Bookseller of the Year

Talk about new beginnings. Last May, A. David Schwartz, owner of Harry W. Schwartz Bookshops, which has four stores in and around Milwaukee, was diagnosed with lung cancer. The illness was as surprising as it was sudden—Schwartz is not a smoker. Despite several operations that included the removal of one his lungs, the cancer spread and Schwartz was told he had just a few months to live. During the summer and early fall of 2003, he accelerated long-standing plans to hand over day-to-day management of the company to Mary McCarthy, the new v-p and general manager.

His family and staff were distraught as he began to waste away and say his goodbyes, assuming he'd never see the end of the year or his 65th birthday. "It was a very emotional, scary time," McCarthy comments. But chemotherapy eventually had a miraculous effect, and while Schwartz is still receiving care and tires more quickly than before, he keeps testing "clean"—and can be as charming and irascible as ever. And these days the mood at Harry W. Schwartz Bookshops, which went from gloom to bliss, is probably more like a New Age convention than that of a typical bookstore: several Schwartz booksellers say they readily hug each other and say, "I love you."

During the roller-coaster of a year, Schwartz and Schwartz Bookshops have marked several other striking, positive milestones, the most significant of which highlights the store's own financial health. In March, Schwartz Bookshops paid off the last of its longterm debt, which had altogether totaled $2.6 million. At a celebratory party that included a ceremonial shredding of loan documents, Schwartz noted that the debt went back to 1984, when Schwartz Bookshops merged with Dickens Books, owned by Avin Mark Domnitz, now the CEO of the American Booksellers Association. During the '80s and '90s, the company opened and closed several stores, all of which led to more debt. The company also seemed always to have at least one lease "open"—in other words, paying rent for unused space. "Avin said that if we paid the debt down, we wouldn't have to worry about Barnes & Noble or Borders because the banks couldn't pull our loans," Schwartz states.

For the past three years, the company has paid off the debt—$300,000 a year, which, as Schwartz observes, was "a lot of cash to generate."

While Schwartz sounds mildly rueful about all the money borrowed and jokes about having kept so many "artisans and contractors busy," he adds a comment made all the more poignant by his illness: "We had to keep on moving and changing. If we hadn't, we wouldn't be here today."

Among other changes and initiatives at Harry W. Schwartz Bookshops in the past year:

It held its first focus groups last September, resulting in significant changes in some key programs as well as in basic areas, including improving lighting and adding the "comfy" chairs preferred by many customers these days.

Communications between stores were upgraded, and staff and management at the four Schwartz Bookshops have begun sharing more information and meeting regularly.

The company has devised a plan with goals to improve, among other things, profitability, bookseller skills, handselling and more. "It is," Schwartz says, "the year of the bookseller."

In addition to his staff, Schwartz attributes a significant amount of the stores' success to three programs: author appearances; Schwartz Gives Back, under which the company contributes a part of customer purchases to arts and social organizations; and the Schwartz 100 and Schwartz 100 Encore, which are the store's "recommended" titles and bestseller list, promoted in-store.

Schwartz Gives Back is a dual program. Under the original program, customers who sign up have 1% of their sales donated to nonprofit organizations that they choose, mainly arts and social agencies. ("We don't do religion, politics or disease," Schwartz explains.) There are some 30 options, including Habitat for Humanity, the Florentine Opera Company, First Stage Children's Theater and the Milwaukee Ballet. In nine years, the store has contributed more than $250,000 to the organizations.

Besides the philanthropic aspect, Schwartz Gives Back gives something to Schwartz as well: the company uses the customer list for its mailing list. Thus, the monthly newsletter goes only to "active" Schwartz Gives Back customers, those who have made a purchase within six months. (Anyone who makes a purchase after six months of inactivity is automatically returned to the mailing list. Marketing director Nancy Quinn emphasizes that, as a result, "we have a customer list rather than just a mailing list.") Schwartz also notifies customers of events and new releases that they might be interested in. The company does not share its customer list or information with anyone. While some bookstores have dropped programs that gather information about customers' purchases because of concerns about the USA Patriot Act, Schwartz continues, since, as Quinn says, "It's too important for us."

Last December, as a result of findings from the stores' first-ever focus groups, the company added a second component to the program, which it calls Schwartz Gives Back to You. Customers who are signed up for Schwartz Gives Back are automatically enrolled in Schwartz Gives Back to You—and receive a $10 coupon for every $200 spent. (Focus group participants were adamant that they did not want to have to carry a card and did not want to pay a fee. As a result, the program uses participants' phone numbers as their ID numbers.)

"Already in just three months, we've seen results," Quinn says. "Schwartz Gives Back had a loyalty component. This adds more." About 55,000 people are enrolled in the program.

