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FEEDING THE DINOSAURS:
ECONOMIC CONCENTRATION IN THE RETAIL BOOK INDUSTRY
Jon Bekken
Department of Communications and Journalism
Suffolk University, 41 Temple Street
Boston, Mass. 02114-4280
[log in to unmask]
617/573-8142
Abstract:
While bookstores play the vital role in book distribution, little
attention has been paid to concentration and conglomerate ownership in the
retail book trade. In 1958, one-store book firms accounted for nearly 80
percent of book sales; by 1982 that figure had fallen to 26 percent even though
single-store retailers continue to account for a majority of all bookstore
outlets. Today the chains control 54 percent of bookstore sales. Buoyed by
discriminatory discounts and publisher-subsidized advertising campaigns, the
chains' dramatic growth seems likely to continue, despite the fact that they are
less profitable than independent booksellers. The chains' marketing orientation
fits well with changes in the broader publishing industry, as publishers seek to
rationalize operations in order to improve the bottom line. As books become
just another commodity, sold through increasingly centralized and monopolized
channels, access for alternative and minority voices is being foreclosed.
AEJMC Qualitative Studies y March, 1996
y Feeding the Dinosaurs
FEEDING THE DINOSAURS:
ECONOMIC CONCENTRATION IN THE RETAIL BOOK INDUSTRY
The book trade, Walter Powell notes, "has long been a neglected American
institution."[1] Although the industry as a whole has undergone dramatic
changes in recent decades, little scholarly attention has been paid to the
evolving structure of the book industry, and particularly to the retail sector
that continues to play the vital role in distribution of trade books. The
increasingly dominant position of the bookstore chains has drawn much less
attention than have similar developments among book publishing firms.[2] This
paper examines the still-emerging patterns of dominance in the retail book
sector and the collusion with leading publishers that facilitates them, and
briefly discusses the implications for more democratic access to the
not-so-metaphorical marketplace of ideas.
It has been clear for some time that the book publishing industry is
highly concentrated. As Maxwell J. Lillienstein, general counsel for the
American Booksellers Association, noted a decade ago,
In 1958 the 50 largest trade book publishers accounted for 65
percent of all trade book sales, none with an overwhelmingly
dominant
position. By 1984 five trade book publishers accounted for an
astounding 35
percent of trade book sales....[3]
Through subsequent mergers and acquisitions the four largest American
publishers accounted for sales of 24 percent of domestic and export sales of all
books of all types in 1987 (the 1992 economic census data has not yet been
released); while the top 20 publishers accounted for 62 percent of all such
sales. These percentages refer to books in all distribution channels, from
bookstores to textbooks to mail-order book clubs.[4] Four firms --
Bertelsmann, Time, Inc., Reader's Digest, and Random House -- accounted for 40
percent of all general interest books sold in 1987. And Ben Bagdikian estimated
six years ago that the six largest publishers accounted for more than half of
all U.S. book sales, leaving the other 2,500 to 25,000 (depending on whether one
counts marginal publishers) firms to divide the remains among themselves.[5]
"To fail to recognize a high degree of concentration in the book publishing
business in the face of such evidence," Lillienstein concludes, "is to ignore
the obvious."[6] Others question the significance of such figures, arguing that
publishing remains highly competitive. As evidence, they point to the large,
and growing, numbers of active publishers and the proliferation of new entrants
to the industry.[7]
Given the wide diffusion of printing establishments and relatively low
costs of production, it is not in fact prohibitive for an individual or small
business to begin publishing. Without access to distribution channels and the
resources to market their products, however, such publishers must remain
marginal. Under capitalism access to cultural industries, Nicholas Garnham
notes, is largely controlled through oligopolistic controls over distribution
channels: "It is cultural distribution, not cultural production, that is the key
locus of power and profit."[8]
Industry Structure
Publishers distribute books both to national and regional distributors
and directly to bookstores and other accounts. In trade publishing, most
bookstore orders until recently were placed directly with publishers, but
slightly more than half of retail book sales now pass through distributors.
However, the larger book chains buy books in huge quantities direct from
publishers (at deep discount) for distribution to their individual stores
through centralized warehouse facilities.[9] Mass market paperbacks are
distributed primarily through "independent distributors" (independent of the
once-dominant American News Co.) which evolved to service news stands and other
non-bookstore retail outlets, but now service many bookstores as well.
Wholesalers generally offer booksellers narrower discounts than do publishers.
However, many bookstores use wholesalers for special orders, in hopes of faster
service, or to consolidate several small orders for larger discounts and reduced
shipping costs.[10]
Books are sold at discounts typically ranging from 20 (short-discount)
to 48 percent (55 percent to distributors) on a returnable basis, in hopes of
encouraging booksellers to place larger orders and to order titles that they
otherwise might not carry. (Few bookstores can carry more than a sampling of
new releases, let alone a comprehensive selection of the hundreds of thousands
of titles in print.)[11] Publishers also offer cooperative advertising plans on
selected titles, through which they subsidize advertising costs based upon
stores' purchase either of that title or of the publisher's entire line. And
publishers offer selected book outlets (primarily bookstore chains) additional
promotional payments to ensure favorable display, position and even store
endorsements.[12]
Books are sold through a variety of channels, most notably through
bookstores, college stores, or direct to consumers, libraries and schools.
Industry statistics, however, are not compiled with the needs of researchers in
mind. Sales data is reported either by type of book (trade, religious, etc.),
by distribution channel, or by some combination of the two. The Census of
Retail Trade reports on bookstores with paid employees, but only at five-year
intervals and after long delays (and in much less detail than that offered
through the 1982 economic census). And the American Booksellers Association
surveys member bookstores, but excludes the larger chains from its
(non-representative) sample.[13]
The most useful source of industry data is Book Industry Trends,
compiled by the Center for Book Research. These statistics, however, are not
without their limitations. Bookstore sales are subsumed within a broader
category of "general retailers" (also including book sales through supermarkets,
drugstores, discount and department stores, newsstands and other retail
outlets), while remainders are grouped with "other" sales. In 1993, sales
through general retailers accounted for some 44 percent of domestic book sales
(followed, distantly, by sales through college stores, direct to consumer, and
to schools).[14] However, a significant portion of these new book sales,
especially those involving mass market paperbacks, are through non-bookstore
retail outlets.[15]
In 1992 the average bookstore responding to an American Booksellers
Association (ABA) survey had annual sales of $621,936 (up nearly three-fold from
1981 figures), a 38 percent gross margin, and an adjusted net profit (after an
allowance for unreported owners' wages) of 1.9 percent of sales.[16] (Profit
margins have fluctuated sharply in recent years. A 1981 ABA survey found an
average profit of 0.9 percent of gross revenues, down from nearly 4 percent in
1977. But in 1985, the ABA found profits averaging 3.3 percent of sales.[17])
These figures mask substantial variance in individual store performance. The
ABA's 1992 survey found profits ranging from a loss of 8.9 percent on sales to a
high of 12 percent (the range is -6% to 19.5% if owner's compensation is
included with profits).[18]
The number of bookstores has continued to rise in recent years, and many
markets are believed to be saturated. In addition, bookselling has
traditionally been under-capitalized, and many operators are finding themselves
ill-equipped to respond to competition from national chains, the rapidly
emerging superstore sector and discounters.
In recent years booksellers have faced fierce competition from
discounters, competition their margins are generally too narrow to match.
Indeed, in some instances booksellers complain of books being sold through
discounters at prices lower than it costs them to obtain the same titles at
wholesale.[19] Chains such as Barnes & Noble and Crown Books discount most
titles, and discounting is increasingly common at discount stores (Wal-Marts and
the like) and other non-bookstore retailers as well. The industry estimates
that at least one-fourth of all paperbacks purchased are bought at discount.[20]
Both independent and chain bookstores have been forced to respond. One of the
primary ways in which the chains initially responded to discounters was through
increased emphasis on remainders and discounts. B. Dalton and Waldenbooks began
discounting in the 1980s, cutting prices on best-sellers and selected other
titles and opening discount subsidiaries to compete with the discounters
head-on. B. Dalton's foray into discounting was disastrous, crippling the
chain's profit margins and leading its owner to put it up for sale.[21]
Waldenbooks did somewhat better with a discount program targeted at repeat
buyers, but is now part of Borders Books, bought in early 1993 to give parent
Kmart a stronger presence in the book superstore field (the combined
Borders-Walden Group was spun off last year as an independent firm). Although
remainders (unsold titles offered at nominal prices to clear publishers'
inventories or in anticipation of a paperback release) are in theory available
to any bookstore on equal terms, in practice they are sold in such large lots
that only chains or wholesalers can hope to bid on them directly. Independent
booksellers can and do purchase remainders through wholesalers, but the chains
inevitably enjoy substantial advantage.
In sum, book retailing was buffeted in the 1980s by increased
competition, particularly for the best-selling titles that have long been the
industry's bread and butter, and by steadily increasing costs. The result is
that despite rapidly rising total sales volumes (about 8 percent per year),
profits fell as chain retailers expanded their presence in the industry.
However, while many independent bookstores were forced out of business, the once
widely anticipated dominance of the B. Dalton and Waldenbooks chains has not
developed -- at least not in the expected form. While the bookstore chains
occupy the commanding heights of the retail book industry today, they have not
done so by pursuing their original vision of blanketing the country with
standardized mall-based stores offering a relative handful of standardized
titles. Instead, the leading chains are shrinking their mall store divisions
and refocussing on "superstores" offering large selections, discounts on
selected categories, author readings, coffee bars and a panoply of services they
once disdained as antiquated. This restructuring has permitted the bookstore
chains to maintain and expand their market share, although their economic
viability absent continuing subsidies from publishers remains to be
demonstrated.
It is by no means clear that the bookstore chains reached their present
position by being more efficient or better serving readers' needs. Indeed,
despite economies of scale and the ability to boost their margins through
in-house publishing subsidiaries and high-margin cafe operations, the chains
appear to have higher operating expenses and to be less profitable than
similarly situated independents (the four largest chains reported an average
loss of 1.5 percent on sales in 1993, and a modest net profit of 0.6 percent in
1994 -- down from 0.8 percent in 1992).[22] Without infusions of tens of
millions of dollars from capital markets and parent firms their ambitious
expansion programs might well have sunk under a mountain of debt. And
independent booksellers have repeatedly charged that book chains receive
preferential treatment in delivery, cooperative advertising payments and
discount schedules in violation of anti-trust laws.
