73. Used Bookstores

0:00A few years ago, Francisco Hernandez opened a bookstore, a physical bookstore. Some people just flat out thought I was crazy. When I was starting out and I was talking to bankers and brokers and lawyers, they were so skeptical. They kept asking me questions like, you're not going to really sell books, right? You're going to sell coffee, you're going to sell wine or beer or, you know, sell drugs or something to make this viable. Hernandez's store is called Leaves. It's on a tree-lined street in Brooklyn. And it doesn't sell wine or beer or coffee or drugs. It sells used books. Books with worn covers, inscriptions, and that distinctive smell of old paper. Buying a second handbook, you're part of something bigger immediately because somebody else had that. You're already in commune with somebody else over space and time.

1:03There's something that is really special about that. It may be special, but the average used book isn't exactly a valuable commodity. Americans throw away around 320 million of them every year. We read them once or twice or even not at all, and they end up being a bulky nuisance in the garage. Most bookstore owners like Hernandez have access to a virtually unlimited pool of inventory. But they have to make a series of calculated economic decisions to figure out what's worthy of shelf space. Every bookseller is going to have a very different cost-benefit analysis based on what you would think of as their brand. Some books can be there as a conversation starter. Some books can be there because they're fun and funny. Some books should be there because their social and political importance are so huge that it needs to be in the public's eye. But most books have to earn their rent in the store or else you don't make money.

2:09For the Freakonomics Radio Network, this is the economics of everyday things. I'm Zachary Kraket. Today, used bookstores. Francisco Hernandez says he wouldn't have known how to run his bookstore if he hadn't worked in someone else's first. I started first learning how to buy and sell books at a place called Alavaster Bookshop in Manhattan on 4th Ave. Books selling is a bit like a guild and you really need to learn under someone to learn the tricks of the trade. It's weird sometimes what books are valuable and which ones aren't. He became different to look at them not just as vehicles of knowledge or as like insight but also as art objects. I learned to appreciate dust jacket design and the physical construction of the book. I learned a lot about the history of how they were bound and how they were printed, which is its own art form really. Today, more than 50% of print books are sold by a single company.

3:13One that probably doesn't think much about books as art objects. There's nothing that competes with Amazon. They can outcompete everyone in price and you can click a button and have that object come directly to your door in like one to two days. That's just an incredible amount of efficiency. If you're buying a textbook for a class that you don't really care about, nothing beats the Amazon. After Amazon opened its online store in 1995, the number of independent bookstores dropped by 43%. But the industry has rebounded over the last 15 years. Today, there are around 2500 independent bookstores. And according to the American booksellers association, there are another 200 or so stores planned to open in the near future. It seems that some book buyers still want a browse shelves that have been curated by knowledgeable booksellers. We're not selling books as much as we're selling and experience.

4:14You can leave with friends. I mean, people have met people that they loved. People have gotten engaged in that space. It's important for not only there to be books in that space, but booksellers and book lovers. Sometimes it's other customers. Sometimes that's me. Sometimes it's my staff. Bookstores may not have all the answers, but we have a large amount of resources to help explore those existential and emotional questions that people have about the world around them. The algorithms are just not there yet to help us find those things. Modern used booksellers don't have the luxury of stockpiling millions of books to compete with the thousands of sellers on Amazon. They have to be a bit more discerning with their inventory, partly out of financial necessity, which is why you won't find any dust on the shelves at leaves. The turnover is so high, books don't have time to accumulate dust really, which is important that it doesn't feel like you're pulling off these old dusty tomes that have been sitting there for 20 years, and that everything feels very fresh and relevant.

