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Everybody's Watching Chicago's Book Wars

With more chains and independents competing here than ever before, booksellers around the nation are wondering who will survive.



Ask Steven Morvay what he thinks about Chicago and he minces no words. Morvay, senior vice president of marketing for Waldenbooks, calls Chicago a "murderous market."

"It's a bloodbath kind of town," he continues, his voice rising. "There's a lot of other markets I'd expand in before I'd jump deeper into that shark pit."

"Chicago today is the most competitive market for bookstores in the country," says Chuck Robinson, president of the American Booksellers Association. "There's no other city where so many chains and independents are battling it out, spending so much money and opening so many new stores."

Right now, he says, everyone in the publishing and bookselling industries is focused on Chicago, waiting for the outcome of what they commonly refer to as Chicago's bookstore wars.

The last few years have seen increasingly fierce competition among the major bookstore chains in Chicago. Barnes & Noble, Waterstone's, Borders, Coopersmith's--if you can name the chain, you can find one of its stores here. Or, more likely, a few of its stores. Many of these stores have just arrived on the scene within the past few years. The city's high volume of book purchases, coupled with the fact that for years the Chicago market was dominated by one chain, Kroch's and Brentano's, may be what's attracting national companies wanting to get a foothold in the midwest. Meanwhile the independents are dug in, ready to fight for their turf.

The battle has already claimed casualties: Last May the venerable if somewhat eccentric Guild Books on Lincoln Avenue closed its doors. And on July 2, Kroch's and Brentano's announced the closing of 10 of its 19 stores. Citing changing consumer buying habits, the chain plans to close mall stores in Skokie, Oak Brook, River Oaks, Vernon Hills, Aurora, and Orland Park by July 31. Stores in Evergreen Park, Rockford, Mount Prospect, and Barrington will be shuttered by August 15.

Robinson believes that if a shakeout among the major bookstore chains occurs here, it will spell disaster for the losers nationwide. And he also thinks that if independents here create a strategy for survival, that strategy will be copied in bookstores from New York to San Francisco. "What happens here in Chicago will probably set the tone for the rest of the country," he says.

In the spring of 1981, news reached the executive offices of Kroch's and Brentano's that a four-year-old east-coast company called Crown Books was preparing to move into the Chicago market, bringing to the city its policy of heavily advertising all its books at discount prices. The folks at Kroch's and Brentano's weren't very worried. They'd faced competition before and their sales were strong, then accounting for about 30 percent of the Chicago market.

Nobody anticipated the all-out attack Crown was about to launch. In October, Crown opened a store in suburban Bloomingdale. Five days later it opened a second store in Park Ridge. And, as if to underscore that it was a player to be taken seriously, a short time later Crown opened a store on South Wabash Avenue, virtually within the shadow of the Kroch's and Brentano's flagship store. The opening shots in the bookstore wars had been fired.

What's so attractive about the Chicago market? For starters, its size. "This is a major market because it's a major center of population," says Dan Mayer, manager of the Waldenbooks at 127 W. Madison.

"Chicago is also a great book city," says Robert Haft, founder of Crown Books, who now oversees 248 stores in the U.S. "Its demographics are just about perfect. It's an educated, sophisticated, active city, and those are the kinds of people who buy a lot of books."

Then there's the city's literary heritage. "This is a nice, gritty town that has always attracted authors," says Sandy Popik, manager of the Barnes & Noble at 659 W. Diversey. "From Frank Baum, who wrote The Wizard of Oz, to Hemingway, Algren, Sandburg, and even contemporary writers such as Studs Terkel and Sara Paretsky, Chicago has provided the world with great literature."

Nationally, book sales were up almost 14 percent in 1992, bringing retail book sales past the $9-billion mark, according to the U.S. Department of Commerce (which doesn't break its figures down by city). That increase followed a healthy 8.5 percent increase in 1991. But common sense dictates that these kinds of increases won't continue year after year. Eventually, sales will flatten.

