Everyone is upset that Elliott Bay Book Co . might move from its Pioneer Square location, where it's been for 36 years, to Cap Hill


Amazon Vs. Elliott Bay Book Co.: Winners and Losers

Everyone is upset that Elliott Bay Book Co. might move from its Pioneer Square location, where it's been for 36 years, to Cap Hill or Ballard or someplace less touristy but with a more manageable rent. As owner Peter Aaron told The Seattle Times, business is way down in our recession economy, he's got a loan due, and he needs a break on rent from his landlord.

Meanwhile, business is booming at Amazon, which once billed itself as "Earth's biggest bookstore." With the aid of some helpful city rezoning in South Lake Union, with Paul Allen's Vulcan as its landlord, the company is preparing to move 20,000 employees out of the ID and the old PacMed Building on Beacon Hill and into 11 spiffy new office buildings served by the shiny new SLUT. (The old waterfront trolley tracks leading to Pioneer Square have been gathering rust for years.) Oh, and we're about to pay for a $200-million makeover of Mercer Street, so Amazon employees have it even nicer in their new hood. Elliott Bay, a small, private company, doesn't report its financials. Amazon, with a $41 billion market cap, reported a 14% increase in sales for the last quarter, ending in June.

The divergent fates of these two iconic and respected local booksellers are connected, though not the way you might think...

Independent bookstores like Elliott Bay, selling both new and used wares, have been steadily closing since Amazon was founded in 1994. So it's all Jeff Bezos' fault, right?

Not so fast, says Thom Chambliss, executive director of the Pacific Northwest Booksellers Association, though he has plenty of issues with Amazon. Of his PNBA members, he says, "The peak for us was 1993, when we had 365 stores. This year, we have 188."

Here in Seattle, Jackson Street Books, M. Coy Books, and Horizon Books are recent casualties of the trend. New and used book vendors alike are suffering. No one is saying that Elliott Bay will close its doors, but single-purpose bookstores are increasingly at a disadvantage, says Chambliss, to multi-purpose retailers.

He explains, "A huge part of the book business has gone to the big box stores--Target, Wal-Mart, Costco." They can draw in customers--i.e., readers--with a special on corn flakes, toilet paper, or red wine; and there in the front of the store is a giant pallet of the latest title by Dan Brown, J.K. Rowling, or Malcolm Gladwell. The same economy of scale applies, meaning they can strike better terms with publishers who need to pay top-tier authors huge advances.

"That takes away the bestsellers," Chambliss complains, "and all you're left with is the backlist, which is harder to sell."

Also, big box stores are designed to receive trucks fresh off the interstate, not like making small UPS deliveries to congested Pioneer Square. They run efficient retail-warehouse operations where huge amounts of inventory move quickly in and out the door.

Amazon operates in the same way, says Chambliss, but with even greater efficiency. As the middleman in our click-to-buy transactions, "they don't have to stock anything." Book warehouses are instead run by a few specialized distributors operating on a hub-and-spoke system. As a result, like Wal-Mart, Amazon can sell certain items as a loss-leader. Thus, per Chambliss, "They're not worried about making money on books."

Meanwhile, poor Elliott Bay basically has to make all its money on books, and pay to warehouse its entire inventory on site. It's the burden of having a landmark bricks-and-mortar location--everyone loves to visit, but it's a white elephant to run.

According to MacKensay Real Estate's Frank Buchanan, who leases Pioneer Square space including, Elliott Bay's present home in the historic Globe Building, "They've got over 20,000 square feet. We're constantly talking with retailers about right-sizing them." While he claims to be optimistic about ongoing lease negotiations with Elliott Bay, he asks rhetorically, "In the books business, what titles do you want to carry?"

In other words, does a bookseller really want to pay for all those dusty shelves of backlist titles that could more profitably be used, for instance, as restaurant tables or bar stools? Dividing the space, or sharing it, is already paying dividends, says Buchanan. "I think they've done themselves a favor by having Tamara [Murphy] run the café. Could they do something in addition to that? We would look at it."

