In this section of our web site, Kate invites questions from our book business colleagues.

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Re: trade credits and discount policy
Re: my son as a manager
Re: loss of big publisher's rep
Re: analysis vs. instinct

Q: I recently opened a small bookstore where I sell new and used books, as well as gourmet coffee. I have been reading ABA's Manual on Bookselling (not easy to find!) and based on the used book chapter, I have made the decision to allow trade credits for used books to be used toward the toward the purchase of new books. Do you think this is the right decision for a store my size? Also, I am wondering what you think of my discount policies. Presently, I discount my new paperbacks 15% and new hardcovers 20%. (I don’t sell a lot of hardcovers; this is not a wealthy community.) Any advice you have would be appreciated.

A: When it comes to store policies, I always favor the “yes” rather than the “yes, but” approach. With your current policy on trade credit, it is easy and clear to the customer that she can use her credit for any item in the store. When you start to add restrictions, you often subtract perceived value. I don’t really see a problem with allowing trade credit to be used toward new books, used books, coffee, or any other items in your store. As long as you are purchasing your used book inventory wisely, you will be able to sell what you have bought at a nice profit. The key is in making sure that you are taking in books that will sell, and not books that will sit.

Your discount policy, on the other hand, strikes me as a little too generous. Who are your competitors and what discounts do they offer? I’d bet they aren’t discounting paperbacks across the board. Even the corporate giants pull back that policy after a few months in a new market. Why? Because they can’t afford it--and neither can you! In a small store, your gross margin on new books probably hovers 40% before you discount anything to the customer. If you slice 15 or 20% off that, you have very little left to pay the bills.

I’d suggest you pull back the across the board discounts and consider implementing a frequent buyer program to reward your repeat customers. This way, you satisfy your regulars, because they are effectively receiving an across the board discount, but it takes some commitment on their part to reap their rewards. The one-time customers pay full price, or they sign up, and perhaps become more regular shoppers in your store.

You might also consider spotlighting certain titles or categories and promoting them at a discount for a limited time, or discounting staff picks on a weekly or monthly basis. In general, I would recommend that you look at creative ways to promote affordability to your customer, without giving the store away. And while I realize that it is tricky to change any discounting program, it is even trickier to stay in business if you don’t have enough margin to pay your bills!

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Q: Along with my husband, I am the owner of three good-sized stores. About a year ago, our son graduated from college and joined the company on a full-time basis. He’s worked as a bookseller since high school, and he has a good knowledge of the business, but he doesn’t seem to get along very well with our other key managers. I’m his mother, but even I can see that he projects a certain arrogance that I don’t really understand. My husband says it will all work out in time, but I’m not so sure. Any suggestions?

A: I’m glad you wrote. While it would probably be easier on your family to let it “all work out,” as your husband suggests, waiting for everything to be okay could harm your business.

When any new family member joins a business, those outside the family can feel threatened. Often family members, particularly the second generation come into the business “to help out.” Such a broad job description can be a recipe for disaster. Have you been clear with others in the company--and with your son--as to the exact responsibilities and restrictions to his role? If not, now is past time. Clarify the roles of all family members, and start treating your son the same way you’d treat any new manager: give him respect and some latitude, but also let him know what is expected of him, monitor progress, and review performance regularly. Remember that eventually, the way you treat him will be mirrored in the way he treats non-family members in the company. If you want the company in good hands after you move on, make sure you work as closely and as carefully with him as you want him to work with his non-family colleagues and subordinates.

Also, I’d suggest that you evaluate objectively whether your son is truly prepared for the role you have asked him to play in your business. Often, I observe younger family members thrust into management and co-ownership roles long before they are emotionally ready for such responsibility. They commonly use arrogance to cover their insecurities, and to prevent themselves from admitting what they don’t know.

Take a moment to consider this: would you fill a key position in your company from outside the family with someone just out of college? Probably not. You would more likely look for someone with experience and a proven track record. Although it is a dramatic intervention, the best remedy for your son’s arrogance might be to send him elsewhere. Ask him to find another job in another company, where he isn’t the de facto boss and where he has to learn about being an employee rather than an employer. In the short run, your son may not be happy about working outside your business, and you might miss having him around. In the long run, your family and your business will benefit from your son’s broadened perspective.