"Right now, it appears the market is strong enough to support just about everybody," says Chuck Robinson. "But buying habits don't change overnight. It might take time for consumers to discover that a 'superstore' contains three or four times more book titles than a conventional store. And with chains like Crown Books offering across-the-board discounts, we may see customers deserting traditional booksellers for the ones that discount."

Kroch's and Brentano's is the oldest and most seasoned contender in the current battle. The chain traces its history to 1907, when Adolph Kroch opened a small German-language bookstore at 26 W. Monroe. Shortly after he opened he was offered a shipment of English-language books at a substantial discount. When those books sold out within days for a handsome profit, Kroch realized he'd tapped a much wider market.

Kroch seemed to have a gift for the business. As Ben Hecht recounts in his autobiography, A Child of the Century, "This merchant of Monroe Street didn't sell me books. Rather, he waved a wand and the wonders of de Gourmont, Huysmans, Strindberg and Proust sprang into being." The bookseller became known as "Papa Kroch," and his store became a gathering spot for literary figures of the day. Hecht, Ernest Hemingway, Carl Sandburg, and Thornton Wilder were frequent visitors and close friends with Kroch.

In 1927 he opened another store at 206 N. Michigan, and six years later he and a partner bought a bankrupt New York-based bookstore called Brentano's. The partnership was short-lived, but Kroch retained ownership of the Brentano's name in the midwest (though it wouldn't become part of the store's name for 25 years). Kroch became prosperous--prosperous enough to send his son Carl to Cornell, where he studied chemical engineering. Upon his graduation in 1935, young Carl went to work not as an engineer but as a clerk in his father's Michigan Avenue bookstore. It was a decision, he said years later, he never once regretted. Carl worked his way up in the business, honing his skills in buying, merchandising, promotion, and sales. In 1952, Adolph Kroch decided to retire, and he handed the business down to his son.

Carl Kroch set out to create a new kind of bookstore: light, airy, and comfortable. He realized the selling power of book jackets, so he designed special tilting shelves that displayed the books' full covers, not just their spines. He believed in a partnership between publishers and booksellers, and when his colleague Richard L. Simon, cofounder of Simon & Schuster, told him about a new idea he had for book pricing, Kroch encouraged him to give it a try. Simon, who recognized that toothpaste selling for 79 cents appeared to be a bargain in comparison to 80-cent toothpaste, priced his company's books at $4.95, $7.95, and $14.95. Odd pricing is now standard industry practice.

When Carl Kroch opened the three-level store on Wabash Avenue in 1952, he added Brentano's to the store's name, along with the legend "World's Largest Bookstore." In 1958, realizing the significance of the shopping malls that had begun springing up in the suburbs, he added a new store to his growing chain at the Old Orchard Shopping Center in Skokie. Little did he imagine that shopping malls would be the stepping stone for rivals that in a few years would threaten the very survival of his business.

By the 1960s, two bookstore chains had discovered that shopping malls, with their heavy traffic, provided the perfect vehicle for selling books on a national scale. Headquartered in Connecticut, Waldenbooks began expanding into east-coast shopping centers. B. Dalton, owned by the Dayton-Hudson department stores headquartered in Minneapolis, started moving west. Within a few years, each chain had stores numbering in the hundreds. It was inevitable their growth would bring them face to face in Chicago.

Waldenbooks entered the Chicago market in 1968 with a store in the Yorktown Shopping Center in Lombard. Three years later B. Dalton opened its first Chicago-area store at Woodfield Mall in Schaumburg. The first stores were modestly successful, enough so to encourage both chains to expand further into Chicago. Today Waldenbooks is owned by K mart Corporation and has 1,070 stores nationally, including 23 in the Chicago area. Chicago also has three Coopersmith's stores, part of a slightly more upscale chain also owned by K mart. B. Dalton, now owned by Barnes & Noble Inc., has 720 stores nationally and 20 stores in the Chicago market. Barnes & Noble also operates 108 stores nationally under its corporate name. Six Barnes & Noble stores are located here.