The Bookstore Chains
In 1958, one-store book firms accounted for nearly 80 percent of all
sales of general interest books, and the four biggest chains accounted for only
11.6 percent of bookstore sales. By 1972, single-store firms' market share had
dropped to 58 percent, but only one bookstore chain had as many as 100
stores.[23] The 1982 Census of Retail Trade reported a four-firm concentration
ratio of 26.8 percent. The four largest firms operated 1,587 stores with
combined sales of $107.4 million; the 50 largest chains, with 2,332 outlets,
accounted for more than 45 percent of all bookstore sales. There were, in 1982,
646 chains operating 3,887 outlets. But only nine chains operated more than
fifty bookstores, and the overwhelming majority operated fewer than five.[24]
By 1987, the top four bookstore chains controlled 34.6 percent of bookstore
sales, and operated 2,322 stores; the 50 largest firms controlled 53.6 percent
of bookstore sales, operating 3,256 of the country's 11,076 bookstores.[25]
That year #3 Barnes & Noble bought #2 B. Dalton from the Dayton-Hudson
department store chain (Barnes & Noble has since added the #8 [in 1987]
Doubleday and #10 Bookstop chains to its holdings), leaving Crown Books a
distant third, ahead of fourth-place Books-A-Million, which gained that rank by
purchasing #4 Bookland in the early 1990s. Kmart, meanwhile, bought the surging
Borders chain of book superstores in October 1992, and then merged Waldenbooks
into the Borders division before spinning the entire operation off last year as
part of corporate restructuring.
Federal Trade Commission figures indicate that in 1987 the 'big three'
controlled 45 percent of trade bookstore sales, while a 1994 consumer research
study found that 54 percent of non-juvenile books bought from bookstores were
bought from chain outlets, the first time the chains accounted for a majority of
sales. (Bookstores, however, accounted for only 46 percent of book purchases,
with book clubs accounting for another 18 percent and discount stores, food and
drug retailers, used bookstores and other outlets accounting for the
balance.)[26] Comprehensive government statistics are not consistently gathered
or reported. Instead U.S. Census retail book statistics include
general-interest, religious and college book stores, even though these form
distinct markets. Census Bureau figures show the four largest chains (of some
7,700 bookstore firms) controlling 41.3 percent of retail bookstore sales in
1992, and the 20 largest firms accounting for just over half of total bookstore
sales..[27] Were college stores excluded, the top four's market share would
certainly be much larger.[28]
Barnes & Noble
Largest of the bookstore chains is Barnes & Noble, which bought B.
Dalton in December of 1986 from the Dayton-Hudson department stores for a price
estimated at between $250 and $325 million. At the time Barnes & Noble was
privately held by president Leonard Riggio and Vendamerica B.V., the U.S.
subsidiary of the Dutch retail conglomerate Vendex.[29] Barnes & Noble had been
the country's third-largest bookstore firm, operating a thriving mail-order
business, 33 discount bookstores, 142 leased college bookstores, and Supermart
Books, which serviced 153 book departments in drug stores and supermarkets.
Other Barnes & Noble activities include wholesaling remaindered books,
proprietary publishing (books published for sale exclusively through Barnes &
Noble outlets), and Missouri Book Company, a used college textbook operation.
Barnes & Noble revenues for 1985 were $225 million, less than half the $538
million in revenues brought in by B. Dalton's 798 stores that year.[30] B.
Dalton was founded in 1966 by the Dayton-Hudson department store chain, building
a reputation for combining effective marketing with a selection comparable to
many independent booksellers.[31] But in the wake of new competition from
discounters, operating margins sunk from a high of 10.5 percent of sales in 1981
to less than 5 percent in 1985.[32] Profitability continued to fall under
Barnes & Noble ownership, and the company is in the process of shrinking its
mall-stores division, shedding 96 mall stores in the last two years, while
opening 142 superstores.
After spinning off Software, etc. (operating 700 computer software
outlets with annual sales of $500 million since its merger with the Babbage's
chain in 1994), Barnes & Noble's college division (156 college stores), and
Supermart Books Distributors, Inc. (servicing supermarkets and drug stores),
Barnes & Noble went public in 1993 -- selling stock to raise funds to reduce its
substantial debt (much of it stemming from the B. Dalton purchase). Between
them Vendex and Riggio continue to hold 37.7 percent of Barnes & Noble stock
(which operates the Barnes and Noble, B. Dalton, Bookstar, Bookstop, Doubleday
and Scribner's chains, as well as Barnes & Noble's mail-order and proprietary
publishing businesses) and retain control of the now-independent
subsidiaries.[33]
In 1994 Barnes & Noble reported sales of $1.6 billion, operating 966
stores (698 mall stores and 268 superstores). In an effort to improve its
shrinking margins, the chain has been expanding its proprietary publishing
operations (largely low-cost reprints of literary classics which have fallen
into the public domain, but also new editions of out-of-print self-help titles
and original books commissioned by the chain); while Barnes & Noble-published
titles accounted for about 3 percent of chain sales in 1994, vice president
Steve Riggio says they will account for 10 percent of sales in a few years.
Operating profits remain modest, rising from 2.5 percent in 1992 to 3.1 percent
in 1993 (FY ending Jan. 29 1994), though restructuring and expansion costs
resulted in losses of $6.2 million over the three years. But operating profits
slumped to 1.6 percent in 1994, strained by the continuing costs of closing mall
stores and opening new superstores. Financial results for 1995 (ending Jan. 27
1996) are not yet available, although overall sales rose 22 percent from 1994
levels, reaching $1.98 billion. Superstore sales accounted for 68 percent of
revenues, and comparable store sales in the superstore outlets continued to
increase even while same-store sales in the stagnant mall sector fell 3.8
percent.[34]
Standard & Poor removed Barnes & Noble from its credit watch after the
stock sale; shortly afterwards Forbes pointed to the "shrinking profit margins
and red ink" stemming from Barnes & Noble's intense competition with Borders,
Crown and Books-A-Million to dominate the superstore business.[35] But other
analysts see a brighter future. Barnes & Noble's corporate report points to the
company's transformation "from a very mature mall-based bookseller to a dynamic
'superstore' operation," while Paine Webber had said the focus on superstores
should enable the company to put its "erratic" earnings history behind it, but
lowered its rating from buy to neutral at the end of 1995 -- sparking a next-day
10 percent fall in B&N stock prices.[36]
Borders Group
In 1984 Kmart purchased Waldenbooks, then the country's largest
bookstore chain (since relegated to second place by the merger of B. Dalton and
Barnes & Noble), from the Carter-Hawley-Hale department store chain. Founded in
1933, Waldenbooks was the fifteenth largest specialty store chain in the
country, operating more stores -- located in shopping malls and similar
high-traffic locations -- than any other bookstore chain and accounting for 15.2
percent of all bookstore sales.[37] Kmart bought Waldenbooks for $300 million
as part of controversial diversification efforts which saw Kmart expand from its
traditional discount store business to specialty retailing ventures including
drug, shoe and home improvement stores (Kmart recently sold off the Borders
Group and other specialty stores as part of restructuring efforts to concentrate
on its faltering core business).[38] In announcing the Waldenbooks acquisition
to stockholders, Kmart reported:
our analysis indicated that the book business was an above
average growth business, particularly for a large operator...
Waldenbooks'
information distribution network is... one of the most advanced in
the
industry and our new book return distribution network allows us to
return
books from all our book store locations to the publishers in a more
cost
effective manner. These are important behind-the-scenes keys to
profitability in the book business.[39]
Waldenbooks was best known for its marketing orientation. In 1984 Vice
President Bonnie Predd boasted that Waldenbooks "decided to violate the canons
of bookselling and treat books like marketable merchandise ... to market books
like toothpaste and laundry detergent."[40] This effort involved redesigned
stores, theme promotions, "book clubs" (offering discounts to repeat purchasers
of genre fiction), extensive advertising campaigns, and MTV-like book promotions
on video monitors in selected stores. (Publishers, of course, footed the bill
for most of these promotions.)[41] Waldenbooks continues to use extensive
point-of-purchase displays, discount pricing on selected titles, a "Preferred
Reader" frequent-buyer program offering discounts and rebates to Waldenbooks and
Brentano's customers (and an associated affinity credit card which gives credit
towards future book purchases based upon volume of billings), and other in-store
promotions to boost sales. (The Preferred Reader program also generates a
valuable database that the chain can use for targeted direct mailing and other
promotions.) Among Waldenbooks' in-store promotions is the "Waldenbooks
Recommends" program -- a single title racked in front of cash registers to
encourage impulse buying. These books are selected not for literary merit but
because the chain feels they have particularly wide-scale appeal. In the
mid-1980s publishers paid $3,000 per title per week to participate in the
program.[42]
Yet despite this aggressive marketing, disappointing sales revenues
forced Walden to "temper" its once-aggressive expansion program -- opening fewer
than 100 new outlets in 1989, and beginning to close stores in the early
1990s.[43] Waldenbooks had developed a reputation for carrying fewer titles
than other bookstores and allowing new books only a few weeks to demonstrate
their sales potential before returning slow-moving titles to publishers for
credit. Although backlist (books published more than six months before) sales
had accounted for nearly two-thirds of Walden sales in 1980, that figure was
trimmed to 35 percent by 1986 and the chain was considering dropping two-thirds
of its remaining back-list titles.[44] Waldenbooks' approach was widely
perceived to have transformed the industry. The chains, the Wall Street Journal
reported, push "sure-fire winners to the detriment of most of the other 40,000
new hard-cover titles that come onto the market every year."[45] Although all
chains "concentrate primarily on commercial books... Waldenbooks in particular
is known for a merciless lack of patience" with new authors and other slow
sellers.[46]
In 1987, the chain operated 1,179 Waldenbooks outlets (including 50 U.S.
Coles stores bought that year from the Canadian chain); seven Waldenbooks &
More, eight Waldensoftware, 28 Waldenkids and 18 Brentano's outlets; and
serviced book departments in K Mart stores.[47] (Waldenbooks converted most
Brentano's outlets into Waldenbooks after buying the chain in 1984, but later
began opening new Brentano's as an up-scale mall store brand enabling the chain
to operate two bookstores in selected malls.[48]) In 1992 Kmart added Borders
Books -- a small but rapidly growing superstore operator -- to its portfolio.
Borders superstores feature a substantially larger selection of books and music
(an average of 128,000 books and 57,000 CDs) than its chief competitor, Barnes &
Noble, reflecting management's origins operating the large, full-service
independent bookstore from which the chain was built in the 1980s. Under Kmart
ownership, Borders grew from 19 to 75 stores (while shrinking Waldenbooks from a
peak of nearly 1,300 stores to 1,127 at the close of fiscal 1994 -- further
closings are underway).[49]
The Borders acquisition marked a dramatic change of course. While the
Waldenbooks approach dovetailed nicely with publishers' publicity and promotion
campaigns for the leading new titles, it could not respond to consumer demand
for a broader selection and for access to titles published more than a few
months before. Waldenbooks' mall sales were stagnant when Kmart bought Borders,
and the chain was barely covering its expenses. But Kmart had difficulty
raising the capital to finance Borders' aggressive expansion, and under investor
pressure it sold Borders in two 1995 stock offerings for nearly $245 million,
substantially less than it paid to purchase the chains. The now-independent
Borders Group operates bookstores under the Borders, Brentano's and Waldenbooks
names, as well as the 10-store Planet Music chain.
The Borders-Walden group reported losses of $61.2 million in 1993 (after
a $142.8 million restructuring charge associated with the closing of several
stores), and a profit of just $20.9 million in 1992 (1.9 percent of sales).
Profits were healthier in 1994 -- $64 million, 4.2 percent of sales -- after the
closing of 200 unprofitable Walden outlets and increased superstore sales.
