Chapter 2: Profit and Mostly Loss

...and the Value of Independent Bookselling

Welcome, subscribers! I’m very honored to have your attention. In this newsletter, I’m going to throw a whole bunch of numbers and statistics your way as I look at Buffalo Street Book’s books for February 2023 and the year 2021, with some nostalgic glances back at pre-pandemic figures. And then I’ll contrast all that talk of profit and loss with an entirely difficult discussion of value.

BSB’s P&Ls

Let’s start by looking at February 2023, the most recent month for which I have complete figures. February is always a slow month for sales. Our budget forecasted sales of $31,167.

Sales: $33,171

   -Cost of Goods: $18,761

   -Payroll: $11,374

   -Rent: $3545                       

   -Other expenses: $5163

   +gifts: $692

net operating profit = -$4980

Sales includes online and in-store purchases, discounted sales to schools and nonprofits, a small amount of used books, sidelines (all non-book items like stationery and games), and a tiny amount of consignment fees. Gifts include annual contributions from sustaining customers, donations at the register where customers may add a small percentage to their purchases if they’d like, and profit sharing from Bookshop.org (more on that in a forthcoming newsletter).

So this column of numbers starts off on a good note with sales that beat our projections, but by the end of the column, the costs of selling those books have overwhelmed the profits. This month, we incurred a relatively high COG at 56.5% (the cost of buying the books from the publisher expressed as a percentage of the book’s price), a number we’d prefer to be around 53-54%. If we’d achieved a COG of 53%, we’d have saved $1181 meaning our operating profit would still be in the red at -$3799. How else could we have closed the gap? The staff is perennially looking for the magic that would allow them to sell you more books without incurring more costs in labor and inventory.

Grim as those numbers are, they are better than February in 2022, when the bookstore’s net income was -$7136. Some of the improvement came from sales, which were up 6.4%. But—depressingly—the bookstore also saved money on payroll because three staff members were out with covid. It was rough in the back office that month! But Feb 2023 was still worse than Feb 2019. Sales fell from $37,228, a 10.6% drop. That month, the bookstore was only down by -$2247.

How do those numbers look to you? Are you at all surprised by them, or are you nodding along in sorrow and rue?

Now let’s zoom out a bit and focus on 2021. This is the most recent year for which we have industry-wide data from the American Booksellers Association’s ABACUS report, which invites bookstores to participate in a benchmarking survey and then measures individual stores’ performance against others of similar market size and net sales.

How did BSB do? We were just below average in most measures for bookstores in the $500K-999K category. Our net sales were $594,693. In 2021, our cost of goods was 56.5% against an average of 55.2%. Our total personnel expense, which is the expense of a FTE as a percentage of net sales, was 28.9% against an average of 24.8%. Our rent was 7% compared to 6.3%.

Our net income (including covid relief funds but before taxes) was 0.1% against 6.2%. Here's what 2021 looked like across the industry before pandemic aid.

Those are some miniscule numbers there in the bottom row. One comment in the ABACUS report stuck out to me:

An important finding of this ABA study is that respondents that were the most profitable in 2021 derived a significant portion of their profitability advantage from lower total personnel costs along with slightly higher gross margin levels.

BSB will never derive a significant portion of its profits from lowering personnel costs. We are committed to paying the Tompkins County Living Wage, which is currently $16.61. We can and should work harder to lower the cost of goods, but the data is clear that we would only eke out a tiny savings from being more ruthless about books ordered and returned. Stocking and curating books is, after all, the very work of the store, so trimming COG too much also trims sales.

Another observation: the delta between the net operating profit of the most profitable stores and the average for all stores is eye-poppingly large. What accounts for that? Not all bookstores are created equal. Many of them come with built-in advantages that are rarely discussed in the industry and are often invisible to customers. Some bookstores on the chart above can make a decent profit because they enjoy one or several of the following benefits:

●      They are owned by people with wealth who work without a salary and/or contribute capital to the store’s operating expenses

●      They do not pay a living wage to their employees

●      They have no debt

●      They own their building

●      They have a corollary business alongside books, such as coffee, tea, or alcohol

Buffalo Street Books holds none of those perks, and so it worries me when industry reports in Publishers Weekly or panel discussions at ABA conferences don’t attend to these differences. Just as in society at large, we need to make sure we aren’t centering privilege as the unexamined norm. And now let’s talk about what Buffalo Street Books and so many other indies of all shapes, sizes, and mission, get right every time they unlock their doors and flip the open sign.