5:17Leaves sells books at a wide range of prices. On a table outside the store, you'll find discounted books for two to five dollars. In the back, in a glass case, there are first editions and collectibles with price tags in the thousands. In between are more cheap books, magazines, a kid's reading nook, and a big selection of fiction, which is really the beating heart of the store. So, it's in the very center. And then off to the side, we have a lot of nonfiction, and the model for how it was put together was that it was more and more abstract as it went along and started off with language, books and biographies and things that were easier, I think, for people to access socially emotionally, and then it gets to the literary criticism and critical theory and esoteric uh... Most of the store's inventory comes from people walking in with books they don't want

6:17anymore. The biggest things always come through the door, people who come in physically with books, and some people will come in and they need them out of their space, so they just donate them, and then some people want us to buy their books. If we can sell it, we're always willing to pay money for it. So what do you do when someone walks in the door with like a cardboard box full of books? The first thing I do is I pull them all out because I want to look at them and I want to touch them in the way that I think somebody who's going to buy it is going to touch them. They're going to test the spine to see if it breaks. So you want to go through it physically and test for condition, and then usually I sort it out. These are books that we... they might be great, but we're not able to offer anything for at the moment. These are books we can offer maybe 20 percent, and these ones we can offer more. Then sometimes we'll separate out special cases for books that I have to look up or to research on. Sometimes I need to go to the library and take out a reference book in order to figure

7:19out what edition is this, how many copies of this book were made, but often we're just making piles of books and separating them based on how well we think they'll do in the store. And we try to do it quickly because time is important for people in New York. What kinds of books are easiest to sell? That's the paperback fiction. We turn out so much of it every day that it supports everything else really. People are reading a lot of science fiction and fantasy. I would say there's a tendency towards escapists, books rather than reading maybe philosophy or current events. People are in escapist minds right now. And are there certain types of books that you have to turn away because people bring in too many of them? Yeah, it tends to be like popular crime fiction and hardcover. Sometimes it's bibles. You tend to have issues with things that are publishing fads. Those clog up secondhand bookstores really quickly a few years down the line. Hernandez typically offers 15 to 30 percent of a book's resale value.

8:22Or more if the seller is willing to take store credit instead of cash. But some popular books will fetch a higher price. Let's say for example, we've got a $10 book of fiction, a paperback that I think will sell very quickly. We could pay up to $4 in cash, maybe $8 in store credit. That person who brought in that one book may be able to leave with another book as like a swap. But it's a part because I know that that book is going to sell so fast that it'll just become cash very quickly versus a $10 book that might sit for a long time. Maybe it's a biography or a history book. I might pay $2 for it and give $4 in store credit. That is going to have to pay more rent really because it's going to sit on the shelf for longer. And collectibles like first editions and signed books tend to sit on the shelf for even

9:23longer. If it's worth $500 but I'm going to have it for five years, I might want to pay $100 because the time to photograph it, to catalog it might be 50 extra bucks, it might be 100 extra bucks and then the time that it takes sitting on the shelf might be another 50 bucks, might be another 100. And you're in total paying $250 to $300 for a book you're going to sell for $500. You net out like half. If the book is really valuable, then you make more money in lower margins. But walkins aren't the only way Hernandez acquires books. We've gotten books from dumpsters and on the street. Dumpsters. Sometimes libraries or schools will just fill a whole dumpster full of books that they're getting rid of. And that's coming up. Francisco Hernandez says that he's traveled all over the country in search of used books

10:25for his store. All the way from California, down south as far as Georgia, Bobbukes and Maine and Vermont, we use every avenue possible. Goodwill's, thrift stores, estate sales will buy whole collections after people pass. People come into their apartment and buy maybe one book or will buy 2000 books. I've spent 12 hours over a period of multiple days in somebody's apartment going through a collection. It can be so much fun. I mean, sometimes it can be devastating because there's maybe 10,000 books in the collection. They spent 50 years accumulating it. They died before they were willing to give any of it up. And so you're there going through the objects that are most personal to them. And sometimes they have one little thing and I'll often put that aside for myself and keep it rather than try to sell it. How do you decide if a big collection of books is worth investing in?

