Books-A-Million, Inc.
Address:
402 Industrial Lane
Birmingham, Alabama 35211
U.S.A.
Telephone: (205) 942-3737
Fax: (205) 945-1772
Statistics:
Public Company
Incorporated: 1964 as Bookland
Employees: 1,180
Stock Exchanges: NASDAQ
Sales: $172.3 million
SICs: 5942 Book Stores
Company History:
Books-A-Million, Inc., is the fourth-largest book retailer in the United States, with combined annual sales of $172.3 million in fiscal 1995. The company operates 124 stores in 17 southeastern states. Of these, 50 are Books-A-Million superstores, which offer more than 3,000 magazine titles, 68,000 book titles, and 75 newspaper titles, as well as collectibles, cards, and gifts. Thirty-one are smaller Bookland stores, which are more traditional book stores: they offer books and periodicals and are primarily targeted to regional markets too small to support a superstore. The remainder are Bookland combination stores, which offer a complete selection of cards and gifts in addition to the books and periodicals sold by traditional Bookland stores. They are located in small towns and target regional markets.
Books-A-Million's roots go back to a humble newspaper stand constructed in 1917 by 14-year-old Clyde W. Anderson, who had dropped out of school to support his family upon the death of his father. The young man's first job was delivering newspapers in his hometown of Florence, Alabama. Shortly after he began selling newspapers, a large group of construction workers from the North came to town to build the Wilson Dam. When they mentioned to the young newspaper boy that they missed reading their hometown newspapers, Anderson contacted northern newspaper publishers and made a deal with the railroad to have the papers delivered to Florence. Using old piano crates, Anderson built a newsstand, and business was soon booming. Within a few years, he and his brother were able to invest their profits in a bona fide book shop.
In 1950 Clyde W.'s son Charles C. Anderson inherited the book store and expanded it into a chain of stores called Bookland. During the 1970s, Bookland expanded rapidly as shopping malls sprang up across the American landscape, and by 1980 Anderson operated 50 stores located primarily in shopping malls throughout the Southeast. Charles C. also established a book and periodical distribution business. When his sons Charles, Jr., and Clyde B. were old enough, they began working in the wholesale business and book store, respectively.
In the mid-1980s Bookland doubled its size when it bought Gateway Books, a chain of stores based in Knoxville, Tennessee. According to the young Clyde B. (who had moved into senior management after graduating from the University of Alabama), many Gateway stores were poor performers. Within two years, Bookland had closed 27 of 50 Gateway stores, a move that left the company with many excess books and store fixtures. These three factors--excess books, excess fixtures, and a young executive with big plans--combined to become the driving forces behind the company's move into superstores.
In 1988 the youngest Anderson led the company to open an 8,000-square-foot store in a shopping center in Huntsville, Alabama. By his own account, the store--furnished in part with fixtures and stock from the abandoned Gateway stores--was a flop. "It was one of my early learning experiences," he reported in an interview with Birmingham magazine. Shortly afterward, however, the company opened a second superstore under the name Books-A-Million. The new superstore was located just down the street from the first one, but this time with 30,000 square feet of selling space, as opposed to 8,000. "We did very successfully from day one," Anderson told Birmingham magazine.
The company made the decision to expand into the superstore format at the right time. In other regions of the United States, larger book retailers, such as Barnes & Noble and Crown Books, had already begun to switch to the superstore format and were beginning to squeeze out smaller stores. The concept behind superstores was to establish specialty shops with an enormous selection of goods and prices comparable to, or lower than, department store sale prices. Bookstores weren't the only retail businesses to explore this concept. Instituted by Toys 'R' Us in the early 1980s, the formula quickly spread into home furnishings (with Bed Bath 'N Beyond), electronics (with Circuit City) and do-it-yourself home improvement (with Builders Square).
Books-A-Million superstores sought to purchase books at high volume and pass the savings on to customers. To draw customers, bargain books--sold at 40 to 90 percent of publisher's suggested retail prices--were placed prominently in the front of the stores and updated weekly to keep bargain hunters coming back. In addition, the weekly top ten best sellers were offered for up to 40 percent off the publishers' suggested retail price, while paperbacks were offered at up to 25 percent off suggested retail prices.
Books-A-Million distinguished itself from its competitors by maintaining a regional focus at a time when national chains threatened to homogenize book selling. Individual Books-A-Million stores were given the freedom to launch marketing campaigns for books of particular interest to customers in their own markets. For example, books published by the Birmingham News on topics like the University of Alabama's successful football season or the death of a local race-car celebrity received special campaigns, as did The Firm, a first novel by Mississippi author John Grisham, which became a national best-seller and feature film. Books-A-Million was also one of the few book superstores to target medium-sized cities; its competitors most often chose to open new stores in larger metropolitan areas.