Buchanan is a businessman and the PNBA's Chambliss is a bookseller, but they both agree on the valuable Elliott Bay brand and the popularity of its author events. Just look at those lines around the block when Michael Chabon comes to read. But such traffic doesn't always translate into sales. You may love the author but have already bought his book at Costco when you were getting sheet cake for your kid's birthday party.

"Events are huge," says Chambliss. "The problem is that that there's no neighborhood there [in Pioneer Square]. There's no one living there. And there's no place to park."

While there's talk of building a new urban village just to the south of Pioneer Squre, on the SoDo stadium lots, the recession won't permit those costly plans to be realized anytime soon. If Elliott Bay should move (instead of downsizing), rents may be somewhat lower on Capitol Hill than in Pioneer Square, but the parking isn't much better. (Also--panhandlers versus hipsters; which are more annoying?) And still there's the question of how an indie bookstore can earn enough to pay for its own on-site warehouse.

"We haven't found the formula," says Chambliss. If supposedly indie-minded Seattle book buyers don't patronize their local stores, he warns, "they won't have a bookstore to go into, if this paradigm continues."

He also points to Elliott Bay's Portland rival as a counterexample. "The downtown success model is Powell's. They own their own building! That's huge." Powell's owners bought not one but two buildings during the depressed '70s, he explains, one with parking. Like the big boxes, and Amazon, Powell's can "do the most with volume." So much so that Powell's, which regularly buys used books up here, warehouses them in Portland and acts as a used-book feeder to Amazon, according to Chambliss. (The closest we had to that model was the old Shorey's Books, which closed in the '90s.)

But Elliott Bay never had the chance to buy its own building, says the man who once owned the company. Real estate developer Ron Sher has anchored his Crossroads and Third Place malls around bookstores and other traffic-generating attractions. "The building was never offered for sale," he says. He bought Elliott Bay in 1999 and gradually allowed his partner, Peter Aaron, to buy him out over the last ten years. Now, he's concentrating on holdings like Crossroads Mall in Bellevue, Ravenna Third Place, and a planned mixed-use development in Bremerton--all of them anchored by bookstores or popular retail.

"Pioneer Square prices were better 20 years ago than they are now," says Sher--better meaning cheaper to buy. So there's no way Elliott Bay could now summon the cash to buy its building or subsidize customer parking. "I think his only chance for survival is to movie," he adds of Aaron, his former partner.

"Book stores are getting to the point where they probably need a rent subsidy," he continues. If landlords benefit from the spillover customer traffic a bookstore generates, "they can make concessions. I'm not even sure that a radical rent reduction would do it. It's sad."

Sher also asks why the City of Seattle can't "subsidize a bit of parking" as it did at Pacific Place, which benefits the Barnes & Noble there.

In the present economic climate, Sher, like other developers, landlords, and retailers, points to the chicken-egg dilemma downtown: "Step one is to get the residential, because you can't do retail without that. But nobody's lending!" For this reason, his own Bremerton plans are on hold, like those of Nitze Stagen for the parking lots north of Qwest Field. (Again, the city was generous with rezoning.) If an urban village had already sprouted there, bringing 1,000 condos and apartments, it would've been an ideal new location for Elliott Bay--though likely with rent concessions.

Amazon alone isn't killing Elliott Bay and its bricks-and-mortar brethren. But it has the lobbying clout to get what it wants from the city, and the bargaining power to get what it wants from landlords: 1.6 million square feet versus Elliott Bay's few, wood-planked floors.

And here's a final, painful irony. From its present leased space in the ID, at least some of Amazon's 20,000 employees may occasionally wander over to Elliott Bay to browse, buy, and eat. (Anything to get away from your desk, right?) Once they begin relocating to their new $700 million SLU campus next year, that's still more pedestrian traffic the store will lose. And if Elliott Bay ends up moving to a new location, you can be sure it won't be in South Lake Union. Unless Paul Allen wants to cut them a deal.

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