Books-A-Million, Inc. History

Address:
402 Industrial Lane
Birmingham, Alabama 35211
P.O. Box 19768
Birmingham, Alabama 36219
U.S.A.

Telephone: (205) 942-3737
Fax: (205) 942-6601

Website:
Public Company
Incorporated:1964 as Bookland
Employees:4,900
Sales:$418.6 million (2001)
Stock Exchanges:NASDAQ
Ticker Symbol: BAMM
NAIC: 451211 Book Stores

Company Perspectives:

The Company's growth strategy is focused on opening superstores in new and existing markets, particularly in the Southeast. In addition to opening new stores, management intends to continue its practice of reviewing the profitability trends and prospects of existing stores and closing or relocating underperforming stores or converting stores to different formats. Key Dates:

Key Dates:

1917:
14-year-old Clyde Anderson opens a newspaper stand in Florence, Alabama.
1950:
Clyde Anderson's son, Charles, expands business into a bookstore chain called Bookland.
1988:
Company buys Gateway Books and opens first book superstore.
1992:
Bookland changes its name to Books-A-Million and goes public.
1994:
Company purchases Books & Company of Dayton, Ohio.
1998:
Books-A-Million launches its web site.
1999:
Company acquires NetCentral.
2000:
Charles Anderson retires, ceding company chairmanship to Clyde B. Anderson, the founder's grandson.

Company History:

Books-A-Million, Inc. is the third-largest book retailer in the United States, ranking behind Barnes & Noble and the Borders Group. Based in Birmingham, Alabama, the company operates 202 stores in a total of 18 states, ranging from Texas to the mid-Atlantic region. The majority of these are Books-A-Million discount superstores. Others are more traditional Bookland stores, some of which (combination stores) offer gifts and greeting cards in addition to books and periodicals. Additionally, Books-A-Million operates Joe Muggs Newsstands. Also, apart from its primary retail components, the corporation has a book wholesale and distribution subsidiary, American Wholesale Book Company; an e-commerce division operating as booksamillion.com; and an Internet development and services company, NetCentral, in Nashville, Tennessee. Books-A-Million, as booksamillion.com, sells a range of products online via its wholly owned subsidiary, AIS (AmericanInternetServices). Booksamillion.com also runs an online café, Joemuggs.com, which offers a wide selection of whole bean coffee, confections, and related gift items.

Newspaper Stand Becomes a Bona Fide Bookshop

Books-A-Million's roots go back to a humble newspaper stand constructed in 1917 by 14-year-old Clyde W. Anderson, who had dropped out of school to support his family upon the death of his father. The young man's first job was delivering newspapers in his hometown of Florence, Alabama. Shortly after he began selling newspapers, a large group of construction workers from the North came to town to build the Wilson Dam. When they mentioned to the young newspaper boy that they missed reading their hometown newspapers, Anderson contacted northern newspaper publishers and made a deal with the railroad to have the papers delivered to Florence. Using old piano crates, Anderson built a newsstand, and business was soon booming. Within a few years, he and his brother were able to invest their profits in a bona fide book shop.

In 1950 Anderson's son, Charles C. Anderson, inherited the book store and expanded it into a chain of stores called Bookland, which were incorporated under that name in 1964. During the 1970s, Bookland expanded rapidly as shopping malls sprang up across the American landscape, and by 1980 Anderson operated 50 stores located primarily in shopping malls throughout the Southeast. Charles C. also established a book and periodical distribution business. When his sons, Charles, Jr., and Clyde B., were old enough, they began working in the wholesale business and book store, respectively.

In 1988, Bookland doubled its size when it bought Gateway Books, a chain of stores based in Knoxville, Tennessee. According to the young Clyde B. (who had moved into senior management after graduating from the University of Alabama), many Gateway stores were poor performers. Within two years, Bookland had closed 27 of 50 Gateway stores, a move that left the company with many excess books and store fixtures. These three factors--excess books, excess fixtures, and a young executive with big plans--combined to become the driving forces behind the company's move into superstores.

In 1988 the youngest Anderson led the company to open an 8,000-square-foot store in a shopping center in Huntsville, Alabama. By his own account, the store--furnished in part with fixtures and stock from the abandoned Gateway stores--was a flop. 'It was one of my early learning experiences,' he reported in an interview with Birmingham magazine. Shortly afterward, however, the company opened a second superstore under the name Books-A-Million. The new superstore was located just down the street from the first one, but this time with 30,000 square feet of selling space, as opposed to 8,000. 'We did very successfully from day one,' Anderson told Birmingham magazine.

1989--91: Expanding the Superstore Format as Competition Stiffens

The company made the decision to expand into the superstore format at the right time. In other regions of the United States, larger book retailers, such as Barnes & Noble and Crown Books, had already begun to switch to the superstore format and were beginning to squeeze out smaller stores. The concept behind superstores was to establish specialty shops with an enormous selection of goods and prices comparable to, or lower than, department store sale prices. Bookstores were not the only retail businesses to explore this concept. Instituted by Toys `R' Us in the early 1980s, the formula quickly spread into home furnishings (with Bed Bath `N Beyond), electronics (with Circuit City), and do-it-yourself home improvement (with Builders Square).

