No Mere COGS: ABA Visits Weird Austin

by Edward Nawotka, PW Daily for Booksellers -- Publishers Weekly, 2/9/2005

This year's first American Booksellers Association Booksellers Forum, which took place last Wednesday in Austin, Texas, in conjunction with the Mid-South Independent Booksellers Association, offered a preview of what booksellers should expect from the ABA at this year's BookExpo America. The focus of the organization remains education, and this session opened with a presentation by ABA CEO Avin Domnitz on the topic of "The Cost of Goods Sold, 101," an expansion of part of his "Two Percent Solution" seminar offered at many of last fall's regional shows.

At the core of the presentation, Domnitz argued that many booksellers who think they are profitable rely on miscalculated data. To correct that, he said, booksellers should more reliably determine the actual cost of the goods sold (COGS)--and he provided a relatively simple formula for calculating COGS. As for inventory, there are two ways to do, he continued. "The right way" is to count total inventory all at once as close to the end of the financial year as possible. The "wrong way" is to count incrementally, section by section, which he says provides inaccurate data.

Susan Post, owner of Book Woman, a feminist bookstore and, along with BookPeople, one of Austin's two independents, said she found the financial seminar much improved over the previous year's sessions. "I've done several of these events, and typically, 15 minutes into it, my eyes would glazed over and my head was pounding," she told PW Daily. "But this presentation has become more and more effective. I went back to my store and looked at the balance sheets and the P&L statement and know that they were stinky."

ABACUS and Gift Cards

This year the ABA is using a new lure to encourage stores to contribute to its ABACUS Survey, which gathers financial statements from bookstores to create benchmark statistics: a $50 reduction in dues to each store that participates. Last year more than 100 stores participated.

Domnitz also had good news about Book Sense's gift cards. More than 300 stores are participating in the program and have sold 175,000 cards that have a total value of $4.5 million. (The average value of gift cards sold is $25.) So far, less than $2 million of the value of those cards has been redeemed. Domnitz predicted that based on data about gift cards in other industries, "breakage" on the cards, or the amount that will go unredeemed, may be as high as 40%.

Big in Everything But Bookstores

MSIBA remains among the smallest of the regional booksellers trade groups. Texas, in particular, has a particularly low ratio of independent bookstores to its population. Houston, Dallas and San Antonio, three of the most populous cities in the country, have less than 10 independent bookstores among them. Austin, home to more than 45,000 students from the University of Texas, has just two independents. Even the chains haven't always fared well: a Barnes & Noble superstore across from the UT campus closed this past January, leaving the nearest general bookstore to campus, BookPeople, a mile away.

Thus the birth of a new store is especially notable. A Thirsty Mind Words & Wine, a bookstore and wine bar, opened in nearby Lakeway, Texas, last November, and owners Anita Mapes and Pam Headrick reported sales have been encouraging.

Mapes was all ears at the ABA/MSIBA gathering, which was attended by approximately two dozen booksellers. "I found it helpful, and it reinforced what I'm trying to do here with my accounting procedures," she said. "Of course, it's easier to implement since I'm just beginning."