In some ways, the story of Better World Books reads like a 21st-century fairy tale.
Once upon a time, there were three young entrepreneurs—Christopher “Kreece” Fuchs, Xavier Helgesen and Jeff Kurtzman. When they graduated from Notre Dame in 2001 and went out to seek their fortunes, they found that dark forces—corporate greed, a ravaged environment and the dot-com bust—threatened the land. Jobless but resourceful, the former O’Neill Hall roommates sold their used college textbooks on the Internet to scrape together some cash. Then they ran a book drive to benefit the Robinson Community Learning Center in South Bend and stumbled upon a miraculous business model that turned donated textbooks into dollars for a worthy cause.
In 2003, the friends entered their idea for a new company in the Notre Dame Social Venture Business Plan Competition sponsored by the Gigot Center for Entrepreneurial Studies. With the help of a fairy godfather (IrishAngel mentor David Murphy, ND ’80) and some magic beans (the competition’s grand prize of $7,000), they fulfilled three wishes. First, they created a profitable business that generated 130 full-time jobs with benefits for its employees—85 percent of whom are under age 30. Second, they channeled some $3.5 million of revenues toward literacy projects around the world. Third, they rescued hundreds of thousands of unwanted books from landfills by selling them online, re-donating or recycling them.
“From the very beginning, we realized that there was a lot of unrealized potential in these old books,” recalls Fuchs. “People were throwing away books, so we said, ‘Let’s make something good come out of it. Let’s try to do this full time, meeting the opportunity that’s out there.’”
Growth and Innovation
In the four years since its co-founders planted their seed money, Better World Books has grown by leaps and bounds. Organizing book drives on more than 1,200 college campuses and spearheading collections from 850 libraries, the company has collected a total of 10 million books. Each day, Better World receives about 20,000 books at its enormous Mishawaka, Ind., warehouse, which has an inventory of 1.8 million volumes. They sell about 5,000 books daily to customers shopping at Amazon.com, Half.com and 14 other Web sites, and ship to 180 countries around the world.
After a whirlwind first year, the young owners approached their mentor David Murphy, a 25-year veteran of corporate operations, finance and mergers and acquisitions, and asked him to join the company as president and CEO. “This was a company that had the ability, as it scaled, to make an incredible impact on literacy and the environment,” says Murphy. “You also had a model that could be self-sustaining from a business point of view. I thought, ‘Wow, how cool is this?’”
Two innovations have fueled the machine. The first is a proprietary software program called Indaba, which allows Better World Books to sell across multiple marketplaces and price books optimally based on what competitors are selling them for, their condition (if used), and the number of copies already on the shelf. Indaba automatically generates new prices for books every 24 hours; it tracks orders and keeps records for every customer.
“When you get to that level of complexity—offering the same book in 16 different places at 16 different prices—there’s a lot of software that goes behind the scenes,” explains Helgesen, who works from San Francisco as chief information and business development officer. “Even when we were really small and didn’t have much money, we contracted with a Russian company to start writing software for us, based on my design, to essentially automate every aspect of our business. The software didn’t exist to meet our business plan, which was that we would sell a tremendous number of books online and do it very efficiently, at a low cost per item.”
A second innovation of the business model is that it taps into the idealism of college students, who donate most of the titles—including valuable textbooks—in Better World’s inventory. “The company obtains books that are no longer wanted so their inventory costs them nothing,” explains Richard Davies of AbeBooks.com, a Canadian bookseller. “They also pledge to give a percentage of their profits to good causes and that’s a powerful marketing tool in an age where ethical retailing is growing in importance.”
Helgesen adds, “The best innovations you’re going to see in the next 10 years—and I think we’re on the forefront of that in a way—are businesses that combine offline and online in new ways. We are really 100 percent offline when it comes to getting books in the door. Acquiring the books is still relationship driven; it’s physical and it’s all about shipping, warehousing and logistics.”
At the same time, sales happen online using highly automated technology, eliminating the need for a costly retail storefront. Customers can get free, cheap or “carbon-free” shipping, which is a plan through which the company purchases credits to offset the pollution caused by delivery. Buyers can choose titles and earmark spending to benefit a favorite nonprofit literacy project. For now, the sum of all these parts gives Better World Books a unique niche in a volatile, competitive marketplace.
The ‘Y’ Factor
Most fairy tales have young heroes, and this story is no different. The co-founders of Better World Books turn 28 this year, and their youth has been a factor in the company’s success. Professor James Davis, who directs the Gigot Center, taught Helgesen as an undergraduate. “He was very entrepreneurial and always on the edge,” Davis remembers. “He always had ideas that shook things up.”
While cofounder Jeff Kurtzman has moved on to other opportunities, Helgesen and Fuchs are passionate managers who personify Generation Y’s approach to work and entrepreneurship. “They don’t know what isn’t possible,” continues Davis. “They have a different attitude toward risk because they have less to lose. They have energy and the willingness to spend hours—and nights—without sleep, working on a deal. And they are creative and know where the cutting edge of technology is, because they’re using it. As a result, they dream things that we won’t ever dream.”
A visit to the company’s Mishawaka warehouse reveals that this is not your father’s book business. Salsa music blares over loudspeakers as employees stack boxes of books. They scan new arrivals into the computer at homemade workstations built from plywood, recycled library carts, Linux boxes and boat batteries. A sign in the shipping department urges staff to “prevent bummer boomerangs” (that’s 20-something speak for returned packages) by getting the customer’s address right.
