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I understand lots of people will want to paint this as a sweeping indictment of minimum wage hikes overall but all of us here should know better than to generalize from one sample, especially one as skewed as this.

Here, we have a business that:

1. Is in a market that's been declining for decades.

2. Is in one of the most expensive cities in the United States.

3. Has a product with an essentially fixed price.

4. Sells a "commodity" product: the book you get from there is indistiguishable from the same book bought elsewhere. (Of course, the overall book buying experience is unique.)

5. Sells a product that has a digital alternative rapidly rising in popularity.

6. Is in the number #1 city in the entire world for people predisposed to prefer digital alternatives to things.

They may as well have been a cash-only store for horse-drawn carriage accessories. I'm sad they're closing, but it's amazing they lasted as long as they did and says next to nothing about large-scale economic policy.

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This reinforces the point made by people who oppose the minimum wage.

The argument opposing the minimum wage is not that it hurts businesses equally, but that it focuses the pain on businesses and workers at the margins. Here we have a business that for all the reasons you point out is a marginal business, and this price shock pushed it over the edge.

It should be somewhat tautologically obvious that the businesses who have the hardest time absorbing a price shock like the minimum wage are the ones that are struggling already. This can be ignored with regard to large-scale industrial policy only if you feel there is no value in marginal industries. But keep in mind that almost all businesses go through "marginal" periods eventually, either on the way up or the way down (or both, sometimes multiple times).

If they have a strong argument that they will be able to come back after being marginal, they can take out a loan or seek investment.

Otherwise, it's just a matter of delaying the inevitable.

It's not inevitable without additional burden of minimum wage increase, it is inevitable with it There's a level of expense where the business is viable, and the level of expense where the business is not viable, and no investment or loans are going to change that - investments/loans are temporary measures, they do not change the income/expense balance. The only way investment could help is if it could either reduce the expenses long-term or increase the income long-term, this was not possible. In that situation, increase of the expense brought by minimum wage rise took the business from the point of being viable to the point of being non-viable, just as any increase of the expenses that can not be avoided would.

>It's not inevitable without additional burden of minimum wage increase

Why not. Inflation doesn't increase on product evenly. If book sales prices do not inflate, but property and fuel costs do expenses increase but profits do not.

I don't buy this. All the parties directly involved - the owners, the present employees, the landlord, and the customers - seem to be in a steady state. It's impossible to predict how long a small business like this might continue; there are still cobblers in San Francisco. Unlike large businesses, small proprietorships can survive in the margins for long periods.

Also: If you shoot someone, you can't defend yourself against murder by saying "his death was inevitable anyways".

Your previous point was about marginal businesses rebounding. My point was that if a marginal business is likely to rebound, they should be able to secure a loan or investment to get them through a price shock, such as an increase in the cost of goods sold, or a fall in demand, or an increase in overhead.

Perhaps we differ in our understanding of the meaning of "marginal business"? Do you anticipate that a book store operating at the margins of profitability will weather all price shocks, legislated or otherwise, indefinitely? I do not. I would consider a marginal, struggling business's demise to be inevitable unless it is able to recover and become a thriving enterprise.

A particular price shock may be the last one the marginal business is able to weather, but it's more like the last wave in a long storm drowning a business, not a bullet to the head. You can blame that last wave, but the truth is that at some point, you need to be able to float.

Regarding the impossibility of predicting how long this business might continue with no meaningful profit margin: I would argue that Poisson distributions are pretty well understood at this point.

if a marginal business is likely to rebound, they should be able to secure a loan or investment

This is not necessarily true. A more accurate statement would be: If a business is likely to repay an investor at a reasonable market rate (discounted for risk), it should be able to secure a loan or investment. These are not necessarily the same thing, especially in a business where "success" may be defined by the owners as merely holding a steady state. Borderlands is a labor of love for the owner, but we cannot expect investors to feel likewise.

