Powell's Spins A Tale Of Survival -- Portland Bookseller To Battle Retail Giants

PORTLAND - These are perilous times for booksellers.

Chain behemoths Barnes and Noble and Borders Group are knocking off independents left and right. Internet retailers like Amazon.com are whizzing through cyberspace like meteors.

But Michael Powell, 58, the owner of Powell's Books in Portland, won't slow down. "We're expanding in the face of competition," he said. "That's how you succeed."

Powell's calculated aggressiveness has put his seven-store chain on as solid a foundation as an independent bookseller can find. His business focuses on used-book sales, a niche less vulnerable to the chain stores' onslaught. Powell stepped into cyberspace before Amazon.com even existed. And he still is deepening his footprint.

"Powell's stands as one of our major models" of how to survive, said Michael Hoynes, a marketing officer with the American Booksellers Association, an organization representing the independents.

Powell is spending millions to expand Powell's City of Books, the flagship store on West Burnside Street in Portland, and to update the other six outlets, all in the Portland area. He is investing thousands more in an ambitious push further into online commerce.

In 1998, sales totaled $33 million, according to company officials. This year, the company has projected a 20 percent jump in revenues.

Powell's has seen double-digit revenue increases in the past, but sales have been flat for the past two years, and in the three years before that, increases remained in single-digit territory. That makes the projections seem all the more ambitious.

"Is it doable?" Powell asked. "Who knows? But if it isn't, it won't be for lack of trying."

A full 70 percent of Powell's stock is composed of used and rare books. Still, new books remain an important part of the mix. "If new-book sales continue to go down, that would be problematic for this corporation," said Miriam Sontz, general manager of the flagship store and a board member of the American Booksellers Association.

Most booksellers offer either used books or new. At Powell's, new are shelved right next to used.

Since the mid-1990s, Powell has spent about $500,000 a year remodeling the satellite stores and computerizing operations. The price tag for the West Burnside store: about $3.5 million.

When the expanded Powell's debuts in November, it will boast 68,000 square feet of retail space, larger than any other bookstore in the country, even Barnes and Noble's flagship store in New York City. Inventories will jump by thousands of volumes. Currently, 600,000 books, or 350,000 titles, are available.

The big area of growth, Powell said, will be in e-commerce. Six years ago, even before Seattle-based Amazon.com was a gleam in the eye of founder Jeff Bezos, Powell began selling online. He did so at the prodding of an employee from the technical-books department, and at first only technical books were offered. In February 1996, www.Powells.com became the Web site for all book inventories.

Last year, online sales accounted for $3.3 million, or 10 percent of total sales. In two years, Powell expects the take to rise to 15 percent of $45 million in total sales, or $6.8 million.

Surprisingly, Powell doesn't consider Amazon.com a threat. Powell's inventories of out-of-print books are considerably deeper than Amazon.com's. Often, the Seattle online retailer is a customer of Powell's, turning to the Portland company to fill requests for obscure titles.

Powell wants to make sure he can meet the anticipated surge in online sales. He has plans to dramatically expand his Internet inventories.

A four-story Portland warehouse, known as the "catacombs," has been cleaned up and expanded in anticipation of thousands of additional volumes. One floor already is full. At capacity, the warehouse will hold 400,000 volumes.

Powell doesn't see an end to the inventory explosion. When the warehouse fills he will consider acquiring another. When is it enough? "That's a question I've never asked myself," he said.

The additional supplies of books could go to the stores to replenish retail inventories, but the intent is to dedicate the space almost exclusively to e-commerce.

Powell contends the Internet doesn't replace store sales with online sales, but expands the market. Internet buyers are looking for types of books that are different from those in-store browsers buy, Powell said, and they tap the Web site from all over the country and the world. Often customers are looking for out-of-print books on specialized topics. That means higher prices.

"You can sell a more obscure book, but you don't have to sell it cheaply," he said of online sales. "And that's what makes the business."

Barnes and Noble also is working to establish a strong online presence, though its site, www.barnesandnoble.com, remains far behind Amazon.com in sales.

Powell is hedging his bets. He is working on a deal that will make his inventories available through Barnes and Noble's Web site.

"We always thought of them as the `evil other,"' Powell said. "But it's a good business decision."

All the Internet action sets the stage for complex associations, strange alliances and, as online ventures are taken public, instant riches. The activity raises the question of whether Powell might join up with a retail or Internet giant on a permanent basis - read "acquisition" - or even take his own business public.

Powell says he has no desire to do either. Go public, he says, and the company becomes the plaything of shareholders, accountants and the Securities and Exchange Commission.

"Not only do you lose control of your company, you lose control of your life," Powell says.

He won't say whether anyone has made him an offer.

Neither does Powell have plans to expand his Web site offerings beyond books. In contrast, Amazon.com has spread into other territory, from pet paraphernalia to online auctions to toys. Barnes and Noble's site sells coffee and compact discs.

"We're sticking with what we know, and what we know is books," Sontz said.