Books-A-Million superstores sought to purchase books at high volume and pass the savings on to customers. To draw customers, bargain books--sold at 40 to 90 percent of publisher's suggested retail prices--were placed prominently in the front of the stores and updated weekly to keep bargain hunters coming back. In addition, the weekly top ten best sellers were offered for up to 40 percent off the publishers' suggested retail price, while paperbacks were offered at up to 25 percent off suggested retail prices.

Books-A-Million distinguished itself from its competitors by maintaining a regional focus at a time when national chains threatened to homogenize book selling. Individual Books-A-Million stores were given the freedom to launch marketing campaigns for books of particular interest to customers in their own markets. For example, books published by the Birmingham News on such topics as the University of Alabama's successful football season or the death of a local race-car celebrity, received special campaigns, as did The Firm, a first novel by Mississippi author John Grisham, which became a national bestseller and feature film. Books-A-Million was also one of the few book superstores to target medium-sized cities; its competitors most often chose to open new stores in larger metropolitan areas.

Bookland began opening new superstores at a rate of about ten per year while continuing to operate its smaller stores. Most of the company's 50 Bookland stores were located in shopping malls with department store anchors such as Sears and J.C. Penney's, or discounters like Wal-Mart or Kmart. Some of these were maintained according to their original format; others were converted to combination stores.

In a 1994 interview with Retailing Today, Anderson explained the reasons behind the decision to develop combination stores: 'We're from a small town and we wanted a concept that would work in a small town. We found that some of these small towns couldn't support just a book store. But if you could have a combination book and something else--we developed a combination books and cards--that the economies of that may work.'

1992--97: Going Public and Refining the Superstore Concept

In 1992 the company changed its name to Books-A-Million, Inc. and went public on the NASDAQ exchange, selling 2.6 million shares at $13 per share. (A secondary stock offering in October 1993 sold 1.25 million shares at $23 per share.) That year, Clyde B. Anderson became CEO. His father remained chairman, and Charles Anderson, Clyde's brother, took over the family's wholesale book and periodical distributorship.

The Anderson brothers proved to have a knack for marketing. 'Get to know your customers and give `em what they want,' was Clyde's philosophy as told to Forbes. A prime example of his strategy occurred in 1993, the year the University of Alabama upset Miami in the Sugar Bowl. Although Sports Illustrated had decided not to feature the event as its cover story, the Anderson brothers convinced the magazine's editors to print 200,000 special editions of the magazine, put Alabama running back Derrick Lassic on the cover, and add additional stories about the Alabama victory. Books-A-Million bought all 200,000 copies of the special commemorative edition and within a month sold all of them, bringing in $900,000 and an estimated profit of $200,000.

By 1993 Books-A-Million operated 113 stores in cities and small towns across the southeastern Unites States. As the company grew, Anderson continued to expand the concept of a superstore. In addition to positioning itself as a bargain book outlet, Books-A-Million began developing the concept of book-store-as-entertainment. Events such as book signings and readings (especially by Southern authors) became regular features, along with book-buying clubs and special discount cards. The company also strove to develop its customer service: book searches, special orders, and free gift wrapping encouraged customer loyalty. In 1993 about ten Books-A-Million stores contained espresso bars, which contributed to the store's image as a place to sit and enjoy books. Even the stores' hours of operation, from 9 a.m. to 11 p.m., encouraged visiting the store and browsing. 'It's a very exciting place to be in our superstores,' Anderson boasted to Forbes.

Books-A-Million also instituted a number of programs aimed at encouraging reading among children. By 1994 many stores contained separate Kids-A-Million departments, colorful sections that offered a large selection of gifts, books, and videos for children. Weekly story hours were held, and the company supported local schools by offering discounts on library material and ordering bulk shipments of books on classroom reading lists.

In fiscal 1994 Books-A-Million had a profit margin of .046, the highest in the book superstore business, on net sales of $123.3 million. The company operated 84 Bookland stores and 29 superstores and was continuing to expand rapidly. By December 1994, the company operated 43 superstores across the southern United States. New stores were reported to cost $825,000 to build, but in 1994 start-up costs were recouped in less than one year.

Twenty more superstores were opened in fiscal 1995. Books-A-Million preferred to build its new superstores in regional shopping centers that had anchor tenants such as Toys `R' Us or discount clothing chains like Marshalls and T.J. Maxx. Less desirable locations were shopping centers with upscale neighboring tenants such as the Talbot's clothing chain, or, on the opposite end, bargain factory outlets. In 70 percent of Books-A-Million's markets the company had no strong competitors; in the remaining 30 percent, its main competitor was Barnes & Noble. Some analysts feared that Books-A-Million superstores were pulling customers from its own Bookland stores, but Anderson told a group of investors in 1995 that sales erosion was minor and was 'more than offset by efficiencies in advertising and transportation costs.' Sales in fiscal 1995 grew to $172.4 million, and net income grew to $8.1 million from $5.6 million in 1994. Same-store sales increased 13.8 percent for superstores and 6.4 percent for all stores.

