Upon Schwartz's return, he and Domnitz set out to learn everything about bookselling and other, comparable retail industries. Domnitz, too, visited the Tattered Cover, and he describes it as an "overwhelming retail experience. I walked in and thought, 'This is all the books in the world."
Fired up by what they had seen, Schwartz and Domnitz undertook a massive benchmarking campaign. They traveled the country, conducted focus groups, and read extensively to discover how people decided where to shop. They spoke with fellow booksellers, from Frank Kramer in Boston to Michael Powell in Portland. In Chicago they spent a day studying Crate & Barrel's use of light and space to create shopping ambience. At office-supplies superstores, they watched price-driven customers shop. "That, in my opinion, is when David and I became retailers," says Domnitz.
The pair identified five shopper rationales: ambience, convenience, selection, service, and price. And then they set about remaking Schwartz Bookshops.
Their earlier expansion had already improved convenience and selection. Buoyed by the 1988 capital infusion and the improving financial picture, Schwartz and Domnitz launched a plan to continually upgrade both the location and the size of the stores. In Brookfield, an affluent edge city, they had opened a 3,200-square-foot store in 1985. They went on to expand it twice, developing 9,000 square feet, including a children's store-within-a-store. Last fall they opened two stores, an 8,000-square-footer in Shorewood and a 10,000-square-footer in Mequon, and they closed two locations that were less promising. In the Milwaukee area, that brought the total to four stores, averaging 8,500 square feet. They held on to two other stores, in Kenosha and Gurnee.
Schwartz and Domnitz focused on service, extending store hours. Though Schwartz feared his customers would rip him off by buying books, reading them, and then returning them, in 1992 he adjusted customer-service guidelines, adopting a no-questions-asked return policy. Customers who special-ordered a book no longer paid for it up front.
Schwartz and Domnitz realized that a large independent was best positioned to offer a satisfying shopping experience. In Denver they'd discovered "the bookstore as a community place." For customers, book buying occasionally was incidental to the experience of, say, an author's reading or a children's puppet show.
The company's 1990 ad campaign identified Schwartz Bookshops as "Milwaukee's Independent Bookseller Since 1927," and newspaper ads have included such touches as a letter from Domnitz to Schwartz's mother, profiles of longtime store employees, and messages from Schwartz to the public. The Writers to Readers series brings authors to town to read from their works, and the stores have initiated tie-ins with such community institutions as the zoo and the library. John Eklund and a third-grade class produced a book together. The mailing list has grown to more than 27,000 people who receive an annual catalog, a biannual children's newsletter, and notices of authors' readings.
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Satisfaction:
Please Customers in an Age of Rising Expectations
At one time David Schwartz had only grudgingly carried best-sellers. His parents, the store's founders, had considered anything that wasn't literature or serious nonfiction a "nonbook." Today such books account for 80% of sales. The 1986 hit Iacocca brought hordes of new customers to his store. "There was a new type of buyer out there," he says. "We had to respond to that customer's need: price." Trained by the larger players, those new customers expected to pay $12 for a book the publisher marked at $19.95 -- a discount of 40% on books Schwartz himself was getting for just 44% off.
Though Schwartz quickly got over his reluctance to stock blockbusters, it took him and Domnitz years to master competitive pricing. "If we hadn't," says Schwartz, "we'd have abandoned the fastest-growing segment of the market -- people in search of the brand-name best-seller." For years they had been discounting best-sellers, but "we were teasing ourselves," says Schwartz, "because we didn't do enough volume for the discounting to have an impact." Less than 2% of the company's sales were at a discount, primarily because it applied to so few titles: only the top 10 New York Times best-sellers, which were marked 30% off.
"We had to equate price with value," Schwartz says. He and Domnitz spent months hatching and rejecting discount plans. They considered a dozen schemes, but they all shared one problem: "The more books we sold, the more money we lost."
Finally, in the fall of 1992 they launched an ambitious discounting strategy called 40-30-20-10. They discounted the top 35 New York Times best-selling hardcovers by 40% and the top 35 paperbacks by 30%. Then, because "we wanted to show that we had not only value but also culture," says Schwartz, the company discounted by 20% the "Schwartz 100," a selection of 100 books of merit picked by store employees. And every month, the stores selected one category -- mysteries, say -- to sell at 10% off. Schwartz and Domnitz made a full commitment to the program by supporting it with $185,000 in advertising. "We have given away about 2.6 points of gross margin in discounting," says Schwartz, "but we increased the volume by about 35%."
