How Could Borderlands Stay Open?

by Alan Beatts

Since April of last year, when it started looking likely that a higher minimum wage ordinance would pass in San Francisco, I've been thinking (racking my brain, actually) about ways to keep the store open in the face of a 39% increase in wages.  I'm going to start with what was my final conclusion and then I'm going to go back and touch on several of the other things that I considered.

First though, the basic facts:

1)  The bookselling side of Borderlands has never been terribly profitable.
2)  Based on current business, the new minimum wage, once fully in effect ($15 per hour in 2018) would move the bookstore from being modestly profitable (roughly $3000 in 2013 before depreciation) to showing a yearly loss of roughly $25,000.
3)  It is reasonable to expect that the best-case, long term sales trend for a brick-and-mortar bookstore is relatively flat.
4)  Making 50-60 hours of work, per week, with no real holidays on my part an intrinsic part of our business plan is neither viable long-term nor something I am going to do.
5)  Any solution would need to have a very good chance of working.  Closing now is a straightforward process and doesn't require any money and a limited amount of frantic work.  Pouring money and / or time into a solution that might work is not something that I'm willing to do at this point in my life.

The only solution that I can see would be to reduce expenses by an amount at least equal to our projected yearly loss.  The only expense that is large enough to reduce by that much is our rent.  So, the only viable solution I can see would be to substantially reduce or eliminate the amount we pay to house the store.  The problem is that I can't see any realistic way to achieve that.  If I had the money, I would buy a building, move the store there and stop paying rent.  It would be a terrible investment, since I'd be losing out on the income from that money, but if I were driven by profits or money, I wouldn't be running a bookstore to start with.  On the other hand, I would own a building that would appreciate over time, even in the current over-heated real estate market in SF, so it wouldn't be a total loss.

However, I don't have even a fraction of the money that would be required for that.  Based on the current market and the sort of building we would need, the price tag would probably be somewhere between 1.5 and 3 million dollars.  So, what it gets down to is -- if someone (or a group of someones) out there wants to buy us a building, I'll be happy to move the store and stay in business.  But, otherwise, I cannot see any solution that will allow us an even half-way reasonable chance to make the business work at a minimum wage of $15 an hour.

Do I seriously think that someone will buy us a permanent home for the store?  Not at all.  I would do it for my store, but I don't think I'd do it for anybody else's.  On the other hand, if I had as much cash as Ron Conway, Mark Zuckerberg or Elon Musk, I guess I might do something like that.  But, realistically, it's not going to happen.

But, if it did, I would keep running Borderlands 'til someone carried me out feet first.  I really don't want to close.  But I can't see any real, sane alternative.

Here's the list of the not-completely-insane things that I considered (I'm leaving out the old-school-bus-as-bookmobile and other, crazier things).  I'll also going to give a thumbnail sketch of the reasons they won't work.

Increase Income
Obviously if we could sell enough books to make up for the higher wages we were paying, that would fix the problem.  My math says we would need to increase sales by a minimum of 20%. We could increase sales in a couple of ways -

1)  Sell a broader range of books
2)  Sell more of the books we already carry
3)  Sell items other than books, with a higher profit margin
4)  Increase the price of the books we are selling now
5)  Raise prices at the cafe to make up the short-fall

Selling a broader range of books is a problem because; first, we'd have to put a lot of money into inventory.  Adding our mystery section meant spending around $8,000 on inventory and we didn't finish the job.  Since there isn't another genre of books that would be a good, logical fit with what we sell now, I think we would need to turn ourselves into a general interest shop.  That would probably cost about $25,000 to $40,000 and we don't have the money (plus I'd be hesitant to risk that much on a less-than-pretty-sure thing).  Second, we don't know the field.  We're excellent at SF and fantasy as well as being damn good at horror and mystery.  But other stuff?  Nope.  As a result, we wouldn't be very good at selling those books, which is a big problem.  Finally, we don't have room.  The store is pretty full now.  Granted we could cut out some of the stuff that doesn't sell so well but we don't have the 20% extra room to increase our sales by 20%.

