How to Make a Profit in the Bookstore Business (2024)

Taking something you love, such as reading and books, and turning it into a business sounds like a dream come true. Operating a bookstore on your own is a challenge. There were about 10,800 bookstores in the United States in 2012, according to the Open Education Database. That doesn't mean your bookstore can't be profitable even in the face of digital books and tough competition from superstores.

Marketing

Draw in customers with events, special promotions and advertising. Book signings are a natural at a bookstore, but those work best with popular authors. Demonstrations presented by authors of cookbooks, crafts, gardening and other how-to subjects bring in customers who may not be familiar with your store. Other events include story hour for children and book discussions. Bring in customers during slow times with discounts for seniors the first Friday of the month. Loyalty programs, such as "buy nine books and get the 10th free," encourage customers to return. Social networking sites keep your friends and fans informed as to what new books have arrived. Another option is to offer special discounts just for your followers.

Book Selection

Select the right titles for your market niche. You want to have the best-sellers but also books that fit your customers' demographics. For example, if your store is close to neighborhoods with young families, you would have a broader selection of children's books than if the store were near a retirement community. Bookstores near colleges or young, single apartment dwellers carry different stock from those in a mall with upscale shoppers. Track your customers' demographics and the books they buy. The point-of-sale terminals may be able to be programmed to do that.

Sales Skill

Use your knowledge to help sell more books. Take the time to talk with your customers and learn about their literary tastes and interests. The big advantage a bookstore has is the opportunity to help a customer find exactly what he's looking for and then suggest a few more books, as well. Big-box stores carry only what sells quickly and have virtually no staff to assist the customers. You and your staff's sales skill gives you an advantage. For example, a young wife comes in to buy a birthday present for her mother-in-law who is planning a trip to Italy. You suggest a travel guide, a volume on Italian artwork, an Italian cookbook and perhaps a journal to keep notes on the highlights of her trip. The young wife probably wouldn't think of looking for these very different books online. She's a happy customer and you've made four book sales rather than the one she came for.

Pricing

The right price is critical to making a profit. Bookstores need to have a gross margin of about 40 percent to be profitable, according to Michael Kaplan in an interview with the Miami Herald News. In other words, if the book is sold at $20 retail, the bookstore bought the book for $12. Books must be priced within the customer's expectations. Too high a price and the customer won't buy, which translates to lower sales. Low prices may generate a greater volume of sales, but the profit is less on each one -- affecting the store's overall gross margin. Best-sellers present a conundrum. As a bookstore, you're expected to have them in stock. However, those titles are discounted heavily at big-box stores and major online booksellers, making it difficult to match their prices.

Return Policies

The bookstore business differs from other retailers in that books are usually offered with a return policy by the distributor or wholesaler. Most consumer goods are not returnable to the distributor or manufacturer. The reason for this industry policy is that the bookstore owner can't possible read every book she stocks or orders. In effect, she's buying an unknown. A clothing store owner knows exactly what the blouses, skirts and jackets she orders look like, and what the quality and colors are. Small publishers, self-published authors and publish-on-demand publishers don't usually accept returns. That means that if the book doesn't sell, it will have to marked down, which cuts into the profit margin. The return policies of the distributors, wholesalers and publishers you deal with affect the bottom line of your bookstore.

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