Last chapter for independent bookstores? Not just yet

Source: McIntyre Books

McIntyre Books

McIntyre's Books in Pittsboro, N.C., has been in business for 25 years. During that time, Keebe Fitch, daughter of the founders, said the shop has seen its share of ups and downs.

"We had double-digit growth in book sales for years until a Barnes and Noble opened on a highway near us around 1991, and then it all came crashing down," said Fitch, who sold real estate for a while before returning to the store as its manager.

"But we've buckled down and have been able to hold on for the long haul," said Fitch, who has a five-person staff. "Our gross sales are up 14 percent so far this year and were up 13 percent in 2011. We've learned how to change and get stronger."

Fitch and her store—located in the planned community of Fearrington Village near Chapel Hill, the campus of the University of North Carolina—are part of a small but growing resurgence of independent bookstores in the U.S.

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"Sales from independent bookstores in 2012 were up eight percent over 2011," said Dan Cullen a spokesman for the American Booksellers Association, a nonprofit trade group of independent bookstores.

"We've got people opening new bookstores and people buying into existing ones," he said. Talk of the death of independent bookstores "as a result of the big-box stores was premature at best," he added.

The dire prediction may have seemed a natural conclusion at one time. Some 1,000 independent bookstores went out of business between 2000 and 2007, according to the ABA, as consumers turned to online buying, downloading e-books, or flocking to Barnes & Noble and Borders (the latter now defunct).

But the ABA said that since 2009, the number of independent bookstores has risen 19 percent, to 1,971.

"When the box stores came into vogue, everyone quickly moved on from smaller stores because the allure of being able to see and purchase a much larger quantity of books was very enticing," said Dick Brulotte, manager of the independent Beehive Books, in Delaware, Ohio.

"Those that tried to stick it out had to find a niche, which would still draw in customers," he said. Brulotte had worked full-time at a Borders location after his retirement from teaching.

Fitch at McIntyre's Books said, "We didn't want to be a superstore, so we learned how to get books that people couldn't find online, and to cater as much as we could to the customer. When a customer walks in, we try to make them feel wanted and at home. It's a very personal experience."

The personal touch

That kind of service, in addition to being local, has been key for independents, according to Ronald Hill, professor of marketing and business law at Villanova University.

"There will always be those who prefer local businesses over chains and close ties over discount prices," he said. "They are willing to pay more for the personal touch that comes with deeper relationships at the community level."

Antoinette Kurtz, a community relations coordinator at Barnes & Noble for five years in the mid-1990s, said the chain had started out as customer-friendly but then changed its business model.

"They moved to a corporate and school sales focus and stopped doing author readings and community events," said Kurtz, now a marketing and public relations representative for authors.

"Those type of sales may be bigger on an individual basis, but in the longer run they are smaller, she said. "What they did was to forget how to draw in customers."

Calls to Barnes & Noble for comment were not returned.

Though Fitch at McIntyre's said matching Barnes & Noble's price discounts is not part of her strategy, other owners feel the need to compete on price.

"Pricing is key for us," said Kathy Doyle Thomas, executive vice president of Half Price Books, a family-owned chain of small bookstores with 116 outlets in 16 states.

"Customers love HPB because of our prices and selection," she said. "When you can give your customers a great product at a great price, they will buy more."

Other tactics include cutting down on items that don't move.

"We got rid of dictionaries and travel books," Fitch said. "We've been judging the kind of books people want."

Independents must find ways to provide extra value to help keep customers and gain new ones, said Beehive Books' Brulotte.

"We've added services such as ordering hard-to-find and out-of-print books and will soon ... order e-books and e-readers for those who have made the electronic transition," he said.

Some book shops are offering full printing services for on-demand books, while others employ updated marketing outreach.

"We used to mainly focus on radio and print but in addition to that, we're using strategies like advertising on Facebook, Pandora and more," said Doyle Thomas at Half Price Books. "These strategies are important for us in expensive media markets like San Francisco."

The independents still standing have endured a tough elimination process, said Larry Chiagouris, professor of marketing at Pace University.

"The stores that were weak have been weeded out, including chains like Borders," he said. "What we have left are the ones who figured out a good business model, like adding great customer service."

Many independents have benefited from Borders' 2011 bankruptcy (which was blamed in part on its expansion into outdated music and movie products) along with the buy-local movement, said Cullen at ABA.

But there's still concern.

"The economy is a worry," he said. "If consumers don't have enough discretionary spending for items like books, that can hurt independents."

And the resignation of Barnes & Noble's CEO last month could signal an increased emphasis on its stores, making it a bigger threat.

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E-books are another challenge. They can be either an income source as a sales item or a major competitor as consumers download titles instead of buying hard copies.

About one in five books sold last year was an e-book, accounting for $3 billion of the $15 billion in total publishing revenues, according to the Association of American Publishers and the Book Industry Study Group.

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Meanwhile, audio books are going through an explosive period, with sales up 21.8 percent last year from 2011, to $241 million. Amazon bought the biggest maker of audio books, Audible, in 2008 and has the lion's share of the market.

This comes as book sales are in general decline worldwide, with sales in the U.S. down 9.3 percent last year.

Independents hold just 10 percent of the overall book market compared with Barnes & Nobles's 20 percent and Amazon's 29 percent, according to the ABA.

"Independent bookstores won't get back to the high numbers they had some years ago," said Pace University's Chiagouris. "So they will have to keep changing to survive."

Reading the bottom line is the key to success in a competitive business, said McIntyre's Fitch.

"Back in the 1980s was an amazing time to be a bookseller," she said. "There wasn't the ruthless competition there is now. There were a lot of good stores that just couldn't make it.

"My advice for someone who wants to own a bookstore is: Do your homework," Fitch added. "Learn the business. Don't just do it because you love books."

—By CNBC's Mark Koba. Follow him on Twitter @MarkKobaCNBC