March 2019

Christian Bookstores are Not Dead; Resilient Indies Carry On

Christian Bookstores are Not Dead; Resilient Indies Carry On

By Greg Squires

Contrary to news headlines and the perception of some, bookstores are not dead and gone. With LifeWay’s announcement that it will close all 170 stores by the end of 2019, preceded by Family Christian going bankrupt and closing 240 stores in 2016, it naturally raises questions about the viability of Christian bookstores.

Retailing and publishing are industries undergoing radical transformations, and the rise of Amazon has made a big impact on these market shifts. This is undeniable. But this story is still being written.

The print book is also not dead. The Kindle and eBooks brought dark clouds of pending doom to the book industry 10 years ago; now in hindsight, we see that people still buy print books and eBook market share did not rise as forecasted.

Independents Remain

Based on a variety of industry sources, there are 1,500 – 2,000 independent Christian bookstores, including traditional retail brick and mortar stores along with church bookstores (ranging in size from small to large). These independent bookstores are operating in the age of Amazon and finding ways to survive despite the changing market landscape.

Independent bookstores in the general market are showing signs of life and are not going away. ABA (American Booksellers Association) reports that membership has risen over the past 10 years and ABA bookstore sales have had compound annual growth rate of 5.4% over the past five years. Two-thirds of ABA bookstores report a net profit after all expenses including manager/owner salary, with the top third reporting 8.8% net profit—not bad for a retail shop today.

Nationally—both in the general market and Christian booksellers—new stores are opening, established stores are finding new owners, and a new generation is coming into the business as both owner/managers and frontline booksellers. (See this week’s PW story on this young couple named bookstore of the year.)

Why Chains Failed

Many of the reports that described the closures of Borders, Family Christian, and LifeWay point to a changing retail landscape, margin compression, and changing customer preference as drivers of their demise.  There is more to each story here.

  1. Chain stores were too big.

The overhead and fixed costs for stores with 10,000+ square feet was too much to operate profitably. In addition to rent costs, the inventory and staff required to fill the space created too great of a burden on the store’s expense profile.

Dozens of independent bookstores have right-sized their store over the past 10 years, reducing their footprint to 2,500 – 7,500 square feet. They improved their profitability and saw little reduction in sales as loyal customers followed the store’s move. For many, this was a difficult decision that required some staff and inventory reductions; but because of their “independence” and resilience these stores were able to make the decisions necessary to keep going.

  1. Chains have managers; Indies have owners.

There is a dramatic difference in ownership mentality between a chain store manager and an indie bookstore owner. Indies have explicit and tangible ownership; they manage the profit and loss closely because their livelihood depends on it.

Managers of chain stores have an inherently different approach to their responsibilities. This may be an unfair generality, as there are great people managing stores with an incredible passion for the customer and the book product. But there still remains an inherent difference between the rightful owner of a business and a hired manager.

Each chain had its own model for managing their stores, sales targets, profitability, and approach to local adaptation. None of these were models of a successful retail chain.

Granted, there are/were some great booksellers in chain stores that have lost their opportunity to serve customers and sell books—this is a sad reality. But, the booksellers that believe their community needs a bookstore will explore or consider ways to open an independent bookstore.

  1. National chains lack local market flexibility; Indies adapt.

Chain stores offer a consistent and common customer experience; when you walk in the door in any city or state, you know what you’re going to get. We appreciate this about Starbucks and Target, but it’s arguably not what the bookstore shopper is looking for.

Indie bookstores are attuned to their local market and shopper, listening to their requests and observing purchases every day, and doing whatever it takes to stock products that sell.  Local authors get prime placement in indie bookstores because there is a personal relationship that creates authenticity and taps into our sense of place.

Listening to the needs of the customer is essential for survival, and it’s very challenging to do this across regions of the United States. Even a dozen distinct merchandising plans in chain stores would fall short of targeting the right products to the target customer base in each market.

  1. Chains carry heavy corporate infrastructure; Indies are lean.

Retail chains require layers of management and a corporate office that centralizes some functions. The premise is that this centralization creates scale and efficiency; that is not always the outcome. The chain bookstore still requires the manager, floor staff, and buyer functions, just as the independents do. But, rather than offering efficiency to the store, the corporate office, regional managers, and leadership teams creates a financial strain on the store that erodes overall profitability.

