For many New York book buffs, the memory of what happened on January 31, 2002, still brings a heartfelt sigh. After 27 years at the corner of 57th Street and Broadway, Coliseum Books closed its doors, the victim of soaring commercial rents and crushing competition from national chains like Borders (BGP ) and Barnes & Noble (BKS ). For weeks before the Coliseum sign came down, faithful customers came to hunt for going-out-of-business bargains and pay their last respects.
Even aficionados recognized that Coliseum was an unlikely object for such regrets. It was an ugly, austere store -- no potted palms or designer coffee counters, none of the sofas and overstuffed chairs that Barnes & Noble have made fixtures of its flagship Manhattan stores. Rather than quiet music tinkling in the background, browsing was done to the accompaniment of honking horns and traffic noise. But to anyone hunting for a hard-to-get book, Coliseum was the place to begin the quest.
Not that Coliseum was elitist, since manager and co-owner George Leibson made sure his 80-member staff also stocked the standard titles, from bodice rippers to the latest egomaniacal autobiographies of Corporate America's high-flying titans.
Well, times change. Commercial rents in New York are softening with the local economy, and while civic boosters talk confidently of the city coming back from its current budgetary crisis, Leibson and partner Irwin Hersch are leading the way by example. Within the next month -- less if his truckloads of undelivered fixtures turn up -- the veteran bookseller will reopen on West 42nd Street.
Last week, Leibson took time away from supervising carpenters to talk with BusinessWeek Online Small Business Editor Roger Franklin about his plans and to explain why, even as other independent bookstores are going to the wall, he hopes to beat the chains at their own game. The key to Leibson's strategy: An entrepreneur's intuitive command of what customers want, preferably before they know it themselves. Edited excerpts of their conversation follow:
Q: You're reopening an independent bookstore with the benefit of a revered name and reputation, but you're doing it when the industry is increasingly dominated by chains. What's the reasoning at work here? What makes you think you can win against Borders and Barnes & Noble?
A:Well, it's a question I've been asked incessantly in the last few weeks and months. Personally, my motive is very basic: Selling books is the only thing I've ever done in my life. We were at Broadway and 57th Street for 27 years, and we lost the lease because the new landlord needed to make a certain amount of money, and we couldn't pay anywhere near that sum. So we closed, sold off all our books, and put our fixtures into storage.
Most of the people who worked for me found other jobs or collected unemployment, and I devoted myself to tying up the paperwork while still looking for other locations because, as I said, I'm 58, and I've never done anything else in my life.
Q: It must have been hard after 27 years of an entrepreneurial existence to even contemplate doing something else.
A:It would have been wise financially for me to try to find a job in the industry somewhere. But I don't know very many people from the industry, surprisingly, after all these years, because I basically kept to myself and kept my nose to the grindstone at the old store. Anyway, it's certainly not the right time to be looking for a job, as many of the people who worked for me found out. So we had an exclusive agent, and...we eventually found this location on 42nd Street, opposite Bryant Park and the New York Public Library.
Q: Sounds like a good location for a bookstore.
A:Well, we're going to find out. Until the day we open the doors with a load of books in the store, we won't have a clue as to what we can do. I had intended to be open by now, because we signed the lease on Feb. 1, and the free rent is running out. But we had a very late start getting construction under way. We're hoping to be open by Memorial Day.
Q: Did you have to do very much construction?
A:A bookstore requires more work than you might suppose. But here, a lot of things were in place -- air-conditioning, a fire alarm, and sprinkler system. It had floors in, didn't need a ceiling, and part of the lighting was in as well. So, to prepare this 10,500 square feet of space, instead of costing $1.5 million, which would be a low-ball estimate, we're going to do it for less than $300,000. We have all the old fixtures, of course, and that helps.
Q: How did you pitch the business plan to investors? I'm intrigued because, in an industry dominated by chains, how did you begin to persuade them?
A:I don't have a formal business plan, but we have people who know us, and we pitched to them. Our investors aren't from out of the blue -- my accountant, my real estate agent, a publisher, a friend of mine who was in the construction business, and a neighbor of my accountant. The pitch was simple...projections to show that we should be able to make a profit, based on figures from the old place.
Q: Are your investors book buffs, or were they primarily impressed by the business side of the deal?
A:Obviously, the publisher's a bibliophile. My accountants I don't think are bibliophiles. Right now, though, it's a time when it's hard for people to find places to put their money. You can put it in the bank, you get 1%. Invest it somewhere else [like mutual funds], you get to watch it shrink, a little if you're lucky, a lot if you aren't. So we're offering a little more than that.
Q: Your old store was a great place for browsing. If you wanted a particular book, more often than not a reader could find it there. That reputation is going to be a big plus, right?
A:Actually, that could be a problem. The first store grew organically from 3,500 square feet to 11,500 square feet of selling space, and there was a hell of a lot of back space, about 4,500 square feet. So I don't think the old store can be replicated. What we can do here, I hope, is concentrate on creating pretty much the same feel as the other place. I'm hoping we will. Oh, and we're going to have a café because the investors insist on it.
Q: Can't sell books without java these days! The chains certainly seem to think so.
