Talking before a large crowd of independent booksellers on Friday, May 30, at BookExpo America, ABA CEO Avin Mark Domnitz presented the financial findings of the ABACUS 2003 study. Introducing the session, Domnitz told attendees, "It's a big day for me, to go publicly with what we've been working on for a year
. In our heart of hearts, we hoped to put together 150 bookstore submissions [of financial data] -- we thought that would be a good sample. We ended up with 197 submissions."
For a number of years, the ABACUS study on the financial operations of independent bookstores provided valuable information for those interested in comparing their company's performance against an industry standard. The study was discontinued in 1999 for a number of reasons. For those who valued and needed this kind of analysis, a considerable void was created, but, due to the participation of independent booksellers, the ABACUS study is back. In addition to providing booksellers with a resource to manage their businesses better, ABACUS data will be used to help direct future ABA educational programming.
Domnitz began by noting some difference between the new ABACUS study and the old one. For one, the time between data collection and publication was significantly faster this time, from two years for the old ABACUS study to only four to six months for the new one. Membership participation rose to 11.0 percent from 6.4 percent, and the annual time to complete the ABACUS questionnaire was cut from 120 - 180 minutes to 45 - 60 minutes.
Booksellers at the session were then presented with a review of the study's results, as Domnitz offered both background detail and analysis, explaining the importance of a number of statistical "data slices," based on 2002 numbers -- grouped by profitability levels, community type, and store size, among other categories. Overall, the purpose of the study, he said, is to help pinpoint those things that are the "indicators of profitability."
In the 2003 ABACUS study, he noted, the average store cost-of-goods (COG) was 60.2 percent of gross sales, while the gross margin for an average bookstore was 39.8 percent.
Furthermore, average store uses of gross margin were: 21.3 percent for payroll, 8.6 percent for occupancy, and 11.5 percent on "all other," resulting in a net income of 1.7 percent.
Domnitz noted that, for bookstores in the top 30 percentile of profitability (higher profit stores), the average net income was 5.6 percent. Conversely, for bookstores in the lower percentile (lower profit stores), the average net income was 11.8 percent.
Surprisingly, Domnitz continued, the COG comparison between lower and higher profitability stores did not show a significant discrepancy: higher profit stores spent 59.6 percent of gross margin on COG, while lower profit stores spent 60.8 percent. "That's
not as big as I thought," he said.
At the same time, the ABACUS study showed clearly that two critical factors in determining bookstore profitability were wages/salaries and occupancy expenses. For instance, higher profit stores spent 16.4 percent of their gross margin on payroll, while lower profit stores paid out 20.9. Also, higher profit stores paid 5.4 percent on rent, while lower profit stores spent 9.3 percent. "Rent is only important as it relates to sales," Domnitz stressed. "Can I sell enough books to stay here?
One must always consider that everything is negotiable at all times."
In addition, Domnitz noted that advertising costs for the high profitability stores were a much smaller percentage of sales than for low profitability stores, and said, "I know that's a result of people who are not collecting co-op." Because smaller stores are often faced with the challenge of collecting "little pieces from a lot of different publishers, and there are a lot of hoops to collect these, but I know that's a lot of money left on the table."
One result of the ABACUS study, Domnitz said, was that the analysis of high and low profitability stores made clear that there were examples of successful stores in both rural and urban locations and in a range of sales volumes. "It has nothing to do with size," Domnitz said. Other issues discussed were sales per selling square foot and finances by sales volume.