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Q: Yesterday, the worst happened. A big publisher informed me that I was losing my rep and would be switched to telemarketing. I know some folks that have some good things to say about this house's telemarketing program, but I am totally bummed. I doubt my chances of changing the decision are all that great (they are a big vendor for me; I suspect I am not a "big" account to them...), but do you have any suggestions as to how to make the best of it?

A: For many booksellers, the loss of an important rep feels like the loss of a trusted friend. Of course you feel bummed! But you are also right to be realistic. Your chances of regaining your rep are probably zip. Many publishers are hurting; they need to cut costs. They see that reps cost a lot of money to keep out in the field, and they see too that not every sales call they make is justified in terms of dollars and cents. At the same time, the publishers have noted a shift in their client base over the past several years. Direct sales to booksellers independent booksellers contribute less and less to their already iffy bottom lines, while sales to wholesalers and the chains are on the rise. What to do? For many publishers, the answer is to service where the sales are, and cut costs where the sales are diminishing. The result: you are repless in Seattle, and many of your independent brethren have suffered a similar loss.

The good news is the role of the rep hasn’t changed so much as the location. Telemarketing reps are generally very well trained, personable and eager to learn about your and your store. They know their lists as well as any rep in the field, and maybe because they know that booksellers still pine for the in-person rep, many phone reps work harder and follow through more consistently than the most beloved and often over-booked field rep. Also, their proximity to other departments in-house can come in handy in areas of co-op, advertising, event planning or when you have a misunderstanding with the credit department.

The key to working by phone is to treat that phone call like a rep visit. Some pointers:
1.) Schedule it. Sometimes it is easier to let frontlist slide when you are not seeing a rep in person. Don’t let that happen.
2.) Prepare for it. You may want to do more preparation for a phone call, so that you can focus on questions rather than strain your neck as the rep goes over every title.
3.) Allow plenty of time. Don’t think of it as a quick call; think of it as a sales call.
4.) Stay focused. Organize your questions in advance; make a list of titles you’d like to promote; have coop requests ready.
5.) Upgrade your telephone. I’m not kidding! Using a speakerphone or a headset will make your telemarketing calls much more comfortable!

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Q: I am a bookstore owner and I buy all the books for my two small but growing specialty stores. I feel as though I know my market, and I have a good feel for my clientele. I use the computer to place orders, but my problem is I really hate analyzing. I know there is a ton of useful information in that system, but I would rather go by instincts and impulse. Any suggestions to make the analysis more appealing?

A: Ah, analysis versus instinct! Try thinking of the information the computer can give you as a way to "inform your gut." See yourself as a sleuth, as using the impartial bystander, the computer as your helper. The impartiality of the computer is inordinately helpful in making stock and category decisions. It surprises you with what it says about what sells, and as a buyer, it will become more and more essential for you to use this tool in your evolving stores.

At the beginning, your instincts are very important, but as time goes on, it becomes more and more important for you to understand what is actually happening to the books you buy. Are they selling or sitting? The computer can answer this question on a title by title and on a whole-category basis. What are the trends, the larger picture? For example, there may be a favorite book of yours that is selling like crazy in a category that is at best mediocre. If you don't work with the numbers, review the trends, you might be fooled into thinking that is a great category for you, and get yourself full of merchandise that isn't moving. Conversely, you could miss the beginning of a trend, miss seeing that you are understocked in an area that has potential to sell more books for you.

As a first step towards “enjoying” your analysis, consider creating some bestseller lists for your store. What are the top 300 selling titles in the store? Try running some reports that show you all the titles in your store or in a specific category that have sold more than 3 in the past six months. (For smaller stores, it may be 3 copies in a year; for larger stores, perhaps you want to review titles that have sold 5 or 6 or more in a six-month period.) What categories sell the most books on a per-volume basis? What categories sell more dollars worth, if fewer units? This information will lead you to the areas that could probably benefit from increased attention.

After you get a sense of the bestsellers and the best-selling categories, have a look at the slow-moving stuff. Look at books that either have not sold at all during a three month period or books that have sold one copy or fewer in six months (or a year). Is there a category that needs more attention to help fuel sales, or are there categories that should be condensed to make room for what is selling?

All this information helps the next time you have to summon your instincts when a sales rep comes to call. As you take those exciting buyerly risks on books that you think have a fighting chance in your store, you’ll know in your gut that your risks are well calculated!

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