Over the next two years, Books-A-Million continued to fare very well. Although its net income dropped off somewhat, its total sales grew to $229.8 million in 1996 and to $278.6 million in 1997. Over the same period, the total number of stores increased from 124 to 151. Significantly, the number of superstores grew from 45 to 91, while the number of traditional bookstores fell from 45 to 38 and combination stores from 34 to 30. The numbers reflected the company's determination to meet its chief competitor, Barnes & Noble, head-to-head in the discount marketplace. Books-A-Million was also looking for new marketing avenues, including those offered through computers and the World Wide Web.

1998--2001: Growth and Diversification through E-Commerce and Acquisitions

In the final years of the century, with its typical market savvy and flexibility, Books-A-Million entered the burgeoning world of e-commerce. In 1998, it put its own web site on the Internet. Later in the same year, after enhancing its original site, the company acquired NetCentral, the Nashville, Tennessee-based Internet development and services firm that specialized in design and e-commerce solutions. It was NetCentral that had designed and developed the newly refurbished web site for booksamillion.com.

On its booksamillion.com site, the company used some of the same marketing strategies that it employed in its superstores, including, for example, allowing Millionaire's Club Discount Card holders the same purchasing discounts that they enjoyed in company superstores: up to 46 percent off on best sellers, 37 percent off on all other in-stock hard covers, and 28 percent off on all in-stock paperbacks. Customers were given the option of joining the club online. The electronic shopping cart helped net sales, which in 1998 reached $327.8 million.

The company got another boost in 1999 when it arranged a deal with Wal-Mart whereby Books-A-Million would provide wal-mart.com customers with access to hundreds of thousands of book titles as well as provide the mass merchandiser with the services of the company's distribution center in Florence, Alabama.

Expanding its e-commerce ventures, in September 2000, Books-A-Million also negotiated a revenue-sharing contract with MediaBay, one of the world's largest purveyors of audio media, including audio books, old time radio shows, and classic videos, selling them as hard goods, including CDS and cassettes, or in downloadable formats via their web site at www.mediabay.com. Under the agreement, MediaBay became the exclusive provider of spoken audio products available to Books-A-Million customers at booksamillion.com. The two companies agreed to promote each other as 'trusted' and 'preferred' partners.

In January 2001, Books-A-Million announced a partnership agreement with Alibris, an international supplier of difficult-to-find books, including out-of-print and rare titles. Effective immediately, customers would gain access to over 14 million such titles, both at retail superstores and over the Internet. Next, in March, Books-A-Million made a significant expansion move, buying the Washington, D. C., area operation of Crown Books Corp., which, on February 12, 2001, had filed for Chapter 11 bankruptcy protection. Books-A-Million took over the operation of nine of the 14 Crown stores in northern Virginia. The company also agreed to buy the complete inventories of 19 Crown Books stores in the metropolitan Washington, D.C., and Chicago areas. The remaining inventory of Crown Books was sold off in liquidation sales and their stores were closed.

Plans announced in the company's fiscal 2001 Annual Report called for additional expansion as well as the integration of the Crown Book Stores it had just purchased. Books-A-Million indicated that it would open 4 or 5 new superstores in the next fiscal year and would expand its new and highly successful Joe Muggs newsstand concept. It also indicated that the e-commerce part of the business had continued to surpass expectations and had delivered major benefits to the company, suggesting that it would consider additional commitments to Internet marketing in the new century.

Principal Subsidiaries: AIS (AmericanInternetServices); American Wholesale Book Co.; Book$mart; NetCentral, Inc.

Principal Competitors: Barnes & Noble, Inc.; Borders Group, Inc.; Half Price Books, Records, Magazines Inc.; Amazon.com, Inc.; MTS, Inc.

Further Reading:

  • 'Borders, BAM Plan Many New Superstores,' Publishers Weekly, May 11, 1998, p. 14.
  • McGaham, Jason, 'Crown Books' Woes Open Door to National Discounter,' Washington Post, March 29, 2001, p. T06.
  • 'MediaBay, Inc. and Books-A-Million, Inc. Announce Broad Marketing and Digital Distribution Alliance,' Business Wire, September 12, 2000.
  • Mutter, John, 'Firings, Lie Detectors, Drug Tests Part of New Look at Books & Co.,' Publishers Weekly, March 14, 1994, p. 11.
  • Nawotka, Edward, 'BAM to Buy Crown Stores in D.C. and Chicago,' Publishers Weekly, March 12, 2001, p. 14.
  • Nelson, Emily, 'Wal-Mart Turns to Books-A-Million to Supply, Deliver Books for Web Store,' Wall Street Journal, July 2, 1999, p. A3.
  • Stern, William M., 'Southern Fried Reading,' Forbes, June 20, 1994, p. 91.
  • Teitelbaum, Richard S., 'Companies to Watch: Books-A-Million,' Fortune, January 25, 1993, p. 105.
  • Williams, Roy, and Mick Normington, 'Anderson Family Values,' Birmingham News, February 26, 1995, p. 1D.

Source: International Directory of Company Histories, Vol. 41. St. James Press, 2001.

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