Shawn Kuhn, P&K Books
 
Poet Robert Frost would have admired the business philosophy shared by Shawn Kuhn and his business partner Tom Pilsch. As Frost wrote, following ‘the road less traveled by’ has “made all the difference” for this pair and their successful bargain book company, P&K Books. In a recent conversation with Bargain Book News, Kuhn recounted some of the unconventional moves that have helped P & K Books prosper and revealed the “top secret” phone number he used to launch his book buying career.
 
What does P & K stand for?
The P is for Tom Pilsch, my business partner, and the K is for me, Shawn Kuhn.
 
How did you get into the bargain book business?
 
Tom and I started as a licensee of National Book Warehouse probably about 16 years ago; owning a minority position in one of their stores in Daytona Beach, Florida. We sold our interest in that store and I moved to Richmond, Virginia where I had family. We opened our first P&K Books store in Williamsburg, Virginia on April 30, 1988.
 
But why the book business? Did you have a background in books?
 
No. Basically, I had always given books as gifts. One day I went to one of these bargain bookstores and was so amazed at their prices that I bought a ton of books. I thought, “This is pretty good,” so I started investigating how I could get into the business.
 
Where are your stores located?
 
We have 12 stores on the East coast: one in New York, four in Pennsylvania, three in Maryland, two in Delaware, one in Virginia, and one in South Carolina.
 
Are they all located in similar venues?
 
Yes, all of our stores are in outlet centers.
 
Why did you decide to focus on outlets?
 
The reason was pretty unscientific. Basically, we got started in Williamsburg in an outlet center because the developer cut us a great rent deal and lent us all the money to start the store. I guess you could say we started in the outlet business by default.
The National Book Warehouse model at the time was to go into a local venue, get an old grocery store, and put in a cheap store with old grocery store shelving. The goal was to do roughly 150,000 to 200,000 in sales. We went against that model by going to an outlet area. We paid a little more in rent than they would in a traditional venue, but after the first year our sales were nearly double what they were doing in the other locations.
 
Locating a bargain bookstore in an outlet center seems like a natural fit. Why wasn’t it being done?
 
It was a natural fit but probably we were one of the first bargain book players in the outlet business. Again, we only ended up in an outlet center by default, not because of any great genius. It was due much more to the grace of God than to anything we did, which is probably the key to all of our success.
 
Have all of your stores been successful?
 
Yes and no. When we first started we went to the outlets. That was different than what the other licensees of National Book Warehouse were doing but we still had the same product. So our success was good in comparison but limited because we were still in the mold of the National Book Warehouse stores.
From the beginning, National Book Warehouse had been sourcing 100% of our books, but after we opened the third store they had a hard time getting us books. Out of necessity, I was forced to become the book buyer for our company. I think we spent about $295.00 on the very first books that we bought. We thought we were riverboat gamblers! Today, 15 years later, we are doing over $3 million in wholesale buying.
 
How big are your stores?
 
We average about 3,000-square-feet.
 
Do you sell mainly remainders, mixed skids, or promotional books?
 
About seven to 12% of our business is front line. The rest would be promotional, hurts, returns, and remainders.
 
Do you feature sidelines?
 
Yes. We aggressively started putting sidelines in our stores about two years into the business. One of the things we realized was that if we weren’t selling books today we wouldn’t close up the stores and go out of business. We are merchants and we have locations that are worthy of selling other things in the same square footage. That mindset opened our horizons to selling sidelines.
 
What kinds of sidelines do you sell?
 
We sell software, music, greeting cards, gift items, pencils, etc. The sidelines aren’t the same in each location. And just because you happen to be our greeting card vendor this year, doesn’t mean you will be next year. If we can’t achieve the dollars per square foot that we want from the cards, for example, we’ll either trim them down or get rid of them and put something else there. We’re in the tonnage business. Some of the tonnage that we sell is sidelines. At least once or twice a year I go up to 230 Fifth Avenue, which is the closeout building, to buy closeouts to be sold in our stores.
 
What percentage of your sales are sidelines?
 
I’d say safely ten-percent of sales are sidelines.
  
Were you trained as a retailer or did you have “on-the-job” training?
 
We had on-the-job training. Our MBA in the book business was very expensive! We have 12 stores now but, at one point, we probably opened about 27 stores. We found that the success to higher dollars per square foot is closing bad locations.
Neither my business partner nor I had a retailing background. We met through a campus ministry organization called Young Life. After that, we pursued other interests and then got involved with the book business together.
 
Your company has an excellent employee retention rate. Can you offer any advice on how to attract and retain quality employees?
 