You seem to have a very "industrial" view of business. It's my anecdotal observation that many sole-proprietorship lifestyle businesses are run with less-than-perfectly-rational economic motives. Borderlands is clearly like this. While this does not optimize for macro statistics like GDP, it does seem to optimize for the happiness of the people involved, which is why I think it's a shame that it's being arbitrarily forced under. An 18% increase in total expenses is not just a wave, but a tsunami.

And who are you to demand they get put down before them or their consenting workers might be ready?

Are they somehow forbidden from stickering books with a higher price?

Bike shops sort of have that limitation, the big vendors pick the prices, but they're like 30% over wholesale and so the bike shops get 30% for assembling the bike and selling it. I can't imagine that book stores are prevented from selling books at a higher price.

Ever heard of amazon? Go much over list price and people start buying on amazon while they browse your store. People want to test-drive bikes, and shipping a bike back is a pain. Not really comparable.

And trapped between the commodity supplier fixing the price, and the state bringing up the costs, its a solid recipe for killing off a business. Which it has done in this case.

So the more interesting question from an economics perspective is whether or not capturing the marginal GDP of this business is a better or worse for the people. Sure the bookstore goes poof, and folks can't get cheap used books any more. The business will be replaced by something that can afford both the higher labor rate, like an upscale coffee shop or maybe a designer boutique.

But the number of bookstores goes down by one, and the volumes available are not available in the library. So the community has lost something too.

Nominally the markets are there to express what is a good application of capital by meeting demand. Should it go to running a bookstore or running a coffee roaster or a blog aggregator Etc. But the artificial floor of minimum wage creates artificial barriers to applying capital. You can see in this post that the floor of $10 allows the bookstore to exist, the floor of $15 does not. So here is a fiscal policy which is going limit choices.

And a really interesting effect is that everyone is going to raise prices to cover that expense, they have too, and so all of those folks who were complaining that they can't afford to eat at the 'upscale' bars and bistros in California its just going to get worse for them, and it won't be the Googlers or Twitterers or Pinsters causing that upswing, it will be the very government they elected to serve them doing it to them.

I find the economics of such things very interesting in the side effects as much as the intended effects.

> folks can't get cheap used books any more

Perhaps you meant locally? Bookfinder, amazon, alibris, et al still provide excellent service.

I'd bet all those books are available less expensively on amazon. The only value being lost is the value of the curation by the owners.

It's also a function of demand elasticity whether cost increases are passed to consumers, eaten by businesses, or some combination. We'll see how much pricing power local businesses have.

And it's a real stretch to argue that a small business owner earning under $30k/year, with limited growth prospects, is an efficient deployment of capital. This was clearly a labor of love.

A trip to a bookstore, for a large section of the book-loving populace, is indeed something of value beyond just "curation" – the experience of browsing shelves, randomly finding or remembering something you wanted to read, seeing new releases on a table and judging the quality of the paper or the binding or appreciating the rag of the edges – none of this can be reproduced online. While you certainly don't have to appreciate them personally, many folks do.

borderlands empirically demonstrates that is not a very large populace, or perhaps that populace was enjoying serendipity at borderlands then buying from amazon

ps -- some of that serendipity is available online too; see eg the big ideas -- authors talking some aspect of their novels -- on John Scalzi's site. Of the fiction books I've read in the last 3 years, probably 80% of them have come from reading these posts. http://whatever.scalzi.com/category/big-idea/

from the OP: "2014 was the best year we've ever had". Serendipity yes can be found online - no recommendations I've seen have ever approached Amazon's (once I fed my data into them), especially a quickly-shuttered (too creepy?) and now not-remembered program that harvested recommendations via pairing you with folks who'd rated/owned/purchased similar things. That said, it was mostly the experience of physicality that I was referring to, although there is something distinct about browsing physical shelves, a hard-to-capture mix of weight, quality, and visual-imprint – spine design and relative length of titles being nearly invisible online; anecdotally one can see reports of authors captive to Amazon's self-publishing ecosystem writing shorter and shorter books in order to capitalize on per/title payments from their Prime lending program.

