Maybe it's the perfect 80-degree weather or the scent of fresh coffee wafting from the Wildflower Bread Company next door, but when the staff at Changing Hands Bookstore in Tempe, Ariz., gather at 9:45 a.m. around the front cash wrap for their morning meeting, most are smiling—beaming, even—when faced with the work ahead of them.

Co-owner Gayle Shanks runs through the day's events, which include a performance by a Putumayo recording artist, a seminar on journaling and a visit from the C-Span Book TV bus, before sending everyone bustling off to their stations.

Unlike most bookstores, there's not a curmudgeon on-site.

When I later ask Shanks if the staff is putting on a show for the visiting PW reporter, she replies, “No, they're like that all the time. The people working here are happy, and they're happy to be working here.” She adds, conspiratorially, “Anyone who is a downer doesn't stick around for long.”

Shanks says her only major problem with her 48 employees is when they call in sick. “There are too many smokers on staff,” she says. “Two or three times a month they call in sick, and when they do, it really screws up my schedule.” The schedule at Changing Hands is a finely tuned instrument, one that instructs each employee on their responsibilities hour-by-hour.

As the first customers filter through the door, many exchange personal greetings with the staff; others immediately head into the 10,000-sq.-ft. showroom. A few customers linger outside to browse the store's bargain books, which are displayed in a year-round “sidewalk sale.”

The name Changing Hands derives from the store's origins as a used bookstore, where books were not so much purchased as they “changed hands.” One consequence of the hippie-ish name is that new customers often mistake Changing Hands for a New Age bookstore.

Yvette Roeder, the store's PR manager, says nothing could be further from the truth. “We're a world-class, full-service bookstore in the fifth largest city in the United States,” she says, referring to the Phoenix metro area. “We cater to suburban moms, dads, kids—anyone who treasures great books. Our demographic is more Trader Joe's than poor student.” Tempe is home to Arizona State University.

Nevertheless, a bit of New Age vibe still clings to the store. A few minutes after my conversation with Roeder, I find her sitting in an empty room staring at a blank wall. “I'm testing the room's feng shui,” she says, explaining that we are standing in a new office, one that's been created to give room to the five-person marketing team, which includes a full-time graphic designer. When I leave, Roeder is trying to find the most auspicious place to put her desk.

As for feng shui, the store's must be pretty good: last year Changing Hands racked up nearly $4 million in sales—50% from new books, 25% from gift items and sidelines and 25% from used books and remainders.

Throughout, Changing Hands combines a laid-back Southwest aesthetic with a 21st-century sensibility. Take, for example, the new floors, which Shanks selected for their environmentally conscious materials as well as the way they helped define the sales space. She points out how the section of gifts and sidelines is distinguished by subtle parquet-patterned bamboo; a path leading around the cash wrap is demarcated by a soft, thatched vinyl walkway, while everywhere else is covered in a carpet in the comforting hue of red earth.

The store's most striking visual feature is a series of hand-painted murals depicting nature scenes lining the walls above the shelves. Hand-lettered signs—one in blue and yellow announcing “community” beneath an image of people walking hand-in-hand—hang from the ceiling, and a smiling orange sun is suspended over the doorway to the back office, all reminders of the store's priorities.

Pinna Joseph, who has worked at the store for 28 years and serves as Changing Hands' marketing and events manager, points out that these artifacts date to the store's first location in downtown Tempe; after each move, first to a two-story location, and now to its present spot in a suburban strip mall, the signs and the sun came along. “Some new employees don't like them,” she remarks, “but I think they help connect us with our past.”

Changing Hands opened in 1974 with a communal ownership scheme that gave every employee a share of the business. Only Gayle Shanks and her husband, Bob Sommer, remain as owners. Suzie Brazil later came on as a third partner. The three divide the duties of ownership equally: Shanks handles front-list buying, Sommer buys remainders and oversees finances, Brazil is night manager.

The owner's principles may be rooted in the 1960s, but their attitude toward business is as rigorous as that of any other 21st-century business. Various booksellers tell me they're encouraged to keep abreast of management trends and incorporate best practices strategies gleaned from ABA education sessions and books such as Paco Underhill's Why We Buy.

It's understandable. Changing Hands needs to be on the top of its game if it is to prevent its customers from transferring their loyalty to any of the half-dozen chain bookstores within a short drive.

As part of their own effort at self-preservation, Changing Hands was a founding member of Arizona Chain Reaction, a 500-strong consortium of independent businesses that encourage customers to shop at locally owned stores.

The store's watershed moment happened a decade ago, when Shanks had an epiphany. “I realized that if I wanted the store to be sustainable while maintaining the same values—being able to pay the staff a living wage, give money and services back to the community, while still providing a wonderful customer experience—Changing Hands had to be profitable,” says Shanks. Accordingly, profit is a word that comes up in nearly every conversation at Changing Hands.

“Each employee is invested in the success of the business,” says Shanks. Year-on-year sales figures from the previous day are posted next to the time clock. A storewide profit-sharing program guarantees a check to every employee at the end of each quarter, provided sales surpass those of the same quarter the previous year.

Cindy Dach, director of marketing and events, believes this emphasis on profitability empowers employees. “If you come up with an idea that will make the store more money, you can create a new role, if not an entirely new job for yourself.” Three years ago, an employee suggested the store list its used books on Now, three employees spend up to four hours three times a week listing used books online, an effort that generates $4,000 a month for the store.

The owners also encourage employees to experiment. Dach cites herself as an example. Searching for a way to promote debut authors, she conceived of the First Fiction Tour, which took authors from five presses to a half-dozen bookstores and bars around the West. She did this despite a demanding in-store events schedule, one that consists of 350 events annually, from readings to book clubs. Though the First Fiction Tour wasn't profitable, it did “generate enormous amounts of publicity and goodwill.”

Together with in-store graphic designer Brendan Stout, Dach has created a variety of programs to promote books in-store, including a “We Love These Books” display of discounted staff recommendations, and “New Essentials” and “Forever Favorites” sections in the children's area for parents.

Changing Hand's most recent marketing program is “Page 23,” devised to highlight “contemporary fiction that is all too often overlooked by mainstream culture.” The first “Page 23” display offers some two dozen edgy titles, such as The Little Girl and the Cigarette by Benoit Duteurtre (Melville House) and African Psycho by Alain Mabanckou (Soft Skull).

Dach explains the idea originated in response to the NEA's 2004 Reading at Risk Study, which cited a decline in reading among 18—35-year-olds. Accordingly, the program is being promoted in the store with hip-looking signage, as well as on MySpace ( Dach is striving to persuade other stores to pick up the program and contribute their own suggestion.

Unsurprisingly, a store as finely tuned as Changing Hands has even managed to put a succession plan in place—something that eludes many booksellers. Dach, together with head trainer and floor manager Mary Martiniak, are in line to take over when Shanks and Sommer retire, perhaps two years from now.

When that time comes, Shanks says she'll have no regrets. This honor from Publishers Weekly is simply the culmination of decades of rewarding work.

Ultimately, Shanks credits her staff with winning the PW Bookseller of the Year Award. “They and my bookseller colleagues have enabled me to have a profession that still thrills me each and every day,” she says. “The books, the customers, the conversations, the energy that surrounds my life is a gift.”