Other companies now competing fiercely in the Chicago market include Borders Bookstores, part of a third K mart chain that sells CDs and videotapes in addition to books; Rizzoli, based in Milan, Italy, with 14 U.S. stores; and Waterstone's Booksellers, a United Kingdom-based chain that opened its second U.S. store here on Michigan Avenue about eight months ago. Stores like Stuart Brent Books and the Barbara's Bookstore chain, the Book Stall at Chestnut Court and Scotland Yard Books in Winnetka, and the three-store Anderson's chain in the western suburbs are all trying to develop strategies to hold off the national chains and the superstores.

"There will have to be a washout among the big guys," says Pat Peterson, a co-owner of the Barbara's chain. "All the big players now in Chicago will not survive."

"We're a local business," explains John Mesjak of Anderson's, "and we've been in business more than 100 years. Our customers know us and we know what they want us to stock."

Barbara's Bookstore was a single storefront on Wells 30 years ago; now there are five Barbara's Bookstores, in Old Town, Lakeview, the Clybourn corridor, Oak Park, and the west Loop. Anderson's began as the book department in a Naperville pharmacy. Soon what started as an upstairs room was remodeled into a small bookstore. Today the independent chain has stores in Naperville, Downers Grove, and Elmhurst.

Both Peterson and Mesjak admit that the independents are facing a tough battle, but they also think many independents can survive. Both stores have established niches in their community, positions Mesjak and Peterson attribute to such things as customer newsletters, knowledgeable sales help, and frequent author book signings and readings. This year, Peterson says her stores will sponsor more than 100 such events. She thinks the problem with the big chains is that their higher overhead costs let sales volume dictate store philosophy and operations. Mesjak agrees that discounting can't be the only answer to selling more books.

But the ABA's Robinson notes that many independent bookstores are at a distinct disadvantage in relation to the large chains. "A business is formulated on a given set of economics," he explains. "Among the most important of these is your cost for buying a book and your profit for selling that book. The average wholesale discount to a bookseller averages somewhere between 40 and 50 percent.

"Now, when someone like Crown comes in and discounts best-sellers 30 percent, it changes the entire economic formula for the small bookseller. To match Crown means working on a lower profit margin, and that often means looking for ways to cut costs," he explains. "Many independent stores simply don't have many excess costs. They are generally undercapitalized and often understaffed. They have to find ways to compete other than strictly price."

Joel Jacobson, owner of the Lincoln Park Bookstore on Clark Street, opened his store in early 1992, unfazed by the intense competition he saw developing in the Chicago market.

"Down the street from me, just a short walk, is a Crown Books and a Waldenbooks," he says. "I checked them both out and they simply don't offer the selection people want. This is a very educated, sophisticated community. People here are avid readers, but with very eclectic tastes. . . . For example, I stock 400 poetry titles. How many do you find at the average chain?"

He stocks 1,200 titles, most only one copy at a time. "When that sells, the computer automatically sets up a reorder, which I can get in less than 30 hours."

Jacobson also provides customer service in other ways: "Who else would, as we did a few weekends ago, give a 12-year-old boy a book to take home for a present for his mother even though he was $4 short? We're still hoping he remembers to come back."

It's not just the independents who believe that success depends on customer service. Sandy Popik says the inventory of her Barnes & Noble store is tailored to meet the needs of the customers she serves.

"We reflect what our customers want to read," she says. Because the store is located close to Chicago's thriving off-Loop theater district, she has increased her inventory of books on theater. "We also have a very large poetry section, an expanded section of books on alternative gay and lesbian life-styles, and a large children's section because this area has many young families," she says.

