The theme for this year's CIROBE (Chicago International Remainder and Overstock Book Exposition) is "Turning Excess Inventory into Excess Cash," and it might well be the war cry for the bargain books industry itself. Flying below the media radar, these guerrilla book traders of remainders, hurts, and promotional reprints are tough to keep track of but score big dollar hits.

Just to give you an idea of this industry's clout, the U.S. remainder business has revenues of around $150 million, and promotional publishing revenue, while difficult to get a firm handle on because of haphazard industry categorization, is estimated at $100 million. The average-sized company in the business d s around $5 million to $6 million with the largest three remainder wholesaling firms, says an anonymous industry source, grossing between $10 million and $30 million. (All figures are annual.)

This segment of the book industry, like every other part, is consolidating, and yet more units are being sold and more money is making it to the bank. "Our part of the industry," says CIROBE co-founder Brad Jonas, "is coming of age and maturing. Bargain is now essential to booksellers' business. The trade has developed a rhythm and systemization all its own. It's now a solid year-round business." Jonas says that while there are "fewer players," the remaining vendors are stronger and some promising newcomers have arrived on the scene.

As far as retail outlets are concerned, things seem to have stabilized somewhat. "Some of the worst is over," Jonas says, of independent bookstore contraction. "Bargain is a way for independents to really compete in today's market," he says, echoing many vendors of bargain books. "Independents are particularly afraid of Amazon, but the value of bargain books has to be 'felt and seen' in person. And also bargain books are difficult to set up for Internet commerce because there is not an infinite source of supply. The flow of available product isn't consistent, making it all the more important for bricks-and-mortar stores."

Robert Wilkie, president of Texas Bookman, says, "Independents can't afford to miss CIROBE. They have to get remainders when they can." Wilkie says independents are the "backbone" of his business because they will "buy across the board and engage in a breadth of ordering," while the chains often want to take all available inventory of a hot title. "Successful independents are focused on their specific markets, and bargain books are a good growth opportunity for them," remarks Bob Walker of American Book Company. "The foundation of our business is the independent bookstore," Tamara Stock of Daedalus says, "and we are seeing a greater willingness to experiment on their part with bargain books, and also with other non-book product, like CDs." She adds, "There will always be room for independents, but only the best will survive. That's just the way business works. I think we've seen the worst mortality rate in independents in the last three or four years. I don't think we're going to see many more losses."

Upbeat Wheeling & Dealing

"I love what I do," says Bonnie Kaplan of I-Deal Books, Miami, Fla. "Every day there is something new at work." "It's fun, never boring, really fascinating," agrees Ed Grossman of Marketing Resource Inc., who left a 20-year advertising career to market closeouts.

Everyone, large and small, says business is great, better than ever, which is all the more notable because last year was a banner year. "Our business is very good," says Wilkie. "Summer was quite brisk and it's usually our slowest time. But it appears everyone we deal with is being quite aggressive." Debbie Smith, sales v-p for Bargain Books Wholesale, says, "Business is excellent. We will far surpass last year." Walker at American Book says, "We're not complaining at all. We're almost three years old and we have seen tremendous growth. Business for us has been great." American Book Co. recently opened a year-round showroom in New York City.

Kaplan at I-Deal Books says business has been so good this past year that the company has had to triple office and warehouse space and hire more staff. "We've had great growth on the Internet," she says. "It's a boon to our international business, too."

Fierce Competition

Despite the enthusiasm, the business remains extremely competitive and, according to Brad Jonas, a few longtime players dropped out in the past year. Albert Haug of Book Club of America notes that Assorted Books has gone out and Smithmark will soon stop dealing in remainders. "I've never seen more remainder companies running into problems than in the last 10 months," he says, noting that inventory difficulties are to blame. "Once inventory backs up on you, you're dead. It's a vicious circle. Remainders lose their value as quickly as flowers. You have to move the books fast, turn inventory at least five times a year, and keep costs low."

Jeff Press, president of World Publications, says, "We are bigger than ever, though some of our competition is gone. It's hard to survive. You've got to buy big and sell everywhere." Press believes that his company and Book Sales, run by Mel Shapiro, considered by many the industry's patriarch, are the two largest bargain book firms in the world. Shapiro, cryptically -- but typical of the shark-like camaraderie of the business -- says through his sales manager, J Fortin: "Whatever Jeff Press said, double it. Other than that, there is nothing new to say."

