Since opening its flagship Schuler Books & Music store in 1982, the family-owned company has battled a steady stream of larger, publicly traded competitors including book superstores, discount-crazy big box retailers and online booksellers. They’ve watched technology reshape their industry, decimating music and video sales, and shifting readers from paper books to e-books.
Of course, like any good novel, the story started out so well before it turned.
“I think we had six or seven years that were a piece of cake,” said founder Bill Fehsenfeld, who runs the company with his wife and co-founder, Cecile. “After that, there’s been change after change after change.”
For three decades, the Fehsenfelds have navigated those changes by bringing a measured “go big or go home” mindset to competitive challenges, all the while maintaining a small-company culture when it comes to employees and tending to customers. And, like most great marketers, they understand that success is a complex formula that requires adaptability, innovation and passion.
Above all, the Fehsenfelds, and virtually everyone who works for them, are “book people,” as Cecile calls them. They care deeply about the printed word as well as the place that bookstores hold in the community.
“Bookstores are a central part and intellectual hub of our communities,” she said. “People don’t just come here to pick up a book … they come to talk to people about what to read or to comment about the books they’ve read. Those conversations create a dynamic you can’t replicate online with an algorithm.”
The ability to create and re-create that dynamic over the years has also allowed Schuler Books & Music to do something many of their indie bookstore peers have not done: survive.
Since 1993, the number of independent booksellers has shrunk from 4,700 to about 1,900 today, according to estimates. During that same period, Schuler grew. Today, the company has five locations — three in Grand Rapids, two in the Greater Lansing area — with 115,000 square feet of retail space and more than 100,000 titles in inventory. They employ 225, down from a peak of 250 employees. Every employee is tested on book knowledge before they’re hired.
The Fehsenfelds met, appropriately enough, in a bookstore in Ann Arbor, Mich., where Bill was a University of Michigan undergrad and Cecile was a graduate student. He later worked at the original Borders bookstore, which served as a model for the flagship Schuler store with its wide open spaces, comfortable seating and large inventory of books.
Opened in September 1982 in a former fabric store on 28th Street, the initial Schuler Books was, in some ways, a bit of a groundbreaking concept in retail bookselling. At the time, the norm was mall stores like B. Dalton or Waldenbooks or regional chains like Chicago-based Kroch’s and Brentano’s that might have carried 2,000 to 3,000 titles. In their new store, the Fehsenfelds offered 24,000 titles in a spacious 7,000-square-foot store. Later on, the big box superstores would expand the retail footprint and the number of titles they offered, but at the time, Schuler’s numbers were impressive.
The emergence of and market saturation by book superstores such as Barnes & Noble and Borders during the late 1990s created new competitive challenges for Schuler Books & Music and other indie bookstores. Rather than shrink from the competition, the Fehsenfelds fought back with a “go big or go home” mentality.
When Barnes & Noble announced it was coming into the Grand Rapids market in 1995, for example, the Fehsenfelds responded by moving across 28th Street to a new location that more than tripled their retail space to 32,000 square feet. They used the extra space to add a café and to launch their music section.
In 2001, Barnes & Noble prompted another “go big” response from Schuler when the superstore moved its Okemos store across town to East Lansing on the Michigan State University campus, alienating a portion of its suburban customers in the process.
“It was like a gift for us,” Bill said.
Schuler responded by moving into the nearby Meridian Mall, doubling its retail footprint to 25,000 square feet and adding music, video and a larger café. The East Lansing Barnes & Noble store closed in 2011.
The “go big” approach has also been evident in their moves into other categories such as music, used books and, more recently, gift items. They stocked thousands of items in each new category from the outset.
“In a big space, you have to make a big presence,” Cecile said. “One of the things that has always driven us is that we always want to have a big selection. If you have a small selection, you have to ask yourself if it’s really worth doing.”
That’s a question they’ve been asking themselves recently about selling music in Schuler stores. File sharing and the emergence of iTunes have cut deeply into their music sales, which are about a third of what they had been a few years ago. At their 28th Street store, they’ve significantly reduced their music section in favor of an expanded kids section and a community space that hosts author readings, community events and hip local folk artists like the Crane Wives and Drew Nelson.
While iTunes cut into Schuler’s music business, online book retailers like Seattle, Wash.-based Amazon.com Inc. battered the book business, which still accounts for about 60 percent of the Grand Rapids-based bookseller’s sales.
