Indie Bookstores Defied Amazon. Who's Next?

It's called the retail apocalypse. No zombies yet, but thanks to the rising dominance of Amazon and its infinite inventory of inexpensive items (plus free shipping with Prime!), traditional brick-and-mortar stores are struggling to survive. In the last few years alone, dozens of national brands have declared bankruptcy or shuttered their stores altogether, including mall staples like Toys"R"Us, The Limited, Radio Shack, Claire's and Payless.

But one long-dismissed business model has unexpectedly thrived in the Amazon age: independent bookstores.

If the last time you thought about the plight of independent bookstores was the 1998 rom-com "You've Got Mail," you've got some catching up to do. When Meg Ryan and Tom Hanks starred as a boutique bookshop owner (her) and the CEO of a Borders-like big-box chain (him), independent bookstores were poised on the brink of extinction.

Indie bookstores took their first hit in the 1980s with the arrival of mall retailers like B. Dalton and Waldenbooks, which opened new stores at the rate of one per week. The second shock was the dominance of big-box chains like Borders and Barnes & Noble in the 1990s. Then Amazon launched in 1995 promoting itself as the "Earth's Biggest Bookstore," offering a deadly combination of online ordering, huge selection, low prices and convenient shipping.

Between 1995 and 2000, the number of independent bookstores in the United States shrunk by 43 percent. Yes, almost half of all indie bookstores went out of business in five years. No wonder Meg Ryan's character hated Tom Hanks's so much (before she loved him, of course).

But something interesting started to happen around 2008, a year after Amazon released the Kindle, its game-changing e-reader that not only threatened to flatten bookstores once and for all, but also the existence of physical books themselves.

As Harvard Business School professor Ryan Raffaelli explores in a fascinating case study, America's independent booksellers, assisted by the American Booksellers Association, engaged in a coordinated effort to awaken consumers to the value of buying a physical book from a knowledgeable local bookseller.

The Buy Local Movement

Since bookstores were some of the first victims of Amazon's dominance, says Raffaelli, they were also the first retail sector forced to adapt to the new reality. They responded by essentially creating the "buy local" movement that's now widely celebrated through events like Small Business Saturday following Black Friday.

When chain bookstores like Borders and its subsidiary Waldenbooks went belly up in 2011, locally owned and operated independent bookstores were waging a comeback. Between 2009 and 2015, the total number of independent bookstores in the U.S. grew by 35 percent.

"In my mind, this is a story of resilience, a story of hope and a story of the power that can come from local communities," Raffaelli says.

Raffaelli cites bookstores as a shining example of what he calls "technology reemergence," the unexpected ways that industries respond to disruptive technological shocks to their core business models. In a previous study, he showed how Swiss watchmakers reinvented themselves after the disruption of digital (think Swatch). Over the past five years, he's conducted hundreds of interviews and field visits with independent bookstores to understand exactly how these once-threatened shops have thrived.

What emerged is what Raffaelli calls the "three Cs" of the bookstore resurgence:

Community: Promoting the idea that shopping locally strengthens the community financially and supports community values.
Curation: Knowledgeable bookstore owners choose and promote hidden gems that aren't on the bestseller lists. They can also make highly personalized recommendations, including titles and authors in completely different genres. "That's actually quite difficult for an Amazon logarithm to do," says Raffaelli.
Convening: Bookstores host hundreds of events each year, from author readings to game nights to children's birthday parties. "Convening is about finding ways to bring people from the community into the store to connect with others and have a conversation about ideas," says Raffaelli.

An Independent Woman

When Melody Williams opened Winding Way Books in Lancaster, Pennsylvania in 2010, Amazon wasn't even on her radar. As a woman of color in a rural city, she wanted to create a space where inclusion and honest conversation were just as important as the books on the shelf. The slogan on Winding Way t-shirts reads: "Make some noise. This is not a library."

"Your bookstore becomes whoever you are," says Williams, who worries about the effects of gentrification in Lancaster, and is vocal about socioeconomic and racial issues. "I put books in the window like 'The New Jim Crow' so that people know that we're aware of what's going on. And when people come into the store, we try to make them feel as comfortable as possible."

The unique role that this small, one-woman bookstore plays in the Lancaster community is something that's impossible for Amazon to replicate. Which is precisely the kind of differentiator that other small businesses need to identify and cultivate if they hope to survive the retail apocalypse.

Serving Your Clientele

Adam Lean is founder of The CFO Project, a consulting service that connects small businesses with experienced chief financial officers for a monthly fee. He says that any small business can follow the successful model of independent bookstores by being hyper-aware of their target audience and serving that audience in real and authentic ways.

"Amazon wants to serve everyone," says Lean in an email. "Smaller stores can survive if they don't try to serve everyone; they need to serve a very specific target audience."

Once you know that target audience, it's all about providing superior service and a superior product in a way that shows that you truly care about the customer. As Lean wrote on The Startup, people make purchases based on emotion and they buy from people they trust. That kind of loyalty takes time and energy to cultivate, but it's something that small, independent shops are uniquely positioned to offer.

In fact, if you look around the retail economy, the bookstore boom isn't an isolated example of an independent David facing down corporate and e-commerce Goliaths.

Neighborhood toy stores known for curated gifts and helpful staff have soared where Toys"R"Us sank.
Independent hardware stores are leveraging knowledgeable staff to compete with Home Depot and Lowe's.
With the surprise comeback of vinyl and the international notoriety of Record Store Day, record and CD stores are making a modest comeback, with 400 new shops opening in the U.S. between 2012 and 2017.
Even travel agents, an industry famously killed by websites like Expedia, are seeing an uptick thanks to customers who are willing to pay more for personalized recommendations.