Among the challenges facing players in the bargain book world are greater technological requirements for order-taking and fulfillment, making it more costly to compete in the top ranks. "It has become important to have very sophisticated technology," says Press. "And size is an advantage there, too."

Tamara Stock of Daedalus, which will celebrate its 20th anniversary next year ("making us third oldest"), says, "One year ago we moved from a 30,000-sq.-ft. warehouse with 'no-tech' to a 120,000-sq.-ft. warehouse with 'some-tech,' and we're still learning a lot. I feel like we're just starting to get it under control."

New Names and Faces

Regardless of industry attrition, new companies have moved in to take up the slack. When asked about up-and-comers at this year's show, Brad Jonas was quick to cite Book Club of America, Marketing Resource and Kudzu. "These are growing companies in our field and they are making a difference," he notes.

Book Club of America, while not literally "new" because it's been in the bargain book business for about eight years, has experienced meteoric growth, according to president Albert Haug. "I think we have become the largest remainder dealer in the world this year," he says. "We will do close to $30 million in sales. The next closest d s $25 million and then it drops to $15 million," he says, without naming any names. "Our business has grown tremendously and this year, year to date, we are up 55%“60% and are experiencing 15 inventory turns a year. We have just moved from 80,000 square feet of warehouse space to 120,000 square feet. But we have realized economies of scale because we only added one new buyer and a v-p of operations."

Most of Book Club of America's business is done outside of the traditional book trade, with outlets such as supermarkets, drugstores and retail establishments that don't have book departments. "That way we don't compete with paperback editions of remainder titles," Haug says.

Marketing Resource Inc., founded by Ed Grossman 19 years ago, has only recently started distributing remainders, but, Grossman says, "The book side of our business is expanding more quickly than other areas of our business. We've expanded our book space four times in the last few years." Marketing Resource deals in "real closeouts of any kind of consumer product," Grossman says, "and offers extremely low prices."

Marketing Resource got into the bargain book trade by selling children's titles to its regular closeout customers, which include divisions of Consolidated Stores. Grossman himself, who boasts a Harvard Business School degree, segued into the closeout game by buying leftover premiums from his advertising client Nestle and "peddling them. It was so much fun, I dropped everything and pursued the closeout markets," he says. Showing how well he transferred his advertising background and expertise to the free-wheeling bargain world, his theme for CIROBE this year eloquently proclaims: "More books for less bucks!" His ads feature chickens pecking the ground crying, "cheap, cheap, cheap!"

Marketing Resource specializes in reference and children's titles, but carries a wide variety of how-to, travel and biography. It has recently made an inventory commitment to teaching materials to service the home-schooling market. "We have product from the quality leaders in the field, like Kids Stuff, Carson-Dellosa and Fearon Teacher Aids," Grossman says.

"We will be one of the largest exhibitors at CIROBE this year," Grossman boasts. "Our inventory has expanded dramatically and we have a lot to offer booksellers at fantastic prices."

Kudzu Book Traders is only just over a year old, says Susan Bain, director of sales, but like the voracious Kudzu vine that is swallowing Georgia, the company sees its mission to "blanket the Southeast with books." With a showroom in Cartersville, Ga. (in the Atlanta area), Kudzu is threatening to do just that. It's first trade exposure was at the 1998 BEA. "Since then," Bain says, "we have doubled our business by improving customer services and operations," which has resulted, she claims, in a consistent 80% fill rate and regular electronic communication with customers. Kudzu carries 12,000 titles in all categories and deals only in remainders. Bain came to Kudzu with experience at Random House and Simon & Schuster under her belt. (Kudzu is privately owned and an offshoot of other book-related businesses, although Bain declines to name the owner. "He's a reticent type," she says.)

Though not new to the biz, president Nancy Starr says Smithmark is charting a new course. Starr herself has recently returned to the company, a division of Stewart Tabori & Chang, from sojourns elsewhere in the industry to "re-focus Smithmark on its great ability to publish promotional books." In the past, Smithmark had embarked on some innovations with remainders that represented a "straying" from what the company d s best, Starr says. "This year's CIROBE will be booksellers' last chance at Smithmark remainders."

"The remainder business is terrific if you can buy the books for less than the paperback edition," Starr says. "But there is a lot of 'not-good' product out there, and we want to concentrate on product whose quality we can control." Starr says many of Smithmark's titles will originate in-house and through the licensing of books, and about a third of the list will come from packagers, with more American packagers acting as suppliers.

Paradigm Shift?

