Ok...your background and mine is similar. I worked bookstores and I have friends who owned one so we both have a down in the trenches bird's eye view. I have also run a few businesses of my own, including the current one, so I deal with this sort of reality every day.
"Passion," and "differentiate your offering," and "don't compete on price," are all well and good. But they don't really make any difference when you can't contain operating costs despite all your "good faith" efforts and heroic sacrifices. People who work need to get paid. People who own businesses need to make a living. Your sales volume and profit margin need to provide enough surplus to meet operating expenses - of which wages make up the bulk in most small businesses; along with rent, utilities, and taxes.
You can't do much about rent costs in retail since location is critical - and landlords know it. So regularly shopping rents and relocating isn't viable. Utilities are fixed. You can reduce your use as much as possible. But health & labor regulations determine just how far back you can cut the heat or A/C before you get into trouble. And if your customers are uncomfortable, they leave and often don't come back. Taxes aren't worth getting into. Most real
tax strategies don't apply to small business. You can minimize taxes with competent ($$$) help. But taxes don't go away. And they generally keep going up.
So where does that leave us? With the prime gross margin (i.e. gross sales minus
returns and discounts minus prime
cost of goods sold - which includes freight-in). Costs are largely driven by volume here. Big orders = higher discounted unit price + more advantageous shipping charges. Small shops can't compete in that arena. So to a certain extent, you could say cost of goods is largely out of a small business's control. You can do some adroit shopping for vendors and try your best to "buy smart." But at the end of the day, your suppliers don't really need you in the book publishing world. Most times you'll need to order your stock through aggregators such as Ingram rather than deal with the major publishers themselves. And these middlemen will take a cut too.
So what's next...ah yes...prices!
Nope. Amazon has got you skunked
there. Those discounts they offer customers are killer. So much so that I see people in B&N routinely see a book they like, pick it up, scan it with the Amazon app on their smartphone, put it in their online shopping cart - and then put the book back on the shelf. "Thankee B&N! I just wanted to take a look at it before I bought it!"
Then, on the way out of B&N, they hit the one-click purchase key and Amazon delivers it to them a few days later. If B&N is lucky, these folks (and there are many) maybe bought a magazine, or cup of coffee during those two hours they were "shopping" in the store.
So what's left? Labor expense? Lay off non-family workers and work longer hours yourself? Ok. But for how long? And besides, even though you can elect not to pay yourself as the owner - everybody else (at least in my state) has to be paid minimum wage. To run a store responsibly takes at least two people. One to cover the front plus one to help out in front and
cover everything else
like shipping and receiving, paperwork, janitorial tasks, stocking shelves, doing the bank and PO box runs, etc. These two may swap roles back and forth. But you still need at least one person available to serve the customers and watch the store at all times. So small business labor savings are pretty much determined by how able the owner is to do without a paycheck. Not a very compelling proposition for most folks who don't have a trust fund to fall back on - as one of our town's former booksellers did. (interestingly, she was the first to close shop when things got really bad. ("Old money" doesn't tend to continue backing a losing proposition - even when they can afford to. A least not the "old money" crowd I've known.)
Despite all the fancy management bromides and new age business thinking, the two things that will most often sink a small business are:
- Insufficient sales volume
- Bad cash flow
Not enough money coming in
- and not on a regular and predictable enough basis - are what kills small businesses more often than every other factor combined.
So no...I don't think the change in the average customer's expectation to pay lower prices than small bookstores can afford to offer is oversimplifying things at all. It goes right to the root of the problem. And that is what is most directly shifting the sales of books away from the traditional local shop, and over to large discount booksellers.