Meeting Minutes 120919

Annual Shareholder Meeting

Seminary Co-op Bookstore

December 9, 2019

MINUTES

I. President's Report

Ken Warren, Chair of the Seminary Co-op Bookstores Board of Directors, presented the President's Report. His remarks are excerpted below.

 -This is the first meeting as a nonprofit corporation in the state of Illinois

-Jeff’s 5-year anniversary

-This is an opportunity to hear directly from community about the recent changes and the process going forward

-Transitions on the board: cycling off: Stuart Flack; Mark Hansen; Julie Peterson 

-Board made decision to renew Natalie Moore, Nicholas Pearce, Martha T. Roth, Connie Spreen  

-Election to the board for the first time: William Howell, Robert Scales, DeWitt Scott

-Elected a new executive committee: Katie Parsons, Julie Getzels, Erin Adams; KW remains as president

-The transition to cultural institution (and, more importantly, ability to speak clearly to others about it)  was made possible by the extraordinary effort of Alex Houston, Marketing Director; she has enabled us to see the possibilities for a bookstore devoted to engagement with authors, other readers, books speaking to other books; her effort has made this vision into a reality; having the right person in the right place at the right time can mean so much to an institution; speak on behalf of the board in expressing sincere gratitude and admiration for the leadership and vision

II. Director's Report

Jeff Deutsch, Director of the Seminary Co-op Bookstores, presented the Director’s report.  Jeff’s remarks are excerpted below.

A. Opening Remarks

It’s such a pleasure to be with you this evening. If we haven’t had the opportunity to meet, my name is Jeff Deutsch and I have been the director of the Seminary Co-op Bookstores since 2014. I can’t believe it has been five years since I first spoke to you in this capacity. You’ll forgive a bit of nostalgia as I mark this anniversary tonight.

As you can see from your handout, and the graph portraying our sales increase over the last five years, we have quite a bit to celebrate as a community. I will share news of our successes, detailing some of our recent structural, financial, and cultural accomplishments. And I will share some thoughts about the tremendous challenges we face as we begin a new chapter in the history of these stores.

The single most important achievement is our recent transition from a DC Cooperative to an Illinois not-for-profit corporation. On May 22 of this year, 70 of us stood in this space and unanimously voted to empower the board to explore and complete such a transition. And, after considerable legal and bureaucratic work, the establishment of the first not-for-profit bookstore whose mission is bookselling was complete. We will speak further about this monumental event later this evening.

Before we get too far along, I hope you will indulge me in the expression of gratitude for a small sample of the volume of booksellers whose devotion to this noble profession has helped ensure our survival.

I would like to begin with a thank you to the team that worked closest with me to continue the fine work that John Modscheidler, Jack Cella, Richard Barnard, Katy O’Brien Weintraub, Rodney Powell, Heather Ahrenholz, and so many wonderful booksellers alongside them, established as the standard for these stores. 

Booksellers like Kasia Bartoszynska, Muriel Bernardi, Miranda Pettengill, Mackie Szymanski, and Jeff Verlanic, alongside store leaders such as Conor Bean, Franny Billingsley, Sonja Coates, Stephanie D’Hubert, Kevin Elliott, Rob Fuller, Malia Haines-Stewart, Evan Higgins, Imani Jackson, Erin Lamb, Freddie Lipmann, Mark Loeffler, Bryce Lucas, and Marina Malazoniya were, are, and will always be the heart and soul of the stores. Their enthusiasms are contagious, and the ten thousand unromantic, unrecognized, and underappreciated acts of diligence, kindness, and schlepping create the magical browsing experience that remains the goal of all of our efforts. 

Colin McDonald, marketing manager and Alena Jones, operations manager, both joined us in 2015. If, like me, you are a fan of our podcast, Open Stacks, you will recognize them as the voices of the Front Table segments. Their wit, generosity, and ability to articulate the subtleties of what makes browsing these stacks such an encounter have inspired so many of our friends in the neighborhood and the diaspora.

Adam Sonderberg has been visiting these stores since he was a child and, when he agreed to take on the role of Seminary Co-op Manager in the fall of 2014, I couldn’t have been more excited for him to return home. Distinguished by his empathy, commitment to these stores, and to developing the passion and work ethic of other booksellers, Adam has done a tremendous job over the last five years. He has raised up a generation or two of world-class booksellers and has been a role model for young booksellers throughout the country. 

Again, any success we have had as an institution was due to their dedication to the mission of these bookstores and the communities they serve.