Though the bargain book world is still a "relationship," if not "hand-shake," business, a new way of doing business has evolved over the last year, involving exclusive strategic partnerships. In what could be a new paradigm for the remainder business, Albert Haug of Book Club of America has just finalized an exclusive distribution agreement with Simon & Schuster for all remainders and hurts that become available from its imprints. While reluctant to give specific details of the business arrangement, Haug says, "We have a very unique way of revenue sharing." A similar deal with Macmillan at the end of last year worked out so well, Haug says, that parent company Simon & Schuster was sufficiently impressed themselves to sign up. "The problem in the remainder business is not selling remainders, but getting enough product," he says. "Good product on a continuing basis is difficult to obtain." Haug says these partnerships, as he calls them, have given his company a tremendous advantage, but have been a great arrangement for the publishers too. "Because we are financially secure," he says, "publishers don't have to worry about getting paid. And for us, just not having to bid saves us a lot of money. The process of bidding is costly and inefficient. With bidding, you don't know what you'll win and that makes inventory planning hard."

"We're looking for a few other publishers to do exclusive deals with," Haug says. "The key is to keep those publishers we are working with happy first. That is foremost in our minds. But this process is terrific for publishers; it streamlines everything for them, they get higher prices for the remainders and their expenses have gone way down."

Something to Sell

Plenty of product is currently available, although opinions differ on quality. Bonnie Kaufman of I-Deal thinks there is a glut of self-help and inspirational material on the market just now. Robert Wilkie says, "There's lot of product now, though in the summer there was a bit of a lull for new lists. Just recently, several things came through that are real exciting -- a list from MIT and a huge list from Morrow because of its merger with Avon." Tamara Stock says, "There was a dry spell in the spring, but things have picked up and it looks like we're going to have a lot of great books at CIROBE." She g s on to say that, unfortunately for Daedalus because "it's what we do best," sales of literary fiction have declined, although abundant product is available. Lynn Bond, president of Random House Value, which distributes Random House imprints' remainders, says, "Things are shaping up for a good fall for us." And as far as promo reprints go, "Our New Age backlist titles, and we have a lot of them, like the Prophecies of Nostradamus, are doing great. We're also doing more promo titles in this area."

Children's books and coffee-table books are in high demand this year. Tamara Stock of Daedalus says, "These things go in waves. There were too many children's remainders a few years ago. Now everybody's screaming for them."

What to Look For

Vendors say booksellers will have plenty of interesting items to peruse at CIROBE this year. "Harcourt Brace hasn't offered remainders in a year and has just let out a list for bid. Everyone is bidding aggressively on it," says Stock. Daedalus is also eager to present two of its own coups at the show: Van Gogh, the softcover catalogue of the recent National Gallery exhibit, and Eros, a "marvelous photography book" says Stock, "from Stewart Tabori & Chang."

World Publications, says Press, "will have the entire ballroom again this year. We have great couches and refreshments. Sixteen of our people will be on hand to help booksellers. This is a very important show for us." World is on a roll with its repackaged Turner title The Twentieth Century: An Illustrated History of Our Lives and Times, which has already advanced 100,000 copies. At 750 pages and with full-color illustrations it is value priced at $34.95 (originally $65), he says. "It's the centerpiece of our exhibit -- Saks bought it, Literary Guild took it, it will be everywhere this fall."

J Fortin, sales manager at Book Sales Inc., says retailers can look forward to some great savings at his booth. "We will have some special markdowns of our backlist promotional titles, including Our Family Tree, which has already sold four million copies and is a natural for the millennium."

Bond of Random Value says, "We expect to have an extensive list with great offerings. We've taken more space this year and hope to have a great working show." Random Value has coordinated its spring sales conference with this year's CIROBE; it will take place in Chicago two days before the show.

Debbie Smith of Bargain Books Wholesale notes: "We have no minimum order, ever. Eighty percent of our customers are independent stores and our owner, Henry VanderGoot, himself owns 15 retail stores, with six in Chicago, so he understands independents' needs."

The outlook for the bargain book segment of the book industry is obviously spectacular in the immediate future, according to these industry gurus. "As long as books are sold returnable by trade publishers," observes Ed Grossman, "there will be a bargain book business."

Further out, however, some challenges loom. Within the next five years, most players agree, e-commerce and on-demand printing are going to be formidable forces shaping the nature of the bargain book trade, just as they are affecting the rest of the book world. No one is claiming to know what that future holds, though one and all feel flexibility is the watchword and that competition will be intense.