Last week, Shelf Awareness ran a short bit about the precarious state of Shaman Drum Bookshop’s finances. This was based on a letter that owner (and Open Letter advisory board member) Karl Pohrt wrote for the Ann Arbor Chronicle. Rather than rehash what was said, or speculate about the Shelf Awareness piece, here’s the full text of Karl’s letter. It’s pretty bleak:

What Happened?

This fall and winter Shaman Drum Bookshop went into a steep financial decline. Text book sales declined 510K from last year. We managed to cut our payroll and other operating expenses by 80K, but that didn’t begin to cover our losses.

There was some good news. Our trade (general interest) book sales on the first floor were actually up in December from last year by 10%, which is extraordinary given what many other retailers were reporting. And trades sales in January were up 15%. Still, this hardly compensates for our losses in textbook sales.

The evaporation of our position has been astonishingly swift. We had been holding relatively even financially until September. Suddenly we’ve moved into the red.

I sort of saw this coming.

In July, 2004, the National Endowment for the Arts published Reading At Risk, a report detailing the decline of literary reading in America. This was followed by a second report in November, 2007, To Read or Not to Read: A Question of National Consequence, chronicling “recent declines in voluntary reading and test scores alike, exposing trends that have severe consequences for American society.”

Around the same time the NEA reports came out, I audited a UM course on the History of the Book in which I learned that every 500 years a major technological shift occurs. Five centuries ago Gutenberg invented (or perfected) moveable type. Now, with the digitization of print, we find ourselves in the middle of another sea change. I recall wondering what the new business model for bookstores would look like, and I worried that our industry would suffer from the same chaos roiling the music world.

And a few years ago the University Library held a conference on Digitization. I was invited to be a panelist and I defended the traditional book as still the most efficient technology for delivering information. I also said I was worried about collateral damage during our forward march into the joyous digitized future. I’m no Luddite, but everyone there seemed to me to be hypnotized by the new technology. Of course, it is dazzling.

In my own retail neighborhood I’ve watched the collapse of Schoolkids Records, an awesome independent record store, due largely to the impact of digitization, and it looks like I’ve got a front row seat on another sad decline. Borders Bookshop, which I think at one time was the best general interest book chain in the English speaking world, is a shadow of its former self and seems headed for oblivion.

Early this fall I told a group of booksellers that our industry (including the publishing sector) had a business model that didn’t work very well for any of us. A few of the booksellers said they didn’t think this was true, the others were silent.

Two weeks ago I met again with booksellers and publishers from around the country at the American Bookseller Association’s Winter Institute. Now everyone seems to agree that the book business is in trouble. The disintermediation resulting from customers migrating to the internet coupled with the frightening economic crisis makes it terribly difficult for us to see a way forward.

The crisis at Shaman Drum Bookshop is due to our loss of textbook sales. This fall the university introduced a program which allows professors to list their textbooks online, which effectively drives a significant number of students to the internet. It is impossible for local textbook stores to compete under these circumstances. I don’t think there are any villains here (well, maybe some greedy textbook publishers), but this is one of the consequences of the university’s policy.

The efficiencies of Amazon—even given the clever algorithms that bring us if you like this, you’ll like that—are no substitute for browsing in a bookshop.

In 1942 the economist Joseph A. Schumpeter said, “Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in. . . .” This is our system and Schumpeter is undoubtedly correct, but there is a countervailing fact that is equally true: Stability is essential for a civilized society. The second truth is what I’ve learned selling books in this community for forty years, being married for thirty-seven years and raising two children.

It also seems to me that if we are witnessing the collapse of Big Capitalism, the way to revitalize the economy is through supporting locally owned businesses. If you agree, please lend your good energy to Think Local First, the movement supporting locally-owned independent businesses in Ann Arbor and Washtenaw County.

What Is To Be Done?

Shaman Drum Bookshop is around one hundred steps from the central campus of the University of Michigan, one of the top ten public universities in the world. I believe the university community and Ann Arbor citizens who love literature need a first rate browsing store for books in the humanities in the university neighborhood. This is what we aspire to be.

However, as I mentioned earlier, it has been clear to me for a while now that the current model doesn’t work. In March 2008 I announced my wish to give the bookshop to the community. I hired Bob Hart, a recently retired Episcopal priest, to research the feasibility of forming a nonprofit bookshop. We wrote up a careful business plan, met with a good lawyer, filled out the IRS forms and submitted our papers in July. In November the IRS notified us that our application was still under consideration. The review is taking longer because a for-profit business is a component of the project.

The new entity is called the Great Lakes Literary Arts Center, whose mission is “to develop excellence in the literary arts by nurturing creative writing, providing quality literature and fostering a literate public.” We’re already hosting two classes in the store. If we do not survive this downturn, I hope the Great Lakes Literary Art Center will continue under other auspices. It is a good idea.

Last week I consulted a lawyer and a financial advisor. They both felt the store could manage the debt load with some temporary help from our friends and a bit of luck. My landlord, who is a decent man, will allow us to keep our first floor space, vacating only the second floor of the building.

The issue now is this: After we scale back the store, do we still have a viable business? I asked my business manager to crunch the numbers based on our projected sales for the next two years. He reported back that we do not have a sustainable business model. Given our current sales projections, we will continue to lose money.

This means very simply that we would need additional revenue sources/streams to make the store viable.

For many booksellers-certainly including me-this is our darkest hour. I know this sounds melodramatic, but that’s the way it feels to me in the middle of the night when I’m trying to figure out how I can possibly make this work.

If I can’t figure this out, the most realistic and responsible thing I can do is shut the store down and move on.

The question then becomes: What is the next version of a bookstore? This is something worth thinking about carefully. Like you, I want to live in a community that has many good bookshops. But then I’ve been spoiled living in Ann Arbor.

Whatever happens, I am filled with a sense of gratitude for having been able to sell books in this town for the past 29 years. It’s been absolutely wonderful.

—Shaman Drum Owner, Karl Pohrt.

For those who are interested, a pdf of the Great Lakes Literary Arts Center strategic plan is available online. And Karl can be reached at pohrt at shamandrum dot com.