We went around the room of our managers at our annual meeting this year and averaged five-and-a-half years per manager service to the company. When you consider that at least two managers had only been with us for one year, then yes, you could definitely say we have a very good retention rate. Again, this is due less to our genius and more to the fact that our company is decentralized. Our managers really are owner-operators. They make hiring-firing decisions and are responsible for the marketing and presentation of their store. Additionally, the manager buys about 50% of the product that is sold in the store. They fine-tune their particular location to the needs and wants of their customers.
 
Why did you decide to give managers so much control over their stores?
 
Conventional wisdom has always told us not to do it. But it works. Among the book players in the outlet business, we have the highest dollars per square foot. I believe that is a testament to the fact that we are on the right track with our managers.
We were just at The Spring Book Show and had vendor after vendor come up to us and say how great our managers are. I do think that we probably have the very best group of managers in the book business. They are good folks. The highest compliment that can be made to Tom or myself is when a customer comes into the store and asks the manager or one of the other employees, “Are you the owner?” I don’t need to be acknowledged as the owner. The highest flattery to me is that a customer would think that one of my employees is the owner because of the level of ownership that they take.
 
How many employees do you have?
 
We have 100 employees.
 
What is your company’s greatest strength?
 
Everybody on the store level is eligible for a sales bonus every month. So from the manager down to the part-time high school student, on any given day everybody knows what the sales goals are for that particular store. We have tried to structure our stores so that we don’t have shopkeepers – we have a store full of merchants. They all have a certain ownership.
 
What are some of the other ways you build that sense of ownership in employees?
 
Recently, we have redoubled our efforts on that level of ownership. This year we are working on a management team in the store that is a team of three. This would include the manager, assistant manager, and either third key or front end manager, depending on the terminology in the given store. We are also employing buying teams. These include the team of three plus other employees. In addition, our motto this year is “Make our store their store.” And the ultimate person that we want to “Make our store their store” is the customer. So we keep trying to bring the input and decision level down closer to the customer level.
We are also employing the statement ”Make our store their store” with our vendors to make them more involved. We’re taking our top 100 “never out of” and putting that in the hands of our vendors; giving them the opportunity to buy with an eye toward our stores.
 
What do you see as your company’s biggest challenge?
 
We’re not the same store that we were when we opened 15 years ago. We’ve had to change and adapt to the market and to the economic changes that we have faced. For example, we had no systems when we started, so we had to put in systems and training. In all of these areas, we have to continually keep changing.
I don’t mean changing for the sake of change, but being open to change as the market dictates. Though we are in the book business and we are selling books, we continually remind our managers and employees that it happens to be books that we are selling. Like I mentioned earlier, we are really in the tonnage business. Tons of books come through the back door of our store through deliveries, skids, and in boxes. We put them on the shelves and on tables and they go out of the store in smaller quantities in little yellow bags.
 
Do you view the frontline bookstores in your market as competitors?
 
If we just see ourselves as the typical bookstore, we won’t make it. We have to remember that we are in the outlet business and that is the tonnage business. Our average item sells for about $4.25. The average item in the frontline bookstore is double that. So in order for us to do high numbers and to be profitable, we have got to be moving tonnage out the door; bringing it in the back and sending it out the front.
 
Who is your biggest competitor?
 
We have some competitors where some of the big box bookstores have come into a stronger local market, for example, Williamsburg.  Because most of our stores are in outlet centers, however, they are located in tourist areas that don’t have a strong local base. The primary trade area would be 50-plus percent tourist. There are other book companies that are located in outlet centers. When we compete with them, though, we continue to have sales that are higher than theirs.
In some locations we are actually our own competition. For example, we might have two bookstores in the same town but in different outlet centers a mile apart from each other. In those centers, psychologically we don’t take as bad of a hit from the competition because if it is not going in our right pocket, then it is going in our left pocket. In fact, two of our stores that compete in the same market are the second and third best stores that we have. So competition should not have any bearing on our store sales.
 
Why do you think your stores out perform other bargain book businesses located in the same outlet centers or locales?
 
Another motto in our stores is “Inside your four walls.” What that means is that we cannot control what is happening outside our stores – the economy, gas prices, weather, tenant mix, etc. The manager can’t control those things but the manager can control what is going on inside his four walls.
In bargain books, the difference between success and failure lies with how someone looks at their business. If they have an internal look toward their business, they are successful. If they look outside of their four walls and try to make external factors responsible for their performance they will not be successful.
 
That approach relates directly to your philosophy of empowering employees at every level. Do you believe this management strategy will become more commonplace in the future at other bargain bookstores?
 