The Schwartz Encore 100, the company's bestseller list, consists of titles that change every two weeks and are discounted 30% (As a result of the focus group, at the beginning of the year the company quietly changed the discount from 40% to 30%, with nary a reaction. Business operations manager Shawn Quinn, who is married to Nancy, calls this "the healthiest move" the store made all year.)

Now the Encore 100 "better reflects what we are actually selling," trade book buyer Goldin notes. The list is more literary and less genre-driven than the Times list. Margins are helped because Schwartz is able to order more of these titles from publishers, and author appearance titles aren't discounted.

Under the company's Schwartz 100 program, titles are discounted 20%. These are slightly less fresh than the 100 Encore and change monthly.

Partly as a result of the focus groups, Schwartz Bookshops instituted the Book Sense gift card in stores in December. Schwartz calls it "probably the best thing" we've done. "It looks good. There are no holes in the program. It's expensive up front and there was one day of pure hell training, but in the long term, it is very good for us."

The focus groups also revealed that many customers prefer the old-fashioned paper newsletter, which is called the Independent . The company's e-mail newsletter goes out twice a month to more than 8,000 people and includes notices about events and titles. Schwartz also puts out a special reading group newsletter that has 600 subscribers. (Each store runs several reading groups, and many more are "registered"—they hold meetings outside the store and receive discounts. Schwartz booksellers offer consultations and suggest titles.)

Last fall Schwartz launched a new Web site, which was designed and is maintained by staff graphic designer Brian Peterka. It features a review archive, recommended titles, an events listing, reading group information and more.

In 1987, a study ranked Milwaukee 49th out of the top 50 bookstore markets, ahead only of Buffalo, N.Y. Schwartz calls this in part a reflection on the city's strong library system. Nonetheless, the store has made an effort over the past 15 years to change the situation—an effort he deems a success. "We have 250 authors visit each year and are now part of 14- and 11-city tours," Schwartz says proudly.

Schwartz's daughter, Rebecca, who worked for a time in the stores before becoming an English teacher, launched the Writers to Readers program, which is now managed by Nancy Quinn. "The author program is so much a part of what we do," Quinn says. "We're pacing for this year to be the biggest year yet."

With four locations, Schwartz "can look at an author and see who fits one demographic rather than another," Quinn continues, "and we can book several authors on one day." Many author events are held in the stores, but when large crowds are expected, the event takes place at the downtown library, which can accommodate 500 people and has an adjacent space for 300 more.

Among the authors scheduled to appear at Schwartz this month are Tim Russert, Alexandra Fuller, Ron Chernow, John Sandford, Heloise and Andre Codrescu. Quinn notes that readings can become true events: an appearance by Azar Nafisi, author of Reading Lolita in Tehran, drew some 350 people and became "a special evening of bringing together books and literature and woman and recognizing the freedom to read." It's the kind of thing, she continues, "that makes you feel good about everything you do with books."

The store also does some TV advertising. (This holiday season, the theme was to have people "recognize that Schwartz is the place to shop for gifts." The spot featured multiple Santas shopping at Schwartz, demonstrating that everyone—even Santa—shops at Schwartz for the holidays.)

At the heart of bookselling for Schwartz is the item that he calls "both an icon and a tool": the book. "I believe the book has a soul, in the sense of having an ethical center," he says. "That's why there are no bad books even if sometimes bad ideas are expressed in books." Because of the ethical center, "books can change your life," he continues. "They changed mine. This is an idea that we transmit to our booksellers."

While Schwartz has obvious political leanings, he says, "I'm always conscious of balancing what we sell. I never let our politics interfere." For example, "I leapt at the chance to bring Paul Krugman here, but last summer we had Wayne LaPierre [executive v-p and CEO of the National Rifle Association], who was a very nice man."

Not surprisingly, Schwartz is an adamant opponent of the Patriot Act. His editorial against it published in the Milwaukee Journal Sentinel was quoted last summer by Wisconsin Senator Russ Feingold when he introduced legislation amending the Act. The piece read, in part, "The FBI already has significant subpoena powers to obtain records. There is no need for the government to invade a person's privacy in this way. This is a uniquely un-American tool, and it should be rejected. The books we read are a very private part of our lives. People could stop buying books, and they could be terrified into silence."

While he obviously reveres books, Schwartz also says he aims to treat employees "like fellow human beings. It's not a utopia. Some have been bitter and unhappy, but basically there is a dignity here. Thousands of people have happily worked as booksellers and have the magnificent ability to express themselves with the book. And because of their responsibility for the book, they have a responsibility for the customer." And just as he tries to treat his employees like a human beings, "there is a distinct sense of the customer as a human being. This is the centerpiece of our survival."

Bookselling, he says, "is a unique calling that gives you an opportunity to do things you can't do in any other occupation. I like to call it the brotherhood and sisterhood of the book."

Even while opening and closing many stores, Schwartz Bookshops has "always had four bookshops," as Schwartz says. The four it has now are in Milwaukee and three suburbs and each is somewhat different. (A Dickens Bookshop survives in Kenosha and a short-lived Schwartz store in Racine closed in February.)