Alex began as a bookseller from 2009-2010. She returned as a bookseller in 2013 and was promoted to lead the newly established marketing department in October, 2014. Since 2014, Alex has overseen tremendous growth and great success, including:

-A growth in author events from ~50 per year to over 600, including Nobel laureates, Pulitzer winners, MacArthur Fellows, a former president and first lady

-Working with developers to create a new Seminary Co-op website

-The establishment of our podcast Open Stacks in the spring of 2017 which has been downloaded 67k times and has released nearly 100 episodes in over 50 countries

-The successful staging of two non-gala galas, raising over $50k in gifts to the Co-op

-Integral leader of the team who helped 57th Street Books win the Pannell Award for excellence in children’s bookselling – the most prestigious award for children’s bookselling in the country

-A commitment to design, in partnership with Adam Sonderberg, Seminary Co-op Manager, developing a new visual identity for the stores, wry and witty posters and advertisements, and items like Marshall Sahlins t-shirts and trading cards

-The development of promotions that help bring important voices to the general public, including our Adorno-a-day celebration, among many others

-Great wit, tremendous intelligence, unparalleled diligence, and a profound commitment to the work of the Seminary Co-op Bookstores

And, as Ken already noted, Alex Houston has made an outsized contribution during her tenure as marketing director. I hope she won’t mind my sharing an excerpt from her cover letter when she first applied for the job in September 2014. “my experience at the Co-Op,” she wrote, “doing work that I love… has resulted in an ever-deepening interest in and knowledge of the dynamic state of 21st bookselling…. Despite – or, indeed, in part because of – the frustrations I have felt with the stores in the past, I am steadfastly convinced of their extraordinary potential, and I am confident that my knowledge, experience, and tireless devotion to the Co-Op’s core mission and message would be invaluable in realizing this promise.”

Alex, you were right. Your knowledge, your experience, your tireless devotion to the Co-op’s core mission, not to mention your wit, your high standards for me and the rest of our leadership team, and the clarity of your moral compass have been invaluable as the bookstores have realized their promise. You are one of the most brilliant and talented colleagues I’ve ever had the opportunity to work with and I am so grateful for the privilege to serve by your side these past five years.

Please join me in acknowledging Alex’s contributions once more.

Lastly, I would like to introduce a couple of new leaders who will be working closely with me and the team I just acknowledged to lead the bookstores into our bright future.

This past fall we have had two accomplished professionals join me as directors of these stores.

Clancey D’Isa was promoted to marketing director last month. Clancey joined the bookstores in early 2018 when she quickly distinguished herself as a principled and critical thinker with a profound commitment to the art and practice of bookselling. She most recently served as the manager of 57th Street Books, where she was an integral part of the team that received the Pannell Award for excellence in bookselling (about which I will share more presently). After graduating from the MAPH program at the University of Chicago, she worked with Browne & Miller Literary Associates, where she learned “to respect the process and value of creative work and those who undertake it.”

Her ability to create community, and to do so with confidence, curiosity, enthusiasm, and a spirit of service made Clancey the obvious choice to help lead the Seminary Co-op Bookstores into the future. If you know Clancey, you know she is a visionary, empathetic, collaborative, and thoughtful professional. Her commitment to excellence in her own work and the institutions’ work has already shifted the character of our internal culture and I look forward to continuing to learn from her fortitude and insight.

Please join me in welcoming Clancey to her new role.

After a thorough and tremendously successful nation-wide search, Jenny Clines was appointed to serve as our first operations director. Jenny spent the last eight years at Politics and Prose – one of the finest bookstores in the country. Jenny played an instrumental role in hiring, training, directing, and leading the managers and booksellers whose work has established their stellar reputation. In addition, she oversaw the planning and logistics of large offsite festivals, especially the National Book Festival, to which last year, Politics and Prose brought 70 booksellers to serve over 200k readers, selling more than 17k books in one day! 

As we conducted the search for our new operations director, we of course sought a high level of professional accomplishment; success in strategy, organization, and leadership were of critical importance. But we also hoped to find someone who understood the character of the stores and someone whose qualities reflected the aspirations of our stores’ leadership: collegiality, keen listening skills, a steady temperament, operational creativity, an appetite for experimentation, a tendency toward reflection, a spirit of benevolence, and a commitment to the mission of our bookstores and our communities. I fully expected to compromise on some of the elements we outlined when describing our ideal candidate, but because Jenny answered the call, no compromise was necessary. 

Like me, Jenny moved to Chicago for the sole purpose of helping steward this institution. Please join me in welcoming Jenny to our community.