By offering customers discount pricing, free shipping and a tax-free purchase, Amazon.com has been able to win the price wars and strip away customers from independent booksellers and big-box retailers alike. Amazon.com also recently announced plans to offer same-day delivery, which would further hurt the convenience factor of local brick-and-mortar stores.
Online retail caused some sales erosion that forced the Fehsenfelds to consolidate the workforce in recent years.
“That’s the kind of stuff that takes the color out of the day,” Cecile said. “We sell an environment and service. We sell the entire book experience. Amazon is a totally different experience where people buy cheap. It’s a hard thing to compete against.”
Amazon.com may soon lose a portion of that competitive edge. After negotiating with lawmakers, the $48 billion (2011 revenues) online retailer recently began collecting taxes in California, Texas and Pennsylvania. Other states appear to be ready to follow the lead, including Michigan. Governor Rick Snyder has urged the U.S. Senate to pass the Marketplace Fairness Act that would level the playing field between Internet retailers and brick-and-mortar retail operations. The Michigan Department of Treasury estimates that total revenue lost by e-commerce and mail order amounted to $872 million in fiscal year 2012 and 2013.
“They ought to be taxed,” Bill says. “It’s an unfair competitive advantage.”
The Fehsenfelds are quick to point out that they also sell books and e-books online via their schulerbooks.com website. Web and e-book sales represent about 1 percent of the company’s revenues currently, but they hope to grow that to 10 percent.
They plan to increase their in-store marketing to alert customers to their digital presence.
While they love print books, the Fehsenfelds are hardly Luddites. They’ve always been quick to embrace technology in the business. For years, they used an inventory management system developed by Borders as part of their wholesale operations. When Borders went bankrupt last year, they created their own.
Schuler Books was also one of the first independent bookstores in the country to install an Espresso Book Machine, which can be used to quick-print books. They bought the machine originally to access online titles and print them. What they found, instead, was a market opportunity to help self-publishers who’d written their memoirs or had a novel manuscript tucked in a desk drawer. Authors pay a one-time set-up fee ($95) and a price per page printed. They also offer editing, coaching and layout.
They’re working on eight or nine projects at a given time, printing quantities that range from a handful of copies to several thousand. Two years ago, they launched their own publishing imprint, called Chapbook Press, which has about 50 titles.
“It’s given us entrée into that market and people like it because the guy we have in charge of it can walk them through the process and it’s relatively inexpensive,” Bill said.
That kind of adapt-on-the-fly approach has served Schuler well. They added used books into the mix about eight years ago, and now they represent about 10 percent of sales. Likewise, the decision to branch into gift items like puzzles, candles and the ubiquitous Moleskine notebooks has helped boost sales and margins in the past couple of years. Gifts represent about 15 percent of sales, as do the cafes, according to Bill.
Employees are also given the flexibility to help build niches in each store to fit the market. In the Lansing store, for example, Schuler sells new and used vinyl, as well as a healthy amount of CDs. They attribute that success to Chris Baranto, an employee of the store who has built a considerable following among Lansing music lovers.
In some ways, the passion of employees and the daily execution on the customer service front have been the key to their longevity, Cecile said. The formula comes down to this: Have the books customers want. Hire employees that read books so they can talk to customers and help them find exactly the right book.
“It’s a thrill to find the right book for a customer who’s looking for something … and to walk over to the shelf and put the book in their hands,” she said.
The customer service lessons probably seem plainly evident, but consider last year’s Chapter 7 liquidation of Borders. While the company blamed the difficult headwinds in the industry, industry experts lambasted the retailer for its lack of execution. Retail management consultant George Whalin told Forbes that Borders most damaging misstep “was hiring people to work in the stores who had little or no interest in books, authors or literature.”
Now in their early 60s, the Fehsenfelds are beginning to ponder what the next 10 years will look like for the company. They intend to increase sales of gift items and build the self-publishing business. They’re considering upgrading the cafes by adding beer, wine and an enhanced dinner menu. They don’t rule out another acquisition or replicating the successful formula in other geographic markets. Cecile admits she’d like to scale back her work schedule, but acknowledges that she’d probably spend some of that downtime in other bookstores.
“We’re thinking through a lot of scenarios and what would make sense,” Bill said. “The stores need to keep going. Where we fit in that picture, we need to figure out.”