Wednesday, February 23, 2011

Five ideas that can help Powell's Books avoid bankruptcy

Powell's Books, a nearly 40-year-old book retailer with six stores in the Portland area, including the 68,000-square-foot flagship, Powell's City of Books, which is described as "the most vaunted brand in the independent bookstore world", is in trouble.

According to article on the, about two weeks ago Powell's laid off 31 employees due to a drop in 2010 sales - In an email memo they sent to their employees, the company explained that "sales for this fiscal year are down and we expect this trend will continue. The largest decreases have been in new book sales". The company also announced it is taking other measures such as suspending company 401k contributions for a minimum of a year and a pay freeze will go into effect July 1st for a minimum of a year.

The problems of Powell's are not very different from other book retailers, both independent and large ones and Tom Gillpatrick, a retail marketing professor at Portland State University explains it very clearly in the article: "The Powell's model that has been so successful is really being challenged by new competitors, new technology and new shopping habits. They need to go back and rethink that business model, otherwise it'll just be ratcheting down and down - unless there's some huge wave of nostalgia."

It's clear that the problems in Powell's Books are structural ones and that if no major steps will be taken in the next year or two, Powell's with their 400 to 600 employees (depending on season) and $68.4 million in revenues (source: Hoover's), will be in a much more difficult situation that might jeopardize its future.

So what Powell's Books can do to reverse this unfortunate but nevertheless foreseen trend? I'm not sure we got all the answers but here are five ideas that might be helpful:

1. Make a better use of your strengths - Integrate your digital and brick and mortar strengths - If you offer great service in the stores, try to offer it online (how about online live help to find the right book)? If you offer a great web experience on your website, why not make it even greater for your stores' customers with exclusive materials available only for those who visit Powell's stores (just like Starbucks for example)?

2. Provide local incentives - It's obvious that Powell's can't compete on price, and it's also clear that Powell's want to increase sales at stores as they don't want to stay an online business. To get there they need to extend their best comparative advantage - being a local business in Portland. The problem is that just being a local business is usually not enough and works in very few places (see Greenlight Books for example).

Powell's should adopt a strategy that is based on providing local incentives - for example partnering with other local businesses and offering discount coupons for customers who purchase in Powell's stores (get a $5 discount in a local coffee shop for every 3 books you buy for example) and in these local businesses (get a $10 discount at Powell's for every 5 coffees you order in your local coffee shop). This way customers will know they support local businesses and profit out of it at the same time.

3. Get POD into your stores (at least to one of them at first) by adding the Espresso Book Machine (check at McNally Jackson in New York). This machine can print in minutes affordable, library-quality paperbacks and can also print anything in the public domain, increasing the store's inventory by over 4 million potential titles. This is something that can really increase the value of a visit in your stores for your customers.

4. Offer a CSA-based program - If there's a place for a local supported bakery and a local supported beer, there's definitely a place for a local supported bookstore program. Just find the right way to make people enthusiastic and involved just like with CSA programs.

5. Find other uses for your space or reduce it - In the near future bookstores will see a decrease in their brick and mortar sales - more people will buy online both e-books and paper books. Therefore, Powell's should look for alternative uses of its space and will provide real value, or if there's no other choice close some of its stores. No matter how you look at it, supply must adjust itself to demand.

We want to see Powell's Books thriving and continuing to be "the most vaunted brand in the independent bookstore world", so I hope our ideas might be helpful and in any event I hope Powell's will consider and implement new and innovative ideas because it has to in order to survive.

Raz @ Eco-Libris

Eco-Libris: Working to green the book industry!