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Reading a hard market

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Posted: Saturday, August 23, 2008 6:33 pm | Updated: 10:36 pm, Fri Oct 7, 2011.

Despite a slumping economy and soaring prices for food and gas, people still have to buy those necessities for daily sustenance and getting back and forth to work and school. But they don't have to buy books.

Library use up since economys been down

Around the East Valley and nationwide, booksellers are feeling the pain.

Still, in a strange reversal of fortunes, during this new and challenging retail environment, the small business owners seem to be faring better than the "big box" stores.

Personalized service that provides more value to cash-strapped customers, knowing community likes and dislikes and having the flexibility to make and execute decisions on the spot give the small shops big clout in an increasingly difficult economy.

On Thursday, bookselling giant Barnes & Noble, which has nine East Valley stores including subsidiaries B. Dalton and Bookstar, reported profits down 15 percent for the quarter that ended Aug. 2. Sales at stores open at least a year fell 4.7 percent compared with the same period in 2007.

Rival Borders, which has eight East Valley stores including subsidiary Waldenbooks, won't release financial reports until later this week. But the 1,100-store chain said in May that sales for the quarter that ended May 2 were off 1.5 percent from a year earlier.

"As was the case with nearly every other retailer, the challenging overall consumer environment hampered sales performance in the first quarter," Borders Group CEO George Jones said at the time. "I am pleased, however, that even within this difficult retail climate, we were able to manage inventory well, begin to aggressively reduce expenses, and end the quarter with better bottom-line results than would have been expected in this type of environment. In fact, we worked with a third-party adviser to develop a plan to reduce our annual operating expenses by $120 million, giving Borders a new, more effective base operating model going forward."

The new model? Borders slashed 274 jobs and put itself up for sale.

Barnes & Noble sniffed - but ultimately snubbed - a purchase, choosing instead to nurse its own business.

Barnes & Noble CEO Steve Riggio said Thursday that the company is scaling back store openings, and he expects full-year sales at existing stores to be down by a percentage in "the low single digits."

NEW VS. USED

Sales of new hardcover books at Changing Hands Bookstore in Tempe also were down significantly in spring, said co-owner Gayle Shanks. But sales of used books were up by about the same amount, she said.

The longtime Tempe bookstore sells both new and used books, and Shanks said sales of used books have surpassed sales of new ones.

"Our used book sales are topping the charts," Shanks said. "Thirty-five years ago we started as a used bookstore, so our heart is in used books and recycling."

Shanks said sales of paperbacks and gift items are also up.

Used books and paperbacks are much cheaper than new hard-bound books, so dollars were down about 10 percent April through June, she said. But so far this quarter, total sales look much better than last, and by fourth quarter, when holiday shopping season kicks in, Shanks expects to be topping last year's take.

Adding events that attract families, stocking up on high-value, low-cost gift items, and making the store inviting for people to sit and read, whether they buy a book or not, are proving profitable, Shanks said.

"People require more of a store than product," she said. "Its hard to part with dollars (in a down economy). You have to provide a good experience. If your store is clean, beautiful, interesting and fun, when people come in, they get value."

Shanks also said she can react fast to changing times - launching promotions, displays or events and reversing course in a snap if they aren't working, something the big-box stores with national contracts can't do.

"We can change something in 10 minutes," she said. "If books on display at the front of the store aren't selling, we can move them. When you buy books for a corporation, you buy for 300-plus stores, you make decisions for displays or discounts for 300 stores."

Knowing her customer base and tailoring stock, events and promotions to appeal to a target audience has been a successful strategy for Barbara Peters, owner of The Poisoned Pen in Scottsdale.

"We're having our best summer in years," she said. "I was sure as the economy soured, we'd see growth, and we did. It's all about the personal touch."

Peters anticipated the impact of the credit crunch on disposable income and revved up her event schedule, even adding a Saturday night "potluck series," inviting customers to bring food and booking favorite authors for informal discussions and book signings, even scheduling communal PBS watching.

The potlucks have been attracting as many as 150 people at a time, she said, and provide an enjoyable evening's entertainment for the price of a book.

LOW-COST ENTERTAINMENT

If a few friends come together, bake a batch of cookies and buy a book for $25, they've saved a bunch over the cost of dinner and a movie.

"It's a lot of entertainment for a small price," Peters said.

Other small-shop owners said they, too, promote their stores as neighborhood gathering places and alternatives to pricier entertainment options.

Tucson-based Bookmans, which buys and sells used books, has six stores, including one at 1056 S. Country Club Drive in Mesa.

Sales at the Mesa store were up 5.5 percent for the quarter that ended June 30, said Sean Feeney, Bookmans' executive vice president.

People know they are welcome to come in, hang out, see what's new on the shelves and, if they find something they want to take home, buy it for a fraction of the new-book price, he said.

That's key especially with gas prices so high and discretionary income so low, Feeney said.

"You need to be focused as a retailer on what value you can create for customers to get them to get in a car and do business with you," he said.

At Half Price Books, a Dallas-based company with two Arizona stores, near Superstition Springs Center in Mesa and near Paradise Valley Mall in Phoenix, defines itself as "a browser's bookstore," said Kirk Thompson, company spokeswoman.

Half Price Books buys and sells used books and new books that it can get for half the original retail price or less, Thompson said.

The company has stores in 15 states, but each location acts like a small shop, getting its flavor and stock from the neighborhood, she said, For example, the stores don't have electronic inventory systems like the big boxes have, so people have to look at shelves to see what's in stock.

"It's a treasure hunt," Thompson said. "People come in and spend time throughout the store. Families come in for an evening of entertainment. That's happening more and more frequently."

The sagging economy has led lots of avid book lovers to sell books back to the store as fast as they can read them, she said. Even some best-sellers hit the shelves within days as used books, just so cash-strapped book lovers can purchase more reads, she said.

"People say, 'I hate to give these up, but I need the cash,' " Thompson said. "It's overwhelming. Some stores just can't get the books on the shelves fast enough. But it's been great for us and great for our customers. It's bringing in great merchandise, and that's bringing in more customers."

SALES SOARING

Sales at Half Price Books' two East Valley stores in July were up 4.6 percent from a year ago, Thompson said, "which is great for any retail establishment, especially a bookstore."

The number of used books the stores bought from customers is up 11 percent from a year ago, with the Mesa store "buys" increasing nearly 20 percent, she said.

Also fueling the used-book demand, lots of people are saving all their book-budget cash and turning to libraries to satisfy their reading cravings.

Circulation was up 20 percent at Scottsdale Public Libraries for the 12 months that ended in June, said library director Rita Hamilton. And in July, 27 percent more people checked out books and other entertainment options than in July 2007, Hamilton said.

"I think the economy is a factor," she said. "People are looking for low-cost entertainment, and this is a perfect place to take the family."

The city is investing in lots more best-sellers, which fly off the shelves, and more DVDs, she said, to try to keep up with demand.

That's not a big worry for the local stores.

Peters said libraries, and even Internet booksellers like Amazon.com, are not competition for bookstores. Anything that encourages people to read is a boon for business, she said. And even if people borrow a book or buy one online, they want to discuss it with others who have read it, and that brings people into bookstores that provide personalized service and neighborhood discussion groups, she said.

And avid readers, once inside a bookstore, are likely to find something else they just have to buy.

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