Megastores Shake Future of Bookselling

STEP inside the month-old Borders Books and Music store in this college town and it's hard to imagine anybody worrying about the future of books.

On three floors of what used to be a department store, a labyrinth of wooden shelves hosts 120,000 titles from Homer to Howard Stern. Bookworms flop on couches or sprawl out on the carpeted floor to read - a practice the management encourages. With 55 stores nationwide, the Kmart-owned chain plans to open 15 more by year's end.

But this new breed of corporate-owned megastore has shaken many smaller shops. Independent booksellers warn that if the public abandons them, they may disappear in droves, erasing the only outlets for some of the nation's best literature.

Avin Mark Damnitz, president of the American Booksellers Association (ABA), says that if customers abandon smaller stores, the chains will be left to determine what sells and what doesn't. ``Having 100,000 volumes in stock is OK if they are carefully chosen with the readers in mind,'' he says, ``but what if profit becomes the criterion?'' in an atmosphere of economic censorship.

``If Borders and Barnes & Noble won't buy the book because it's not economically attractive, then it won't get read,'' Damnitz says. ``It doesn't take a genius to figure that out.''

Some small publishers have reached the same conclusion. Andre Schiffrin, head of the New Press, contends that ``independent publishers depend entirely on independent booksellers.''

In their defense, the large stores say these criticisms are proof that their new strategy has made the independents nervous.

``It's a different ballgame from the early days of chain stores,'' says Dan Conetta, vice president of marketing for Borders Books and Music. ``Our stores have gotten bigger. Our average store is now 30,000 square feet and has 120,000 titles.... That's a pretty good record of offering diversity.''

Mr. Conetta adds that Borders, based in Ann Arbor, Mich., employs an advanced inventory system that caters to the tastes of individual markets. He argues that such innovations are winning over customers, and pushing the independents to work harder to justify themselves. ``Anybody in the business who hasn't been taking care of his customers faces a threat,'' Conetta says.

``These big bookstores are doing wonderful things for books,'' says Sally Richardson, president of the trade division at St. Martin's Press. ``When you go inside, it sets you alight as to the possibilities. People roam, browse, and stop for coffee. They're becoming social centers.''

But Damnitz, who owns six bookstores in Milwaukee, says that the importance of the independent bookseller goes beyond service. Small stores survived the first surge of chains in the 1980s by offering readers something the corporate stores could not: a selection of hard-to-find books from small independent publishing houses.

Damnitz says these houses have become something of a literary minor league, providing an outlet for first novels and groundbreaking books that larger publishers would not be able to make a profit on.

Should the independent stores go broke, Damnitz says, the small presses would lose their primary market and evaporate as well.

Most large-scale publishers don't buy this argument. ``The business is evolving all the time,'' says Alberto Vitale, head of Random House. ``Twenty years ago when the chains started being a factor, people predicted the end of independent bookselling. The stores that survived have become tremendously efficient.''

Independents admit this point, but they argue that they've been fighting the chain stores with one hand tied behind their backs. In a lawsuit filed in May, the ABA accused five publishers of violating antitrust laws by offering special discounts to the larger book chains. The suit alleges that pricing deals and promotional alliances between large publishers and large bookstores have unfairly discriminated against independents.

Nevertheless, the practice of treating large customers differently is a common economic principle, but absent in the book business, says Alan Gottesman, an analyst at Paine Webber. This is one of the many quirks of bookselling that will have to change if the industry wants to compete with the onslaught of CD-ROM and interactive media that threaten to alter the face of books.

In particular, Mr. Gottesman notes a ``bizarre tribal custom'' in which booksellers can return unsold books to the publisher for credit.

In addition, Gottesman says that book prices are ludicrous, given that less than 10 percent of the public visits a bookstore in a year. ``Twenty-five dollars a pop for a hardcover book makes for a limited market,'' he says.

``The real challenge facing booksellers is whether they want to satisfy a more noble literary purpose and risk losing some money, or sell books people want to buy at prices they will pay.''