The Average Revenue of Small Bookstores
Small bookstores have experienced waves of trauma in the modern digital world. Before the internet, bookstores were a primary outlet for information, and the business model was stable. The invention of e-readers and digital book marketplaces caused a significant downturn for small bookstores, but the ones that survived, are experiencing a resurgence through loyal customer bases and creative revenue models.
The operational overhead of a small bookstore is small. A boutique book store, often run by the owner, has the potential for a few employees who are paid low retail wages. The primary cost requirement is the retail space itself. Books take up space; require organizational isles; and the retail space requirements are moderate. The actual overhead figures vary greatly by location, and no single number is available. The second overhead requirement is inventory. Many small bookstores procure used inventory for free, and then they resell books. The margins are excellent, as this inventory costs nothing to acquire. New releases and best sellers however, are acquired at dealer pricing and are marked up after the fact. In many cases, dealer pricing is dependent upon order size.
Local customers are valuable for small book stores because they will pay retail pricing without requiring shipping and price slashing to compete in eCommerce markets. Local customers are also great candidates for up-sells and diversified revenue streams as discussed below. This can take the minimal revenue output of a small bookstore and make significant increases through customer loyalty and higher margin products.
Local books stores without an eCommerce sales channel are severely limited. The major advantage a local store has is their ability to source and store used books while offering them to a larger market. eCommerce sales also make it possible to scale from a small, local only business to a revenue driven growth model. The eCommerce shift does require more intensive logistics for marketing, packaging and shipping inventory.
Bookstores often diversify revenue streams by adding a range of services that incorporate well with the environment. Coffee shops are a natural attachment. Craft beer and liquor sales also draw new crowds to book stores. The new revenue streams offset help drive book sales.
According to Statista, bookstore revenue fell from $18.49 billion in 2010 to $12 billion in 2017. Textbook revenue accounts for 20 percent of all book sales in the U.S. The actual revenue for small bookstores varies widely. The margin on new books is often less than 5 percent. Acquiring used books for free and re-selling is better for margins but the time investment is significant unless donors come to the store directly. At a 5 percent margin (which is the high end), a store would need $1 million dollars in revenue to make $50,000 in profit.