The novel approach
Publication Date: Wednesday Aug 10, 1994

The novel approach

Passions run high as powerful bookstore chains encroach on the territory of the independents. Will Palo Alto be the next battleground?

by Monica Hayde

It was around 1988 or '89, when mall shopping was in decline and the recession was on everyone's minds, that the presidents and CEOs of the corporations that ran the country's chain bookstores finally realized they were doing something terribly wrong. Under the harsh fluorescent lights of their cramped mall stores, they scrutinized their meager selection of titles. They looked quizzically up and down the quiet mall corridors and saw few shoppers perusing the shelves of their little B. Daltons or Waldenbooks.

They took a good long look at the bored-looking kid whom they paid minimum wage to stand behind a counter and wave customers in the general direction of the self-help books.

After they finished hitting themselves on their foreheads with their palms, these higher-ups from corporations like Kmart (which owned Waldenbooks and would soon come to purchase an Ann Arbor, Mich.-based independent chain called Borders), ventured forth and examined such bookstores as Denver's colossal Tattered Cover, the venerable City Lights in San Francisco, the long-loved Cody's Books in Berkeley--strong, community-centered, often family-owned shops such as the 39-year-old Kepler's Books in Menlo Park and Printers Inc. in Palo Alto and Mountain View.

They saw the independents' spacious yet comfortable stores, conducive to browsing and lingering. They observed the well-attended free events like author and poetry readings. They marveled at the foreign language periodicals, at the title bases of 80,000 or 100,000 and at how those ingenious owners often paired their bookstores with the second finest of life's commodities: coffee.

So they looked at their demographic and market surveys, determined that the market for books was growing, and could grow even more, and said, "If they can do it, we can do it."

And they did. Only bigger. Much bigger.

Thus began a new--some say dark--chapter in the 500-year-old story of bookselling. In a nationwide confrontation marked by impassioned rhetoric, lawsuits alleging unfair trade practices and an investigation by the Federal Trade Commission, the owners of the independents are appealing to the loyalties and affections of their longtime customers, maintaining that books are not just a commodity to be distributed like cans of soup or toilet paper. Meanwhile, the chain stores are opening their warehouse-sized "superstores"--complete with cafes, stages for children's events and accompanying music stores--almost daily, claiming they have helped to increase the market for buying and reading books.

Since 1990, the giant of the giant chains, the New York City-based, half Dutch-owned Barnes & Noble, whose empire includes B. Dalton, Doubleday and Bookstop/Bookstar, has expanded to 263 superstores nationwide, including 51 in California at last count. According to the company's public relations department, a new Barnes & Noble superstore opens every 4 1/2 days, on the average.

The Maryland-based Crown Books, known a decade ago as the quintessential fluorescent-lighted mall store, has also started its own brand of superstore, with approximately 40 locations nationwide.

Meanwhile, Borders, which had about 20 modest-sized locations when purchased by Kmart in 1992, has since expanded to 55 stores nationwide. Every new store opened since 1993 is a 20,000- to 45,000-square-foot Borders Books and Music superstore. By comparison, Kepler's, considered a superstore when it moved to its current location in September 1989, is about 10,000 square feet. (Although double the square footage does not necessarily translate into double the number of titles, a store with more space can better display the titles it carries.)

At least four Borders Book and Music stores are scheduled to open in California this year, including a 40,000-square-foot flagship with a CD-ROM department on San Francisco's Union Square and a 50,000-square-foot "future store" in Westwood, says Borders vice president of marketing Dan Conetta.

And if Palo Alto developer and landlord Chop Keenan gets his way, there will be another outpost of this massive--and, by many accounts, quality--book and music store, complete with "e-bar" (Borders-talk for espresso bar), in downtown Palo Alto, possibly at the site of the now-closed Varsity Theatre.

In exchange for seismic and historic upgrades on his 67-year-old building, Keenan wants the Palo Alto City Council to grant him a 50 percent square footage bonus in order to make way for a 37,000-square-foot, two- or three-story Borders.

The City Council was scheduled to discuss the issue at its Sept. 7 meeting. But Keenan has recently been informed the he must complete an environmental impact review, which is estimated to take until January or February, on his proposed project before beginning the $2.5 million renovations. (See related story on page 9.)

No matter what might happen with the Varsity, "either Borders or Barnes & Noble is coming to Palo Alto," Keenan says emphatically. "There is a market here."

While many critics of Keenan's plans are primarily concerned with preserving the Spanish-style building as a theater, local bookstore owners say that if a large chain store comes to town, there is more to be lost than just a beautiful old movie house. Naturally, the owners of the local independents are concerned about losing a chunk of the profit pie, says Clark Kepler, who runs the Menlo Park bookstore his father, Roy, founded in 1955. But it goes deeper than profit margins, he says. When it comes to books, and the community-centered independent bookstores in which Bay Area communities take so much pride, there are some more fundamental concerns.