Dan Mayer says his Waldenbooks store is frequented by commuters. "We stock a very big selection of business books as well as best-sellers, romances, and thrillers," he says. "You won't find as many books on gardening or home improvement here as you would in one of our suburban stores. Most of our customers don't browse--they pick out a pick and go to catch their train." The B. Dalton on North Michigan Avenue also has a pretty extensive business section, says store manager Steve Fridley. "But we also get a lot of tourist trade, and we feature a very large collection of books, maps, and guides about Chicago."

Miwa Messer of Michigan Avenue's Waterstone's Booksellers says depth of selection and range are keys to serving her market. "We try very hard to make as much of our authors' back lists [books previously published] available as possible," she explains. "We also try to stock a lot of books published by the smaller presses that aren't available elsewhere, as well as anthologies."

Crown Books' Robert Haft first conceived the idea of a chain of discount bookstores while he was an MBA student at Harvard. As he browsed through the many campus bookstores, he wondered why every store charged full price. Discounting was nothing foreign to Haft. His family made millions operating a chain of discount drugstores on the east coast.

In his final semester he attended a class where a guest lecturer, an executive from Dayton-Hudson, spoke on retailing. Knowing that Dayton-Hudson owned B. Dalton, Haft asked why books couldn't be sold at a discount.

"For a second, the man just stared at me," Haft recalls. "Then he said very tersely, 'Everybody knows that can't be done.'

"I felt like I'd just asked the dumbest question in the world," Haft says. "I felt terrible. But then, the more I started to think about it, I realized it wasn't such a dumb idea after all."

He spent the next summer researching the book industry, and the more he learned the more confident he became that it was possible to discount books and still make a profit. In the fall of 1977, he opened his first Crown Books store in a suburb of Washington, D.C. It proved so successful that by the end of his first full year in business there were ten Crown Books stores in operation on the east coast.

His premise was easy to grasp: every New York Times best-seller was discounted 30 percent, and every other book or magazine in the store was discounted a lesser amount. He bombarded the print media and television with his message: "If you paid full price, you didn't buy it at Crown."

Haft's strategy was to enter one market, dominate it, and then move on to another promising market; even today, Crown stores are found in only five regions of the country. In January of 1980 he entered Los Angeles; in March he opened in San Diego; and by the end of that year he had stores in San Francisco. Then his sights focused on Chicago.

"I was familiar with Chicago. My father used to go there every year to attend the houseware show, and I'd usually go with him. I thought it was a great city and I really wanted to have stores there." Today Crown Books has 38 stores in the Chicagoland market, ranging from small stores Haft calls "classics" to Super Crowns, stores three to four times the size of the traditional stores and boasting a selection of as many as 100,000 in-stock titles. The typical Crown store has narrow aisles that make casual browsing difficult. But Super Crown stores have wide aisles, softer lighting, public rest rooms. Some even have a children's play area.

Haft has his sights set on opening as many as eight new Super Crown stores in the Chicago market within the next year, including one downtown. In May Crown opened an outlet store at 26 N. Wabash that offers discounted foreign and American books as well as a large selection of books on audiotape. Haft claims it's already doing well.

"In all the research we do, one fact stands out loud and clear," he says. "People today want a wide selection. Of course, they also want a good price and attractive, comfortable surroundings."

"They're starting to call this bookseller's row," a waitress in a Deerfield coffee shop says with a grin. Looking out the window at the intersection of Waukegan and Lake Cook roads, it's easy to see what she's talking about. Within less than 100 feet of each other are a Crown Books, a Borders Bookstore, and a Barnes & Noble. It's a microcosm of the competition being waged in the Chicago market. A few years ago, this affluent area didn't have one bookstore within a short drive; now there are three within a short walk of one another.

On a Wednesday afternoon, all three stores are at least half filled with browsers and buyers. According to clerks in each store, "business is great." Hearing this comment, a shopper at the checkout counter looks up and says, "I love it--I shop at all three and I always find what I want."

