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June 13, 2011 / schulerbooks

Schuler Profile Piece in Crain’s Michigan Business

Check out this really nice profile of the Schuler company that ran yesterday. It talks about the challenges faced by booksellers in today’s economic climate, as well as the sorts of changes the stores have undergone to remain competitive. 🙂

Bookstore’s survival guide: Change products, not focus

June 12, 2011 8:00 PM
By Pat Shellenbarger SPECIAL THANKS TO CRAIN’S MICHIGAN BUSINESS

Browsing the shelves in a corner of Schuler Books & Music’s flagship store, Greg Smith is precisely the kind of customer whom independent booksellers have relied on since the days of Gutenberg. He doesn’t order books online, and he doesn’t own an electronic reader, preferring the smell and feel of a traditional book.

“I come here almost every day on my lunch hour,” Smith said. “It’s kind of a therapy, the quietness and the ambiance a bookstore offers.”

While such traditional bookworms still are the mainstays of their business, Cecile and Bill Fehsenfeld, owners of the Grand Rapids-based chain, have known for years they cannot rely on them alone to sustain their five stores. In an age when book publishing and selling are under siege, Schuler’s is an anomaly: a locally owned, independent chain that is still profitable, although not as much as in the past.

Not that it has been easy. Evolving reader habits and competition from Amazon.com, Wal-Mart Stores Inc. and Target Corp. have forced ye olde booksellers into survival mode. Even behemoths Borders Group Inc. and Barnes & Noble Inc. are not immune. Ann Arbor-based Borders — which itself began as a family-owned independent store — filed for Chapter 11 bankruptcy in February, has closed more than a third of its 642 stores and is negotiating to sell its remaining locations. And Liberty Media Group seeks to buy Barnes & Noble.

Borders and Barnes & Noble officials declined to comment.

The Fehsenfelds also have received offers to sell. “We’ve never considered it,” Cecile said. “It’s our baby.”

Change is good Schuler’s has survived not by running from change but embracing it. The company sells books on schulerbooks.com and in December began offering e-books. It’s a far different environment than when the Fehsenfelds opened their first Schuler Books in 1982. Back then, they sold only books, the kind printed on paper.

“We were such purists, we didn’t even have greeting cards,” said Cecile, 61. They added them in the mid-1980s, one of the first moves they’ve made to supplement their core book business.

The couple met in 1973 — appropriately, in a bookstore. Bill, a Grand Rapids native, was a University of Michigan undergraduate working at Ulrich’s bookstore in Ann Arbor. Cecile, a graduate student from Georgia, wandered in one day and met him at the special-orders desk. Five years later, they married. In the early 1980s, they moved to Bill’s hometown, at the time a book lover’s wilderness.

That lack of competition allowed them to realize Bill’s dream of opening a bookstore. It was in a former fabric store with 27,000 books and 7,000 square feet — large at the time but small by today’s standards. Each of their stores now carries more than 100,000 books. They chose the name Schuler — the maiden name of Bill’s grandmother and his middle name.

Since then, the Fehsenfelds have expanded slowly, opening a second store in Okemos, east of Lansing. In the mid-1990s, as Barnes & Noble was opening its first Grand Rapids store, the Fehsenfelds moved into a larger location down the street. Bigger, but not too big While the chain has grown to five stores — three in the Grand Rapids area and two near Lansing — Schuler’s continued catering to hard-core readers, expanding its selection and sponsoring in-store lectures and signings.

Some bookstores, including the big chains, lost that focus in the pursuit of bigger profits, the Fehsenfelds think. “When you think of the people who have gotten in trouble in our industry, they’ve either expanded too fast or lost sight of some of the basics people want in a bookstore — the experienced staff and a clean, well-maintained store,” said Bill, 60. “I think we’ve done a pretty good job of focusing on the basics. We have not overextended ourselves.”

The couple attribute the success, in part, to an informed staff, which has grown from the original seven to 250 employees.

Their job application includes a book quiz.

The recession and Michigan’s high unemployment rate have cut into their sales, Bill said. “You can almost draw a graph and show that as the price of gas goes up, our sales go down, and library circulation increases,” he said.