The Value of Independent Bookselling

Websites work beautifully for buying and selling books. You don’t need to try on a book, or to sniff it for ripeness.

This is why the American Bookseller Association, the trade organization for independent bookstores, started IndieCommerce, the customizable platform that Buffalo Street Books uses for its online sales, which gives customers a real-time look at the inventory of their local store, as well as the ability to special order books that aren’t in stock. It’s also why Bookshop.org exists. Bookshop is a new independent online retailer that aims to take market share away from Amazon; bookstores without a website can open a digital storefront on Bookshop.org

But consider all the other things that an independent brick-and-mortar bookstore—responsive to its customers and energetic in its initiatives—does for its community, all of the things that are valuable but have no price tag.

Discoverability

Online ordering works best when you know what you want, but websites aren’t great at helping you find your next read, unless you are content to stay within the algorithm of bestsellers. The irreplaceable value of a bookstore is that it is perfectly designed for you to discover books in two ways.

What do you do when you enter a bookstore? You tilt your head to the right and start to slide down the row of shelves. Browsing is an overlooked intellectual activity or value, yet it is crucial to the life of a reader. Maybe your eye catches on what you’ve already read (“Ooo, I wish I could read that for the first time all over again!”) and maybe that prompts a thought about a related book you’ve been meaning to read, and you straighten up and zip to another shelf and there it is—your next read. Or maybe you are simply intrigued by a face-out book you’ve never heard of, or a shelf-talker with a magnetic book description. Browsing is not just a prelude to reading; it is itself a kind of reading, in which your mind enters the readerly dimension of books, the space that connects them to each other. It is a speculative, introspective, even imaginative activity.

Substantial, worthwhile browsing happens when books are in physical proximity to one another, and the primary value that a bookstore brings to its customers is the curation of books for their discovery. Walking into a bookstore puts you in the way of serendipity.

The other way to discover books is to talk to a bookseller and get their recommendations. Obviously, booksellers do not get into their line of work for the money; they work in bookstores because they love to read and want to be around books, even when they must put down their books to go to work. They are quietly, deeply knowledgeable; they have expertise not only in the genre of books that they read for pleasure, but also in the reading habits of their community and the larger field of publishing. They are often underutilized. They are self-selected for their jobs, the kind of people for whom matching a reader to a book is a matchless pleasure. What’s the opposite of an algorithm? A bookseller.

Community

Bookstores convene like-minded people over their shared interests. I find it wildly pleasurable to people-watch and eavesdrop in a bookstore. Friends run into each other while shopping, their arms full of books, and soon they are comparing spines and pulling each other over to different sections of the store. Or two people come in together, and maybe they are brand new friends or an almost-couple, and as they browse together they are telling each other the story of themselves over the books they point out to each other.

Bookstore build communities through book clubs, author events and other literary readings, workshops and classes, and philanthropic outreach to other organizations in town. They partner with other businesses, arts organizations, nonprofits, daycares, schools, universities, and libraries. They offer deep discounts to their partners so these organizations can further their missions through books.

Bookstores exuberantly respond to community needs, selling the books that reflect their customers’ lives and histories and desires. I could list dozens of beautifully specific stores, but here are just two. Marcus Books in Oakland, California, is the country’s oldest Black-owned bookstore. Julian and Ray Johnson met at Tuskegee University and shared a love of reading and a belief in self-reliance, so when they moved to California, they helped create a kind of Harlem of the west, publishing and selling books by Black authors at a store founded in 1960 and named for Black nationalist Marcus Garvey. Or take Red Planet in Albuquerque, New Mexico, Earth’s only Native-owned comic shop, meeting the needs of “Indigenerds” everywhere since 2017 with Native-authored comics, books, games, toys and collectibles, as well as hosting Indigenous Comic Con and Wordcraft Circle of Native Writers and Storytellers.

Research has consistently shown that independent bookstores drive traffic to the other businesses in the area. Buffalo Street Books has been an anchor business in the Dewitt Mall in downtown Ithaca for decades. Indie bookstores reinvest money in the local community rather than siphoning it up to a corporate overlord. The ABA has done studies showing that indie retailers recirculate 47.7% of their revenue back into their community, over three times as much as national chains, which recirculate only 13.6%. Indies do create jobs that are desirable even despite their low pay. Buffalo Street Books also employs volunteers and paid interns, including high school students through the Youth Employment Bureau and college students from Cornell University and Ithaca College.