The Borders Bookstore in Deerfield, open just since April, is the chain's second in the Chicago area. (The original opened in Oak Brook about four years ago.) Borders was a highly regarded independent chain operated by two brothers in Ann Arbor, Michigan, before being purchased by K mart last November. The Deerfield store is a prototype for all future Borders stores; it offers more than 100,000 book titles, including enough obscure and esoteric holdings to give even the most well-stocked independent a run for its money. It also boasts 50,000 audiotapes and compact discs and a video section with more than 7,500 titles. The ambience: comfortable but hurried. Is this a bookstore or a Blockbuster?

Dan Conetta, Borders vice president of marketing, calls the combination of books, video, and music a natural mix. "Books educate and entertain, and certainly music and videos do the same," he says. "The book customer is usually someone who also enjoys music and likes videos, especially the classics, which are a large part of our video section."

If it proves successful, Conetta thinks competitors may try to copy the concept, but he warns that to make it work a very sophisticated computer inventory system is needed. Borders has created its own system to support what Conetta calls a "very deep catalog" of books, music, and video.

Conetta says sales at both Chicago-area stores reflect double-digit growth, but he also says Borders didn't fully expect the intense competition it faces in Chicago. "It's a tough market."

Its sister company, Waldenbooks, appears committed to remaining in shopping malls. According to Steven Morvay, 95 percent of his company's stores are located in malls. Its main competitor, B. Dalton, seems to mirror this strategy. Both stores are neat and well-organized, but with an inventory geared more to the mainstream than to literary depth.

Morvay won't comment specifically about the performance of Chicago-area Waldenbooks stores, saying only "their performance is mixed." He also would not speculate on plans to close some existing stores or open additional stores in the Chicago area. He confirms that Waldenbooks plans to stay mall-based, and predicts that the Chicago market will eventually be two-tiered: mall stores and all others, each serving a specific market.

Executive vice president Steve Riggio of Barnes & Noble, whose responsibilities include overseeing the chain's B. Dalton stores, talks hesitantly about future growth. "It's no secret that there are no new malls being built," he says, and 90 percent of B. Dalton stores are located in shopping malls. To counter this, says Riggio, substantial investments will be made in existing stores, remodeling and enlarging them.

He becomes much more enthusiastic when he talks about Barnes & Noble stores. With as many as 200,000 titles in stock and obviously geared to the upscale market, these stores are designed to be a book browser's delight. The Diversey Avenue store features a vaulted wooden ceiling, track lighting, plush carpeting, and comfortable seating areas. It even features a coffee bar where shoppers can sip espresso while they leaf through a book or a magazine.

"We want our Barnes & Noble stores to be places where people feel comfortable to come and just hang out," Riggio says. "We want to make them an alternative place to meet. If people are comfortable, they'll browse--and they'll buy." Although he refuses to be specific about where, Riggio says the chain is aggressively seeking sites in the Chicago area for additional stores.

Like Barnes & Noble, Waterstone's Booksellers on Michigan Avenue wants its customers to feel comfortable and pampered. The store reflects the elegance of bookstores past; carpeting, a sweeping staircase to the lower level, gracious lighting fixtures, and custom-built library cases give Waterstone's an almost homey feeling in spite of its superstore dimensions.

Owned by the W.H. Smith Group, operators of 90 bookstores in the United Kingdom, the Chicago store is really a pilot program according to David McRedmond, who heads the company's U.S. operations. "Demographically, Chicago is a lot like the UK," he says. "It's a terrific, literate city with a huge book-reading public. We knew we'd face very tough competition here, and it's a good test for us."

The Michigan Avenue store has 18,000 square feet of retail space and stocks 120,000 titles. Selections run from best-sellers to imported art books, leatherbound classics, obscure foreign translations, and small-press offerings. Waterstone's shuns traditional book signings and instead features selected authors reading from their works. Unlike many other bookstores here, which will welcome any author willing to make an unpaid appearance, Waterstone's is very selective and invites only "important" literary figures, according to McRedmond.