At one time, Schwartz says, he regretted not following the Tattered Cover model—one large store—"but not now. We are serving various communities. The stores are too big to be considered neighborhood stores, but they have the character of neighborhood stores."

Books are all bought centrally but received locally. However, publishers' overstock and, now, nonbook and gift items are received at a central location, which has reduced freight and receiving costs.

In order to improve margins and earn more co-op money, store managers are encouraged to re-order from publishers and to do so more frequently. As a result, while book purchases increased more than 5% in 2003, wholesaler purchases dropped by more than 25%. (The company uses Ingram as vendor of record for more than 200 suppliers, which Goldin calls "critical to our success.")

The stores share some physical characteristics: they were all designed by David Schwartz's wife, Carol Grossmeyer, who wanted to "create lots of small areas," she says.

Two of the stores have cafés, which Schwartz calls "thankless." The Downer store is lucky enough to have a Starbucks next door. One store somehow survives without a café. The store in Shorewood, just north of Milwaukee, generates the best volume of the four and includes a coffee shop up front.

The store in suburban Brookfield, opened in 1985, is in an upscale shopping mall. Ten years later, a Barnes & Noble opened nearby and "took the wind out of our sails," as Schwartz says. "We haven't totally recovered. It took 40% of our business over 10 years." Even in this location, where incomes seem solid, sales of high-ticket art and photo book have declined; at the same time, customer interest in what Schwartz Bookshops calls "social criticism," where, among other works, one finds the bestselling nonfiction, both left and right, has grown substantially.

The Mequon store draws customers who are "more upper middle class" and stocks "more bestsellers and fewer politically progressive" titles than some of the other stores. It's in the "heart of the Jewish community," which migrated to the area from the city over the years. Some 20% of its business is children's. On the day PW visited, a woman shopping in the store who lives in New York volunteers that she calls the store regularly for book recommendations for her father-in-law. "I worship Schwartz," she gushes. Schwartz modestly responds, "This happens a lot. We're really important for them."

Used books make up about 5% of the Mequon store's stock, but are an even larger component at the Downer store in Milwaukee, which has a more edgy, literary emphasis. Popular used book sections at Mequon include fiction, biography, history and mystery. "Used books extend the inventory at a relatively inexpensive cost," Schwartz says. Most used paperbacks are priced at half the list price, while hardcovers are usually a third of the list price.

Sidelines, excluding magazines and calendars, account for 10% of the overall business and include mugs, cards and stationery. Much of it is scattered appropriately about the stores, so that, for example, cooking paraphernalia is in the cookbook section. Given the cost of what it takes to receive and mark down and display the items, the profit margin isn't as great as people think. Still, he says, sidelines "soak up some of the money that customers don't spend on books."

Competition has been tough. Schwartz notes that in 1991, in the three counties that comprise the Milwaukee metropolitan area, there was 80,000 square feet of bookstore space, including five Waldenbooks and four B. Dalton Booksellers. Now there is 290,000 square feet of bookstore space, including five Barnes & Nobles and three Borders. Mirroring the situation elsewhere in the country, while book retail square footage multiplied (in this case by nearly four), population growth was minimal (less than 5% in this part of Wisconsin).

He doesn't speak bitterly about the competition. "I've learned a lot from Dalton and Barnes & Noble and Borders," he says. "I have a lot of respect for them. They're not horrible or predatory. It's the way of American business: go where the business is. If an independent is in a good location, they'll go there. It's not a kind or generous thing to do, but there's nothing kind or generous about capitalism."

In conversation, Schwartz frequently mentions his father, who founded Harry W. Schwartz Bookshops in 1927 as a modern lending library that carried secondhand books. He is perhaps best known as a vigorous opponent of censorship. Schwartz père delighted in putting copies of banned books, including The Tropic of Cancer and Lady Chatterley's Lover, in store windows. When people complained, Schwartz says, laughing, "My father would say, 'I have your book, too,' and point to Mein Kampf."

David Schwartz took some time joining the family business even though—or because—his father told him that the only "worthy" occupation was being a bookseller. "I fought that," he comments. "I didn't believe it." It was only when he was in his 30s, after returning from a year on a commune in Maine, "did I accept that I would be a bookseller."

Clearly, he is doing some things differently. Noticing a customer taking notes from a book in one of his stores, Schwartz observes that his father "would throw people like that out." Likewise, when discussing sidelines, he says his parents' idea of sidelines were popular biography and self-help titles.

Still, it's easy to imagine "old Harry Schwartz"—one of David's ways of referring to his father—would approve of how his son has carried on the business—and mission. As Schwartz puts it: "Over the last 75 years, we have sold more good books to people and been an immense force for progress and decency. Without us, the area would have an empty heart."