Live From BEA -- Day 1

ABA Educational Programming Packs 'Em In

On Thursday, June 2, more than 500 independent booksellers, including approximately 60 new and prospective booksellers participating in an ABA-sponsored Booksellers School, converged at New York City's Jacob Javits Convention Center for ABA's Full-Day Educational Program at BookExpo America (BEA). Booksellers participated in activities ranging from morning sessions that provided in-depth examinations of issues related to margin, sales, payroll, cost of goods sold, and occupancy expenses to the "What Are You Reading/Publishing?" Lunch. Afternoon programming built upon the morning sessions and added further insight into topics originally raised in ABA's popular "The 2% Solution" seminar.

The Plenary Session

The day began at 8:30 a.m. with a provocative Q&A between prominent philanthropist and author George Soros and his publisher, Peter Osnos, publisher and chief executive of PublicAffairs.

George Soros in conversation with Peter Osnos -- live via satelite from the Ukraine.

Soros appeared at BEA live via satellite from the Ukraine, where his Open Society Institute is working to establish services, such a free legal assistance, to ensure human rights and access to justice for all citizens.

Osnos deftly bridged the seven-hour time difference with his questions, spurring a discussion that ranged from current events and U.S. foreign policy to the changing political landscape at home. With an eye toward the almost 200 booksellers in attendance, Osnos introduced such topics as the effects of the USA Patriot Act and the economic challenges facing independents. Recognizing that independent booksellers were grappling with competition for consumers' attention from a growing number of media, Soros told the audience, "I hope there will be independent booksellers in the years to come, for our society will be weaker and poorer without them."

Osnos began the discussion with Soros by asking about the current situation in the Ukraine and Georgia. Soros said it is "rather chaotic ... there is a lot to do," but he noted that the movement for an open society is making strides.

Soros explained that his extensive involvement in the 2004 presidential race was a result of his belief that the U.S. was in danger of becoming less of an open society. When asked by Osnos about the effects of such legislation as the Patriot Act, Soros pointed to the U.S. Constitution and democratic institutions as key components of American society, but, he underscored, "they are being eroded." Recent moves, especially the war in Iraq, have fundamentally changed the perception of the U.S. abroad, he said. Acknowledging that many in Georgia and Ukraine think of the U.S. as "great friend," he also noted that, in many foreign nations "there is great reservation about American policies."

Contemporary America is an "open society that doesn't subscribe to the principles of an open society,'" said Soros. "We have to recognize our fallibility.... The first principle of an open society is, we may be wrong." Continuing, Soros said that, although he sees a threat to our Constitutional safeguards, he also sees "a growing awareness among people of the danger.... The general public is not extremist, and the public is beginning to take exception." Soros said that he was quite confident that "we're going to see a reversal, we're not going to lose our democracy."

The Morning Sessions

Following the Plenary Session, booksellers took advantage of ABA's comprehensive educational offerings, which emanated out of the "The 2% Solution" seminar presented at last fall's regional trade shows and the winter/spring booksellers forums. For booksellers unable to attend a previous presentation of the "The 2% Solution," the session was presented on Thursday morning. For booksellers already familiar with the concepts of "The 2% Solution," ABA used the numbers generated by the ABACUS study of independent bookstore operations to develop in-depth sessions focusing on each of the four prime factors affecting profitability: Sales, Margin, Compensation, and Occupancy Cost.

ABA CEO Avin Mark Domnitz and (seated) booksellers Daniel Goldin and Barry Rossnick.

More than 200 booksellers were in attendance for the seminar "Increasing Margin: An Advanced Course in Growing Your Bottom Line," which was led by ABA CEO Avin Mark Domnitz and which featured a panel of two veteran booksellers, Daniel Goldin of Harry W. Schwartz Bookstores in Milwaukee and Barry Rossnick of Books, Inc. in San Francisco. At the two-plus hour seminar, Domnitz compared and contrasted two hypothetical bookstores -- one profitable, one unprofitable -- and discussed the "achievable means" an unprofitable bookstore could use to move "from a negative to a positive."

