Inside Indie Bookstores: Powell’s Books in Portland, Oregon

Yeah. In order to maintain our inventory, we can't rely only on books bought in Portland. We've always relied on a certain number of books being bought elsewhere in the country, whether they're from store inventories or private collections. Well, that's an expensive way to buy books. You have to fly people there to look at them, then you have to fly people there to box them, and then you have to pay the shipping in. Also, you usually have to take everything, which means you're handling a lot of books you don't want. So the online buyback is great because theoretically we want all those books. And you don't have to go anywhere to get them. And the customer boxes everything up. At the moment, Amazon doesn't do that. There are some people who do, but they're not major players. So that's given us at least a temporary advantage in source of books.

I'd like to go back and talk a little bit about the operation of the main store. In addition to the industrial look and feel of the space, another way that Powell's is different from most bookstores is that you mix new and used books on the shelves. Why did you decide to do this?
Well, we started as a used books company. My dad introduced new books in the late seventies, and his mantra was two of everything and three of nothing. So when a local writer like Jean M. Auel published her first book, we had just two copies. Then we bought a bunch of tables from Dalton's, and they asked, "What are you going to put on these tables?" And I said, "Stacks of...something." So that's when we got into the new arrival business.

But now we have about three hundred thousand volumes in the main store, as well as however many in the other stores. It's a substantial part of our business. In dollars, roughly 50 percent of our total business is new books, about 40 percent is used books, and then 10 percent is magazines, cards, and sidelines.

On average, bookstores make about 40 percent on each book they sell. Yet you've managed to nudge that up to nearly 44 percent. Considering that these percentages are before operational expenses, a small difference like this can mean the difference between staying open and going bankrupt. How did you achieve this?
You know, when you're done, you're always plus or minus. Your minus can be a lot, but your plus is hardly ever more than 2 percent after costs. And that's before you make any capital reinvestment. Because we're a larger business, we tend to order in volumes that allow us to get the maximum discount. And we do one other thing: We ship all our books to a central warehouse and then we distribute. I don't know if it's Borders or Barnes & Noble, but whatever the discount those stores got for shipping to a central warehouse, the publishers had to match that for us.

I'm sure that being your own distributor also makes things more efficient.
Yeah. We do all central receiving. Once the books are received, they're labeled and then distributed out to each of the stores. So we have our own truck fleet that runs our books around.

With used books, on the other hand, you've said that your average is closer to 65 percent. Is that also something you've been able to nudge up in similar ways, or is that number static?
We have slowly, over time, pushed that up about five points, either by paying less or controlling inventory better, and by making fewer buying mistakes. In the used-book world the risk is that you're going to buy something that you already have too many copies of, or that sales have evaporated for, or it's a book you had once and never sold. Now computers can tell you all that, so while we don't check every book we buy at the moment we buy it, if there's any doubt about the book we can scan it and see its history, the current inventory level, sales history, and make a judgment based on that. So I think our rate of having to pull things from the shelves has dropped considerably.

What's hurting us at the moment is this move away from people buying new hardbacks. You've probably heard this elsewhere, but in this downturn many people are avoiding a twenty-five-dollar book and moving, in our case, to used books. This has meant that we can try to keep our dollar volume up by boosting the units we're selling, because used books are cheaper, but of course the labor involved doesn't go away.

Or the overhead or the cost of the building.
Right. But the overall dollars have dropped because you're not selling that twenty-five-dollar book. Fewer dollars are coming in. So it's been a challenge. And we've had to do several things in the course of the last year to accommodate that.

Such as?
Well, we had to reduce the number of people working in the company, which we did through not filling positions when people left.

But no one was let go?
No one was let go, no. At one moment we were within two weeks of seriously considering it, but then the numbers looked like they maybe didn't require it, so we backed off. You don't do that casually. You don't turn people loose in this economic environment. I really didn't want to do it, and fortunately we didn't have to. We had twelve months of down business. But [last] September we had our first up month, so that was certainly good news.

What do you think accounted for that?
People are buying more books! I don't know what to say.

Are you a bellwether for the economic recovery?
Well, I hope so. It's not like spending money on cars or houses, but if they're feeling comfortable enough to do that...I mean, listen, they have an alternative. First of all, they can choose not to read. They can go to the library, they can buy fewer books, whatever. But the fact that the customers are back feels great.

Some people have suggested that it's not the fact that Amazon or big-box stores like Walmart and Target are selling books that accounts for many independent stores' losing their footing, but rather it's a lack of readers. Do you feel that's the case?
No, I'm not a subscriber to that. I understand the theory. The theory is that there are only so many hours in the day, and so if you're playing computer games or tweeting or searching the Internet or going to a movie or watching TV, you haven't got time left over for reading. And, yeah, that makes perfectly good sense. Yet we are selling more books. [Last] September we sold more books than we did a year [earlier] by a fairly sensational number. They were cheaper books, but there were more of them.

Long run? I'm not a predictor of the future. I don't know. Will the Kindle and the Sony Reader, or print on demand, or some other phenomenon we haven't thought of yet, erode our business? It's certainly possible. Nothing is forever. And there's no way to say that somebody's new vision of the future won't force us to reshape our vision. But I think as long as we're alert and pay attention and find ways to adapt, then we'll be okay.

Let's talk specifically about electronic books. Do they affect your business?
We sell them. Been doing that for the better part of ten years.

Really?
Yeah. There just weren't very many books and they weren't great and we didn't sell a lot of them, though there have been people trying to do this for a long time. And, you know, it's a small part of our business. But we're positioned to make it a bigger part if that happens.

Now, I want to go back a minute. People always say, "Well, there's this way of doing business and then there's Powell's way of doing business." But I want to point out that I got on the Internet because there was one guy on my staff who came to me and said, "I can put the technical books on the Internet. I need ten thousand dollars to do that." The money wasn't for himself, but for the technology. And I said, "Seems good to me." At the time, Barnes & Noble and Borders were opening stores all around me. My wagons were circled and they attacked from the suburbs, these giant stores. And I thought, "If there's any way to leap over those stores and reach a broader audience, there's nothing better than this thing called the Internet." And I was very enthusiastic. And so for ten thousand dollars—which is a lot of money, I appreciate that—and his time, we got to play. But it's not like somebody handed me ten million dollars and said, "Here, go invest this in the book business." We have built every brick, every stone—every element of the system is a result of organic growth.

In addition to building this business from the ground up, your family has always played an important role in the process. Your father came to Chicago to work in the first store, and now your daughter Emily is involved.
Yes. Emily is going to take over in July.

How long has she been moving into this role?
Probably four years now. She was director of used books for a while, and she worked to get our minds back into the used book world. 

What do you mean?
Well, when the economy started to go bad, we told ourselves that we needed to get more used books on the shelves. That meant changing some of the ways of channeling books to the stores and also boosting the volume. For the last year she's been in charge of the Internet marketing world, with the goal of taking a fairly flat Internet business and seeing it grow. She just finished an executive MBA, and one of the faculty members from her program, along with another fellow he knows, are acting as consultants. So she's been working with them to redirect the energies of staff, reorganize staff, and redesign the Web site, and to do things that make it easier to use, more intuitive. We've always won awards for the content on our site, but I don't think anybody would ever give us an award for the smoothness, or the use of the page. Now we're trying to make it a more intuitive process to use, and that always involves a fair amount of rewrite on software, so you can't do it overnight. But you can do it. So she's been working on that and doing a great job.