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Retailing Books: A Brief Look

The recent news story on the resignation of Ron Marshall, CEO of the Borders Group (the NYT story is here), suggests that this major retailer had and still is having troubles. Marshall, who just arrived at Borders a year ago, did what turn-around experts do best. He cut costs and eliminated many of the smaller and less profitable Borders outlets. Evidently not enough.

How big is book retailing? Manufacturing and Distribution USA (one of our books) tells us that the industry (technically NAICS 451211 – Book Stores) had nearly 10,600 establishments in 2009, sold $19.9 billion in merchandise (not all of that books), about $1.8 million per establishment. This sector also employed nearly 162,000 people. Establishment counts are down from 11,700 in 1990 but employment is up from the 86,000 in that year—suggesting that in this period stores have become bigger. Ron Marshall was just following a trend. This period also saw the rise, from a flat horizon, of a giant, Amazon.com. Amazon’s sales (per its most recent 10K filing with the SEC) had net sales in 2009 of $24.5 billion—up from $8.5 billion in 2005: that’s growth, folks). Borders Group? $2.63 billion, up from $2.59 billion in 2005. Barnes & Noble? $4.53 billion (2008), up from $4.12 billion (2004). There are also other smaller chains.

The gatekeeper for independent bookstores is NewPages.com. Its site is here. The site features mailing lists to book stores, public libraries, and academic libraries. It also has a page on which specific bookstores may be found state by state. It lists 81 of them for Michigan, for example. NewPages’ mailing list of independents shows 1,400 stores.

In terms of dollar volume, the retail sector would seem to resemble a spinning top. It’s biggest element is Amazon on top, the big chains below, the smaller ones lower yet—and the entire structure resting on a needle-thin support—the independent book sellers. The top is kept upright by its rapid spin, namely the dollars flowing through the giants. In terms of number of outlets, we’re looking at a pyramid in which that giant, Amazon, is now at the bottom. It has the largest number of outlets—every computer connected to the Internet. It is no wonder that Amazon is able to get its books at the lowest possible cost: it simply offers greater sales potential than any other vendor. And from the publisher’s point of view, the survival of the Borders, the Barnes & Nobles, and other chains is highly desirable because these retailers are the more profitable channel.

Now for a kind of footnote. We got to wondering about Ron Marshall—a year at Borders and gone again? Where did he come from? Where is he going? Turns out Ron Marshall came from the food sector and is going back to it. Ron’s career? Nash Finch (food distributor), Pathmark Stores, Inc. (grocery chain), Borders (books), Great Atlantic and Pacific Tea Company (A&P, grocery chain). Food is just a little more basic than books, alas. But you cannot live on bread alone.


One Response

  1. How’re things going here? What happened at the ConFusion in the way of Ghulf Genes sales? Just interested. You can answer by email of course.

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