However, Borders management slashed overhead expenses, reduced staffing levels
and revamped its re-ordering system for the mall stores, which account for the
bulk of operating profits.[50] Borders reported a $211.1 loss for 1995
(including a $201.8 million write-down of goodwill) despite increasing sales to
$1,749 million (reflecting a 65.7 percent increase in sales in its superstore
division, but a 5 percent decline at mall outlets).[51] The mall and
superstore divisions have radically different operations. More than two-thirds
of Borders' book sales are of books that sell only one copy (or less) per store
per month, requiring larger inventory and relatively slow stock turn. But the
majority of mall store sales are of best sellers and other impulse items, and
over 90 percent of sales are from the chain's top 15,000 titles.[52]
While Borders remains unprofitable, it is highly regarded by analysts.
Alex. Brown & Sons "recommend[s] aggressive current purchase" of Borders stock,
while Goldman, Sachs & Co. rates it a "moderate outperformer... in the early
stages of an exciting growth phase." Donaldson, Lufkin & Jenrette gives Borders
Group an outperform rating, attributing its performance to "a well trained staff
focused on providing the customer with the best experience in this segment...
employee empowerment and a culture attuned to success." Borders hires most
workers on a full-time basis, requiring them to pass book or music knowledge
exams before being hired. A substantial majority of workers have college
degrees. But while the stores' highly trained workforce may well be central to
Borders' prospects, there is growing evidence of employee dissatisfaction.
Workers at Borders' Central Philadelphia superstore are in the process of a
National Labor Relations Board election after the Industrial Workers of the
World submitted representation petitions signed by 72 percent of store workers.
Borders management responded with a series of captive meetings designed to
undermine support for unionization, and sent an email message to all Borders
managers alerting them to the IWW organizing drive. The message backfired at at
least one store when it found its way to workers, some of whom called the IWW in
to organize their store. Borders workers start at $6.50 an hour, although
full-time workers receive health insurance coverage. Meanwhile, in 1994
Borders' three top executives received compensation packages ranging from
$247,420 to $861,639, and held Borders stock worth more than $22 million dollars
(excluding long-term stock options) as of Dec. 14, 1995.[53]
Crown Books
Crown Books, a rising star a few years ago, is now a distant (and
down-sizing) runner-up with just $283.5 million in sales (down from $305.6
million the year before) and 172 stores at the close of 1995 (down from 240 in
1993). Crown continues closing stores as it converts operations from its small
strip-mall outlets to the larger SuperCrown format, though it recently backed
off plans to withdraw from the Houston market. (At 12,000 to 35,000 square feet
SuperCrowns are much smaller than the other leading chains' superstores; regular
Crown outlets run between 2,000 to 3,000 square feet.)[54] Crown discounts its
entire stock and operates clusters of stores in and around seven large cities
(Washington, D.C., Los Angeles, Chicago, San Francisco, San Diego, Houston and
Seattle), concentrated to maximize advertising productivity. The chain
experienced meteoric growth in the early 1980s, but was hit by the growth of
competing discounters and pre-emptive discounting by other chains.[55] Crown
Books is controlled by the Dart Group (which in turn is controlled by Herbert
Haft), which owns 51.4 percent of Crown stock. Dart also owns Trak Auto (an
auto parts chain), Total Beverage Corp. and 50 percent of the Shoppers Food
Warehouse chain.[56] Crown nearly collapsed in 1994, riven by a high-profile
battle between founder Robert Haft and his father, who holds a controlling
interest in the bookstore chain. The younger Haft was ultimately forced from
Crown Books, though not without winning a $34 million jury award (currently
under appeal) for wrongful dismissal; the faltering chain's sales have been
tumbling ever since and Crown executives have spent much of their time
addressing what the annual report terms "extensive" disputes involving the Haft
family.[57]
Crown sells books, magazines and computer software; discounting its
entire stock from 10 to 35 percent. Stores are located in low-rent areas,
clustered in metropolitan areas for concentrated advertising and distribution.
Crown originally offered only a very limited number of titles, relying on
discounts to draw patrons and high-volume sales to make up for margins narrowed
by discounting. By stocking only best-sellers and other "sure-fire" books,
Crown held its return rate down to ten percent, far below the sector's typical
one-in-three returns ratio. Crown and the imitators it spawned transformed the
industry in the 1980s, undermining the viability of the narrow selections and
list prices that characterized many bookstores. But in the face of increased
competition from other discounters and superstores, Crown began opening
SuperCrown outlets a few years ago, which combine discounting with selections
more comparable to those in other chains' smaller superstores, and aggressively
closing smaller stores.[58]
Six years after Robert Haft opened his first Crown Books outlet, the
ABA's American Bookseller published a study on the impact of Crown's 30
Washington, D.C.-area stores on local booksellers. Although Crown contended
that it did not compete with other bookstores (a claim echoed by all the
chains), instead attracting people who would not ordinarily buy books, ten
small, suburban booksellers had been forced out of business by competition from
nearby Crown outlets.[59] Booksellers reported sales down by 35 to 60 percent
over previous levels in Crown's wake. Of 16 independent suburban stores to
survive, only nine were healthy -- none competed directly with a Crown
outlet.[60] Within Washington, D.C. proper, some stores close to Crown outlets
survived, although four local chains accounted for ten of 13 affected
"independent" survivors. The ABA report concluded that to survive competition
from discounters stores needed either a large selection, a high-traffic
location, or a specialty inadequately served by the chains.[61] But it is far
from clear that Crown itself will be able to survive competition from Barnes &
Noble, Borders and Books-A-Million.
Books-A-Million
The most profitable of the superstore chains is Books-A-Million, a
regional retailer which is quickly closing in on Crown Books. B-A-M sales for
1994 were $172.4 million, up 40 percent from the preceding year (1995 sales have
not yet been reported, but sales through the third quarter were up 37 percent).
The chain operates 126 stores in 17 states, including 80 smaller mall stores
under the Bookland name and 46 superstores under the Books-A-Million and Books &
Co. (in Dayton, Ohio) names, and also owns American Wholesale Book Company.
Books-A-Million only recently emerged from the shadows as a regional bookstore
chain, catapulting itself into the ranks of the leading chains by developing a
string of superstores in the South and buying the Bookland chain (which was the
fourth largest bookstore chain in 1987, operating 73 stores). It bought the
two-store Books & Co. chain for $3.3 million in 1994.[62]
Like its competitors, B-A-M is expanding its superstore operations --
aiming at 69 stores by the end of the year -- while trimming its mall operations
to 72 stores. But unlike its competitors, Books-A-Million has largely avoided
expensive store closings and restructuring, reporting the highest profit margins
of any major chain, at 4.7 percent in 1994. B-A-M raised $67 million in two
stock offerings in the early 1990s (the founding Anderson family retains
majority ownership) to pay off its debt and finance new expansion. While
Books-A-Million is far behind market-leading Barnes & Noble and Borders, its
strong southeastern base has made it a regional powerhouse. When Alabama won
the Sugar Bowl in 1993, the Birmingham-based chain persuaded Sports Illustrated
to publish a special edition featuring the team by agreeing to buy 200,000
copies, non-returnable. Books-A-Million lures customers in with deep discounts
on best-sellers, but sells most books at full price. Its superstores offer about
68,000 titles, substantially less than most Barnes & Noble and Borders outlets,
but feature a large selection of regional titles.[63]
B-A-M superstores give prominent space to tables of books at deep
discount (40 to 90 percent), organized by areas of interest (rather than by
price, as is the policy for bargain books at most chain operations). The chain
offers its own frequent buyer program, the Millionaire's Club, offering B-A-M
customers 10 percent discounts, and a Read & Save program for Bookland customers
where they receive a $10 rebate for every $100 spend in those stores.[64]
However, while B-A-M stock continues to do quite well, some market
analysts have begun to cast doubt upon the company's long-term prospects as the
larger Borders and Barnes & Noble chains invade B-A-M's southern small-town
base, which the chain long had to itself. Barnes & Noble, in particular, has
targeted the South for new superstores. Some analysts believe Books-A-Million's
heavy reliance upon best-sellers (which account for about a twelfth of sales,
about twice the level of Barnes & Noble) make the chain particularly vulnerable
to publishing trends. The small to mid-sized cities where B-A-M is concentrated
"can't support the competition," says Turner Investment Partners portfolio
manager Bill Chenoweth, explaining why he sold the fund's 30,420 shares. Munder
Capital Management is also skittish about B-A-M's ability to survive heightened
competition in its core markets, selling about half of its 322,000 shares.[65]
Rounding out the top five is the Lauriat's/Encore combination resulting
from Lauriat's purchase of the Encore bookstore chain in late 1994. Lauriat's
bought the 94-store Encore chain for $18 million and also the 13-store Book
Corner chain. The resulting 153-store chain focuses on smaller, neighborhood
stores throughout the New England and mid-Atlantic areas, though it also
operates a few superstores. Lauriat's operates stores under the Lauriat's,
Royal Discount, DeWolfe & Fiske, Encore and Book Corner names. The chain is
privately owned by Thomas H. Lee & Co., a buyout fund which also owns General
Nutrition Centers, Continental Cable and Chadwick-Miller, a housewares and gift
importer. Lee formerly owned Snapple Beverage Co., EquiCredit, and several
other firms.[66]
There are hundreds of smaller bookstore chains, most confined to a
single metropolitan area with fewer than five outlets. In 1986 only two of the
fourth through twelfth largest bookstore chains operated even 100 outlets -- and
one of those was a franchise operation (Little Professor). Combined, those
chains accounted for only 7.7 percent of total estimated book store sales, about
one-fourth the market share enjoyed by the three dominant firms.[67] A number
of smaller chains also exist, ranging from special-interest chains featuring
children's, religious or health-related books to paperback and full-line
bookstores operating on local, regional and national levels.[68]
Implications of Chain Ownership
The chains act like censors... If they don't want to carry a book
it disappears... Small publishers don't have the clout to get into
the
chains... The chains sell shelf space like supermarkets sell
Jell-O... [They]
don't care what product they sell... it could be hamburger.
Dpublisher Lyle
Stuart[69]
As the leading superstore chains continue their march to market
dominance, they are leaving in their wake a string of independent booksellers
who lacked the financial resources necessary to survive against competitors with
the financial resources to lose millions of dollars in order to break into and
dominate local book markets. But the leading chains did not develop this
dominant position by being more successful at selling books. Quite the
contrary, before the advent of the superstores (modeled on the full-service
independent booksellers they are now cannibalizing), several independent
bookstores and regional chains did substantially more business per store than
did their giant competitors. In 1987, Barnes & Noble/B. Dalton averaged
$950,000 in revenues per store -- a figure boosted by extremely high volumes in
Barnes & Noble's discount outlets. Waldenbooks, with less selection and fewer
high-volume outlets, averaged $641,026 per store. Crown Books, which relied on
volume sales to offset its discounting, posted sales of $824,390 per outlet. In
contrast, Kroch's & Brentano's -- then a full-service chain with 17 stores, all
in the Chicago area -- averaged sales of $2.8 million per store (the chain has
since collapsed in the face of superstore competition, closing its last stores
earlier this year).[70] Two other chains (Doubleday and Bookstop -- both now
part of Barnes & Noble) boasted sales in excess of $1 million annually per
outlet, while only three of the top twelve chains reported sales levels
significantly lower than Waldenbooks' that year.[71] With their growing
superstore operations, of course, per-store sales have increased dramatically at
the chains. In 1995, Borders superstore outlets averaged $5.9 million per store
(mall stores averaged about one million in sales), compared to $4.2 million for
Barnes & Nobles' more numerous but smaller superstore outlets (and about
$912,000 for its mall outlets).[72]
Barnes & Noble/B. Dalton and Borders/Walden now control nearly half of
the bookstore market, and with smaller national, regional and local chains
control a solid majority of the retail bookstore market even though a majority
of stores continue to be owned by independent operators. The national chains
exercise an influence on the market disproportionate to their numbers, however.