One of the keys to increasing gross margin, Domnitz said, is to bring in higher-margin merchandise (such as remainders, sidelines and gift items, calendars, and used books). He then discussed the ins and outs of properly pricing this merchandise to maximize margin.

Other margin-increasing strategies discussed at the seminar were how to better plan purchasing, rounding orders up or down to take advantage of purchasing discounts, and taking advantage of stock offers and EDI discounts, among other ideas.

Following the seminar, attendee Tripp Ryder of Carleton College Bookstore in Northfield, Minnesota, told BTW, "I thought [the seminar] offered a great amount of information. We're a small college store ... it makes me think in a different way."

Compensation was the subject of "It's in the Payroll," led by BookSense.com Director Len Vlahos, who emphasized that a discussion of payroll within the context of an operating statement should be reframed into a discussion of total compensation, which is defined as all wages, salaries, and bonuses; all employee benefits that are paid by the employer (including health, life, and disability insurance, workers' compensation, and unemployment insurance); all employer contributions to retirement plans, including SEPP, 401K, and profit sharing; and FICA and Medicare paid by the employer.

The session also examined methods of controlling payroll; provided tools for budgeting and monitoring payroll; and demonstrated how controlling compensation can lead businesses to profitability.

Vlahos emphasized that to reduce payroll costs, booksellers must use payroll budgets; schedule efficiently; control pay rates, raises, and overtime; and make staff more productive. As an example, to achieve efficient scheduling, he suggested cross training all staff, so that each knows how to handle all regular store duties; designing a user-friendly store layout, so that customers put less demand on employees; and outsourcing of specialized functions such as payroll administration, graphic design, and e-mail marketing management.

Booksellers were also encouraged to take advantage of systems designed to make their lives easier and their businesses smarter and more efficient. These include the use of voice-mail to inform customers of hours, directions, etc.; broadband Internet connections for faster and more reliable service; and e-mail and the Web as cost-effective and quick means to communicate with customers. Vlahos also emphasized that technology and best industry practices should be used to reduce payroll hours devoted to backroom functions.

In conclusion, Vlahos noted that if a crucial key to profitability is in the payroll, a well-trained staff is a bookstore owner's best asset. This was reiterated by Carol Chittenden of Eight Cousins in Falmouth, Massachusetts, who noted, "You have a real advantage over the chains in the way you train your staff."

"Increasing Sales," which was presented by ABA Board member Russ Lawrence of Chapter One Book Store in Hamilton, Montana, took a nuts-and-bolts approach to boosting profitability. Lawrence started with the simple premise that the greater the difference in favor of revenue, the more profitable your business will be. He then broke down several strategies for increasing sales, including the use of co-op, websites, and e-mail. Topics included improving traffic flow, best merchandising practices, loyalty programs, and the value of increasing sales both inside and outside the store.

A quick way to increase profitability was the use of co-op, said Lawrence, who explained that booksellers should devise a co-op plan that prioritized "focusing on the big dollars first" and "consolidating advertising to use up small co-op amounts." But most important, Lawrence explained, was to make sure the co-op gets redeemed. "Use it or lose it," he said.

Another low-cost approach to increasing traffic flow, said Lawrence, was to make the bookstore newsworthy by implementing a public relations plan. " Build a relationship with your local media," he said. "Send them well-written press releases for events, ARCs, and the press kits from publishers. Invite them to events and make them a friend of the bookstore."

Websites are another excellent marketing tool to bring in customers, said Lawrence. "Mention your website everywhere," he said. "On signage, in your newsletter, in advertising, on store bags.... Use affiliate programs and create an in-store kiosk featuring your website." He emphasized that booksellers should not use chains' online databases to look up bibliographic information. "Use the BookSense.com site instead," he suggested.