B. Cultural Accomplishments

We hosted or supported 671 author events last year, serving over 68k patrons. This reflects a 21% increase in the number of events and a 28% increase in attendance compared to last year, and a 257% increase in number of events and a 656% increase in attendance compared to FY14-15.

Our Open Stacks podcast launched in the spring of 2017, has released nearly 100 episodes and has been downloaded 67k times in over 50 countries. It has featured Pulitzer-prize winners, National Book Award winners, and MacArthur fellows, not to mention dozens of our local authors, scholars, and booksellers.

Our children’s department sales continue to increase as we continue to expand the selection. We sold ~$397k worth of children’s books last year, which is a 60% increase over FY14-15. In addition, 57th Street Books received the 2019 WNBA Pannell Award, the most prestigious award in children’s bookselling in the United States, in recognition of “bookstores that enhance their communities by bringing exceptional creativity to foster a love of reading and books in children and young adults.” 

Quantum leap forward with website. Recognized a 3-fold increase in web sales; coursebook tool; virtual front table.

C. Financial Trends

Sales were up 8.4% or ~$267k compared to last year and 39% or ~$975k compared to five years ago. American bookstore sales over the last five years, as reported to the US Census Bureau, decreased by 7%.

But this doesn’t tell the whole story. While our success over the last five years far exceeded my and the board’s expectations of what was possible, not to mention likely, there are two critical challenges we still face.

As you can see from a view of the last fifteen years, while we have grown by 39% over the last five years, we had lost 54% of our business between 2004 and 2014. While I don’t anticipate getting back to $6 million in annual sales any time soon (at our height, in the 90s, our sales reached closer to $10 million), our hope is that through fundraising and perhaps monetizing other activities, like our podcast, we could continue to see growth rather than the decline the industry is seeing overall.

The second critical challenge is our bottom line. Our operating loss increased 8.5%, from ~$257k to ~$278k. There was a minimum wage increase last summer (2018) of 9% (and another this summer (2019) of 8.3%). We also expanded our healthcare benefits to staff last year, accounting for $10k of the increased expense. In the last five years, minimum wage increased 57% in Chicago, and it will increase another 15% by 2021. That accounts for an 82% increase over seven years. And, to be clear, even at $15 per hour, booksellers are vastly underpaid for their work.

And this is just one element of a much larger and potentially devastating reality in the book industry. It is one of many things that makes it so hard to succeed in the book industry. 

Q: Why hasn’t the increase in sales covered the operating loss? 

A: We are trying to scale up -- the money has gone to growing the programs (events, podcast, etc.) -- but it will take a while for the changes to settle.

Despite a topline growth of 39% over the last five years, we have only seen a 10.1% improvement in our bottom line – a savings that I anticipate will only increase over time.

D. A Not-For-Profit Bookstore

I shared comparisons with you last year, noting how our stores differ from those of our peer bookstores, all of whom are bringing culture and unquantifiable value to their neighborhoods. I spoke to the vast differences in our numbers compared to other independent bookstores, all of which are unprofitable and culturally enriching decisions. (To be clear, the independent bookstores against which we are comparing our numbers, have very similar struggles, but they, at least, are realizing a small return on their sales.)

What makes the numbers so difficult is that books comprise 98% of our total inventory across the two stores (and 99.5% of the inventory at the Co-op) compared to an industry average of 81.7%, the balance of inventory comprised of significantly more profitable tchotchkes; that our book margins are 37.7% compared to an industry average of 45.3% due to our high volume of academic and scholarly books; that our books sell slowly, sitting on our shelves for 280 days compared to 133 days; and that our payroll as a percent of sales is 32.2% higher than the industry average – and you heard what we pay.

I also shared what I think is the most telling number: 57%. 57% of titles that sold at the Co-op last year, sold one copy -- we sold 28k total titles, 16k of which were unique sales. We look closely at approximately 30k (~300 Front Tables) new books published each year and over 30k additional books that sold throughout the year. We carry approximately 100k titles. That means, amid all of the noise and all of the decisions to bring in books, we made 16k correct decisions on behalf of a single member of our community.

The fact is, in the 21st century, no one needs bookstores to buy a book. There are cheaper and easier ways to buy books, if you don’t tabulate the hidden costs. But it is our belief that bookstores are as essential as ever to an educated, inquiring, and informed citizenry. We are proud to forge one particular path forward, one which privileges the browsing experience,  books that sell slowly because they are written for the deliberate, books whose value endures, and whose audiences, while modest perhaps, are committed to the life of the mind and the spirit of inquiry.