Their high-traffic locations and lavish advertising budgets have enabled the
chains to stake out a dominant position, especially in the lucrative best-seller
market. Indeed, some best-seller lists ignore sales by independent booksellers
altogether. The Wall Street Journal compiles its list almost entirely from the
four largest chains, while the vast majority of the 3,000 bookstores included in
USA Today's best-seller list are chain outlets (although the paper claims to
weight the data to compensate for this).[73]
But there is substantial evidence that the chains do not buy books from
the same range of publishers or on the same basis as do the independent
booksellers who dominated the retail industry until recently. B. Dalton made
national news in 1988 by notifying nearly 500 publishers that it would no longer
buy directly from them. The decision affected all publishers doing less than
$100,000 annually in business with the chain, in a move B. Dalton claimed was
intended
to increase the opportunities for small publishers to sell to our
chain.... We are not in the business of denying access to the world
of ideas
represented by publishers and authors -- no matter what the size of
their
balance sheet or their credentials.[74]
Despite such reassurances many publishers were concerned. "It's not
going to put us out of business," explained Kenneth Arnold, director of Rutgers
University Press, one of the affected publishers,
but it puts one more barrier in the very littered landscape
between the publisher and the book buyer. The visibility in the
chains is
very important, especially because in many parts of the country the
chain
stores are the only places that you can get a book.[75]
The superstores are friendlier to independent publishers than the
mall-based operations, if only because of the need to fill their shelves, but
they rarely buy directly from independent publishers. Instead, the chains buy
through wholesalers. As a result, independent publishers lose 10 to 15 percent
of their margin, and suffer delayed payments (Ingram, one of the country's
largest distributors, has been accused of returning books just before invoices
come due, only to reorder them a few days later). But, as publisher David
Godine notes, "you can't afford to not be in superstores, ... [and] you can't do
business today without Ingram."[76] Although independent book sellers are still
important in launching books,
most publishers agree that the chains' support eventually becomes
essential. "To get a book to sell extremely well, you need good
display
space in the chains," says Joseph Friedman, vice president, sales,
for Arbor
House Publishing Co.[77]
Michael Hejny, a book buyer for B. Dalton, explained that while "merit
has a lot to do with certain kinds of books... most of the time it's not the
most important consideration." Instead he looked for "brand-name" authors who
can be counted upon for sure-fire best sellers, value pricing, striking covers,
and publisher support (including advertising and funds for in-store
promotions).[78] While the superstores have reduced their original reliance on
a handful of top-selling titles, they continue to dominate this sector.
As the superstores run out of new markets to penetrate, they are being
forced into smaller and smaller markets, and into head-to-head competition on
each others' home turf. Thus, Borders is in the process of opening its first
store in Barnes & Noble's long-time stronghold of Manhattan, N.Y., while Barnes
& Noble is invading Books-A-Million's territory in the South -- and both are
entering smaller markets such as Portland, Oregon, which has more bookstores per
capita than New York City.[79]
The resulting demise of once-prominent independent booksellers has many
smaller publishers worried. One literary publisher terms the situation "a
disaster... My best customers... are going out of business right and left."
Instead of offering a greater variety of books, he says, "you are getting a
greater number of the same kinds of books... but the choice is diminishing..."
Another said the superstores stocked his titles, but would not give them the
support necessary to promote sales without promotional payments he could not
afford. (Indeed, one publisher complained of books sitting unsold on superstore
shelves for years, before being returned in badly damaged condition.)
Publishing house executives are reluctant to comment on the record, but one
anonymous sales directors was quoted by Publishers Weekly saying the industry
faced "the most serious bookselling situation ever, much more serious than the
mall chain expansion of the 1970s..." While Barnes & Noble and Borders fight it
out in markets incapable of supporting both, he continued, "the real loser in
this battle will be the independents," unable to compete with superstores
willing to sell books at a loss in order to establish long-term market
dominance. In the end, he predicted, independent quality bookstores will go out
of business, and publishers will find themselves forced to sell most of their
books to five chain buyers, many with little knowledge of books or readers.[80]
Some of the largest trade publishers report that direct sales to
independents now account for slightly more than 10 percent of new book sales
(although additional purchases would be funneled through distributors). Because
publishers rely on the chains to launch new titles, the bookstore chains have
been able to exact favorable terms which, independents charge, have largely
financed their expansion and discounts. "No discussion of the influence of
large bookselling chains," Maxwell Lillienstein of the American Booksellers
Association noted several years ago,
would be complete without reference to the favorable prices given
them by virtually all publishers... prices [which] permit the chains
to
plough the resulting profits into more branches, more price-cutting,
more
advertising, and more in-store promotions.[81]
At the time, this discount amounted to an additional 7.3 percent over the
prices available to independent booksellers, allegedly based upon the larger
quantities ordered by the chains. In an anti-trust lawsuit brought by the
Northern California Booksellers Association against Avon Publishers, a federal
court ruled that Avon could not justify the larger discounts, finding persuasive
the claim that these discounts were granted "in response to pressure from the
chains" and unfairly contributed to chain growth and profitability.[82]
While the bookstore chains, with their hundreds of outlets, do place
large orders with publishers, these are often separately shipped to stores
across the country in quantities no greater than those received by many
independent booksellers (and far smaller than the quantities ordered by some of
the larger independents who are nonetheless denied the advantageous discounts;
however, the chains are increasingly turning to regional warehouses in order to
facilitate transferring books among their stores and to justify larger
discounts). Crown Books demanded, and received, the chain discount when it had
only four stores, taking advantage of the more generous terms to make possible
its deep discounting and finance its rapid expansion.[83] Publishers who refuse
these terms find it difficult to sell their books. Publisher Lawrence Hill
reports that chains have refused to carry his books because he does not offer
the larger discounts.[84] When Doubleday -- one of the country's largest
publishers, now part of the Bertelsmann conglomerate -- announced in 1974 that
it would stop granting extra discounts to chains, B. Dalton stopped ordering
Doubleday titles altogether while Waldenbooks cut back on orders. Doubleday
capitulated within the year.[85] Since then the chains have dramatically
increased their market share, and hence their bargaining power.
Analyst Leonard Shatzkin agrees that these higher discounts are
frequently contrived, and that chains "depend heavily on the discount advantage"
to sustain profitability.[86] Maxwell Lillienstein calculated that publisher's
discriminatory discounts trim gross margins by a minimum of 5.25 percent -- "in
most cases... the difference between moderately profitable operation and
extinction."[87] Six years ago the Federal Trade Commission filed antitrust
complaints against six of the country's largest publishers, charging them with
granting the chains favored treatment in the form of larger discounts and
promotional dollars.[88] Trade press reports indicate that an undisclosed
settlement has been negotiated (but not yet approved by the full Commission),
but frequently promised announcements of the details of that settlement have yet
to appear.[89] Another antitrust investigation is underway into allegations
that Barnes & Noble and Borders collude in deciding which mall stores to
close.[90]
The chains have successfully used their marketing power not only to
demand larger discounts and promotional support, but also to entice publishers
to cut list prices or change covers on particular titles in pursuit of larger
orders. Promotional support is an especially contentious issue, as publishers
pay the bulk of the substantial advertising costs incurred by chain operators.
"The publishers, in effect, are also buying desirable store display space," the
Wall Street Journal noted. "A 'regular' book... is guaranteed high-visibility
display in the stores, while 'promotional' books are stacked on the front-right
display tables."[91] In 1988, publishers paid all but 15 percent of Crown
Books' $4.2 million advertising budget.[92] An internal Barnes & Noble document
from 1993 illustrates the range of promotional programs available to publishers.
Barnes & Noble sold space in its weekly advertisements in the New York Times and
other papers (advertised books are also guaranteed prominent display space at
store front) and literary magazines. Page 1 reviews in Barnes & Noble's
newsletter/catalog, Review & Preview of Books, can be bought for $8,000 (reviews
and features inside the publication are available for $3,000). B. Dalton stores
will feature titles as "Book of the Week" for a $3,000 payment. A payment of at
least $18,500 guaranteed books best-seller treatment in superstores (Barnes &
Nobles declares books best-sellers before publication, offering them at a deeper
discount than on other new titles; $12,000 buys "bestseller pricing" and display
for a month in B. Dalton outlets). Books could be guaranteed placement in the
"New & Noteworthy" or "New Arrivals" section for just $3,500 per title. More
recently, the New York Times reported that publishers were charged $1,500 to
participated in Barnes & Noble's "Discover Great New Writers" program (including
face-out placement near the front of the store and a posted mini-review; the
program generates $150,000 a year), $10,000 a month for front-of-store space for
cardboard display units, $3,000 a month for end-of-aisle displays, etc.
Publishers' promotional payments finance the chains' aggressive advertising,
enabling them to reach customers in a way independent booksellers cannot hope to
match. Barnes & Noble reports that publishers pay 100 percent of the cost of
its consumer advertising. And the New York Times reported that Borders stood to
bring in more than twice as much from publishers as it spent for advertising
space for a recent Christmas season promotion.[93]
Thus, despite the fact that independent and regional booksellers still
account for the bulk of bookstore sales, publishers have adopted policies that
offer a wide range of competitive advantages to the largest chains. One
publisher's sales executive ("who spoke on condition of anonymity, expressing
fear of commercial retribution") told the New York Times that publishers are
"forced to buy into these kinds of programs, even for books that would do well
on their own, just so that when we do have a book or an author who needs extra
exposure, they're willing to accommodate it." Many independent booksellers have
been severely squeezed by this competition, handicapped by smaller discounts and
their inability to secure publisher-funded promotional budgets. In response,
the American Booksellers Association has repositioned itself as a voice for
independent booksellers, encouraging the FTC investigation and filing its own
antitrust suits against five publishers in May 1994 and against Random House in
January 1996. The Random House suit parallels the FTC complaint and seeks an
injunction requiring the publisher to offer independent booksellers the same
wholesale price and promotional allowances given the chains. The ABA had held
off on suing Random House because of the pending settlement. "But the terms have
never been announced, and we got tired of waiting for it to happen," said ABA
director Bernie Rath. The Association singled out Random House as the worst
offender of those investigated by the Commission, offering chain stores
discounts four percentage points more than those offered to independents. Random
House responded by withdrawing from the ABA's annual convention and trade
show.[94]
The other ABA suit charged publishers Houghton Mifflin, Hugh Lauter
Levin, Penguin USA, Rutledge Hill and St. Martin's with offering preferential
terms and conditions to the national bookstore chains and warehouse buying
clubs, making special payments for favorable store placement, making payments to
bookstore chains to promote books as if they were bestsellers, and offering
discounts to warehouse clubs so deep that they can sell books to the public at
prices lower than the lowest wholesale rates available to retail booksellers.
