some effort to cater to Republicans and Libertarians. We are also more likely to talk about the Giants than the Democrats.

The application period starts now and ends when we hire someone. Procrastination is not a qualification for this job.


Bookselling & Bartending

May 3rd, 2013  |  by  |  published in Bookselling, Local Authors

Eureka Books at NightEureka Books co-owner Amy Stewart‘s essay on author-owned bookstores, with a booze twist, just appeared in Publisher’s Weekly, a trade journal for the book industry:

Doesn’t it seem like bookstores are the latest fashion accessory for authors? We should be shopping for a sensible handbag that doubles as a carry-on, but instead we’re out buying bookstores. Ann Patchett has one, as do Louise Erdrich, Jonathan Lethem, and Garrison Keillor. Larry McMurtry owns several, although I hear he’s consolidating…. [read on]


Four More Days!

October 28th, 2012  |  by  |  published in Bookselling, Bookstore

Last two days!

If you’ve been too busy in the last 23 days to check out the Eureka Books 25th Anniversary Sale, now is the time.

Nearly everything in the store is 25% off.  That’s 25% off new books, used books, 2013 calendars, t-shirts, blank journals, greeting cards, maps, prints, and more.  This is our way of saying thanks for supporting us for 25 years.

But also, to be honest, we want to get you back in the door if you haven’t seen us lately. While Eureka Books is still a great source for rare, out-of-print material, we also carry new releases and current bestsellers.  If you don’t find what you’re looking for, we can (probably) order it, even if it’s out-of-print.

So come by in the next two days and take advantage of the sale.  Drop your name in the hat* to win a $25 gift certificate (no purchase necessary).  Spend 10 bucks and we’ll give you a coupon that’s good after the sale is over.

*Not an actual hat, but you get the idea.

 


Presidential journals

October 18th, 2012  |  by  |  published in Bookselling, Bookstore

We are fresh out of binders full of women, but we have a great selection of blank journals, including these timely gems.


A Rant about The Little Bookstore of Big Stone Gap

August 30th, 2012  |  by  |  published in Bookselling

Wendy Welch, the owner of The Tales of the Lonesome Pine Bookstore in Big Stone Gap, Virginia, is looking for someone to run her shop for two months while she embarks on a book tour to promote her forthcoming book, The Little Bookstore of Big Stone Gap. Applications are due September 1.

As gigs go, this one is not especially attractive. As Ms. Welch told Shelf Awareness: "Our shop is in a small rural community of 5,400 and it doesn't do
enough trade to hire someone in at a living wage. Plus we have two dogs
and three cats on staff. So what we're offering is complete room and
board for a person or couple (from laundry soap to the occasional pizza
delivery) in return for him/her/them watching the shop for October and
November, when most of the 'road trip' activities for the book take
place."

So you get to work five days a week and take care of an incontient, senile cat, in exchange for a box of Tide and pie now and again from Pizza King. Awesome!

But it could be useful experience–in how NOT to run a bookstore.

By Welch's own account (I read an advance copy of the book, to be published on October 2), she is a lousy bookseller. The job, after all, is to SELL books. If after five years, you don't sell enough books to pay yourself–let alone an employee–and you have to get a teaching job for the benefits (as Ms. Welch did), you aren't a bookseller, you are a hobbyist.

As hobbies go, entertaining neighbors as Ms. Welch and her husband do, in a book-lined room of their house, is a pretty good one. And if Ms. Welch had decided to leave it at that, more power to her. But she is about to go on the road promoting a book extolling the wonders of her late-in-life career as a bookseller, and she presumes to speak for all of us in offering her opinions.

This post, for what it's worth, is a rebuttal of those ideas. I left the book on the plane, so I can't quote from it (nor should I, as
it has yet to be published), so the quotations are from the Tales of the
Lonesome Pine store blog, which is pretty much like the book.