Fuchs, the chief operating officer, comes to work in tennis shoes, a windbreaker and a baseball cap. “I may be the least shining example of dressing like an executive,” he laughs. “We definitely don’t have a dress code here except requiring close-toed shoes for safety. We don’t really care about appearances. It’s written in our handbook—we don’t care if you have a nose ring or a horn attached to your skull or some other crazy thing. We value and try to measure performance fairly, based on what that performance is.”
At Better World, there are costume dress-up days and employees sometimes play Frisbee or Wiffle ball in the parking lot during breaks. “This is a place where you hang out with your co-workers in your free time,” says Fuchs.
While office culture is laid-back, the co-founders are intense, serious and knowledgeable about every aspect of the business. That said, when Fuchs is asked to compare the workplace he created with others he has known, he struggles for words. The explanation is simple—he’s 28, and this is the first real job he has ever had.
The Virtuous Amazon
When it comes to their jobs, Professor Davis says many twentysomethings want a good place to work and a workplace that does good. Better World Books is striving mightily to provide both. Employees get benefits such as health insurance, paid vacation, book discounts and 401(k) matching contributions after 90 days on the job. Equity ownership is offered after one year, and workers can increase their earnings over time through an incentive compensation program that rewards productivity. A companywide profit-sharing plan will launch in 2008.
But financial incentives are only a part of what helps the business attract and retain young employees. Flexibility is also appealing; managers can work from cell phones and laptops and keep any hours needed to get the job done, rather than following a strict 9-to-5 schedule. “The ideal job is an opportunity for continual learning,” adds Fuchs. “That’s what keeps people here challenged. What motivates them is not money so much as challenging, fulfilling work. People like the mission of the company. They feel that when they work here, they’re doing more than earning profits for shareholders.”
So far, Better World executives say that most of their profits have been plowed back into the company. But some $3.5 million has been raised for educational institutions, nonprofits and libraries around the world. Half-a-million books have been donated to needy organizations—mostly in Africa—and more than 5,000 tons of books have been recycled. The company recently joined a group of “B Corporations,” which aims to balance social, environmental and economic benefits (hence the “B”) for their stakeholders.
It was also recently recognized with a Fast Company/Monitor Group Social Capitalist Award.
Looking ahead, Better World Books wants to build a more direct relationship with its customers rather than reaching them randomly through Amazon.com and other Web sites. “We think there’s a huge opportunity to build BetterWorld.com into much more of a national and international brand and say, ‘Hey, this is the virtuous Amazon. This is the bookstore for literacy,’” explains Helgesen. “People who shop with their values first are not a small percentage of the market—they’re huge. It’s millions of people around the world.”
Will Better World Books live happily ever after in the competitive arena of e-commerce? According to Better World Books CEO Murphy and Professor Davis, the big challenges will be retaining talent and managing growth and inventory in a constantly shifting marketplace.
Better World has become a leading seller in a relatively short period of time, amassing a large inventory and outperforming rivals with far greater experience, according to Davies of AbeBooks. Direct purchases from BetterWorld.com have increased to 14 percent of total sales, but the company still relies on other vendors to sell its inventory. Most importantly, it is just one of many challengers hoping to snag a segment of market share from Amazon.com—whose media sales (including books, music, DVDs and more) hit $7 billion last year.
“Our revenue is up a factor of 850 times from our inaugural year and is now approaching $20 million annually after five years in business,” says Murphy. “But even though we are one of the top used book sellers on Amazon, we are still just a small drop in the bucket in terms of online market share—probably 1 percent.”
“The giant crystal ball question is, ‘What will the used book industry look like in ten years?’” adds Darin Sennett, director of web stuff (yes, that’s really his title) at Powell’s Books in Portland, Oregon, which shares a customer base with Better World Books. “Are ebooks going to destroy everything? Where will the used books come from, who has them and how do you get them?”
Intense competition can bring down even the mightiest e-warrior, according to Albert Greco, a Fordham University professor who studies the online book industry. “More and more consumers are buying online, but more and more companies are selling there,” says Greco. “Retailing is a tough business and not every company with a great product will make it. The market tests you every day, and it tests you in ways you can’t anticipate.”
With room for more than 2 million volumes in its warehouse, a growing base of socially minded suppliers and customers, and what Murphy calls “a wonderful chemistry of smarts and scrappiness,” Better World Books may survive the challenge. “I think as long as they continue to focus on the customer, they will continue to grow and succeed,” says David Scott, senior manager of Books Marketplace at Amazon.com. “Another key factor, of course, is their ability to source inventory to sell, and there, too, they seem to have found a model that works well.”
But if the business can’t thrive forever, that may be OK, too. “We’re not afraid to dream big and make it happen,” says Murphy. “At the same time, there’s a healthy tolerance for risk, and an attitude that says, ‘Let’s just try it and see what happens.’”
The founders of Better World Books say failure isn’t a likely ending to the story. “There’s nothing certain in this industry,” Fuchs admits, but “when it comes down to the dreams that I have for this company, [it’s] to make an impact on the world and to build a great company. And by great, I mean one that’s a leader not just in the industry but in terms of our responsibility to our stakeholders—the environment, the community, our employees and our shareholders. The more we’ve grown, the more I realize what we have an opportunity to do. It’s an exciting thing to be part of a company that’s blazing that path.”
—Elizabeth Station is a writer based in Evanston, Illinois.
—Photos by: Matt Cashore (ND ’94), Art Hansen Photographic and Better World Books