"By granting favorable terms to only a few accounts," ABA past president Chuck
Robinson charged, "these publishers have given a select group of voices the
ability to make themselves heard over and above their competitors, distorting
the level playing field and free market of ideas." The ABA suit seeks an
injunction prohibiting the anti-competitive practices.[95] ABA president Avid
Domnitz describes "secret deals, phone bestsellers and illegal promotional
allowance payments" as a "cancer" undermining independent booksellers and their
ability to offer a diverse selection of reading material to the public.[96]
The ABA subsequently settled with Hugh Lauter Levin, Penguin and
Houghton Mifflin, which denied wrongdoing but paid hundreds of thousands of
dollars to the Association for legal fees and agreed to permit independents to
group buy for larger discounts and to make books available to distributors
serving bookstores at the same terms available to warehouse clubs.[97] The
remaining defendants have been unsuccessful in their efforts to have the suit
dismissed or stayed pending FTC action on its antitrust suit.[98] The ABA suit
was preceded by a series of letters in the American Bookseller protesting
publishers' policies. One bookseller noted that Barnes & Noble was selling the
Columbia Encyclopedia 5th Edition (list price $125) for $75, slightly less than
the actual cost to retail bookstores. Even though publisher Houghton Mifflin's
discount schedule listed a maximum 47% discount, Barnes & Noble had secured a
60% discount for its 12,000 copy order. Another bookseller protested that
Rizzoli International offered books at a 50% discount to gift stores and other
non-bookstore retailers, but offered a maximum discount of 43.7% to
booksellers.[99] And while publishers maintain that they have eliminated
differential discount schedules, independent booksellers continue to
occasionally receive errant invoices documenting deeper discounts for chain
booksellers. When Stuart Brent Books received a packing slip showing an extra
two percentage points over wholesaler Baker & Taylor's published discount
schedule, ABA executive director Bernie Rath seemed resigned, terming it "a
typical but not particularly egregious case of a supplier favoring a chain over
an independent store;" adding that the ABA's lawsuit documents much wider
spreads.[100] While two percentage points may seem trivial, the average
operating margin for the four largest chains in 1994 was just 2.1 percent (a
figure exceeded only by Books-A-Million), up from an average operating loss of
0.3 percent in 1993, while their average 1994 profit after restructuring and
other non-operating costs was 0.6 percent.[101]
Conclusion
The increasing concentration of trade publishing power in the
hands of a few industry giants... enables seven large publishers to
command
access to the trade channels of distribution... The retail channels
of
distribution are in turn dominated by five major groups of chain
stores....
Industry consolidation has continued to make it hard for independent
publishers to gain access to the best-seller lists.[102]
The implications of chain ownership of retail bookstores are especially
troubling for small and alternative publishers. Publishing consultant John
Huenefeld notes the vital role of small publishers in "keep[ing] alive a healthy
intellectual pluralism that will be much diminished if centralization brings the
industry under the total domination of a small number of corporate giants." The
conglomerates that own the major bookstore chains and wholesalers
are careful and diplomatic in their public statements of support
for small publishers, [but] most are relatively systematic about
excluding
all but the most promising from access to the huge consumer and
library book
markets they dominate.[103]
While entry into publishing remains relatively easy, distribution is
another matter -- a concern raised by witnesses before the Federal Trade
Commission's Symposium on Media Concentration. "Any small publisher who has
tried to sell these chains knows full well... [that] chains can't be bothered
with setting up small accounts," publisher David R. Godine noted. "The small
publishers' inability to secure good distribution... threatens to stifle opinion
and competition," added Bernard Rabb of Columbia Publishing Company.[104]
Writing in 1961, Raymond Williams argued for the vital importance of the
field of distribution to encouraging responsible publishing and the availability
of a diverse array of views. Lamenting the fact that hundreds of (British)
towns were "without anything that can be called a decent bookshop," Williams
noted that "chain shops apply to books and periodicals simple tests of quantity:
below a certain figure they do not consider particular items worth handling. Is
this any kind of freedom, or free availability?"[105]
Here in the United States, chain bookstores have their defenders.
Daniel Boorstin lauds drugstores, supermarkets and discount book chains for
"democratizing" book buying, while Richard Snyder of the publishing giant Simon
& Schuster praises the book chains for eliminating the elitism of the book
market.[106] The chains, it is argued, bring books to people who otherwise
might never encounter them -- and to towns that were previously without any
bookstores whatsoever.[107] Until relatively recently bookstores were, in fact,
predominantly clustered in major cities, and the U.S. had fewer bookstores per
capita than did Japan or many European countries.[108] Yet while the chains
were expanding into shopping centers across the country, hundreds of independent
booksellers were simultaneously entering the industry, often undercapitalized
but driven by a love for books. So long as they competed on a relatively even
footing, these independent booksellers were able to survive, if not exactly
prosper.
But independent booksellers continue to be plagued by rising costs and
shrinking margins at the same time that the chains have been able to parlay
their marketing power into larger discounts and publisher-funded promotions;
siphoning off much of the bestseller business independents rely upon to make up
for slower-moving titles. No doubt, many independents will survive,
particularly those that have been able to develop a specialty or breadth of
titles that attracts a loyal customer base. But for most independent
booksellers profits are low to nonexistent.
Profits are also low to nonexistent for the leading bookstore chains.
However, they continue to enjoy larger discounts and easier access to
publisher's advertising dollars for promotions. There is little evidence to
indicate that the bookstore chains' steadily increasing share of the retail book
market is due to greater efficiency or to effective competition for readers'
loyalties. Indeed, under critical scrutiny the leading book chains look more
like lumbering dinosaurs incapable of sustaining themselves against their more
nimble independent competitors. But fed by large infusions of investment
capital and discounts and promotional payments significantly more generous than
those available to their competition, the leading chains have been able to
destroy their competitors through sheer brute force. The chains' marketing
orientation fits in well with changes in the broader publishing industry, as
publishers increasingly seek to rationalize operations in order to improve the
bottom line. And as independent booksellers develop effective strategies for
countering the chains, the bookstore chains are well positioned to adopt them
for themselves, just as they have used their economic leverage to dominate the
superstore approach pioneered by independents in the 1980s.
In short, so long as independent booksellers are unable to secure a
level playing field their future seems bleak. Were this simply a matter of
small business being displaced by big business, it might be a matter of only
passing concern. However, it involves a vital cultural sector, one which plays
a central role in the dissemination of ideas. As such, the ongoing
concentration of book distribution into ever fewer hands has serious
implications upon the ability for new voices to enter the metaphorical
marketplace of ideas. It is time to enforce prohibitions against feeding the
dinosaurs. Otherwise literary publisher Jane Howle's vision of a future where
"you would have the bulk of books bought by just four or five chain buyers," a
thought "horrifying to contemplate," may well come to pass.[109]
TABLE ONE
1987 SALES OF TWELVE LEADING U.S. BOOKSTORE CHAINS
1987
# Stores # Stores Revenues Market
Chain May 1988 May 1987 (millions) Share
Barnes & Noble/B Dalton 1000 995 $950.0 18.0%
Waldenbooks 1248 1100 800.0 15.2
Crown Books 205 201 168.9 3.2
Bookland Stores 101 73 50.0 0.9
Kroch's & Brentano's 17 17 47.0 0.9
Zondervan 83 82 40.0 0.8
Little Professor 114 113 38.7 0.7
Doubleday Book Shops 28 26 34.5 0.7
Lauriat's 40 35 32.0 0.6
Bookstop 17 12 31.5 0.6
Encore 41 40 29.0 0.6
Cokesbury 37 37 22.4 0.4
Source: Jon Bekken, "Concentration in the Retail Book Industry: The
Emerging Distribution Monopoly," International Communication Association, 1989.
TABLE TWO
SELECTED PROMOTIONAL PROGRAMS
Barnes & Noble Superstores
Discover Great New Writers - 20 titles displayed face-out with
front-of-store placement and featuring a mini-review on the shelf. Price $1,500
for two- to three-month period.
Dumps - Front-of-store floor space for corrugated displays. Price
$10,000 a month.
Endcaps - End-of-aisle displays. Price $3,000 a month per book, or
$10,000 a month for entire display.
Cafe Table-top Tent Cards - Feature 12 titles each month. Price $1,200
with two other titles; $3,000 for full card.
B. Dalton, Doubleday and Scribner's
Bestseller Display - Positioned in the front of store and sold at 15 or
20 percent discount. Price $12,000 a month.
New Arrival Wall - Face-out display. Price $2,500 for three weeks.
Endcaps - "Own your own" or be one of six titles on a particular
theme; face-out display. Price $3,000 monthly per title or $10,000 for entire
endcap.
Borders Superstores
Original Voices - Positioned in the front of the store and sold at 30
percent discount; listed in Original Voices brochure. Price $1,500 to $2,500
monthly, depending on season.
Children's Endcap - Up to five children's titles, sold at 30 percent
discount. Borders provides a sign. Price $7,760 to $7,900 monthly for entire
endcap, depending on season.
Source: Mary Tabor, "In Bookstore Chains, Display Space Is for Sale," New
York Times, January 15 1996, p. D8.
TABLE THREE
SALES OF LEADING BOOKSTORE CHAINS
(in millions of dollars)
1992 sales 1993 Sales Stores 1994 Sales Stores 1995 Sales Stores
Barnes & Noble $1087.0 $1337.4 937 $1622.7 966 1980.0 1013
Borders (Kmart) 1202.0 1370.6 1511.0 1750.0 1108
Crown Books 240.7 275.0 240 305.6 196 283.5 172
Books-a-Million 95.1 123.3 109 172.4 124
Lauriat's/Encore* 65.2 74.5 140.0 162 153
*1993 is estimate
Sources: Jim Milliot, "Chain Sales Rise 18% in Year; Market Share
Increases," Publishers Weekly, April 11 1994, p. 8; "1995 Sales Down 7% at Crown
Books," Publishers Weekly, Feb. 19 1996, p. 112; "Yearly Sales Up At Crown, But
Fourth Quarter Weak," Publishers Weekly, Feb. 13 1995, p. 13; W. Hood et al.,
"Kmart Corp. Company Report, Prudential Securities Inc, Aug. 18 1994; A.E. Ryan
et al., "Books-A-Million Company Report," Prudential Securities Inc, Nov. 21
1994; Books-A-Million Annual Report 1995; Jim Milliot, "Superstore Strength
Results in 21% Sales Increase at B&N," Publishers Weekly, Feb. 20 1995, p. 107;
Jim Milliot, "Year's Sales at Borders-Walden Jump 10% to Over $1.5 Billion,"
Publishers Weekly, March 6 1995, p. 13; Jim Milliot, "Chains' Margins Improve in
1994," Publishers Weekly, July 10 1995, p. 9.