A:The trick to surviving as an independent bookseller, as I say, is concentrating on doing the one thing that you can do better than the chains. For us, that means having the book that somebody wants at the time they want to buy it.
It's extremely labor-intensive to achieve that. I had six buyers in the other store. We're trying to do it with four here. Me? I don't want to be a buyer, but I think I'm going to have to be because we have to be fast to compete, to get what the customer wants onto the shelves fast enough to satisfy. I hope that we can continue to do that, because that's the thing we do better. I'm hoping that we can get back up to what we had before. Not in volumes, but titles -- back up to around 100,000 titles.
I didn't have chairs at the old store for people to sit in. We didn't have a café. We had a problem with the dirt coming in off the street -- we're going to have the same problem here, by the way -- so I had to shrinkwrap just about every book. If the customer wants to order a book that's fine, but they can do that anywhere. What we aim to do is give people what they want when they want it. As I said, it's an extraordinarily labor-intensive process to anticipate the needs of so many different readers with wildly varying tastes and interests.
Q: Are you going to have an online operation?
A:We're going to have a Web site, but I'm certainly not going to be selling books online. What you'll be able to do is find a book on our Web site and send an e-mail asking us to send it, but it won't be anything like the way Amazon does business.
Q: Book junkies are buying an awful lot of books from Amazon, books that would otherwise be purchased from stores like yours. Does that deep-pockets competition worry you?
A:I do know we're going to have a very tough time fighting off Amazon. I had hoped that, by the time I reopened, Amazon would be history. But they're still going, and this is problem. First of all, you get books cheap from Amazon, and I just can't afford to give discounts. To me, the economics of [online bookselling], well, they're just plain crazy. I don't see how Amazon can sell books at 30% off -- and that's delivered, too, in many cases.
From my perspective, what Amazon is doing is just nuts. How can Amazon make money on books at 30% off? There's just no way, even if they're buying at a 50% discount. Yet Amazon stock is doing O.K. What am I missing? It's really quite astonishing. As I said, I had hoped that by the time I opened, Amazon would be history, and I'd only have to fight Barnes & Noble's and Borders, which are bad enough to fight.
So anyway, that's where we are. We may or may not be able to make this new store work. But I do know I can't afford to discount books with the rent that I pay for this location. But that's all right, because neither does the competition -- you don't find Barnes & Noble discounting much of anything except The New York Times Bestseller list or their own bestseller list.
Q: Overall, how are book sales holding up? In times like these -- terrorism, war, economic anxiety -- are books a "necessary luxury," so to speak?
A:They've always been sort of recession-proof because people turn to them as an inexpensive form of diversion in hard times. Are as many people reading these days? Well, I only know what everybody else knows, and that's there are other means of acquiring information. There are other means of entertainment and diversion.
Myself, I don't get to read a fraction of what I want to -- what I used to read -- and for any number of reasons. People, even intelligent and inquisitive people, are busy making ends meet and dealing with the demands of our society. You sit down at your desk, and it can take you two hours just to get it clean of all the the paperwork you need to do. And then there's e-mail! There was never a bigger time waster in the world than the personal computer.
Think what it was like looking up something in the encyclopedia. You'd find it, then that might lead to looking up something else, and then, maybe, something else again. But that was beneficial. With the Web, it's often not. What I mean is, you're still looking things up, but they're often the wrong things. It's so much easier to get distracted, and I guess that impacts books and reading them.
Q: So in the time you've been in the business, how has it changed? I mean, you had what, almost three decades in the business now?
A:I started in 1965 as a clerk. Computers changed the whole world, but what they did in the bookselling business was revolutionary, because they gave the chains the tools to do a very good job, which is something they had never been able to do before.
Q: Managing inventory and the like?
A:Correct. We were one of the first booksellers to jump into a computerized system -- a clunker by today's standards, but very good for the time -- and that helped us to fight off the chains. You know, our old store was only a short block from a Barnes & Noble, and we were able to compete successfully against it. Once computers arrived -- and this is true of what happened to the hardware industry and the stationery and, well, you name it -- the chains were able to do a much better job on inventory. And with their obvious economies of scale, they were able to knock little people out.
And so that's the primary change in the business. And I mean, that change drove all the other changes. It drove the changes, too, in the buying and in publishing, because the publishers now had to satisfy the chains. Where there used to be 5,000 or 6,000 independent bookstores, there are only 3,000. And the clout of the chains is that much greater. They call the tune on a lot of things to a lot of publishers.
What [the technology revolution did] was give the chains the wherewithal to discount books and knock the independents out. Now, most of the independents are gone, so the chains can drop their discounts. In other words, they have achieved the goals they set themselves of clearing the field.
Q: What sort of margins would you be looking at?
A:The standard margin for books is 40%. If you can operate at 43% after freight as a gross margin, you're doing pretty good. The chains obviously operate at a slightly higher figure because they're always buying at the top discount, and also because they still have some other advantages over us -- in returns to publishers and things like that.
It's certainly the wrong time to be in this business in terms of the economic cycle, and it's the wrong time in this business in terms of the competition. But it's what we know, and we know it well enough to compete with the chains, so that's what we'll do.