Ms. Welch's basic idea is that bookstores are idyllic community resources free from the taint of lucre. "What WE booksellers do is important…WE represent an open
market of free ideas, with value tied to meaning more than money," she writes (emphasis added, to show that she pretends to talk for all of us). In another post she says, presumably implying vows of poverty and years of penance done at the store, "Bookslinging is a hard way of life, but boy it’s a good one….WE’re like nuns and monks…"

I reject the notion that going into bookselling should be like taking a vow of poverty.

Consider the bigger picture, using Ms. Welch's forthcoming book as an example.

In the book, she mentions (brags?) that she sold the rights for the book for more than she expected. So she got paid to write the book and it will sell for $24.99 per copy. That's not just love, is it?

Her agent took 15%. Again, money, not (just) love.

The editor who bought the book gets a paycheck, health benefits, paid vacation, and a retirement contribution, as does the publicist, marketing manager, etc. They aren't working for love.

Nor is company that will print the book, nor are the employees who work the presses. Nor is the company that manufactured the paper. They all expect to get paid. And rightly so.

So why is it that Ms. Welch believes that the bookseller at the end of the chain between author and reader should work for love and the occasional pizza and not worry about making money? It's an insulting and intellectually bankrupt view. That attitude may well be why she doesn't make money selling books.She blames her store's dismal finances on the small population of her town. But somehow that town supports two pizza parlors, a McDonalds, a Dairy Queen and several dozen other businesses whose owners, I'm pretty sure, are making money, writing paychecks, and paying their mortgage. (Ms. Welch's funding for her bookstore adventures came from a lucky real estate purchase and sale).

Ms. Welch believes that she has created a "community" bookstore and says that mission in life is to be "to be [a] lifelong advocate for books and the people who sell them." As long as they don't expect to buy a house or send their kids to college while selling books.

She believes her unprofitable store is so important to her town that she can't close it for two months while she goes on a book tour. She thinks the town loves her store because so many people tell her how wonderful it is (and most of those comments are transcribed in her book).

But here's a secret: I've been in hundreds of bookstores around the country–some good, a few great, a handful dismal, and too many simply drab. And in every single one people tell the owner, "This is such a wonderful bookstore." It's what people do. They say nice things to shop owners. Shop owners believe them at their peril. If your shop is really valued by the community, those well-wishers take the next step and give you some of their hard-earned money.

Eureka Books in neither the oldest (at 25 years), nor the most financially successful of the seven established bookstores in our rural county of 150,000 people. However, I think we have earned the adjective "community" because the community supports us and we in turn support the community.

Here's how we have invested back into our community, in tangible, measurable ways, over the last quarter century (many of our bookstore colleagues have invested even more):

Salaries paid to employees: Roughly $1.25 million
Books bought from local residents: A million dollars, give or take
Rent and other goods and services bought locally: Close to $2 million
Taxes paid: A million dollars, give or take
Books sold: 750,000 volumes.

I agree with Ms. Welch that bookstores are a "place where people…unite in
believing that commercial viability isn’t the sole criterion for ranking
an idea’s importance." She seems to take it a step further, believing the commercial viability itself is not of any great importance.

I disagree. I want a community with a well-funded police force and good roads. I want the men and women who work here to make a decent wage. I want our local landlord to have enough money to keep up this important historic building. And I want our community to be exposed to the broadest swath of ideas in the world.

None of that is possible if we, as booksellers, don't run our businesses well and profitably. Successful local businesses give communities character. The more successful we are, the more taxes we pay, the more employees we can hire, and the better our community will be. And the more successful we are, the more books pass through our hands into the hands of readers, which in the end is the point. To me, that's what a real community bookstore is all about.

And if I ever have to leave town for two months, I won't ask someone to do my job for free. I'll hire an extra employee, find a pet sitter for the cat and the chickens, and let my replacement buy their own pizza and laundry detergent with the living wage I'll pay them.

–Scott Brown


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