TABLE FOUR
CHAIN SUPERSTORE SALES
(in millions of dollars)
1995 Sales Stores Increase 1994 Sales Stores 1993 Sales Stores 1992
Sales Stores
Barnes & Noble $1350.0 322 42% $953.0 268 $614.6 203 $328.8 135
Borders 683.5 116 66% 425.5 75 244.8 44 123 31
Crown 167.2 70 110 61 50 28
Books-A-Million* 110.0 45 50 26 25 16
TOTAL: $1,655.7 458 $999.4 334 $526.8 210
*Estimated
Source: "B&N Sales Up 22%, Near $2 Billion," Publishers Weekly, February
12 1996, p. 14; "Borders Group, Inc. Announces Year-End Results," News Release,
March 11 1996; Jim Milliot, "Superstore Sales Topped $1.6 Billion in '94, 65%
Gain Over '93," Publishers Weekly, May 15 1995, p. 10; Jim Milliot, "Led by B &
N, Superstore Sales Soar to $1 Billion," Publishers Weekly, May 16 1994, p. 9.
NOTES:
[1] . Walter W. Powell, "Competition versus Concentration in the Book
Trade." Journal of Communications, Spring 1980, p. 89.
[2] . See Maxwell J. Lillienstein, "Charting the Ongoing Concentration
of the Book Industry," American Bookseller, February 1986, pp. 63-69; Raymond
Sokolov, "Plagued by Rising Costs and Falling Sales, Book Publishers Are in
Throes of Change," Wall Street Journal, July 2 1982, p. 24; Irving Louis
Horowitz, Communicating Ideas: The Crisis of Publishing in a Post-Industrial
Society, New York, Oxford University Press, 1986.
[3] . Lillienstein, 1986, op cit., p. 63.
[4] . Maxwell J. Lillienstein, "The Consolidation of the Book
Industry," American Bookseller, April 1987, p. 50; 1987 Census of Manufacturers
-- Concentration Ratios in Manufacturing, Washington, DC: Bureau of the Census,
pp. 6-18.
[5] . Lillienstein, 1987, op cit., p. 50; Ben Bagdikian, The Media
Monopoly (3rd edition), Boston: Beacon Press, 1990, p. 19.
[6] . "General interest" books defined to include trade books,
mass-market paperbacks, and books sold by mail; categories that, Lillienstein
argues, "compete with one another for consumer interest." Lillienstein, 1980,
op cit., p. 23.
[7] . See, for example, Paul Hirsch, "U.S. Cultural Productions: The
Impact of Ownership," Journal of Communication, Summer 1985, p. 120; Paul
Doebler, "The Book Industry, 1981: From Business as Usual to ???," in Book
Industry Trends, 1981, New York, Book Industry Study Group, 1981. Benjamin
Compaine argues that concentration increases competition: "When a big company
takes over a smaller company, they often provide the resources... to publish
more competing titles and to, in effect, increase competition." (Federal Trade
Commission Bureau of Competition, Proceedings of the Symposium on Media
Concentration, Washington, Government Printing Office, 1979, at p. 646.)
[8] . Nicholas Garnham, Capitalism and Communication: Global Culture
and the Economics of Information, London: SAGE Publications, 1990, pp. 162-63.
[9] . John Mutter and Jim Milliot, "Whole Change," Publishers Weekly,
January 1 1996, pp. 44-46. For overviews of the book industry see: Lewis Coser,
Charles Kadushkin & Walter Powell, Books: The Culture and Commerce of
Publishing, New York: Basic Books, 1982; Leonard Shatzkin, In Cold Type:
Overcoming the Book Crisis, Boston: Houghton Mifflin Company, 1982; Benjamin
Compaine, The Book Industry in Transition: An Economic Analysis of Book
Distribution and Marketing, White Plains: Knowledge Industry Publications, 1978.
[10] . David Youngstrom, "Caught in the Middle: The Predicament of the
Wholesaler Today," American Bookseller, October 1981, pp. 21-22.
[11] . Shatzkin, 1982, op cit., p. 7. Shatzkin argued that "in the
skimpily stocked stores that make up the majority of retail shops, the selection
may be so limited that at least part of the potential clientele has learned not
to bother coming in at all."
[12] . Mary Tabor, "In Bookstore Chains, Display Space Is for Sale,"
New York Times, Jan. 15 1996, pp. 1, D8; Warren Cassell, "What's Wrong with
Co-op and Three Ways to Make it Better," Publishers Weekly, October 2 1987, pp.
62-65.
[13] . John P. Dessauer, Inc., "The 1987 ABACUS Financial Profile,"
American Bookseller, February 1989; Center for Book Research, "The ABACUS
Financial Profile," American Bookseller, December 1986.
[14] . Statistical Service Center, Book Industry Trends 1994, New York:
Book Industry Study Group, 1994, pp. 2-11, 2-185. Calculation by author.
[15] . Gallup 1985 Annual Report on Book Buying, Princeton: The Gallup
Organization, Inc., 1985. This study is based upon interviews conducted
throughout 1984 with a national sample of 12,000 consumers. Figures have been
adjusted to remove mail order outlets.
[16] . 1992 Census of Retail Trade -- Geographic Area Series,
Washington DC: Bureau of the Census, Nov. 1994, Table 2; Carol Miles, "994
ABACUS Expanded," American Bookseller, October 1994, pp. 71-108; John Dessauer,
"ABA Bookstore Financial Profile, 1981," American Bookseller, January 1982, pp.
19, 23 and 36. The ABACUS survey was conducted in July 1993, and surveys only
non-chain ABA member bookstores. The 213 respondents (of 2,000 surveys sent
out) operated 242 stores. While the representativeness of this sample is open
to serious question, the Census Bureau no longer reports anything but the
sketchiest data.
[17] . Dessauer, op cit.; Bernie Rath, "A New Approach: The ABACUS
Financial Profile 1985," American Bookseller, December 1986, p. 3. By 1992 46
percent of bookstore employees were part-time workers, while overall earnings
(full and part-time workers, including managers) averaged just $10,035 per year,
with bookstore workers typically earning between $5 to $6 an hour. Not
surprisingly, the industry suffers from high turnover, with an average length of
employment of less than two years. Bookstore executives do much better,
however. In 1993, Crown CEO Robert Haft was paid $1.9 million, the average
compensation to independent bookstore earnings was nearly $42,000. 1992 Census
of Retail Trade, Table 2; Ned Densmore, "Staffing Your Store with
Entrepreneurs," American Bookseller, October 1994, pp. 67-70; Carol Miles, op
cit., p. 11A; Stephen Cogill, "Payroll, Personnel, and the Minimum Wage,"
American Bookseller, October 1987, p. 13; Maria Heidkamp, "MPBA Wages and
Benefits Survey," Publishers Weekly, Nov. 9 1992, p. 36; Jim Milliot, "1993
Executive Sellers, Booksellers," Publishers Weekly, Nov. 22 1993, p. 20; Carol
Miles, "1994 ABACUS Expanded," American Bookseller, October 1994, pp. 71-108.
[18] . Miles, op cit., p. 10A.
[19] . See, e.g., Walter Effron, "A Questionable Deal?" American
Bookseller, April 1994, p. 6 (Letter). Another letter in the same issue
complains of Rizzoli International Publishers offering books to gift shops at 50
percent discount, but explicitly excluding booksellers (eligible for a maximum
43.7 percent discount) from the offer. Anthony Miksak, "Dilemma Over Discount,"
p. 6.
[20] . Leonard Wood, "Nearly 25% of Paperbacks Bought at Discount in
1984," Publishers Weekly, February 8 1985, p. 31. If anything, discounting has
expanded in the following decade.
[21] . Joann Davis, "The Dangers of Discounting," Book Research
Quarterly 3(2), Summer 1987, p. 79; "Earnings at Dalton Showed Steady Decline in
Recent Years," BP Report 12(25), May 25 1987, p. 5; Marianne Yen, "What Troubles
B. Dalton? Some Observations," Publishers Weekly, October 17 1986, pp. 16-17.
[22] . Jim Milliot, "Chains' Margins Improve in 1994," Publishers
Weekly, July 10 1995, p. 9 (Milliot restates 1993 losses to show a more modest
1.0% loss); Jim Milliot, "Restructuring Charges Result in Loss for Chains in
'93," Publishers Weekly, July 4 1994, p. 12; Milford Prewitt, "Bookstores flip
to new page with meal service," Nation's Restaurant News, June 27 1994, pp.
32-33+. It is difficult to directly compare ABA statistics and chain corporate
reports. Borders-Walden until recently provided only summary data through the
Kmart annual reports, while Books-A-Million and Barnes & Noble include certain
occupancy and sales expenses in their costs of goods sold, thereby making their
operating margins appear narrower than those reported by independents, even
though it is universally acknowledged that the chains in fact receive larger
discounts from publishers than those available to independent booksellers, if
only because of their larger purchasing volume.
[23] . Lillienstein, 1986, op cit., p. 63.
[24] . Bureau of the Census, 1985, op cit., pp. 142, 74.
[25] . 1987 Census of Retail Trade -- Establishment and Firm Size,
Washington DC: Bureau of the Census, Jan. 1990, pp. 1-128.
[26] . Chris Goodrich, "Chain Reaction," The Nation, May 1 1989, p.
596; Jim Milliot, "Book Purchases Increased 1.6% in 1994, Study Finds,"
Publishers Weekly, Oct. 16 1995, p. 10 (citing study by Book Industry Study
Group). The BISG study does not distinguish between small, mostly regional,
chains and the dominant chains.
[27] . Establishment and Firm Size, 1992 Census of Retail Trade,
Washington: U.S. Department of Commerce, 1995, pp. 1-137, 1-70; "Store Sales Up
4.9% in 1994," Publishers Weekly, March 13 1995, p. 12; Jim Milliot, "Chain
Sales Rise 18% in Year; Market Share Increases," Publishers Weekly, April 11
1994.
[28] . Indeed, 19 percent of books sold by bookstores were textbooks
(and 36.8 percent of sales for stores handling the category), even though this
is a category with little presence in most non-college bookstores. Book sales
accounted for 79.7 percent of average book sales, periodicals 3.4 percent, and
school and office supplies (combined) 2.3 percent (12.6 percent for stores
handling the categories). Of course, Barnes & Noble College is a major operator
of college bookstores. Merchandise Line Sales, 1992 Census of Retail Trade,
Washington: U.S. Department of Commerce, 1995, pp. 3-24 - 3-25.
[29] . "100 Largest Foreign Investments in the U.S.," Forbes, July 27
1987, p. 147; Allene Symons, "Barnes & Noble to Buy B. Dalton; Will Become
Largest Chain," Publishers Weekly, December 12 1986, pp. 17-23.
[30] . Symons, 1986, op cit., p. 17
[31] . Thomas Whiteside, The Blockbuster Complex, Middletown: Wesleyan
University Press, 1966, pp. 44-45.
[32] . Madalynne Reuter, "Dalton Has 'Turned the Corner,' Chairman
Says," Publishers Weekly, October 17 1986, p. 16; Yen, 1986, op cit., p. 16.