Indie bookstores operate as local “lean machines” that must manage their cash and expenses to carry on month by month. Those that have done so to this point have found a way to survive.

  1. Chains lack personal relationship; Indies know your name.

Customers shop in bookstores today because they want curation (discover the new and recommended) and they want community (personal relationship and authentic trust) with real human beings. This is the bookstore’s advantage over Amazon.

Chain bookstores—again, not true in every case but generally—didn’t overwhelm the customer with personal recommendation or authentic community. It’s expensive to provide human coverage of a store of 25,000 square feet or more. I’m amazed at how many red vests I see in my local Ace Hardware—they are committed to deliver on their promise to be the “helpful place.”

To add to that, independent bookstore owners and staff generally have more longevity than chain bookstore staff. With less turnover, there is a greater personal connection with customers and stronger bonds of trust. People shop in bookstores largely because they are looking for a book or gift and aren’t sure what to buy—they are expecting someone to help them, and it’s even more satisfying when the person knows your name.

  1. Chain corporate goals trumped customer needs.

LifeWay made substantial merchandising decisions over the past 18 months that are important to understand. There was an increased presence and positioning of B&H Publishing product (the publishing house owned by the Southern Baptist Convention, which also owns LifeWay). Simultaneously, there was a substantial reduction in placement and inventory of other publishers’ products. This seemed like an effort to improve margins, to focus on the theologically conservative product, or both; but it did not serve the customer’s needs. If a customer is looking for a key title that is out of stock or is told “we don’t carry that,” the customer will likely never come back. A turn toward margins or theological preference is a turn inward that pushes customers away and leads to demise.

Frankly, all publishers are challenged to serve the entirety of a customer’s needs because, in most cases, they don’t sell the breadth of product that a customer is looking for.  This further reinforces the need for a retailer to represent breadth and service to all customer segments.

It’s a new day

The bookselling and publishing industries are at an inflexion point; “what is the future of book retailing?”. Will publishers double-down on direct-to-consumer and allow Amazon to expand to an even greater share of sales? Or, will there be a rise in count and reach of independent stores to fill in where chain stores have left customers under-served?

There is a group of resilient, adaptive, locally-engaged independent Christian retailers that are determined to carry on. These bookstores have become regional stores and are drawing customers from much farther distances.

Churches and their leaders have long relied on local booksellers for book recommendations, Bible studies, and other resources. These needs still remain, and some of the strongest Christian bookstores have found ways to engage with pastors, serving as a guide to their book selection, and offering them focused attention to serve their needs in ways Amazon can’t.

These independent retailers are collaborating more than they ever have. Many are sharing transaction and inventory data via ParableConnect and are making smarter merchandising decisions and more intelligently managing their product mix. Retailers are getting assistance from vendor sales reps to accomplish the same, which helps everyone. And, there is increased collaboration among the marketing groups as the Christian Products Expo (CPE) has become the meeting place for the industry in the absence of CBA.

The map below demonstrates that there is strong nation-wide coverage among active independent stores—this is not every Christian bookstore but a strong representation of known active accounts. The industry needs these stores to survive and thrive, and customers want this too.

Bookstores carrying on with ownership change is another sign of life. ABA reported 28 such transitions in 2018. There are several Christian bookstores that have changed hands in recent months, and more are pending. After 45 years, Bill and Isla Ballou sold The Solid Rock in Kearney, Nebraska in January to a vibrant new owner with a vision for serving younger customers. And Heritage House Bookstore in Brockton, MA just announced their sale to new owners after 55 years of ownership, to name a few.

Christian bookstores are not dead. It’s not an easy business but it’s a good business and an essential part of book publishing, author’s success, and the consumer discovery of books. Independent Christian bookstores have not given up and will continue to serve customers in their local markets. Regardless of your connection to this industry, you have a role to support your local independent bookstore. Perhaps it is your calling to open one in your area or advocate for someone else to do so. There are plenty of good examples and models for profitable book retailing today.

For more book retailing recommendations or further commentary on industry trends, see the Christian Retail 2018 Year in Review.

With stores selling to new owners and passing on to the next generation of Christian booksellers, this should be an exciting time in our industry. Independents remain, and independence remains. And those are good things, because they’re what built the industry and will continue to move us forward.