And that is what you have accomplished with us this year. Booksellers and Hyde Parkers are averse to change. But we recognized the need to be dynamic in stewarding this institution and the need to acknowledge that the governance model established in 1961 and the industry established in the late 20th century would no longer support our bookselling model. We recognized the urgent need to meet the current moment and imagine an alternative path forward. We achieved something special, with the potential to revolutionize the bookstore writ large, bringing it into the 21st century, but most importantly, the potential to ensure we establish a strategy for the future of our particular stores.

The Corporation’s purpose is to stock and sell a wide variety of books that provide cultural, literary, and intellectual value to its distinctive and engaged worldwide community of readers. The Corporation shall do this by maintaining an eclectic collection of titles not readily available elsewhere and by promoting a culture of informed book-buying through an array of events and vibrant discussions.

Again, our not-for-profit is the first in the country whose mission is bookselling. In establishing an institutional structure that supports our mission, we have also established a new channel for publishers to consider as they reimagine the industry with us.

E. Support Opportunities

Five years ago I stood up here and asked for your assistance as ambassadors. I asked you to advocate on behalf of this business with the same passion that you would if you were the sole owner. As we have expanded our community and shifted to a not-for-profit bookstore, owned by the public, not just shareholders, your work on behalf of these stores remains of critical importance. We won’t survive without you.

I’d like to close with a thought about value and worth. Lewis Hyde, in his 1983 book, The Gift, contrasts the giving of a gift to the selling of commodities. In his analysis, “a commodity has value and a gift does not. A gift has worth.” He goes on to explain the distinction: “I mean ‘worth’ to refer to those things we prize and yet say ‘you can’t put a price on it.’ We derive value, on the other hand, from the comparison of one thing to another.”

We are currently running a pay-what-you-want sale. We are occasionally gifted libraries and we, in the spirit of the gift, pass them along to our community. You can see some of Alex’s handiwork in these – I guess you’d call them “ads” – for the sale. You can’t put a price on that which provides enduring meaning or fulfils a moment’s promise. Simone Weil tells us in Gravity and Grace that “stars and blossoming fruit trees: utter permanence and extreme fragility give an equal sense of eternity.” That which endures and the ephemeral give us an equal sense of eternity. Our hope is that the browsing experience we create in our stores, and the community they foster across time and in the present moment, might occasionally create meaningful experiences that are as priceless and incomparable as the books we sell; and that these experiences might evoke Weil’s stars and blossoming fruit trees.

Thank you for your time and thank you for all that you do on behalf of these stores.

III. Q&A

Jeff opened the floor to questions.  Below are excerpts of the ensuing discussion:

Q: How are you defining cash on hand?

A: That is our bank account balance. Yes, we also have a line of credit. 

Q: How would payroll be met if, say, there is a flood?

A: I am sleeping better now that we are a not-for-profit. I am confident that we have more options to us with things like the payroll. Call in favors, pass around a tin cup, lines of credit--those are our options. One of our goals as a NP is to provide for situations like this. We are pursuing things like endowments, though it’s not clear that that in particular is an option.

Q: How are the normal wear-and-tear expenses, like building damages? 

A: Yes, we have not been able to replace or clean everything we’d like to.

Q: Are we now in the midst of our non-gala gala campaign? 

A: We held our second Non-Gala Gala this year. The playful monthlong email campaign invited customers to help make our stores stronger, more robust cultural strongholds by staying home, reading a book, and giving a gift to support our bookstores. We raised over $20k through the initiative, with contributions coming from over 150 individuals. Gift cards and shopping, downloading, listening to, and rating the podcast are all ways to help. 

Q: What role do coursebook sales play in the current situation?

A: When I talk about the decline from ~$10 million to under $3 million, a significant portion of that is textbooks. That our textbook sales have increased in the past 5 years is a huge testament to the work of our texts department. The industry overall is trending downward. More important, it’s the first interaction that so many of our most devoted community members have. That experience is tremendous value. Accounts for about ~$750,000 in sales. Very small margin on most of these books. 

Q: Since we’re now a NPO, what kind of opportunities would there be for sponsorship? Sponsor someone to clean the carpets, replace 

A: We are not a 501(c)3, so all donations are gifts without tax deductions. And anyone in fundraising will tell you that unrestricted funds are far, far more desirable that funds given for specific purposes.

Q: Why not be a 501(c)3?

A: There are a number of reasons we did not opt for this. It is nearly impossible to achieve. We’d have to convince the IRS that we are different from BN or another bookstore. We are not in it for the tax incentives--we are okay with paying taxes. There was no model for this, so it didn’t seem like a possibility. If we’re able to affect the industry as we hope, maybe the IRS will see a reason to create a new category for us. Right now, we don’t fit into any of their categories.