"One of the things that makes Borders and Barnes & Noble such a threat to independents is that it would appear that they have done something that many independents thought the chains would never be able to do: They have co-opted the image of the independents. They are no longer using plastic and metal in their interiors; they've gone to wood. They've gone away from a small selection of discounted bestsellers to--in many cases--quite a broad selection. They're throwing big money to these efforts. They have coffee bars, lounge chairs, readings. They look like an independent," he says.

So, what's the problem? Wouldn't book-mad Palo Altans love to have a large downtown book and music store? After all, Kepler's is in Menlo Park. And Printers Inc. is all the way down on California Avenue. Wouldn't it be nice to have another place to read the New York Times with a double-decaf cappuccino? And isn't capitalist competition just the name of the game?

Let's look down the road a few years, Kepler says. Aside from the fact that an outside owner would have no vested interest in the community and little concern for its unique reading habits and desires, let's think about what could happen if these chain stores, with their sometimes lower prices and pull with the publishing houses, eventually drove independents out of business, he says.

"They are actively trying to compete against every good independent in the country, and essentially blow us out of the water," Kepler says. "That is not illegal, but it's taking the genteel world of bookselling to a new level. We're talking about ideas, opinion, the written word. The threat is in the homogenization of opinion and ideas. When you have reduced the many, many independents--and that means every independent having its own personality and character in terms of the selection the owners bring to their bookstores--and you put that in the hands of just a small, few chain booksellers, what you have is fewer people deciding what America reads. It's something we've already seen in the newspaper business, for example."

Indeed, according to Susan MacDonald, who, along with Gerry Masteller, owns the 16-year-old Printers Inc. in Palo Alto and its younger sibling in Mountain View, the bookselling business is facing the retailing phenomenon that has long ago hit many other industries and services in this country: mom-and-pop hardware stores being swallowed up by Wal-Marts, the corner groceries giving way to super Safeways, small clothing boutiques unable to compete with giant discount houses and outlet stores.

In many cases, national chains can provide consumers with lower-cost items, often even better selection.

When it comes to books, though, there is cause for alarm, MacDonald says, echoing Kepler's concerns, which are shared my many other independent bookstore owners.

"What is going to happen when there are only a few major chains left, and they can say, 'We don't want that book in our stores. It's too controversial,' or, 'We can't sell a million copies of that book, so we don't want to carry it?' Where does that leave our culture?" MacDonald asks. "And what about the importance of local retail decisions being made by people who live and work in the community?"

Faith Bell, who runs the used bookstore Bell's Books on Emerson Street in Palo Alto, says she thinks her specialty store, which was founded by her father, Herbert, in 1935, "would probably be hurt less than any other bookstore in town," if a chain moves in. Still, she is concerned about the loss of community-run businesses on all levels.

"Many independent booksellers have a very high ethical standard about maintaining a stock they can be proud of, even if that means less of a dollar return, if that means stocking Thoreau, Emerson and Carlyle instead of hundreds of copies of the latest Danielle Steel bestseller. It seems interesting that here in Palo Alto, where we pride ourselves on being such intellectual readers, that we're willing to sell that for a song," she says.

Over the telephone from Ann Arbor, Borders vice president Conetta responds. First of all, he says, Borders has built its reputation on exactly what the independents are saying the chains don't offer: depth and breadth of titles--some stores with as many as 170,000 titles. The average is about 120,000 per store, he says. They've got your Thoreau, your Emerson. Yes, even your Noam Chomsky. "I think a lot of independents just really don't have any idea what kind of store Borders is," Conetta says, adding that managers are encouraged to fine-tune their centrally ordered stock according to local interests. Borders also allows great latitude in advertising, promotions, in-store events and community relations.

"Let's face it, the bookselling market is getting more competitive," Conetta says. "Nowadays, the smaller you are, the more specialized you're going to have to be. The days of trying to be all things to all people with a relatively small title base are over. There will be some shifting, but I think there will always be a niche for the larger independents, 10,000 square feet or more."

John Mutter, an editor at the Washington, D.C.-based trade magazine Publisher's Weekly, has been observing for four years the unfolding chains vs. independents saga. He says Borders is "a good bookstore."

"Of the chain superstores, Borders probably represents the biggest threat to the independents," Mutter says. "They have a great stock; their employees are generally better trained. Barnes & Noble is very erratic. Some of their stores do very well, some are doing badly. Crown is similar."

Mutter cautions that in this battle of the bookstores, much remains to be seen.

"There haven't actually been a lot of independents that have gone out of business yet," he says. "It's too early to see what the effect of the big chains will be. In some cases, it's the superstores that are already in trouble. In other places they're doing very well."