[33] . "Software etc. and Babbage's to Merge," Publishers Weekly, Sept.
5 1994, p. 9; Barnes & Noble 1993 Annual Report, 1994, p. 20; Jim Milliot and
Sara Wheeler, "Vendex Sells More B&N Shares; Stake Now Only 11%," Publishers
Weekly, Oct. 31 1994, p. 8; A.E. Ryan et al., "Barnes & Noble/Books-A-Million -
Company Report," Prudential Securities Inc., June 22 1995 (Investext database).
Vendex, however, recently converted its shares in Barnes & Noble College for
shares in the publicly held company, leading Publishers Weekly to speculate that
they might intend to liquidate their holdings. Jim Milliot, "Borders to Acquire
Remaining Shares Held by Kmart," August 7 1995, p. 295; "Vendex International
N.V.," New York Times, July 21 1995, p. D3.
[34] . "B&N Sales Up 22%, Near $2 Billion," Publishers Weekly, February
12 1996, p. 14; Jim Milliot, "Chains' Margins Improve in 1994," Publishers
Weekly, July 10 1995, p. 9.
[35] . Patrick Reilly, "Publishing: Big Bookseller Grows Its Publishing
Arm," Wall Street Journal, November 29 1994, p. 1+ (Proquest Access
#9411290094); Richard Phalon, "A bold gamble," Forbes, Feb. 28 1994, pp. 90-91.
[36] . C. Bibb, "Barnes and Noble Inc." Paine Webber Inc., July 14 1994
(accessed through InfoTrac's General BusinessFile); Bloomberg Business News,
"Stock retreats by 10% as Paine Webber cuts its rating," New York Times,
December 30 1995, p. 43; Barnes & Noble, Inc., 1993 Annual Report, p. 3.
[37] . David P. Schulz, "The Top 100 Specialty Stores," Stores, August
1987.
[38] . K Mart Corporation, 1987 Annual Report, 1987; K Mart
Corporation, 1986 Annual Report, 1986; Bridget Kinsella, "Kmart to sell
controlling stake in Borders-Walden," Publishers Weekly, Aug. 22 1994, p. 10.
[39] . K Mart Corporation, 1984 Annual Report, 1984, p. 4.
[40] . Bonnie Predd, "Marketing Writes New Chapter in Bookselling
History," Marketing News, September 14 1984, p. 51. See also "Walden Plans
Aggressive Expansion in '87, Says Sales Were Up 15% in '86," BP Report 12(13)
March 2 1987, p. 7, where Hoffman contends that "the publishing community should
introduce authors as Proctor & Gamble introduces soap."
[41] . ibid.; "Strong Finish Helps Give Walden Good '87...," 1988, op
cit., p. 6; Symons, 1988, op cit.; Kerry Hannon, "Seen any good books lately?,"
Forbes, September 21 1987, pp. 180-81; "Walden Promo Spot to Appear on 10
Videocassettes Sold by Chain," BP Report 12(35), August 10 1987, p. 6; "Walden
Plans Aggressive Expansion...," 1987, op cit.; Brian Moran, "Waldenbooks throws
the book at discounters," Advertising Age, March 4 1985, p. 6.
[42] . Kleinfield, 1986, op cit. B. Dalton has responded to the
preferred reader program with its own Book$avers Club, which offers 10 percent
discounts on purchases, targeted newsletters, and a gift registry service. "Get
the Book$aversR Club Advantage," Undated promotional bookmark and application
form, B. Dalton Bookseller.
[43] . "Walden Had Difficult Year, Difficult Week," BP Report 14(13),
February 27 1989, p. 1+.
[44] . Kleinfield, 1986, op cit.; Bolle, 1987, op cit.; "Booksellers
Urge Improved Distribution...," 1987, op cit. p. 5.
[45] . Sokolov, 1982, op cit.
[46] . Kleinfield, 1986, op cit.
[47] . "Barnes & Noble/Dalton Tops Sales of Nation's Bookstore Chains,"
BP Report 13(26), May 30 1988, p. 1; Kleinfield, 1986, op cit.; Allene Symons,
"Waldenbooks Marketing Night: New Strategies, Fine Tuning," Publishers Weekly,
March 4 1988, pp. 68-69.
[48] . Coser, Kadushkin & Powell, 1982, pp. 349-50; "Barnes & Noble/B.
Dalton Tops Sales...," 1988, op cit., p. 1.
[49] . John Mutter, "The Fine Print: Walden Edges Toward Borders,"
Publishers Weekly, May 23 1994, pp. 38-39; John Mutter, "Beyond Borders:
'Trimming' Walden," Publishers Weekly, Feb. 7 1994, pp. 28-32.
[50] . Jim Milliot, "Year's Sales at Borders-Walden Jump 10% to Over
$1.5 Billion," Publishers Weekly, March 6 1995, p. 13; Jim Milliot,
"Restructuring Charges Result In Loss for Chains in '93," Publishers Weekly,
July 4 1994, p. 12; K Mart Corporation 1992 Annual Report, Jan. 27 1993; Gary
Balter and Candler Young, "Borders Group, Inc.," Donaldson, Lufkin & Jenrette
Company Analysis, December 20 1995. Balter and Young, the source for the
statement about mall store profitability, have recalculated Borders reported
financial statistics in an apparent (but unexplained) attempt to compensate for
the effects of rapid expansion and restructuring. Their data show 1994
operating margins at 4.59 percent in the mall stores division, and 2.05 percent
for superstores, projecting that superstores will overtake the mall stores in
1997.
[51] . "Borders Group, Inc. Announces Year-End Results," News Release,
Borders Group Inc. (Ann Arbor, MI), March 11 1996; "Borders Sales Rise 15% to
$1.75 Bn.," Publishers Weekly, March 11 1996, p. 16; Jim Milliot, "Borders to
Acquire Remaining Shares Held by Kmart," Publishers Weekly, August 7 1995, p.
295; F.B. Bernstein, "Borders Group, Inc. - Company Report," Merrill Lynch
Capital Markets, July 11 1995 (Investext database).
[52] . Balter and Young, op cit., p. 19.
[53] . "Philly Book Workers Go IWW," Industrial Worker, April 1996, p.
3; "Philly Borders Workers Lining Up," Industrial Worker, March 1996, p. 3;
Interview with IWW General Executive Board Member Penny Pixler, March 9 1996;
Interview with IWW organizer James Withrow, March 10 1996; Prospectus 430,884
Shares Borders Group Inc., January 2 1996, pp. 48-49, 53 (calculation of stock
value by author, based on March 8 1996 closing); Gary Balter and Candler Young,
"Borders Group, Inc.," Donaldson, Lufkin & Jenrette Company Analysis, December
20 1995; Gary Balter, "Borders Group, Inc.: Solid Christmas Sales A Positive
Surprise," Donaldson, Lufkin & Jenrette Securities report, January 9 1996;
Christopher Vroom et al., "Borders Group, Inc. Delivers Industry-Best Christmas
Sales--Strong Buy," Alex. Brown & Sons Inc. report, January 10 1996; Fran
Bernstein, "Borders Inc. Reports Christmas Sales," Merrill Lynch report, January
9 1996; David Bolotsky, "Borders Group, Inc.," Goldman, Sachs & Co. report, Nov.
14 1995; Gary Balter and Candler Young, "Borders Group, Inc.," Donaldson, Lufkin
& Jenrette Company Analysis, December 20 1995.
[54] . "1995 Sales Down 7% at Crown Books," Publishers Weekly, Feb. 19
1996, p. 112; Jim Milliot, "Crown Books to Close More Stores," Publishers
Weekly, June 19 1995, p. 11; A.E. Ryan, op. cit.
[55] . "First Quarter Net Falls at Crown Books," BP Report 12(29), June
22 1987, pp. 4-5; "Barnes & Noble/B. Dalton Tops Sales...," 1988, op cit., p. 3;
Crown Books, 1987, ibid..
[56] . Bill Saporito, "The Most Feared Family in Retailing," Fortune,
June 22 1987, pp. 65-75; "Dart Group Corp.: Fiscal 2nd-Period Net Tripled on
Strength in Auto Parts," Wall Street Journal, September 14 1994, p. A6.
[57] . "Haft wins $34 million jury award," Publishers Weekly, Sept. 26
1994, p. 15; "Company's stock falls 21% after management report," Wall Street
Journal, Jan. 18 1995, p. 10; Karen Lundergaard, "Crown ills grow as expansion
plans slow," Washington Business Journal, Oct. 14 1994, p. 1; Jim Milliot,
"Crown Books Still Sinking; Borders, B&N Both Up," Publishers Weekly, August 21
1995, p. 10; Crown Books Annual Report 1995, pp. 4, 24-27; Crown Books
Corporation, Form 10K for FY ended Jan. 28 1995, pp. 12-16, 46-52.
[58] . Saporito, 1987, op cit.; Jim Milliot, "Yearly Sales Up At Crown,
But Fourth Quarter Weak," Publishers Weekly, Feb. 13 1995, p. 13; "Crown to Seek
Bigger, Better Superstores," Publishers Weekly, June 20 1994, p. 23.
[59] . Susan Scanlon, "Bookselling in the Nation's Capitol," American
Bookseller, April 1983, p. 32.
[60] . ibid., p. 33.
[61] . ibid.
[62] . Clyde B. Anderson, Books-A-Million Third Quarter Report, 1996;
Books-A-Million, Seeds of Growth (Annual Report), 1995; Jim Milliot, "Sales at
Four Biggest Chains Rose 17% in First Half of Fiscal 1996," Publishers Weekly,
September 4 1995, p. 10; A.E. Ryan et al., Books-A-Million Company Report,
Prudential Securities Inc., Nov. 21 1994 (accessed through InfoTrac General
BusinessFile); Jim Milliot, "Restructuring Charges Result In Loss for Chains in
'93," Publishers Weekly, July 4 1994, p. 12; Jim Milliot, "Chains' Margins
Improve in 1994," Publishers Weekly, July 10 1995, p. 9; John Mutter,
"Books-A-Million Buys Independent," Publishers Weekly, Feb. 21 1994, p. 15;
David Berreby, "The growing battle of the big bookstores," New York Times, Nov.
8 1992, p. F5. Books-A-Million was formerly known as ARS Group Inc, and also
owned Hibbett Sporting Goods until 1992, when it was spun off as a separate
operation.
[63] . William Stern, "Southern-fried reading," Forbes, June 20 1994,
pp. 91-92. B-A-M did take a $2.9 million charge in FY 1996 for closing 23 mall
stores.
[64] . Books-A-Million, 1995, p.
[65] . Emily Nelson, "Books-A-Million Faces Big Rivals As Superstores
Invade Its Territory," Wall Street Journal, Aug. 23 1995, Sec. S p. 2.
[66] . Steve Bailey and Steven Syre, "Tom Lee rises from tough year
with new fund," The Boston Globe, Oct. 31 1995, pp. 41, 41; Jim Milliot, "Major
Changes Hit Book Retailing World," Publishers Weekly, Dec. 5 1994, pp. 12, 19;
Judith Rosen, "For Lauriat's, Superstores Are Superfluous," Publishers Weekly,
January 30 1995, pp. 29-32; Jim Milliot, "Integration of Encore, Book Corner On
Track, Lauriat's Says," Publishers Weekly, June 26 1995,, p. 22.