The couple — he’s board chairman, she’s president, and their three daughters fill out the board — declined to discuss revenue figures for their family-owned business, although Bill conceded “it’s declined somewhat over the last few years.” Cecile added: “We are profitable. We’ve had to make some changes to make it profitable.”

Many changes are driven by competition from the big-box stores, Amazon and e-books. In the mid-1990s, the Fehsenfelds added a cafĂ© to their first store — now standard in all five — and began carrying CDs. The name was changed to Schuler Books & Music. They placed overstuffed chairs and sofas around the stores, creating a homey atmosphere.

When books, music and cappuccino no longer could carry the business, the Fehsenfelds added sidelines, such as puzzles, games and other gifts complimentary to books. Five years ago, they began selling used books and are expanding the space for them, an addition that has been “very helpful as the economy struggles,” Bill said.

In 2009, they bought an Espresso machine — not the kind that makes strong coffee but one that prints and binds books. Local authors bring in their novels, memoirs and other books on discs and, for a $95 setup fee plus so much per page, can have them self-published. A typical 180-page book costs about $11 per copy.

The electronic era Traditional books still account for about 60 percent of their sales, Bill said, although the portion from gifts, the café and e-books is growing.

In December, Schuler’s began selling e-books under an agreement between the American Booksellers Association and Google Books. In that segment, unlike with printed books, the store is on a level playing field with its larger competitors. The book publishers set the price for e-books, and all sellers are required to adhere to it, keeping a percentage for themselves. In the book business, that’s known as the agency model. The e-books can be read on smartphones, computers, Apple’s iPad and almost any e-reader except Amazon’s Kindle, which has proprietary software.

The agency model was the publishing industry’s answer to changing technology, a move the music business failed to make. Music CD sales have declined as more customers download songs from the Internet. That’s why Schuler’s is phasing out its music section and, thus, eventually will drop “& Music” from its name.

“Publishers understood, unlike the music industry, that there has to be a place for people to browse their books,” Bill said. “They were concerned that Amazon was creating the idea that books have low value.” Schuler’s cannot sell books below cost, as Amazon does, and remain profitable. They know some customers browse their stores, then go home to order from Amazon.

“You know what’s the most disheartening thing?” Cecile said. “People will say that to our staff, “Amazon is cheaper, so I’ll go home and order it from them.’ What’s happened to our sense of values? People think they’re getting ripped off if they don’t get a big discount.”

In the retail book business, the Fehsenfelds are regarded as innovators, said Deborah Leonard, executive director of the Great Lakes Independent Booksellers Association.

“They’re certainly in the first wave of trying new things,” Leonard said. “Everybody’s trying everything right now to see what works.”

Nationally, many independent bookstores have closed in recent years. Five years ago, the American Booksellers Association had about 2,000 members. Currently, it has about 1,500, although that number increased slightly in the past year, said Meg Smith, the trade group’s membership and marketing officer. Although “the industry never has been an easy one,” Smith said, some independent stores, such as Schuler’s, can respond more quickly than their larger competitors to changes in the market.

The Fehsenfelds were among the first to open big stores that retained the friendly feel of a locally owned shop, Leonard said. “The other thing about local stores like Schuler’s is they give back to the community,” she said. “Amazon’s not going to sponsor your kid’s soccer team.”

In the cafĂ© of its downtown Grand Rapids store, Schuler’s recently began selling beer and wine, in addition to the usual sandwich and latte fare. If successful there, the company might seek state and local approval to offer beer and wine at its other locations, Bill said.

He and Cecile know that the only constant in their business is change. “We’re trying to figure out where the industry’s going at the moment,” Bill said. They are making a significant investment in a new computer system to track their inventory and are considering other options to remain competitive.

“I would say the business is challenging, but we are actively adapting,” Cecile said. “We believe bookstores are still relevant, and we intend to continue to be what a bookstore should be.” Her husband added: “I could not have imagined the business as it is now. It’s fun, it’s hard, it’s challenging. Every time we make changes, it’s an interesting piece of the puzzle. I firmly believe booksellers are here and will continue to be here, but they have to keep changing.”

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