And, as the competition heats up, there is some indication that the chains might have more to fear from one another than the independents have to fear from the chains.

Take, for example, Borders' recent ad campaign in Albany, N.Y., where Borders and Barnes & Noble loom across the street from each other.

The headline on Borders' ad in the city's alternative newspaper reads: "Yeah, it's big. But it sure ain't corporate." Without naming Barnes & Noble, it went on to say: "Unlike faceless chains run by guys with bad ties, Borders is run by real book and music people."

In 72-point type, Barnes & Noble fired back: "We are Barnes & Noble. Borders is Kmart." The ad continued: "We think you should know that these self-described 'locals' are not independent little booksellers at all, but part of a giant book company, which is actually a division of Kmart. You see, their founders sold out to Kmart for a suitcase full of money--enough, perhaps, to allow them to buy a closet full of suits, but not enough to buy them a new face."

In the modern-day bookselling biz, it would seem, you can't judge a bookstore by its cover.

However lofty or compelling discussions of de facto censorship or outside ownership might be, there are still two other major issues at stake in the bookstore war: proximity and pricing. By Conetta's own admission, Borders, or any other chain that hopes to turn a profit, would hardly use a scattershot approach to opening new stores. Some areas, generally broken down by zip code, yield higher book sales per household than others. In publishing circles, the Bay Area market is generally seen as second only to New York. And Palo Alto and Menlo Park, specifically because of Kepler's and Printers Inc., rank right up there with San Francisco and Berkeley as landing stops on those all-important author tours.

The thing about regions with a high concentration of book buyers is that they generally already have a high concentration of bookstores. The chains have hardly let existing stores--whether independents or other chains--deter them from moving into a potentially profitable area.

In fact, some independent owners contend that the chain stores are deliberately moving in as close as possible, sometimes across the street or next door to existing bookstores in order to more readily lure away customers. (Both Barnes & Noble and Borders have vehemently denied this practice.)

What's even more discouraging, says Avin Domnitz, president of the American Booksellers Association, is that once these stores are installed, there is significant evidence that they are illegally undercutting the independents' prices with help from the publishing houses.

In May, the ABA, a trade association composed of primarily independent booksellers, filed suit against Houghton Mifflin, Penguin USA, St. Martin's Press, Rutledge Hill Press and Hugh Lauter Levin Associates, charging that these publishers were offering illegal secret deals to the chains and discount outlets. Under the Robinson-Patman Act it is illegal for a manufacturer to discriminate in price or terms among competing retailers.

Even before the advent of the chain superstore, independents were threatened by "an uneven playing field," as Domnitz puts it. Correctly or not, many publishing houses seem to think the chains offer greater efficiency, he says.

In 1986, the Northern California Independent Booksellers Association won a suit similar to the one filed this year against two large paperback publishers. And, in 1988, the Federal Trade Commission filed a Robinson-Patman action against six publishers, charging them with illegal price discrimination.

Still, Domnitz says, the independents are just beginning to face "their greatest challenge."

Just ask Jerry Shurtleff, who started working at Kepler's in 1964, helped found Printers Inc. in the '70s and opened Central Park Books in San Mateo in 1980.

On Feb. 28, he closed his bookstore for good.

He was distressed by more than the disgruntled customers who would come in to declare that they could get a certain book for a few dollars less just down the road at the new Barnes & Noble in Redwood City, he says. Overall, when Shurtleff looked ahead 10 years, he didn't like what he saw for the bookselling industry as a whole.

"I don't believe in just plowing ahead year by year," he says. "I loved the industry--the way it once was. Today, everybody wants everything discounted. I see it as the Wal-Martization of the country."

Others, such as Neal Coonerty, owner of Bookshop Santa Cruz, maintain some degree of optimism. (Although no lease has been signed, Barnes & Noble is slated to move into a large building--also owned by Chop Keenan--across the street from Coonerty's bookstore.)

"Sure I'm concerned, but no one really knows if this superstore concept is really going to pay off," he says. "At this point, they just seem to be chasing each other around the country. We're just going to keep doing what we do well. We know our product. We know our customers."

Kepler has a similar response: "We're going to continue to serve our community," he says. "We'll prove to our customers that even if we're not as big as them in square footage, we can offer more."

To hedge his bets, though, Kepler also plans to move the store's business offices off-site and expand the bookselling space by several hundred square feet.

MacDonald of Printers Inc. takes a long pause before she responds to what she would do when, or if, a chain superstore comes to town.

"Will we hang on? I think so," she says slowly. "I think the possibility is that I just might not want to work as hard as I do now. It's already hard to turn a profit in this business, but we do it because we love it. I'm just not sure how much I would love it then."

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