A Bookstore?A small, independent bookstore recently opened in our neighborhood. We really want to support our local business community but every time we walk by this establishment, we silently pity the obviously misguided purveyor, wondering who in their right mind willingly opens a bookstore these days? Has this person never heard of Amazon? Or seen You’ve Got Mail? Our reading this week encouraged us to reconsider some of these assumptions. To be sure, small independent bookstores across the nation have faced wave after wave of competitive threats: Superstores like Barnes & Noble, Borders, and Chapters in the early 1990’s; Amazon in the mid-90’s; and e-books in the mid-2000’s. That said, we were surprised to learn that independent bookstores now are having a bit of a resurgence. According to the American Bookseller Association, the number of U.S. independent bookstores rebounded roughly 40% from 2009 to 2017 after seeing year after year of steady declines. How could that be? As it turns out, while Amazon wounded independent bookstores, it completely annihilated their big-box competitors, thereby creating a gap in the market. HBS Professor Ryan Raffaelli, who spends his time thinking about such things, explains: “What you begin to see is a bifurcation of the industry where the indies represent this high experience, a chance for the consumer to engage on a set of very personal dimensions, versus Amazon, which is really about, can I just get something quickly at the cheapest price?” The demand for smaller, independent bookstores is reflective of broader social trends, which Raffaelli calls the “3 C’s”: Community (promotion of localism and upholding community values), Curation (specialized and personal customer experience), and Convening (hosting a wide variety of events). Because of their ability to tap into these strong social dynamics, independent bookstores are actually becoming a cornerstone of many urban real estate developments, something that would have been unfathomable 20 years ago. Raffaelli again: “Real estate developers are actually willing to give deals to some of the independent bookstores because the independent bookstore is a mark of authenticity. You know, we often think about anchors as being – a traditional mall, you want to have a Sears or a J.C. Penney’s. But in these city center, local community growth areas where we’re seeing actually quite a large expansion, bookstores is actually one of those components.” As SmallBizLabs points out, despite the fact that big businesses seem to be getting ever larger, there is a small business economy thriving in parallel as social trends drive growth not only in independent bookstores, but in all services that provide a “shift to experiences over things”, “growing interest in personalized services”, and the “desire to be part of a community” (think local coffee shops, breweries, gyms, clothing companies, etc.). For Chenmark, this trend is important to understand as many of the businesses in our portfolio have developed strong brands associated with being a trusted local provider, which means plans for growth must be handled in a manner that does not disrupt the innate attractiveness we currently enjoy in the minds of our customers. Furthermore, it is also a good reminder that although a business may never be able to scale to Amazon-esque proportions, it may still be able to create substantial value by catering to underserved segments of the market. | 
