Last month's closing of Koen Book Distributors and niche wholesaler Alamo Square Distributors served as a not-too-subtle reminder that regional wholesalers face a host of problems in maintaining their place in the publishing food chain. Industry insiders point to a succession of missteps in search of the next big deal that led to Koen's demise, including a disastrous contract with a chain of grocery stores. With margins still hovering in the 1% to 2% range, "we don't have the luxury to weather a minor catastrophe," said American Wholesale Booksellers Association president Michael Raymond, a partner in the distributors in South Bend, Ind.
As Raymond sees it, cutting expenses and careful diversification are key to indie wholesalers' survival. At the distributors, Raymond has been changing the inventory mix and adding more small presses, which tend to have better margins. And, like the Booksource, which exited trade distribution at the beginning of the year, Raymond has moved into the school and library markets, which now comprise 20% of the company's business.
Bookazine in Bayonne, N.J., the third largest distributor after Ingram and Baker & Taylor, is turning to niche wholesaling for growth, according to executive v-p for sales and marketing Rich Kallman. After seeing the company's airport business take off last year, when it was awarded a multiyear contract to service Hudson Booksellers, Kallman hired John Davis, most recently with Central Park Media, to develop a pop culture and graphic novel program, similar to one he created for Koen. Bookazine's gay and lesbian sales segment has steadily increased since the company brought in former Golden-Lee GLBT specialist Ron Hanby 10 years ago, and Bookazine is now looking to expand that business by becoming the exclusive distributor for alternative lifestyle publishers. Currently it sells and distributes Bruno Gmunder to other wholesalers, including Ingram.
But diversification is not enough without investing in infrastructure. New Leaf Distributing Company president and CEO Alim Thompson blames his company's financial problems on doing things the same old way. When new owners Santosh and Karuna Krinsky rescued the Lithia Springs, Ga., company from closing two years ago, Alim proposed a significant upgrade of the computer system, which is now being implemented. In 2006, New Leaf will introduce a BookSense.com—like program to use its Web capacity to support New Age stores and enable them to market online—and it will offer its customers direct-to-consumer shipping. "I can't say we're thriving," said Thompson, two years into the transition. "But we're hanging in there. We've renegotiated our deals with many of our publishers and have been able to increase our margins. Our sales are up just 1% or 2% over last year. But at least they're not down."
Margins have improved somewhat for Vicky Eaves and Sam Spiegel, co-owners of Partners and Partners/West, a single company that operates as if it were two separate regionals, with a 50,000-sq.-ft. facility in Holt, Mich., and a 66,000-sq.-ft. one in Renton, Wash. Free freight from companies like Time Warner and Simon & Schuster has definitely helped. However, "what makes us stand out," said Eaves, "is we're both heavily involved in the buying and the inventory management." In addition, Partners/West has benefited from the closing of rivals Pacific Pipeline and Koen Pacific and from what Eaves regards as a particularly strong bookstore market, Kepler's closing notwithstanding.
New Kid on the Block
But not everyone is cautiously optimistic, or certain that plain old service-oriented wholesaling isn't exactly what's needed. Former Random House distribution veteran Jack Herr is downright bullish about BookStream, a new wholesaling operation that has been in the works since 1998; it will launch by December 1 in Poughkeepsie, N.Y. He has hired several Koen staffers to get the company up and running, including v-p of sales and marketing Maury McClelland and buyer Ken Abramson. Herr's plan is to keep things simple. "Initially we'll be very basic," said Herr. BookStream will focus on serving independent booksellers on terms that call for a flat discount of 42% across the board and free freight on orders of $150 or more.
