Borders Patrol

Book sales are surging. Superstores are booming. And the American Booksellers Association doesn't like it.

Nick Gillespie from the July 1995 issue

(Page 2 of 3)

"It's the most democratic forum," said McCullough, "the most democratic marketplace of ideas imaginable. No civilization has had anything like what we have now."

"The number of serious books we sell today in hardcover, plus the paperbacks, compared to 30 years ago, is a quantum increase," said Halberstam.

In other words, forget about the marketplace of ideas--we're talking supermarket here. Will and company are absolutely right when it comes to the way books are hawked nowadays: Never have so many books--new and old--been so available to so many people. According to the Book Industry Study Group, retail sales through bookstores increased from 914 million books in 1988 to 1.074 billion books in 1993. Part of the larger market for books is no doubt a function of an increasingly better-educated public.

But there can be little argument that part of the growth is the result of vigorous competition among booksellers, large and small. Indeed, the bookselling business is a case study in varied retailers. Book Industry Study Group data for 1993 show that adults purchased books from a number of different sources, none of which could claim anything close to market domination. (See chart.)

A 1994 study by Denver-based consulting firm G.A. Wright of retailing trends found that from 1985 to 1993, the number of "ultimate companies" (i.e., parent organizations) selling books increased from 9,243 to 19,853. Growth boomed at all levels of economic activity. For instance, while the number of companies with sales over $100 million grew by 200 percent, those with sales up to $1 million--roughly 90 percent of all bookstores in America--increased by 131 percent. The study also found that among retailers, bookstores enjoyed the second-lowest closure rate--1.3 percent. (Used merchandise stores, including such businesses as thrift shops, antique shops, and pawn shops, had a 0.9 percent rate.)

All in all, the findings paint a rosy, if competitive, future for small retailers, including booksellers. The trick is, in G.A. Wright's words, to meet the needs of an "older, affluent, and more diverse population" that is withdrawing from the mass market in favor of the convenience and individualized service that smaller stores can provide. A niche bookshop such as Sisterhood, with its specialized focus, is well positioned for the future.

To be sure, chains have been enjoying the largest growth among bookstores. In the fiscal year ending January 31, 1995, says Publishers Weekly, sales in the entire bookstore segment rose by 4.9 percent. But for the top four chains--Barnes & Noble (which includes Barnes & Noble, Bookstar, Bookstop, B. Daltons, Doubleday, and Scribners bookstores), Borders Group (Borders, Brentano's, Waldenbooks), Crown Books, and Books-A-Million--sales rose 16 percent.

And within the chains, the biggest sales growth is in the superstores. Borders' superstore sales, for instance, increased 89 percent over the last fiscal year. The chain currently runs 80 superstores and hopes to open another 30 by 1996. Barnes & Noble, the country's largest bookseller, operates 268 superstores and plans to push the total to 343 by year's end. Superstore sales account for 59 percent of all sales for Barnes & Noble.

By carrying a "tremendous and authoritative stock, creating a browser-friendly atmosphere" (complete with chairs, benches, and cafes), book superstores have become "destination stores," says Barnes & Noble spokesperson Lisa Herling. "They are places where people go to spend time." For the record, she also categorically denies that Barnes & Noble receives special discounts from publishers.

Curiously, superstores downplay pricing as a primary factor of success. While superstores usually discount certain books (Barnes & Noble, for instance, discounts hardcovers 20 percent, New York Times bestsellers 30 percent), Herling and Borders' Conetta stress that title base and ambience are what get people to walk through the door.

Those notions seem to resonate with customers. "My husband and I come here with [our 3-year-old daughter] because there's something for all of us to do," Monica, a paralegal in her late 30s, tells me on a recent Sunday at the L.A. Borders. "We can get something to eat, listen to music, browse the store. One of us can stay with our daughter while she plays in the kids' room. It's very convenient." At the Encino Barnes & Noble superstore, Jeff, a computer programmer, says he drops in for the magazine selection. "It's incredible," he says. "You can spend the whole day sifting through them. I probably pick up a couple of different copies every other weekend."

Does Robinson-Patman help a market to function more efficiently? In the words of the congressman who led the fight against its enactment, the act "intended, under the cover of devious but innocent-appearing wording, to assure profitable business to a trade class regardless of the efficiency of service rendered to the consumer." Indeed, Robinson-Patman is an exercise in governmental doublespeak, simultaneously exhorting free market values while effectively outlawing them: In the name of supporting competition, the statute effectively forbids sellers and buyers from jockeying for the best terms possible--that is, from competing.

"The day of the independent merchant is gone unless something is done and done quickly," Rep. Wright Patman of Texas, the act's chief sponsor, declared in a 1935 congressional hearing. "He cannot possibly survive [competition from chains]. So we have reached a crossroads; we must either turn the...business of this country...over to a few corporate chains, or we have got to pass laws that will give the people who built this country...an opportunity to exist....[The Robinson-Patman Act] has the opposition of all cheaters, chiselers, bribe takers, bribe givers, and the greedy who seek monopolistic powers."

Principal among the cheaters and chiselers Patman decried were chain grocery stores that, because of more efficient purchasing and distribution organizations, undercut traditional food merchants. While consumers benefited from the lower prices (it was, after all, the Depression), competing independent merchants cried foul. Rather than competition, Patman urged "a policy of live and let live" among merchants, big and small. Interestingly, the actual author of Patman's original bill was the counsel of the United States Wholesale Grocers Association, a lobbying group for independent food merchants. Given such history, it's no wonder that, in the words of University of Chicago and Carleton University economist Thomas W. Ross, "[Robinson-Patman] looks less like an antitrust measure than legislated relief for small business."

Robinson-Patman is itself a revision of the Clayton Act of 1914, the first antitrust statute that expressly prohibited certain forms of price discrimination. In an attempt to cultivate competition in a given field, Robinson-Patman prohibits a seller from charging "discriminatory" prices to buyers of goods of "like grade and quality" where the "effect of such discrimination may be to lessen competition or tend to create a monopoly." The prohibition extends to non-price considerations such as promotional allowances, as well. The act does grant the seller the right to vary prices in a "good faith" attempt to match competitors. It also allows for volume discounts, but it mandates that such policies be linked directly to savings in economies of scale. The main enforcer of law is the Federal Trade Commission.

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