It sounds like a good argument, right? Just stock up on a ton of authors, deepen your selection, and wham! Suddenly you're relevant again. But unfortunately, that completely ignores the way that Amazon's business model completely smashes physical bookstores.
Here's my qualifications: I used to buy books, nationwide, for both Waldenbooks and Borders. That's right - if you thought the Computer Books and Graphic Novel selections at Waldenbooks sucked a decade ago, I was the guy to blame. So while obviously things have changed in a decade, I was also part of the team telling Borders they had to get on the damned stick and get a working website that was better than Amazon's. They didn't listen. Bad Things happened.
So. Let me tell you how the physical bookstore model works.
You have a budget for a given timeframe, and you have $X to buy books. You have a full list of every book that will be coming out for the quarter - and so you look at past history, try to estimate what sales will be, and then finally make a big ol' spreadsheet that says, "Here's how I'm going to spend my $2.1 million for Fall 2010." (It's a lot more complicated than that, but that's the way it works. Keep in mind that I'm radically simplifying, because I don't want to be here all day.)
Your profitability is judged by a large part on inventory turn - which is to say, "How much of your inventory do you sell through in a given time frame?" Grocery inventory turn is frighteningly fast - averaged out, they sell everything on their shelves about once a week or more. (Then again, they have to - it'll go bad if they don't.) Bookstores are more sedate - selling through inventory twice a year is a solid store.
You need that inventory turn, because the quicker you sell a book, the faster you make back your money. You don't pay for your books right away - you have a few weeks before the bill comes due. If you can sell the book before that bill comes due, you've made a quick and righteous profit and never have to send your distributor a check. If you can't, well, you have to send the distributor a check from your checking account, and be down cash. And, eventually, you must pay taxes on that book in your store. And if that book doesn't sell, you can get a refund on the book from your distributor, but then you have to pay for your clerks to find the book, box it up, and ship it back - a cost that's more than you'd think.
Inventory on your shelves has real costs. Not only do you pay for the books, you pay for the square footage, you pay for the clerks to find and shelve it - a lot of inventory not only slows down your turn, but it drastically reduces your profitability. So your inventory is of prime concern as a bookstore.
Now. How do you buy?
Let's say you go the B&N route and purchase a lot of copies of a few books. (Comparatively, of course - the average B&N still has a ton more books than any non-supersized bookstore.) On the turn model, that's great - you blow through those Harry Potters! But here, Amazon is eating your lunch. Because you don't have a lot of back stock, the only reason people have to come to you is for Harry Potter - which you can have shipped to your house, plus any of those weird books you wanted, for free. (Well, if you order over $25, which everyone pretty much does.) So over time, you train your customers that you're not that vital to their well-being bookwise, and your sales decline severely... Which is what happened.
Plus, Amazon's business model? It's better than yours. When you're ordering the new Stephen King, you have to order all of those books months in advance, guessing what your sales will be based on the old sales models, all so you can put stacks on the shelves so people will see it. (And you do want stacks - people are amazingly capable of overlooking a single copy of a book.)
Amazon, on the other hand? They know what their pre-order sales are to the number. And they get the cash right away, because you pay up front for Harry. Depending on how ridiculous a fan you are, you might just have floated a loan to Amazon for months. (EDIT: Apparently, Amazon doesn't charge cards in advance for pre-orders - though I could swear they'd done that for a few of mine. Even if they don't, though, the fact is that they'll ship your pre.order almost immediately after they receive the book, resulting in lightning-fast turns and free loans for them even in the absence of advance card-charging.)
So let's compare:
- You have to guess what your sales will be for an upcoming book based on past sales only, excepting a handful of preorders (and who preorders at a physical store these days)? Amazon, by and large, knows exactly how many they're going to sell, because they've already sold them (barring the inevitable spikes and differences). Amazon has a much better future data for knowing what to order than you do - because their preorder sales are large, and they can use that very effectively to track what the sales will be. If pre-order sales for the new Stephen King are disappointing, comparatively, they'll know well in advance and can simply not order as many for the day of release. You, on the other hand, don't know until the books hit the shelves, by which time it's too late.
- You do not make money until a customer pays you and takes the book out of the store. Whereas Amazon gets the money for a large number of pre-orders, so they've already made a profit on a significant number of books before the first book even ships. And when those books ship, they get the sales on day one, so they have a few weeks of float time to pay their distributors - meaning that they're getting free loans all the time.
No. There are greater costs. Because those deep backstock books? They don't sell fast. That's the nature of deep backstock. Which means you'll now be carrying a lot of inventory that you've already paid your distributor for that you may not see a profit on for a year. Maybe two years. Maybe never. And all those books will be clogging up your cash flow, preventing you from ordering what you need.
(And let's not think about what happens when that single copy of a book is shelved in the wrong section, either because of incompetent bookstore clerks or lazy customers shoving it back wherever. That book might have customers clamoring for it, and still be unfindable and thus unsalable - particularly if you have a very deep backstock with lots of books to get lost in.)
Oh, and you have to order those books spread across a large number of stores. Don't forget that. If you decide it's essential to have some deep backstock, that same backstock has to be at a significant number of your stores. If you sell, on average, one a week across the chain, you have to keep copies stocked across the chain. To sell that one book a week, you may have to keep fifty copies in stores across the country. That's a lot of books.
And you know what? Amazon is still eating your lunch. Amazon killed the special order. There was once a time where if you walked into a store with a lot of books and didn't see what you wanted, you'd say, "Well, I really want this, can I special order it?" And the store would spend six to eight weeks trying to find it and eventually you'd come in to pick it up. (Or they'd forget about your SPO entirely, which is why I was happy as a customer to see Amazon arrive.)
Amazon means that if you do not have the book right now, you lose the sale. "Screw it, I'll just get it from Amazon." And they leave. So no how matter how deep your backstock is, any thing you're sold out of or don't carry is now a sale that will never be replaced. And remember, you're carrying lots of books, one to each store, that sell maybe one copy per store per year to get that reputation of depth - your turn's shot to shit.
Amazon business model, however? They sell one a week? Great. They have one store. If they sell one a week across their chain, they can keep one on hand. Their inventory costs are almost automatically lower than yours. (In reality, it's probably closer to "one a week per warehouse," but they have fewer warehouses than you have stores.)
So you're damned if you do, damned if you don't. Carry only the top-sellers, and people just buy those top sellers from Amazon. Carry a deep selection, and your profitability tanks, and people order the books they can't find from Amazon anyway. It's why physical bookstores are having a hell of a time competing - if you're going to be a good bookstore in this day and age, you'd better offer something that Amazon doesn't have. And that's tough to do, because while people say they love "expertise," it often doesn't translate into profits, and specializing can only work in certain areas.
Amazon's winning the bookstore war because it's hard for physical stores to compete with online ones. And books are just the first casualty.