Selling 20% more of the books we already carry is completely beyond reach.  We do a good job at what we do (wouldn't still be in business if we didn't).  Adding our mystery section gave our sales a nice boost because we actually added customers, but otherwise our sales have been pretty steady for years (economic crash in 2009 aside).  Based on everyone I've talked to, increasing sales by 20% without changing locations, adding inventory, or making some other sort of big change just doesn't happen in the book world (or most any other retail business).

Selling things other than books is tricky for several reasons.  First, what sort of stuff would we sell, exactly?  It would need to be something that goes, in some way, with books -- otherwise it would just be weird.  It would have to be simple so as not to add much to our existing workload.  We already carry things like journals, bookmarks, postcards, and so forth.  We've tried selling DVDs (back when people bought such things) and also jewelry.  Neither of those things were much of a success at all.  Second, I'm not sure that idea really works very well for bookstores -- it certainly didn't work for Borders Books.  One of their last-gasp attempts to recover their business involved selling all sorts of crap other than books.  Finally, we got into this business to be booksellers.  Moving a fifth of our sales to something else isn't something anyone here is very enthusiastic about.  Also, like moving towards becoming a more general interest store, there is the problem of tying up a lot of money in inventory that might or might not sell.

All that I'll say about increasing our prices is that it's already hard to get people to pay the publisher's list price for a book.  How often have I heard people say, "I'll just get it cheaper on Amazon"?  I don't think that enough people to keep us in business would pay a 10 or 15% surcharge to buy books at Borderlands.  Of course, we could increase the prices on our used books, but they only represent about 7.3% of our sales, so that could never be enough.

I did spend a fair amount of time thinking about increasing the prices at the cafe to make up for the increased wages at the bookstore.  But the math said no.  The problem is that I'm going to have to increase the prices at the cafe to make up for the higher payroll at the cafe. It's not possible to raise the prices enough to accomplish that as well as raising them enough to cover the bookstore.  We'd price ourselves out of business that way.

Reduce Expenses
OK, so if we can't get more money coming in, what about reducing the money going out? The catch is that, other than payroll and rent, the bookstore has almost no expenses.  Other than credit card processing (where we have quite a good rate), our highest expense is our PG&E bill . . . which is only about $2000 a year.  In fact, rent, payroll, and credit card processing represent 68% of all our expenses.  There isn't anything left that we could cut to make up $25,000 a year.

As a result, the only thing we could cut would be payroll.  Most of the people who work at Borderlands are part-time, so cutting any single employee doesn't make much of a dent. Based (once again) on ugly math, to get the store on a balanced financial footing, I'd have to lay off almost everyone on staff.  Jude Feldman, the general manager, would remain along with one part-time employee.  Jude would need to work the counter from noon to eight, five or six days a week, while I did all the back office work.  In other words, I would continue doing the job I do now along with taking on about half of the job that Jude does.

That option was one that Jude and I discussed a great deal.  In fact, we went around and around about it.  And finally we decided that it wasn't something either of us wanted to do. When it gets down to it, as much as we both love bookselling, it's more important to us to have reasonably sane, healthy lives.  We have both worked the sort of hours that I just described.  In fact, we've done it many times over the past 15 years.  However, all the times in the past we did it to accomplish a specific goal.  Neither of us are willing to plan on working those hours as a matter of course, just to keep the store open.

Other Ideas
We could, of course, move the store out of San Francisco to someplace that doesn't have as high a minimum wage.  But, I suspect that the sales we would lose because of moving somewhere with a less dense population and fewer visitors would create a financial problem almost as bad as what we're facing.  On top of that, no-one on the staff here (yours truly included) wants to commute a long way to work.  Last but not least, Borderlands is a San Francisco sort of shop.  I don't think it would flourish in deeply alien soil.