I think that if you were to interview most independent booksellers in the United States today, they would say that they very much believe the problems with the sales in their stores have to do with something outside of their four walls. We used to be more actively involved in the American Bookselling Association, but I stopped putting their materials in front of my managers. Why? Because the posture of the American Bookselling Association was that there are external forces controlling the success of your store. We decided that that was wrong.
There are not many small regional chains that started 15 years ago and are still in business. There are not many that started 15 years ago and expanded. And there are not many that started 15 years ago and are continually improving. We are where we are today because we don’t listen to what the experts say.
 
Your partnership with Tom has also endured for 15 years. That’s longer than many marriages today. How have you maintained such a strong business partnership?
 
Well, for one thing, we don’t share the same office. Our offices are about 150 miles apart. Like I mentioned earlier, we have a decentralized business. Mostly, I take care of the buying and marketing end of the business and my partner Tom takes care of the bill paying, landlord relations, and personnel. He and I are in contact many times during the day by telephone and e-mail. Probably the strength of our partnership is that we aren’t together all the time so we don’t drive each other crazy. We meet about every two weeks midway between our two locations. We have lunch, trade political musings and jokes, get down to business and then head back to our own little fiefdoms.
 
P & K Books does not have a distribution center. Why did you decide to operate without one?
 
We’re probably one of the few chains our size that does not have a permanent distribution center. We have occasionally had stores or offices that had the capacity to handle product and we would then bring that product in and distribute it. For the most part, though, we have required our vendors to accommodate our lack of warehouse or distribution center by repackaging product for us or we’d buy in bulk and then they would break it down for us. We found that this gives us a savings of about $75,000 a year. The only distribution center that we would consider at this point would be one that is attached to a store.
 
Without a distribution center, how do you maintain a good product flow?
 
One of the ways that we survive without a warehouse, and one of the things that works hand in hand with us not having a warehouse, is that Freight Management Systems has become our traffic manager. When Larry May first came to me and talked to me about Freight Management, I think we had about 14 stores at the time. I already had a very deep discount with the shippers, but I saw the value that Freight Management offered in serving as a traffic manager for us. With Freight Management, I have the advantage of a $40,000 traffic manager that I don’t have to pay for. They route product for us. For example, if I buy a trailer of books, it will be picked up from one area and they will reroute it and send individual skids to stores where the vendor was only willing to sell me a trailer at a time. They will hold product and regulate the flow of product into my stores. I could not replace their service for just the fee I am paying them in freight savings.
Freight Management is an integral part of our business. I used to do it all myself and I had a relatively good discount. I don’t even have a freight rating or discount with any trucking company today because Freight Management routes all my freight and it is far more advantageous for our company.
 
How do you purchase books – At book shows? By phone? Directly from vendors?
 
When we first were in business we knew nothing about buying. We were told that National Book Warehouse had a corner on the bargain book business and that they were the only people who had product. And since they were the people who were distributing us product at margins that worked for us, we were pleased. But as I said, when we opened our third store they didn’t have the ability to source us at a level that we needed. So I went to the shelf, found books, and then went to the phone and dialed that top secret number, 1-800-555-1212. I asked directory information for the phone numbers of these publishers and started buying hurts directly from publishers in New York primarily. Then, because we had a location, salesmen would come by.
Probably the first salesman to come to me was Bob Walker, who was with World Publications at the time. He has since become a dear friend of mine. Bob kept calling and asking me if he could come visit. I told him that I wasn’t interested but he was very persistent and showed up. Finally I told him that I still wasn’t interested but I’d give him a look. He walked away with a $2500.00 order. Years later he told me, “I knew if this is what you bought when you were not interested, then I wanted to get you when you were hungry.”
 
Do you attend any of the book shows?
 
Oh sure. We go to The Spring Book Show. We will send people to On Board. We do not go to CIROBE because it is so late in the year. All of our buying is done by that time. I attend the ABA every year and then make occasional visits into New York. We also have vendors that come visit us. I’d say The Spring Book Show would be the lead book buying event for our company. I think it is the best book show that we go to. It is the one most catered to my stores.
 
What is your favorite book, movie or comic strip character and why?
 
I love John Grisham and I am just getting into James Michener. I also share with my children a love for Sponge Bob and we can sell a lot of Sponge Bob in our stores. From Michener to Sponge Bob – I guess I am real Renaissance man.
  
Maryellen Duckett is a Tennessee-based freelance writer for National Geographic Traveler, Family Fun, and On the Road with Hampton magazines. She and her husband, Randall, are co-authors of the family travel books 100 Secrets of the Smokies and 100 Secrets of the Carolina Coast (Rutledge Hill Press).