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This article was published in U.S. 1 Newspaper on November 11, 1998. All rights reserved.
Encore's Encore in Princeton
The bookstore at the Princeton Shopping Center is five times as big as the typical neighborhood bookstore but half the size of the big box stores like Barnes & Noble. At 20,000 square feet, Encore Books & Music is neither fish nor fowl.
And bookstores at the shopping center have had varied success. Titles Unlimited, a small place that belonged to a five-store local chain, was in bankruptcy in 1992 when the larger Encore (then owned by Rite-Aid) moved in next door. But then in 1993 the still-larger Barnes & Noble landed at Windsor Green, expanding to MarketFair, luring away some of the shopping center's loyal customers. Now it is Encore's turn to work itself out of bankruptcy. It's doing it. In a different way from its Nassau Street neighbor, Micawber Books, Encore and its owner, Lauriat's, are trying to prove that smaller bookstores can survive against competition from big box stores and Amazon.com.
The turnaround officer is Matthew Harrison, brought in last February to Lauriat's, the 126-year-old regional chain that bought Encore in a highly leveraged buyout in 1994. "Basically this is a very good company with a very solid franchise and a solid group of managers," says Harrison. "But the company expanded into too many unprofitable locations, and the staff was too much for the company to support. It had lost its strategic focus. It was undercapitalized."
Aiming to come out of Chapter 11 in the first quarter of next year, he cut staff and closed one-third of the some 110 locations, including stores in Plainsboro and Trenton, letting stay those at Foxmoor in and Franklin Park. "It is evidence of the quality of the people who work for this company that we made the decision and did it within four months," says Harrison. "That built a lot of credibility with publishers. Yes, they need us, too, but they got burned pretty badly and they are a very skeptical group," says Harrison.
He scrutinized the business plan using focus groups conducted by the Connecticut-based Cambridge Group. "We spent a lot of time talking to our customers to find out whether there was a viable core business, or if the book retailing world was going to be limited to superstores and Amazon.com."
The conclusion was what any seat-of-the-pants observer could have predicted: that Princeton and places like Princeton are good bookselling locations. "We realized that our heavy niche was the heavy book buyers, people age 50 and over with above average income, above average education, a variety of interests, and time. A very small penetration of that market gives you a profitable business," says Harrison. "And assuming that a store can provide basic selection, convenience, and values, what differentiates their decision is service. They want a place where booksellers can talk to them about books."
The son of a career Army officer, Matthew Harrison Jr. went to West Point, Class of '66, and spent 20 years in the infantry and the intelligence corps. He and his wife, Judy, have two college-bound daughters. When he retired from the service he went to work for Wedtech and two months later it collapsed, scarred by scandal. Two Congressman and several other people went to jail.
"The creditors and the independent counsel needed somebody they could trust to wrap up the company. That enabled me to build a reputation in the turnaround community. I was such a novice that there was no way I could have been clever. I had to rely on being direct. It happened to be the quality that was necessary," says Harrison, who wrote a book, "Feeding Frenzy," based on the experience.
Harrison was asked by the owners of the Lauriat chain (Ing Equity Partners, a Dutch financial conglomerate) to take the firm through Chapter 11. It owed $29 million in unsecured debt, mostly to publishers.
Harrison's current business plan calls for discounts (20 percent off across the board to those who buy $10 membership cards, plus 30 or 40 percent off best sellers). His ideal stores are small (4,000 to 6,000 feet) and located in shopping centers, not malls (which are for impulse shoppers) in upscale neighborhoods. Yes, the chain has some mall stores. Yes, the shopping center at 20,000-feet is way bigger than the plan. But the shopping center store is a keeper, he says. It's got the demographics. "Clearly it is one of our larger stores and one of our higher volume stores," says Harrison.
Independence in ordering is key, says Harrison. "We are basically building a chain of independent bookstores with a centralized backoffice for MIS and inventory control, but each with enough autonomy to orient its inventory to local interest. Some stores are located next to an Asian community. Others might need a large supply of hunting and fishing books."
Mega stores have more space for inventory but they return a high percentage of their stock. A smaller store, says Harrison, can have higher "sell through" rates. "We can watch very carefully as to what kinds of things sell there and can be much more discriminating. Also, because of our computer system, we can get most any book within a couple of days."
"Inventory levels have started to get back to where they needed to be, and we will be properly inventoried for the holiday season," says Harrison. He hopes to interest an investment group, which has owned major retailers in the past, to bring the chain out of Chapter 11 by the first quarter of next year. Otherwise, he will have to use operating income to pay off the Chapter 11 responsibilities.
Encore's most senior employee, in both age and in years spent at the shopping center, has one foot in both bookselling worlds, the old and the new. Poppy Kennedy is 76 years old and has worked at Encore for five years. She remembers the old days (she actually worked for Lauriat's back then) when booksellers had to know their stock.
"That was a time I will never forget," says Kennedy, "when you had to get on a ladder and climb up to get a book. Nowadays, when the customer wants a book, you press a button on the computer," says Kennedy. "But if you know the classics, it never leaves you. `Chicken Soup for the Soul' flies off the shelf now, but my happiest times are when somebody wants to know which John Dos Passos novel to buy."
-- Barbara Fox
The new manager of the shopping center store, as of last week, is Andrew Garbarino, a 1995 graduate of the University of Delaware who has worked in two of the chain's stores. The employee with the most seniority is Poppy Kennedy, age 76, who has been there five years but had worked for Lauriat's in Boston in its pre-computer days.
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