Wrapping up the session, Lawrence summarized his approach to each customer who walks through the door. "Pretend that everyone has a $20 bill pasted to their forehead and it's your job to remove it."

Reducing rent, often assumed to be a fixed cost, was the focus of "Renegotiating a Lease," presented by ABA Board member Cathy Langer of Denver's Tattered Cover Book Store. Pointing out that occupancy cost is the second-largest bookstore expense, Langer worked to dispel the belief that this cost is fixed and can never be changed. Langer discussed how closely monitoring industry trends, watching the local real estate market, and maintaining a dialogue with a landlord will better position booksellers to control their occupancy expenses.

The presentation offered concrete examples of how a bookseller can best initiate a discussion with the landlord about an existing lease. Langer began by offering some general principles of negotiation: plan ahead, leave room for compromise, and offer alternatives instead of rejecting a proposal. "Just saying 'No' stops the conversation," she said. "Make a counteroffer instead." She also detailed ways to "make your case," including explaining how much rent you can afford and challenging maintenance charges that do not benefit your space.

Langer also gave alternative steps to reduce rent, such as giving up a percentage of square footage or subletting a portion of the space to another complementary business. She closed with the advice that if the bookseller has a premium location and all tactics to decrease the rent fail "think about buying your building."

Andi Allen of Piece of Mind Books in Edwardsville, Illinois, said the session helped her frame ideas for future negotiations. "[Langer] gave different variables to consider [for negotiating with a landlord] that are always useful. It helps to know what can be added to a lease or excluded," she said.

Increased accuracy in all aspects of bookstore record keeping was underscored in "Cost of Goods Sold 101." Presented with candor and humor by BookSense.com Director Len Vlahos, the session covered a frequently overlooked component of a bookstore's bottom line.

Briefly, Vlahos defined the Cost of Goods Sold (COGS) as the total cost of everything a store sold or offered for sale during a fixed period, usually a fiscal year. Gross margin equals the COGS subtracted from total sales. From that number, all other operating expenses must be deducted to arrive at the bottom line.

"Since our goal is to move independent bookstores from an average bottom line that shows a minus 1.67 percent to one that shows a two percent profit margin, we must create an accurate set of financial documents," Vlahos said. He stressed the importance of the updated, streamlined ABACUS program to gather accurate financial information and create a standard against which booksellers can evaluate and develop the variables for their success. "Everything we are presenting here started with ABACUS data. It's not only an index for comparison, it is a very useful tool when meeting with banks and landlords.

"This is the primer -- from here, you can make a plan to increase margins," said Vlahos, who then led participants, step-by-step, through the formulas required to calculate the cost of goods sold. The essential first step is to pinpoint the actual store inventory at one time, he explained. "This calls for a full physical count once per year," he said, acknowledging some skepticism among the booksellers in the room. An incremental inventory, used by many booksellers present, is taken at various times throughout the year and is less intrusive, but far from accurate, he noted.

The ABACUS Study of independent bookstore operations shows that the average profitability of independent bookstores respondents was just a mere negative 1.67 percent. But how can booksellers raise their profitability to a more satisfying two percent? In the comprehensive seminar "The 2 % Solution: Moving Towards Profitability," Chuck Robinson, co-owner of Village Books in Bellingham, Washington, discussed how booksellers can achieve greater profits.

Robinson stressed the importance of bringing in as many customers as possible. To do this, booksellers should consider, for example, plans for advertising via co-op dollars and for implementing public relation efforts. "You want to get your name in the newspaper for everything," he noted. And Robinson has long been a "real advocate" of building customer databases to help reel in new shoppers. Equally important are bringing back former customers and convincing current customers to show up more frequently. Other ways to boost profitability, he said, include using websites and e-mail as marketing tools; reaching out to special interest groups; improving in-store visibility with signs, window displays, and lighting; forming marketing alliances with other businesses; and doing in-store -- and out-of-store -- events. During the question-and-answer portion of the seminar, Susan Weis of Breathe Books in Baltimore, Maryland, commented that she's "gone straight to publishers" to tell them how author events have benefited her store -- and that's allowed her to grab more authors.