[67] . See, for example, Calvin Reid, "Harper & Row to Acquire
Zondervan for $57 Million," Publisher's Weekly, January 17 1988, p. 16; Dan
Cullen, "Doubleday Book Shops at 75: A New Stage of Growth," American
Bookseller, September 1987, pp. 58-59; Martha Moraghan Jablow, "How Encore Rose
from a Used Book Outlet to A Multimillion Dollar Sale to Rite Aid," Publishers
Weekly, October 12 1984, pp. 31-36. Zondervan has since been sold to its
management; Doubleday has been sold to Barnes & Noble, and Encore has been sold
to Lauriat's.
[68] . See, for example, Jim Milliot, "New Offering Will Fund Noodle
Kidoodle Expansion," Publishers Weekly, January 29 1996, p. 11; Maureen J.
O'Brien, "Health Fair: Just What the Doctor Ordered," Publishers Weekly, March
25 1988, pp. 31-34; Michael Messina, "The Americanization of Rizzoli," American
Bookseller, April 1985, pp. 39-42; "Two Milwaukee Booksellers Merge Businesses,"
American Bookseller, October 1984, p. 45.
[69] . "Publishing Symposium Sees Industry in Transition," BP Report
12(44), October 12 1987, pp. 1, 6-7.
[70] . Mark Veverka, "Meet the author of Kroch's buyout," Crain's
Chicago Business, Dec. 13 1993, pp. 3, 45; Bridget Kinsella, "K&B Cuts 12 Jobs,
Including Buyers," Publishers Weekly, Jan. 9 1995, p. 17; Bridget Kinsella, "The
Final Bell Tolls for Kroch's & Brentano's," Publishers Weekly, June 26 1995, p.
18.
[71] . "Barnes & Noble/Dalton Tops Sales...," 1988, op cit., p. 3.
Calculations of per-store average sales by author.
[72] . Calculated by author from year-end financial reports.
Donaldson, Lufkin & Jenrette offer higher 1994 figures which are inconsistent
with these reports of $7 million per Borders superstore, while slightly
understating Barnes & Noble results. Balter and Young, op cit., p. 22.
[73] . "How USA TODAY compiles its Best-Selling Books List," USA Today
Special Edition for American Booksellers Association Convention, May 1995, p. 4.
[74] . Madalynne Reuter, "Dalton Stops Buying Direct from 500 Smaller
Publishers," Publishers Weekly, May 6 1988, pp. 10-11; Cynthia Crossen, "B.
Dalton Plans to Shut Out Small Publishers," Wall Street Journal, April 22 1988,
p. 35.
[75] . Crossen, 1988, op cit.
[76] . Jim Milliot, "The Name of the Game is Distribution," Publisher's
Weekly, Nov. 21 1994, pp. 48-50.
[77] . Steve Weiner, "Book Chains Look for Big Authors, Great Cover
and, Sometimes, Merit," Wall Street Journal, June 27 1985, p. 33.
[78] . ibid.; see, also, William Dunn, "Selling Books," American
Demographics, October 1985, pp. 40-43.
[79] . Ellen Heltzel, "Small bookstores bound to stay in the fight,"
The Oregonian, August 4 1994, pp. 1, A17; Ellen Heltzel, "Bookstore Davids
holding off Goliaths," The Sunday Oregonian, July 2 1995. The latter notes the
closings of three independent booksellers, but says booksellers are more upbeat
than when Borders first entered the market.
[80] . John Baker, "Publishers Concerned by Superstore-Indie Struggle,"
Publishers Weekly, September 18 1995, pp. 10-11, 19, emphasis in original. For
a discussion of the threat to independent booksellers in New York City, see
William Grimes, "Giants threaten small booksellers," The New York Times, August
3 1995, pp. B1-2. Even specialty booksellers find themselves threatened,
according to a report on African-American-oriented bookstores. Ernest
Holsendolph, "Small Bookshops Turn the Page to Survival," Emerge, June 30 1995,
p. 20.
[81] . John Baker, 1985, op cit.; Lillienstein, 1986, op cit., pp.
64-65.
[82] . Madalynne Reuter, "Avon Cost Study Does Not Justify Discounts,
Judge Rules," Publishers Weekly, November 14 1986, pp. 12-13; Chris Goodrich,
"Most Paperbacks Are in Chains," The Nation, May 4 1985, pp. 523-25. The
lawsuit was subsequently settled. See Molly Colin, "Giving No Ground, Avon and
NCBA Settle Suit," Publishers Weekly, November 13 1987, p. 9.
[83] . Goodrich, 1985, op cit., p. 523.
[84] . cited by Maxwell Lillienstein, "I Accuse...," American
Bookseller, July 1979, p. 31.
[85] . Compaine, 1978, op cit., p. 132.
[86] . Shatzkin, 1982, op cit., pp. 87-88.
[87] . Maxwell J. Lillienstein, "The Demise of the Independent Store:
Fact or Self-Fulfilling Prophesy?," American Bookseller, December 1978, pp. 5-7.
[88] . In the Matter of Harper & Row, Publishers, Complaint, Federal
Trade Commission Docket No. 9217, Dec. 20 1988; Chris Goodrich, 1989, op cit.;
Howard Fields, "Six Houses Win One Point In First FTC Skirmish," Publishers
Weekly, April 21 1989, p. 14; Meg Cox, "Booksellers Say Five Publishers Play
Favorites," Wall Street Journal, May 27 1991, pp. B1, B5.
[89] . e.g., "New Rumors on Long-Awaited FTC Decision," Publishers
Weekly, March 13 1995, p. 8; Jim Milliot and John Mutter, "FTC Probes of
Publishers, Booksellers Make Slow Progress," Publishers Weekly, May 17 1993, p.
15.
[90] . "Bookstore companies face federal inquiry," New York Times, June
17 1995, p. 20; "U.S. Probing Store Closings by Two Large Booksellers," Wall
Street Journal, June 19 1995, p. B10 (Proquest #9506190065).
[91] . Steve Weiner, 1985, op cit.
[92] . "Income Up At Crown Books; Lawsuits Settled," BP Report, January
31 1989, pp. 3-4.
[93] . Mary Tabor, "In Bookstore Chains, Display Space Is for Sale,"
New York Times, January 15 1996, p. D8; John Mutter, "B & N's Special Terms,"
Publishers Weekly, July 4 1994, pp. 19-21.
[94] . Tabor, op cit., p. D8; John Baker, "ABA Sues Random House on
Pricing," Publishers Weekly, Jan. 8 1996, p. 10; Jim Milliot, "Random House
Withdraws From the ABA Convention," Publishers Weekly, Jan. 15 1996, p. 310; Jim
Milliot, "ABA Vows to Continue Fight for 'Level Playing Field,'" Publishers
Weekly, Jan. 15 1996, p. 319; "Random House sued by booksellers group," New York
Times, Jan. 8 1996, p. 41.
[95] . American Booksellers Association Press Release, May 27 1994,
Tarrytown, NY; "An Overview of ABA's Antitrust Lawsuit," American Bookseller,
July 1994, pp. 39-40.
[96] . Avin Domnitz, "Personally Speaking," American Bookseller, July
1994, p. 41.
[97] . Karen Angel and John Baker, "ABA Settles with Hugh Lauter Levin
in Price Suit," Publishers Weekly, February 13 1995, p. 10; "Pearson's Penguin
Settles Antitrust Action in U.S.," Wall Street Journal, Nov. 9 1995, p. A5;
"Houghton Mifflin Settles Suit by Booksellers Group," Wall Street Journal, Oct.
27 1995, p. B9.
[98] . Jim Milliot, "Judge Denies Publishers' Motions to Dismiss ABA
Suit," Publishers Weekly, March 13 1995, p. 8; "Federal Court Clears the Way for
Independent Booksellers' Antitrust Discrimination Suit Against Book Publishers,"
American Booksellers Association news release, March 3 1995.
[99] . Walter Effron, "A Questionable Deal?" (Letter), American
Bookseller, April 1994, p. 6 [a response in the same issue by Houghton-Mifflin's
Nancy Grant said the actual spread between the two discount rates was much
narrower, and that the special terms were available to any bookseller]; Mike
Collins, "A Response to a Response" (Letter), American Bookseller, May 1994, p.
6; Anthony Miksak, "Dilemma Over Discount" (Letter), American Bookseller, April
1994, p. 6.
[100] . Jim Milliot, "B&T and the Case of the Errant Packing Slip,"
Publishers Weekly, July 10 1995, p. 8.
[101] . Jim Milliot, "Chains' Margins Improved in 1994," Publishers
Weekly, July 10 1995, p. 9.
[102] . Moseley Associates, "Trade Publishing," Book Industry Trends
1994, New York: Book Industry Study Group, 1994, p. 2-13.
[103] . John Huenefeld, "Can Small Publishers Survive... And Who
Cares?," Book Research Quarterly 1(4), Winter 1985-86, pp. 72, 74. See, also,
"Dystel Symposium Discusses Innovation in Publishing," BP Report 13(1), November
30 1987, pp. 2-3; Michael Cain, Book Marketing: A Guide to Intelligent
Distribution, Paradise, Dust Books, 1981.
[104] . Federal Trade Commission Bureau of Competition, 1979, op cit.
See, in particular, the testimony of Walter Powell at p. 581, and written
submissions by David R. Godine at p. 710 and Bernard Rabb at p. 748.
[105] . Raymond Williams, The Long Revolution, London, Chatto & Windus
Ltd., 1961, p. 342.
[106] . Daniel Boorstin, Books In Our Future, Washington, Congressional
Joint Committee on the Library, 1984, p. 6; Whiteside, 1981, op cit., p. 116.
[107] . See, for example, Compaine, 1978, op cit., pp. 127-29.
Compaine notes, as one of the benefits of the chains, that Waldenbooks has
alerted publishers to the need for books on such weighty topics as backgammon
and needlepoint. (p. 129) Today, presumably, they would simply publish such
titles themselves through their Longmeadow Press subsidiary. Compaine argues
that chains are also better stocked than are their under-capitalized independent
counterparts. J. Kendrick Noble, similarly argues that the larger chains, at
least, offer "a reasonable selection of books," although conceding that their
emphasis on bestsellers "may make it harder for smaller companies to bring their
wares to readers' attention." ("Book Publishing," in Benjamin Compaine, ed., Who
Owns the Media?, White Plains: Knowledge Industry Publications, 1982, p. 122)
Coser, Kadushkin & Powell, 1982, argue, in contrast, that chains "pay little
attention to the diversity of their book offerings." (op cit., p. 349)
[108] . O.H. Cheney, Economic Survey of the Book Industry, New York:
R.R. Bowker 1931 - Reprinted 1960; Benjamin Compaine, The Book Industry in
Transition, White Plains: Knowledge Industry Publications, 1978; Coser,
Kadushkin & Powell, 1982, op cit., p. 336.
[109] . John Baker, "Publishers Concerned by Superstore-Indie
Struggle," Publishers Weekly, September 18 1995, p. 11.
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