Growing Future Books

Let’s linger on that last point for a moment. Writers have long testified to the education they have earned by working in bookstores, as have editors and publishers. Selling books is a gateway into a literary career, one that begins by reading but is electrified by learning the world of books and thinking to oneself, “I could do that. I want to be a part of that conversation.” Who among the current staff of a local indie might be tomorrow’s new author with an irresistible hardcover on the “new titles” table? Bookstores create the future writers of the books of which you are a future reader.

They also provide passionate support to midlist books from major publishers (all the books that aren’t bestsellers but that form the backbone of a publisher’s list), and lesser-known books from indie publishers and university presses. The practice of handselling a book, when a bookstore employee personally recommends a book to a customer, has turned many obscure books into highly renowned successes. It was indie booksellers who first fell in love with Tinkers by Paul Harding, a slight but powerful novel published by the indie publisher Bellevue Literary Press, and the book’s word-of-mouth readership culminated in the 2010 Pulitzer Prize; would it have reached the Pulitzer committee’s attention without that first, committed fan club? Big publishers know exactly how valuable indie bookstores are to the fate of their books and have done studies to try to quantify the effect of handselling: 30-50% of a book’s sales in its first six months come from indie booksellers.

Erudition and Pleasure

The dry phrase “lifelong learning” doesn’t really capture the dense, rich, bottomless excitement that readers get from books, but it does point to a very real value at the heart of indie bookselling. Bookstores foster the excitement of reading entirely apart from the educational system. They offer a completely different relationship to literature than what we encounter in elementary, high school, and even college. As an English major at a good liberal arts school, I nonetheless graduated college without knowing how to find the next book I wanted to read. School does not prepare you to curate your own reading life. That skill comes only from browsing and talking and buying and reading books outside of school. Bookstores foster a dimensional literacy, the cultivation of your interior self through stories, ideas, and language.

And bookstores teach you about wine and cider. Bookbinding. Antiracism. Playwriting. These are just a few of the topics at recent BSB events. You can start or join a conversation on just about anything at a bookstore. Alongside libraries, independent bookstores are the best way to learn from the everyday experts in your town.

As Helene Hanff wrote to the booksellers at Marks & Company in 84, Charing Cross Road, “if your books cost what they’re worth I couldn’t afford them!” Price and value are two separate things, and both books and bookstores are worth far more than their market valuation. This excess value is invisible, intangible, incalculable. So my question is: how can we illuminate this value to amplify and energize the entire industry of independent bookstores?

The Next Chapter of Open Book

Next month I’ll zoom out even further and take stock of indie bookselling in the wake of the pandemic, and I’ll profile a few bookstores that are leading the way into the future with their innovative business structures. In the meantime, I’d love to hear from you. What are you curious about? What should we discuss? What should I read? Who should I talk to?

Book Recommendations

Helene Hanff, 84, Charing Cross Road: a charming collection of letters that Hanff, a young New York aspiring writer, sent from 1949 to 1968 to the British booksellers who supplied her with her drug of choice. A short, exuberant read. (Fun fact: Helene is a cousin of Jean Hanff Korelitz, author of a great suspense novel about books and writing, The Plot, and whose most recent novel, The Latecomer, which I also loved, is set partially in Ithaca.)

The National Book Critics Circle Award got at least two categories wrong at their awards ceremony last week. The winner in biography absolutely should have been Aaron Sachs, Up From the Depths: Herman Melville, Lewis Mumford, and Rediscovery in Dark Times, a braided narrative about how Mumford helped revive Melville’s literary reputation, the surprising resonances between their lives, and their shared commitment to renewal during crises in modernity. Rarely is biography so relevant and so immersive (full disclosure: Aaron is a dear friend and fellow Ithacan, but still—this book’s creative approach to biography deserves a prize). And the autobiography award absolutely should have gone to Ingrid Rojas Contreras, The Man Who Could Move Clouds. This magical realist memoir is so good I don’t even want to describe it to you and am jealous that you get to discover its pleasures (full disclosure: none. I have zero connection to this author or her book and read it only when I noticed it among the NBCC finalists. It is flat-out phenomenal). Happy reading!

Note that though this newsletter benefits Buffalo Street Books, it represents only my thoughts and opinions, not those of the BSB staff or Executive Board. All errors are, of course, my own. I don’t claim to be an expert, merely someone with a seat at the table and an ongoing willingness to learn about this industry.