Increasing margin was given plenty of attention. It's crucial to bring in such higher-margin merchandise as remainders, sidelines, and used books. Buying directly from publishers and reducing freight costs are also profitable steps, Robinson said. And it's simply a "no-brainer" to promote and sell gift cards.

Booksellers should consider reducing payroll costs, too. Robinson urged everyone to "set pay scales, with a pay cap for each position." The importance of reducing occupancy expenses was also a topic discussed. "Know that rent is going to be a problem before it becomes one," he said.

The move toward greater profitability is difficult, Robinson admitted, but by concentrating on issues relating to sales, margin, total compensation, and total occupancy, the two percent mark is attainable.

After the almost three-hour presentation, several booksellers expressed optimism. "It was a huge amount of information, but he provided really great examples," said Jane Knight of Bear Pond Books of Montpelier, Vermont.

ABA President Mitchell Kaplan addressing booksellers and editors at the "What Are You Reading/Publishing?" Lunch.

Following the morning events, approximately 500 booksellers and editors from Book Sense Publisher Partners attended the "What Are You Reading/Publishing?" Lunch. The event is an outgrowth of an ABA Board-member tradition of sharing with each other the titles that they are currently reading and enjoying. Discussions ranged from frontlist to backlist, as booksellers and editors offered a combination of titles and perspectives.

Children's Programming

Spirits and expectations were high for the afternoon of children's programming beginning with the Association of Booksellers for Children (ABC) annual meeting followed by a 20th anniversary celebration luncheon. After an afternoon packed with presentations by authors, editors, publishers, and one very smart dog, many children's booksellers were eagerly awaiting their chance to continue the celebration at the legendary Copacabana in the evening.

One of the most exciting presentations, also celebrating a 20th anniversary, was given by author and illustrator Alexandra Day and the canine star of her popular Good Dog Carl series, Carl the Rottweiler. His contribution was brief, pointed, and very well received.

The next block of afternoon programming was sponsored by the Children's Booksellers and Publishers Committee (a cooperative committee of ABA, ABC, and the Children's Book Council [CBC]).

The program included a dialogue between National Book Award finalist Julie Ann Peters (Megan Tingley Books, Little, Brown and Co.) and her editor, Megan Tingley.

At the Children's Book Buzz, pairs of editors and marketing staff from about 35 different publishers, table hopped, and presented their hot picks. Watch for coverage of the Buzz and other children's programming in an upcoming issue of BTW.

BEA Buzz Forum

At the late afternoon BEA Buzz Forum hosted by Sara Nelson, editor-in chief of Publishers Weekly, an array of titles was presented by the industry's leading editors and publishers. As BTW went to press, featured titles included HarperCollins' True Story: Murder, Memoir, Mea Culpa by Michael Finkel and F.U.B.A.R.: How the Right Wing Has Trashed America and What You Can Do to Clean Up the Mess by Sam Seder and Stephen Sherrill; Hyperion's The Tender Bar by J.R. Moerhinger; Random House's Maybe a Miracle by Brian Strause (Ballantine) and The Lost Painting by Jonathan Harr; Scribner's What Remains by Carole Radziwill and Skinner's Drift by Lisa Fugard; Viking's Eat, Pray, Love: One Woman's Search for Everything Across Italy, India, and Indonesia by Elizabeth Gilbert and The Trudeau Vector by Juris Jurjevics; and Warner Books' The Widow of the South by Robert Hicks.

Look for coverage of ABA's Thursday afternoon education sessions and African-American and College Store programming in next Thursday's edition of BTW. --By Dan Cullen, David Grogan, Rosemary Hawkins, Jeff Perlah, Karen Schechner, Nomi Schwartz