I considered selling (or closing) the cafe and sub-leasing that storefront.  In this market, it would probably rent for more than I'm paying right now.  Of course, it would have to rent for $2000 more a month than I'm paying right now, but even that isn't out of the question. However, currently my pay comes from the cafe's income, not the bookstore's.  So, if I did something with the cafe, I'd have to figure out how to get my pay from the bookstore's income.  I don't make much money ($28,000 gross last year), but that's still a big chunk of money and there is no way that selling the cafe or sub-leasing it could produce enough to make up for the added payroll at the bookstore and my salary.

That thought led me, for about ten seconds, to the thought that I could go get a job elsewhere that would pay me enough to support myself.  In that case, my salary from the cafe could go to the bookstore and it would cover the payroll costs.  But, of course, the two problems there are that I would be working one job while still needing to do my job at the bookstore.  The burn-out there would be something to behold.  Besides, do I really want to work some other job just so I can keep owning a bookstore where I never have time to be a bookseller?  Dumb idea.

Without going even further down into crazy-land, there is only one other thought that I had. We could sell memberships to the store, ask for donations to keep running, or in some other way offset the added payroll by relying on the kindness, generosity and support of our customers.  I have two problems with that idea.  First, Borderlands is a for-profit business that I started with the intention of making money.  I don't think that it's right to ask our customers and community to give me their hard-earned dollars so that I can continue to support myself. If I had made the store a non-profit whose purpose was to promote genre fiction, that would be a different matter but -- that's not what I did.  And so I don't think that it's right for me to ask for continual hand-outs so that I can stay in business.  The second problem that I have is that it wouldn't work.  Over the years I've seen many stores try many things to remain in business. Asking your customers and community for support works wonderfully -- as long as it is to accomplish a specific goal.  But I have never seen a success come from counting on that sort of support to maintain a functioning business over the long term.

The last thing I should address is the possibility of selling the store to someone who either has more money to put into it than I or is willing to work the sort of crazy hours I did when I opened.  Or, I suppose, the possibility of turning it into a non-profit by creating a suitable entity, raising money for that entity, and then selling the store to it.

Not going to happen.

There is a very fine and chilling SF story by Tom Godwin called "The Cold Equations".  If you're not familiar with it, you should read it (despite the arguably fair complaint that it depends on good physics and lousy engineering).  The core of the story is that math leads to conclusions that cannot be argued with, regardless of what seems right, fair or just.  And the math about Borderlands says that what we've been doing won't work anymore.

Everyone at Borderlands has seen a slow, sad spiral that a bookstore goes through when the money just doesn't work out anymore.  I'll bet that many of the people reading this have seen it too.  It's heart-breaking and, perhaps worse, it creates a set of memories that overlay the good ones of the store in its prime.

It may be hugely arrogant, but I don't believe that any owner can beat the cold equations that we're facing.  When I first discussed our situation with the staff the feeling was unanimous (and, in a couple of cases, very emphatic) that we wanted to close the store with all the care, class and consideration for our customers with which we had run it.  That is both the reason that the store is not for sale, and also the reason that we're closing now, long before higher wages drag us down the drain.

One footnote before I end this.  It might seem that my suggestion at the beginning of this essay, that the only real solution to the problem is for someone to give us a building, doesn't really match up with my opposition to asking for a hand-out so that I can keep running my business.  Let me clarify that -- if someone wanted to give Borderlands a building to operate out of, I would actually say no because it would be a hand-out.

My counter-offer would be that I would be thrilled to set up (or help set up) a non-profit foundation to own and manage a building with the express purpose of housing a bookstore (or bookstores) as a literary and community resource.  Of course, I'd be thrilled if Borderlands was the first tenant.  The beautiful thing about that idea is that, regardless of Borderlands' financial health (or mine), a place like that could serve as a permanent support for bookselling, no matter how much the world and San Francisco changes.  As I said at the beginning of this post, I don't think that there is a snowball's chance in hell that it will happen.  However, I'm likely to have more spare time on my hands in six months to a year.  Starting that foundation and seeing if it's possible to make it happen for some other store might be a good way to spend some time.