Burdened with a deficit and declining sales, University Bookstores opened the doors of its new Coffman Union superstore today with heavy expectations.
“We’ll see our sales go up right out of the shoot,” University Bookstores director Bob Crabb said.
Whether sales will be strong enough to cover rent, repay loans and leave any money left over for the University is in question.
“Our projections show that we don’t quite break even after all of that,” Crabb said.
‘Negative financial results’
An October report by the University Department of Audits found University Bookstores’ financial condition to be its greatest risk.
“For the past several years the bookstores (have) been experiencing negative financial results, with a trend towards increasing deficits each year,” the report said.
Total sales at the bookstores fell to $22.2 million in 2002 from $28.3 million in 2000. During the same period, the stores’ net deficit climbed to $1.8 million from $722,000.
Crabb said the financial flux can be almost entirely attributed to lost computer sales. The stores stopped selling hardware in 2000 after the Office of Information Technology launched its TechMart Web site, an online service with links to computer vendors selling discounted equipment.
Crabb said it didn’t make sense to compete with TechMart, especially because computer sales at the bookstores had fallen by half since peaking at $16 million in 1995. The bookstores continued selling software and accessories until last week, when they laid off their entire seven-person computer sales department.
“Sales had dropped so dramatically that it just didn’t make sense to stay in that business,” Crabb said.
Book sales steady
Book sales alone, however, have been steady for the past decade with few exceptions, Crabb said.
The switch to semesters from quarters caused a “modest” sales decline, Crabb said. Other college stores have experienced significant losses after similar transitions. The University of California-Berkeley saw sales decline 22 percent after it changed over in the 1980s, but Crabb said there was only a 2 percent to 3 percent drop at the University.
“We thought it would have more of an effect than it did,” he said. “But that’s enough to make a dent, since textbooks are such a big part of our business.”
Last year, textbooks accounted for approximately $14.5 million, or 65 percent, of the stores’ total sales. The entire college textbook market is estimated at $7.1 billion per year, according the National Association of College Stores.
That figure appealed to several e-commerce entrepreneurs during the past half decade. Web sites such as Textbooks.com, BigWords.com and VarsityBooks.com went after the market with a flurry of on-campus advertising.
Most of the sites, however, eventually failed without having any major impact on the University Bookstores’ business. Crabb guessed the online textbook retailers did not affect bookstore sales more than 2 percent or 3 percent.
“Before the dot-com bust, there were companies trying to do for textbook e-commerce what Amazon.com had done in the trade book business,” Crabb said. “What they didn’t realize – and didn’t appreciate – was the fact that for trade books, margins are much bigger than they are in the textbook business.”
Whereas Amazon.com and other trade book retailers can mark up their products by 45 percent to 50 percent, textbook venders typically charge much less, just 23 percent on average, according to the National Association of College Stores.
Despite Amazon.com’s quarterly losses, Wall Street continues to have faith in it. But investors gave up on most textbook e-commerce companies.
“It never was a good business model,” Crabb said.
Superstore size and scope
Before coming to the University eight years ago, Crabb was a vice president with Barnes & Noble, overseeing the company’s B. Dalton chain. The Coffman Union bookstore rivals in size and scope the superstores built by his previous employer.
The 46,000-square-foot store is nearly as large as Barnes & Noble’s 50,000-square-foot Har Mar Mall location and almost twice the size of the Block E Borders Books. The East Bank bookstore in Williamson Hall, previously the largest on campus, was 13,500 square feet.
With more than 200,000 titles, the new Coffman Union store consolidates the East Bank, West Bank and Health Sciences stores into one location. The St. Paul bookstore and the West Bank law bookstore will remain open.
The Coffman Union store also boasts an art supply center, hundreds of magazine titles and the largest selection of Gophers apparel in the state. Besides course books, Crabb said he hopes the new store can carve out a niche for academic-leaning trade books.
“Barnes & Noble stays with the popular publishers,” Crabb said. The Coffman Union store’s trade selection, on the other hand, will be heavy on university and small-press titles, as well as technical reference books, he said.
Complicated expenses
In proposing the new superstore to the University Senate’s Finance and Planning Committee in 2000, Crabb said the Coffman move would make the bookstores more efficient to operate by reducing the need for staff and eliminating redundant inventory at multiple store locations.
Crabb said last week that with the exception of the computer sales staff, all employees at the old locations will retain their positions at the new store. He said that while the new store will not result in fewer jobs, it will increase the flexibility to place employees on needed tasks. For example, if the cash registers are slow, the store could dedicate more employees to other tasks, he said.
The University has not determined, however, whether the money saved from efficiency will outpace – or even equal – the costs of constructing and maintaining the store.
The bookstores will pay the Twin Cities Student Unions nearly $500,000 in annual rent for the Coffman Union space. An internal loan covered some moving and construction costs, but balancing the department’s books will depend on stronger than expected sales.
“The projections we made when we originally proposed Coffman assumed that we would be closing the St. Paul store as well, but we were asked to keep that store open,” Crabb said. “That complicates the expense side of the equation. We weren’t anticipating taking out a loan.
“If our sales are better than we have in our projections, that will solve it,” Crabb said. If not, the stores will have to look at other options.
One possibility might be convincing University administrators to lower the stores’ annual assessment, an amount reallocated from certain auxiliary departments to other University units.
Last year, the University Bookstores assessment was $1.2 million. Crabb said annual assessments went up during the computer boom of the 1990s but did not fall proportionately after computer sales dropped.
Crabb said he’s in constant communication with the University’s budget office.
“They’re very aware of the numbers and know that there’s a possibility that we don’t get the sales we’re expecting, and there will be a problem there.”
Dan Haugen welcomes comments at [email protected]
