Written by Jennie Wang
Nowadays, how often do people deliberately walk into a bookstore with the intention of purchasing a specific book? Do they walk past shelf after shelf, navigating through aisles to reach the right section, then sweep their eyes over the spines of each book until they spot the desired title? In a society boasting increasing technological advancements, bookstores are becoming less and less of a necessity. Instead, a plethora of other, more convenient alternatives exist. These include options such as downloading e-books, purchasing books online and having them delivered directly to one’s house, or ordering books to pick up at a certain location. So what does the future look like for bookstores? Are they still going to exist 20, 30 years from now?
To answer these questions, one must first consider some general information concerning bookstores, such as how many and what kinds of bookstores exist today. Next, one should look at the economics of owning a bookstore, such as the costs and benefits of keeping a bookstore open. Finally, using this information, one can make conclusions about how bookstores have survived for this long and whether or not they will continue to survive in our current society.
First, what is the market for bookstores like and how does the bookstore industry work in the United States? Companies in the bookstore industry are responsible for retailing books, newspapers, and magazines purchased from large manufacturers, either domestic or international, and selling them directly to the public through brick-and-mortar stores. Currently, the US has 17,729 bookstores employing a total of 74,132 workers, with the largest US companies being Barnes and Noble Inc., Follet Higher Education Group Inc., and Books-A-Million Inc. In 2021, the market size of the bookstore industry is $9.5 billion, an amount that had been decreasing at a 5.7% rate every year, on average, starting from 2016. This decline in revenue is due to many factors, namely, rising competition from online retailers and an increasing popularity of e-books. Additionally, in an attempt to prevent the spread of Covid-19, many bookstores temporarily closed their shops, causing total industry revenue to decline by 10.8% in 2020 alone, although a small rebound in the near future may occur (“Book Stores Industry in the US”).
Being aware of these challenges, one might wonder how it is that bookstores make a profit. Overall, a bookstore’s decision to stay open depends on its benefits and costs. The costs consist of variable costs such as inventory, employee salaries and benefits, advertising, bank payments, and taxes; and second, fixed costs, which include rent and utilities. The benefits consist mainly of book sales, which means that finding an accurate retail price is very important. Bookstores generally purchase their books from the publisher or manufacturer at a 40% discount from the retail price. This means that if the store buys a book for $6 from a publisher, it will sell the book for $10 to their customers. The $4 profit is then used to cover their costs. In the end after subtracting all expenses, the store is left with $.20 net profit, so a 2% profit margin. From this example, it is clear that a bookstore has very low profit margins. This explains why some bookstores choose to open up cafes in the building or sell other merchandise in addition to books such as shirts, bags, and bookmarks (Laube, 2021).
To understand the cost-benefit situation more clearly, it is helpful to look at a specific example. Politics and Prose is an independent bookstore located in Washington D.C. that employs 50 workers with hourly pay and health benefits. The store has about 8,000 customers that pay a $20 annual membership fee. Based on their sales data from 2008, the store made $6.8 million in sales, with $3m coming from hardback sales, $2.2m from paperback, $250,000 from used books, and the rest from miscellaneous sales. The costs they had to pay were $3.9m for books, $1.6m towards payroll, and an unspecified amount towards general expenses. The store earned a total of $73,000. Though the total net profit of a bookstore can be very low, as long as the revenue from book sales covers the variable costs, the store stays open (Heath, 2009).
Knowing that revenues of bookstores are decreasing every year and understanding that bookstores make a low profit, it’s necessary now to ask whether or not bookstores will last far into the future. An interesting fact to note is that though stores have declined in number by 12% from 2012-2017, the American Booksellers Association (ABA) reports that membership in bookstores has actually increased by 13% in the same amount of time. Based on various pieces of evidence, one can conclude that bookstores and printed books are not going to be disappearing anytime soon. First, internet superstores have made information on books more widely available, causing consumers to turn towards bookstores and the people they encounter there for recommendations, be that employees or fellow book shoppers. According to Oren Teicher, chief executive of the ABA in 2017, “As the volume of books published increases, the importance of a bookseller that can recommend titles has never been greater.” In contrast to the low priced, algorithm-based suggestions of the internet, brick-and-mortar stores offer people a chance to interact with a community of expert readers (Ang, 2017). Second, a younger generation of business owners is in the process of replacing more traditional bookstore owners, with ideas and new methods to attract consumers. For example, brick and mortar stores offer services that online stores don’t. In 2017, a bookstore located in the Bronx called the Lit Bar included a literary-themed bar in their store. So while book sales brought in 40% of the revenue, sales from drinks provided a return of 200% (Ang, 2017). Third, though e-books were first assumed to be the catalyst that would bring an end to the demand and production of physical books, evidence says this is not so. From 2008 to 2010, though sales for e-books increased by 1,260%, they stagnated in 2015. Sales from print books still make up 80% of the book market, with physical books bringing in $4 billion revenue in sales against the $770.9 million from e-books in 2018. This is because e-books represent a large decline in utility and a marginally small gain in efficiency. Although e-books are more convenient and less expensive, they do not contain some of the unique and valuable qualities found in physical books. (Anagnos, 2018).
There is still further proof that bookstores remain a vital piece of society. Publishers are aware that the market for books is a sustainable industry and are not hesitant to show it. Penguin Random House recently invested $100 million towards doubling warehouse sizes and increasing the distribution of books, with HarperCollins and other major publishing companies following suit (Alter, 2015).
Bookstores are challenging to run, but it is clear that they are necessary and important. Though internet stores provide consumers with the option to purchase e-books or deliver books straight to their houses, bookstores offer an opportunity to be in a cozy, comfortable, and welcoming space surrounded by books, which a bibliophile can then display on a bookshelf or store in a bookbag. He can rest one on his lap and flip through its pages and breathe in its scent. Physical books are special, and the distributors of these hidden gems, the common bookstores that we so often drive past, are here to stay.
References
Alter, A. (2015, September 23). The plot twist: E-book sales slip, and print is far from dead. Retrieved February 25, 2021, from https://www.nytimes.com/2015/09/23/business/media/the-plot-twist-e-book-sales-slip-and-print-is-far-from-dead.html?_r=2
Anagnos, C. (2018, December 22). Why e-book sales are Suddenly falling: Chloe Anagnos. Retrieved February 25, 2021, from https://fee.org/articles/as-independent-bookstores-make-a-comeback-e-book-sales-take-a-dive/
Ang, K. (2017, July 10). Thanks, Amazon Prime! Now independent bookstores are booming. Retrieved February 25, 2021, from https://www.marketwatch.com/story/thanks-amazon-now-indie-bookstores-are-booming-2017-01-25
Book Stores Industry in the US – Market Research Report. (2021, February 4). Retrieved February 25, 2021, from https://www.ibisworld.com/united-states/market-research-reports/book-stores-industry/
Heath, T. (2009, June 28). Bookish Doyennes Nurture D.C. Landmark. Retrieved February 25, 2021, from https://www.washingtonpost.com/wp-dyn/content/article/2009/06/26/AR2009062605010_3.html?sid=ST2009062702615
Laube, S. (2021, February 10). Bookstore economics 101 -. Retrieved February 25, 2021, from https://stevelaube.com/bookstore-economics-101/