"We very much want the visibility Michigan Avenue affords us, as well as the opportunity to become part of Chicago's cultural center," he says. Waterstone's has pledged $100,000 to the Chicago Public Library Foundation, and W.H. Smith donated $300,000 toward the launch of the Harold Washington Library.

It's only a short cab ride from Waterstone's to the city's very first superstore--the Kroch's and Brentano's at 29 S. Wabash. Even by today's standards, the store's inventory is impressive--120,000 titles and 700,000 volumes. Upstairs on the windowless fourth floor are the executive offices where tough decisions have been made recently--decisions that may well determine whether Kroch's and Brentano's survives or falls victim to the bookstore wars.

The company has seen its market share drop from a high above 30 percent in the mid-80s to an estimated 20 percent earlier this year. "We've seen competition heat up in other markets as well," says William Rickman, president of Kroch's and Brentano's. "It just seemed to come to a head here quicker than anywhere else."

It's ironic that Rickman, a 30-year vet with the company, finds himself elevated to chief operating officer just at the time the chain is facing its most severe challenge. "For many months we've examined a number of business scenarios and could not come up with any answer other than to close our mall stores," Rickman says. It's a decision he made with "sadness," and the fact that the closings leave 50 full-time and 80 part-time employees out of work didn't make it any easier.

"Making money in malls has become increasingly more difficult," Rickman says, and he can cite the factors that led to the decision to abandon mall-based stores. "First is the overall economy. In addition, shopping habits have changed over the years. People visit malls less today; when they are in a mall they visit fewer stores, and overall they're spending less in malls than they used to. The big guys seem to be trying to simply buy market share. My pockets aren't that deep. But I can take other measures to preserve this company as part of the local culture.

"All businesses have to reinvent themselves at times," he says. "Maybe we waited a little too long, but we feel very positive about what we're doing."

The "reinvention" began this spring, when Kroch's and Brentano's managers were offered early retirement. Ten percent of the managers accepted, including six of the company's 12 vice presidents. In all more than 40 employees left.

A few months ago, under chairman Carl Kroch's guidance, the management team voted to create a "new Kroch's and Brentano's." As part of the plan, compromises were reached with creditors. Carl Kroch personally guaranteed the company's debts to the tune of $2.5 million. A new point-of-sale computer system was installed, linking all stores together and making financial reporting more accurate and timely. And, after years of stubbornly refusing to "view books as a commodity by discounting them," Kroch's and Brentano's launched a major discount campaign, offering 40 percent off New York Times best-sellers, selective discounts on other books, and a "frequent reader" program that gives customers a $15 gift certificate for every $100 in purchases. To communicate all these changes to the public, the company went to an outside advertising source for the first time in its history, hiring a small Chicago marketing company for 90 days to produce print ads and bus signs promoting the new program.

With all of these changes, and the closing of the chain's ten mall stores, "We're perfectly configured to maximize our strengths," Rickman says confidently. He envisions a new identity for the chain--where each store has strong links to the community it serves.

"We have our flagship store on Wabash, our smaller convenience stores in the downtown area, and neighborhood stores, such as those in downtown Evanston and Oak Park and on the Clybourn corridor." He claims the downsizing will enable each store to better create its own identity within its neighborhood and create a sense of community belonging.

Only time will tell if the changes Kroch's has enacted will have the desired effects. But Rickman is confident that the company will expand again someday.

"We won't be back in malls in the foreseeable future, but I'm sure we'll open more stores in suburbs or city neighborhoods that are not now being served by a bookstore that is truly part of the community," says Rickman. "There's quite a heritage here. It's important we preserve it, even if it means making some changes. We're now a different, more focused kind of business, but I'm very positive about our chance of survival. Sure, it means change. But somehow I think Adolph Kroch would approve."

Art accompanying story in printed newspaper (not available in this archive): photos/Loren Santow.

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