Bookland began opening new superstores at a rate of about ten per year while continuing to operate its smaller stores. Most of the company's 50 Bookland stores were located in shopping malls with department store anchors such as Sears and J. C. Penney's, or discounters like Wal-Mart or Kmart. Some of these were maintained according to their original format; others were converted to combination stores.
In a 1994 interview with Retailing Today, Anderson explained the reasons behind the decision to develop combination stores: "We're from a small town and we wanted a concept that would work in a small town. We found that some of these small towns couldn't support just a book store. But if you could have a combination book and something else--we developed a combination books and cards--that the economies of that may work."
In 1992 the company changed its name to Books-A-Million, Inc., and went public on the NASDAQ exchange, selling 2.6 million shares at $13 per share. (A secondary stock offering in October 1993 sold 1.25 million shares at $23 per share.) That year, Clyde B. Anderson became CEO. His father remained chairman, and Charles Anderson, Clyde's brother, took over the family's wholesale book and periodical distributorship.
The Anderson brothers proved to have a knack for marketing. "Get to know your customers and give 'em what they want," was Clyde's philosophy as told to Forbes. A prime example of his strategy occurred in 1993, the year the University of Alabama upset Miami in the Sugar Bowl. Although Sports Illustrated had decided not to feature the event as its cover story, the Anderson brothers convinced the magazine's editors to print 200,000 special editions of the magazine, put Alabama running back Derrick Lassic on the cover, and add additional stories about the Alabama victory. Books-A-Million bought all 200,000 copies of the special commemorative edition and within a month sold all of them, bringing in $900,000 and an estimated profit of $200,000.
By 1993 Books-A-Million operated 113 stores in cities and small towns across the southeastern Unites States. As the company grew, Anderson continued to expand the concept of a superstore. In addition to positioning itself as a bargain book outlet, Books-A-Million began developing the concept of book-store-as-entertainment. Events such as book signings and readings (especially by Southern authors) became regular features, along with book-buying clubs and special discount cards. The company also strove to develop its customer service: book searches, special orders, and free gift wrapping encouraged customer loyalty. In 1993 about ten Books-A-Million stores contained espresso bars, which contributed to the store's image as a place to sit and enjoy books. Even the stores' hours of operation, from 9 a.m. to 11 p.m., encouraged visiting the store and browsing. "It's a very exciting place to be in our superstores," Anderson boasted to Forbes.
Books-A-Million also instituted a number of programs aimed at encouraging reading among children. By 1994 many stores contained separate Kids-A-Million departments, colorful sections that offered a large selection of gifts, books, and videos for children. Weekly story hours were held, and the company supported local schools by offering discounts on library material and ordering bulk shipments of books on classroom reading lists.
In fiscal 1994 Books-A-Million had a profit margin of .046, the highest in the book superstore business, on net sales of $123.3 million. The company operated 84 Bookland stores and 29 superstores and was continuing to expand rapidly. By December 1994, the company operated 43 superstores across the southern United States. New stores were reported to cost $825,000 to build, but in 1994 start-up costs were recouped in less than one year.
Twenty more superstores were opened in fiscal 1995. Books-A-Million preferred to build its new superstores in regional shopping centers that had anchor tenants such as Toys 'R' Us or discount clothing chains like Marshalls and T. J. Maxx. Less desirable locations were shopping centers with upscale neighboring tenants such as the Talbott's clothing chain, or, on the opposite end, bargain factory outlets. In 70 percent of Books-A-Million's markets the company had no strong competitors; in the remaining 30 percent, its main competitor was Barnes & Noble. Some analysts feared that Books-A-Million superstores were pulling customers from its own Bookland stores, but Anderson told a group of investors in 1995 that sales erosion was minor and was "more than offset by efficiencies in advertising and transportation costs." Sales in fiscal 1995 grew to $172.4 million, and net income grew to $8.1 million from $5.6 million in 1994. Same-store sales increased 13.8 percent for superstores and 6.4 percent for all stores.
The future success of Books-A-Million is contingent upon the company's ability to control costs, and in this Books-A-Million leads all other book superstores, in part due to its close relationship with the Anderson family's distributorship. Books-A-Million has also carved out a unique position as a regional retailer in a trade increasingly dominated by national players. These factors combine to make near-term prospects for the company quite promising.
Principal Subsidiaries:Book$mart; American Wholesale Book Co.
Further Reading:
Stern, William M., "Southern Fried Reading," Forbes, June 20, 1994, p. 91.
Teitelbaum, Richard S., "Companies to Watch: Books-A-Million," Fortune, January 25, 1993, p. 105.
Williams, Roy, and Mick Normington, "Anderson Family Values," Birmingham News, February 26, 1995, p. 1D.
Source: International Directory of Company Histories, Vol. 14. St. James Press, 1996.