11:28Usually I'll go through and find the most valuable books, get a really exact sense of what we're going to price those, and then go through other books and then group them roughly, between $25, $10, $20. So yeah, we'll kind of divide the labor up to ones that need more time and attention and ones that we can kind of just move through. Because when you're going through a 2000 book collection, you rarely have the amount of time that you really need. Buying books is a gamble. You can't be sure how long it'll take for a particular volume to sell. But you can make an educated guess. But I'm looking for our books that I've sold many times before. If I know I might have a client for it, you're more likely to buy it. Are there books that we don't have at the moment? There might be a great book, but we have 10 copies of it. And so it's just going to take up space in the back stock. There are a lot of booksellers, book barns that have not infinite space, but more space

12:31than books. But in New York, there's many more books than there is book shelves to fit them really. So when you're going to invest in a big tone, it should be worth it. And so smaller poetry books, chat books, things like that are easy to invest in because they take up so much less space. The soft cover takes up less space than the hard cover version. Even if the hard cover is slightly more valuable, I'll go for the soft cover every time. Hernandez always has to take space into consideration because it's one of his biggest expenses. He pays around $6,400 a month on rent for retail, space, and three storage units in two different boroughs of the city. But his biggest overhead cost is his staff. There are eight employees that work at Leeds, all of whom add expertise to the store. I'm a really good curator. I have a lot of experience, but I have my limitations. It just is a human and how many books I could possibly read and how many perspectives I can empathize with at any given time.

13:34People who go into a used bookstore to buy a book are usually the kind of people who buy a lot of books, meaning there are potential source of recurring revenue. So, it's in a book dealer's interest to cultivate relationships with customers by learning about their tastes and preferences and suggesting new books and authors. It's a very personal form of retail, and there are plenty of people who like the idea of working among books. There are so many people out there who are interested and want to do it. I get maybe one resume per day. It's a desirable job, in part, because putting a book in the right customer's hands is rewarding experience. I sold the first edition of Gravity's Rainbow by Thomas Pinchin, which is a huge book and a really tough one to read. And I sold it to her. She must have been 16 or 17. She brought in the money that she needed for it as if she broke open her piggy bank like in dollars and pennies and quarters.

14:36And when I asked her if she needed a bag, she'd shook her head and held it like it was a baby and walked out this 800 pound beast. Yeah, it was an emotional object. Often, the books he sells are emotional objects for Hernandez too. The most valuable, and maybe my favorite book right now, is a signed copy of the Blue A Sty, Tony Morrison. We have it for $4,500 right now, and that's a really, really special book. You probably made a hefty investment in that too. Yeah, that one costs a little bit extra, I think. It was a book that I wanted to sell because I just love it. I wanted to own it. And there's no other way to own it other than to sell it. Hernandez bought that volume from a fellow book dealer. It's something he and other dealers do often because a book might fit in one shop better than another or it might be appealing to a particular client. Any book seller comes into my bookstore, gets 20% off any book that they buy because book sellers buy books and we really want to keep the whole ecosystem afloat.

15:40The more books that we sell to each other and to other people, it benefits everyone. Books hasn't completely resisted the pressure toward efficiency. They have a website where you can order rare and special books. And there are listings also appear on used book platforms like Bibliot and Abe Books, which is owned by Amazon. But Hernandez says his physical store on that cute little block in Brooklyn is the heart and soul of the business. And whether you're buying a cheap paperback or a 760 page copy of Gravity's Rainbow, it's there on the shelf because he or one of his knowledgeable staff pulled it out of a vast ocean of used books in the hope that you would find it. More important than efficiency is human connection. And I think that will never go out of style. I think people will never not need that. For the economics of everyday things, I'm Zachary Kraken.

16:44This episode was produced by Morgan Levy and Sarah Lilly and mixed by Jeremy Johnston. We had help from Daniel Moritz-Rapson. And thanks to listener Jack Carlin who suggested this topic. Our inbox is always open. Alright, until next time. I'm gonna buy books, I'm sure, because I'm compulsive and have a sickness and can't help myself. The Freakonomics Radio Network, the hidden side of everything.