How to Start a Bookstore

Part 1 - How to start a Bookstore business - Background

For a time, it looked like non-chain bookstores were dead. Electronic reading devices put e-books near at hand, even the big-box retailers went out of business or scaled back their venture, and Amazon gobbled up the lion’s share of the reading public. Then smaller, independent bookstores closed shop one after another.

But all of that’s changed as avid readers have gone too long without access to brick and mortar bookstores, craving to get their hands on the print version of their favorite titles. Indie bookstores are opening up or regaining new popularity across America. In addition, the “buy local” movement has brought new energy to the little bookstore down the street. This article showcases some of the industry’s new dynamics.

Our guide is in 3 parts:

• Part 1 - How to start a Bookstore business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening a bookstore?

Your startup costs will be highly variable based on your location, square footage, local labor costs, buildout expenses, and many other factors.

• First month’s rent and utilities – $2,000

• Fixtures – $4,000

• Inventory control system – $7,500

• External and internal signage and furnishings – $5,500

• Logo and business cards – $600

• Buildout – $500

• Grand opening promotion – $1,000

• One month’s operating expenses – $3,500

This might only serve as rough guidance in your case, since your rent and initial inventory costs might be much higher. But it does give you an idea of some of the costs you’ll have to consider. Also, how long can you go without paying yourself a salary? Finally, consider ancillary costs if you’re going to sell coffee, postcards, t-shirts, or other items.

This might only serve as rough guidance in your case, since your rent and initial inventory and other costs might be much higher. But it does give an idea of some of the cost items you’ll have to think about. Also, how long can you go without paying yourself a salary? Take that into consideration as well. Also, consider ancillary costs if you’re going to sell coffee, postcards, t-shirts or other items.

As with any kind of business, you must start by writing a realistic business plan. Then look at your per-unit profit margin and estimate how many books you’ll have to sell every day to break even. Does that number seem realistic? Ask yourself hard questions like that.

Read our bookstore purchasing guide to learn about the materials and equipment you’ll need to start a bookstore, how much to budget, and where to make purchases.

What are the ongoing expenses for a bookstore?

Rent and inventory will be your two largest ongoing expenses. Rent is, of course, easy to estimate, but your inventory levels will vary depending on sales. Employee costs can also be high if you’ve hired staff, so make sure you don’t take on that investment until you must.

Who is the target market?

Your market niche will define your audience. For example, children’s literature appeals to parents, travel writing draws in readers with wanderlust, etc. Regardless of theme, your customers will be eager readers, or at least curious enough to want to know about your topic of choice. If you’ve chosen your primary genre wisely, it’s an area you know much about, so you’ll probably have an innate understanding of your audience and their preferences.

How does a bookstore make money?

Publishers will typically grant small retailers a 40% discount on their books’ cover prices, so that’s your maximum profit margin on new releases. If you buy and sell used books, you might have much higher margins. Perhaps you’ll buy a paperback in decent shape for fifty cents and sell it for $2.50. It’s also possible to buy large collections of books on eBay, Amazon, or other sites at a low per-unit cost for resale.

In addition to books, you might sell additional items that at least loosely tie in with your bookstore theme. This might be coffee, postcards, stationery, music, posters, mugs or muffins—whatever might fit your space and your customers’ tastes at a reasonable profit margin.

How much can you charge customers?

You won’t have anywhere near the buying power of Amazon or the large national chains, so you can’t expect to be able to compete on price. Book publishers put the suggested retail price on their books, so you can’t exceed that figure (and you wouldn’t have any customers if you tried).

You’ll have more leeway if you’re running a used bookstore. Consider pricing your inventory at about half of a book’s cover price, with discounts for multiple purchases. Most of your customers read a lot, so quality and quantity are of equal importance.

How much profit can a bookstore make?

Your profit margin, if you’re selling new books, should be in the 40% range.

How can you make your business more profitable?

Research ancillary services that can add value for your clientele, and consider expanding your business into the digital world. Make your website an ecommerce site, and encourage online orders. Some successful indie bookstores expect that online purchases will make up nearly 30% of their annual sales in the coming years.

Day-to-Day and Growth

What happens during a typical day at a bookstore?

• Reading book industry publications such as Publishers Weekly and Book Business to stay abreast of upcoming releases and industry trends.

• Interacting with social media to communicate with followers, and mentioning new product offerings, sales events, and upcoming author signings.

• Opening your store, meeting customers, and keeping shelves tidy and properly organized.

• Scheduling staff work shifts, if you have employees.

• Ordering new releases (or buy from your public if you’re a used book retailer).

• Communicating with authors, musicians, or others who schedule visits.

• Planning new promotions.

What are some skills and experiences that will help you build a successful bookstore?

Start by giving very careful attention to your market niche. If you choose to be a generalist who carries “everything,” you’ll be placing yourself in direct competition with the likes of Barnes & Noble and Amazon. How savvy does that sound?

Filling a niche also has the advantage of allowing you to go deeply into your genre or area of specialty, without having to spend beyond your means with startup inventory. In other words, you might not have to invest too heavily in order to fill your shelves with every book you can find on travel writing, whereas if you were trying to comprehensively carry 20 different areas of interest, your startup costs could be exorbitant.

This niche strategy will also help you quickly identify and attract your readers. If, for instance, you own the only science fiction and fantasy bookstore in half your state, you might draw at least an occasion visit (or more frequent online business) from sci-fi fans hundreds of miles away.

Get to know your customers, solicit contact information, and draw them to your social media presence. When they visit your store, they should find it to be a source of the kind of book talk they can’t get from a virtual vendor such as Amazon. Build your community of readers, and invite them to experience author readings, signings, and other events. Maybe you’ll even have acoustic musicians performing while customers browse. In short, you must be creative enough to figure out how to draw people into your store, and sharp enough as a marketer to give them reasons to keep coming back.

What is the growth potential for a bookstore?

According to the U.S. Census Bureau, bookstore sales increased 2.5% between 2014 and 2015. That might not seem like a dramatic increase, but considering the long downward trend that had seemingly consumed the industry, the year-to-year growth rate is promising. 

Your single-store sales might be limited by floor space, but you might also increase revenue through your ancillary product sales. Physical growth can come from expansion of your existing space into adjoining territory, or even an additional location if your business continues to thrive.

What are some insider tips for jump starting a bookstore?

In this Denver Post article, Nicole Sullivan, owner of independent bookstore BookBar, credits her success with building a “hybrid business.” BookBar also includes a wine bar and coffee shop and conducts such events as happy hour and book socials to give her customers a leisurely social experience.

If you can add ancillary products or services that complement your core business, it can provide you with new income streams. In fact, your ancillary business might even do better than the book business, or at the very least it can provide cash flow while your bookstore’s reputation gets established within your community.

How and when to build a team

When you have the need (and the financial resources) to add employees, make sure you grow a workforce with a passion about reading that matches your own. With that in mind, consider hiring college students studying literature, English, creative writing, or similar pursuits. During the interview, ask them about their reading habits. What kinds of books do they typically read? Who are some favorite authors?

Start with part-time employment because that’s likely to be all you can afford at first. If you have two or three part-time staff members, it will give you scheduling flexibility and reduce the need to provide group health care coverage—which would be one of your steepest overhead costs.

Read our bookstore hiring guide to learn about the different roles a bookstore typically fills, how much to budget for employee salaries, and how to build your team exactly how you want it.

Part 2 - Is a Bookstore business the right fit for you?

Part 3 - Action plan to launch your Bookstore business in 90 days