You've Got Pluck

By Amanda Bower / San Francisco

Conventional wisdom on the business of bookselling goes something like this: independent bookstores cannot survive. No matter how knowledgeable their staff, how comfy their couches or how well they fill a niche, it is impossible to compete with the buying power of chains and the convenience and range of e-tailers.

Try telling that to Andy Ross. The 59-year-old Californian has placed a $3.7 million bet--his house, his entire life savings and hefty loans from the bank and his brother--on conventional wisdom's being wrong. The owner since 1977 of Cody's Books, a Berkeley, Calif., institution that was tear-gassed in the '60s and bombed in 1989 in response to its commitment to sell Salman Rushdie's Satanic Verses, Ross has spent the past three years in the red. Rather than follow the Meg Ryan route (in the 1998 movie You've Got Mail, Ryan's character closes her cozy kids' bookstore, unable to compete with the chain around the corner), Ross decided to fight back.

His weapon? San Francisco's Union Square district--home to Armani, Bulgari, Cartier and now Cody's. This month Ross has expanded across the bay from Berkeley into a two-story, 22,000-sq.-ft. space next to a Virgin Megastore and opposite an Apple Store. A garish $35,000 yellow sign outside can be seen all the way from Macy's--crucial, Ross says, to luring the shopaholics who frequent the district into the store (and away from the nearby Borders).

Why take the risk? Efforts to shrink Cody's two Berkeley locations into profitability had failed, so Ross decided that to make money, one must spend money. Together with an accountant friend, Ross projected that sales from a San Francisco store would make the business profitable. "Even if we're off by 20%," Ross says, "we still break even and we pay back the loan." That loan wasn't easy to come by. Ross says he was rejected by six banks before an independent lender, Summit Bank in Oakland, agreed to put up $1.9 million. "I had to get help from the landlord, my brother, refinance my house and use all my savings," Ross says. "We've risked everything."

It may pay off, says Stanford business school professor William Barnett. "This sounds like a very smart identity play," he says. "In these kinds of businesses, we see not just an appeal to quality but an appeal to identity and authenticity." Yes, the books at Cody's are probably all available on Amazon, and yes, many of them are also sold, at a discount, by the big chain store around the corner. But just as a small wine bar can thrive by pouring drinks available more cheaply at a liquor store or sports bar, so can a bookstore trade on its cachet of cool. "My guess is that the market does value the combination of being there, touching, feeling, browsing the books, along with the feeling of being in a cool social situation, with a sideways glance at the next table," Barnett says.

Statistics from the American Booksellers Association bolster his--and Ross's --argument that there is still room for small independents among Barnes & Noble, Borders, Amazon and even Wal-Mart and Costco. The group's membership is down from 4,700 a decade ago but has remained stable at 2,000 for the past three years. And while book sales overall have remained static for the past two years, Ipsos BookTrends reports slight growth for independent bookstores--just over 2% since 2002.

Perhaps that is the reason Ross remains remarkably cheery for someone shouldering so much personal debt. He walks through the brightly painted store at breakneck speed, gesturing toward features like a 144-ft.-long display wall--the longest wall in bookselling, he thinks. "I should be putting my money into conservative things, savings bonds, not retail," he says. "But I believe in my vision enough to take that risk." If he succeeds, small bookstores around the country will be popping a cork too.