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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%."

Differentiate:
Hit 'Em Where They Ain't
Schwartz and Domnitz focused on the five retail keys, and they designated an employee to develop a new niche that would differentiate Schwartz Bookshops from its rich but generic competitors: business books for business buyers. Today, in his small office over the Iron Block store, Jack Covert operates a business that is approaching $2 million in annual sales. "Once, we thought of Jack as a salesperson. Then we thought of him as a supersalesperson. Now we think of him as a marketing person marketing Schwartz Bookshops," says Schwartz.

Schwartz hired Covert to sell directly to businesses. "David took me to the back of the old store at Fifth and Wisconsin. The entire back wall was computer books. The left-hand wall was medical books. And there was a gondola of business books. And David said to me, 'This is your store. You will buy and you will sell. And you will make mistakes. And I will never tell you you are wrong." Covert used to fill his car trunk with business books and make cold calls on local businesses. He phoned companies listed in the Hoover Handbook, a compendium of more than 500 major corporations. As he grew his business he fought for resources to handle growing demand.

Reaching his faraway customers in Hong Kong and Egypt via fax, EDI, or on-line communiquÉ, Covert and his staff of 10 employees, each at a workstation in the downtown store, offer delivery of any business book anywhere overnight.

Covert himself is known in the world of business-book publishing. His championship of obscure works has helped turn such books as The Goal into national best-sellers, and his monthly top-15 list is a frequently cited standard. He publishes a 20-page glossy quarterly newsletter touting new picks to an audience of 60,000 book buyers, and the publishers themselves heed his suggestions. "Jack is not simply a bookseller -- he's a tracker and a prophet," says Doubleday/Currency editor Harriet Rubin.

Endgame:
There Isn't Any (Unless the End Is Yours)
On a Sunday afternoon at the Brookfield Harry W. Schwartz Bookshop, David Schwartz walks through the store straightening books on shelves, turning titles face out in a gesture as unconscious as shifting a car. He asks the "booksellers" (Wal-Mart has associates, Schwartz has booksellers) about coming events and the daily gross. He hails a loyal customer. In the midst of his attractive store, Schwartz is a fussy host -- the happy genius of his household.

Customers help themselves to free, freshly brewed coffee. A butcher-block table in the cookbook section holds pencils and scraps of paper so browsers can copy recipes. In the business section, customers have left business cards for a drawing to win a $20 book. And there are comfortable reading chairs everywhere.

The merchandise is no longer limited to books; there are blank journals, slogan-laden T-shirts, audiotapes, dolls, and toys. Schwartz knows customers respond to the "command to buy." Near the front door, a table with toy dinosaurs and stacks of Stephen Jay Gould's The Panda's Thumb and Dinotopia, a pop-up book from James Gurney, is part of a promotion with the Milwaukee County Zoo. During this Schwartz Digs Dinosaurs month, 15% of proceeds go to the Milwaukee Zoological Society.

The Shorewood store, which Schwartz visits later in the day, has a different look and feel from the first: visitors sip caffÈ latte and peruse foreign journals at the gemÃ"tlich coffee bar to the left, or they proceed straight to painstakingly selected displays of books. Thirty percent of store sales come from the first 50 feet: the Schwartz 100; handsome editions of fiction by Grace Paley and Vikram Seth; business titles like Quality Wars and Competitive Advantage Through People; and displays of Sandra Cisneros's Loose Woman, accompanied by stiff cards announcing her reading that Wednesday.

For all they've learned and done, have Schwartz and Domnitz earned a just reward? Last July Barnes & Noble opened a 37,000-square-foot superstore on the south side of Milwaukee. This year it intends to open two more local stores, including a 26,000-square-foot store half a mile from Schwartz's Brookfield location.

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