Ah, I see what you meant. There's still the Strand, but perhaps thats the kind of thing that can only exist in nyc.

While I buy math books in paper, for fiction I only buy ebooks. The backlight for reading in a shared bed without a lamp on is a killer feature for me and probably many others.

The Strand in NYC, Powell's in Portland, and a number of more local ones at a smaller scale. New/used bookstores definitely aren't dead, they just survive in areas with more bookish populations (the entire city of Portland would riot for days if Powell's ever threatened to close).

I like the "treat it as a cultural institution and charge admission" solution, if that's what it takes to avoid closing. A few dollars would totally be worth it for an hour-long leisurely browse.

Maybe bookstores could charge a pay-what-you-want admission fee, like museums.

Bookstores in SF have been closing for a while; blaming this closure on the minimum wage hike is specious, to say the least. Yeah, I read the blog; but closing the bookstore today, because wages will go up in 2018 (3 years from today), is ridiculous.

Let me offer an alternate explanation, based on speculation (but grounded in the realities of the booming SF realestate market): someone offered to buy out Borderlands lease for a ridiculous amount, and it was an offer they just couldn't refuse. So basically it was a choice between (a) struggling along paycheck-to-paycheck for the next 3 years, or (b) getting a nice fat check to close the doors and do something else. They chose (b). The Valencia corridor between 16th and 24th has exploded, with a large number of hipster restaurants and boutiques, and money is flowing in like crazy. Might as well tap into that while the going's good.

Expect to see some hipster cafe, restaurant or boutique opening in their place in the next few months.

Yeah, running a business like a bookstore is exhausting, and at some point you just hit one too many challenges and decide you're better off giving up and doing something else. I've literally walked in to client appointments and had the business owner break down crying during slow business periods.

And, the unfortunate reality is that if the community thought the bookstore was valuable, then they wouldn't be closing. Which makes me sad, I love bookstores.

I should probably go visit one of my local ones today.

I've often wished that I could visit a bookstore to buy e-books, with a commission going to the store. The entire transaction could take place via mobile, but physical books would be available in the store for browsing and discovery.

Alternately, put out a physical tip jar for showroomers.

I note that the author of the blog post says:

"The change in minimum wage will mean our payroll will increase roughly 39%. That increase will in turn bring up our total operating expenses by 18%. To make up for that expense, we would need to increase our sales by a minimum of 20%. We do not believe that is a realistic possibility for a bookstore in San Francisco at this time."

They weren't paying their people much, were they?

No, they weren't paying their very limited staff much; it's a marginal business that's been on the decline for years, and even one of the managers is stated as having a salary of only $28k. All of this is in the article.

>managers is stated as having a salary of only $28k.

Which isn't a livable wage in SF, right? At some point businesses that can't survive cost inflation, either due to worker costs, government regulation, or energy cost must give up their space for those that can.

The manager didn't even make any money from the bookstore, it was the cafe that paid for the salary.

Not even the owner(s?) - I suspect that everyone involved including the owner could make significantly more by working even a low- to mid-range clerical job anywhere else in San Francisco.

It doesn't look like you paid much attention when reading, min. wage goes up immediately, not in 2018. 2018 was mentioned in different context altogether - that if the plans of minimum wage in 2018 become true, it makes more sense for the owners to get minimum wage job than to own/manage a bookstore, both money-wise and effort-wise.

Looks like YOU did not read the blog post.

Minimum wage went up by $0.31 on January 1. That's a 3% increase; not the 39% the post is whining about.

It will go up to $12.25 on May 31.

And to $15 in 2018; which is a significant jump, I admit. But long overdue.

Not immediately but business can not operate with a time horizon on a couple of months. If they need substantial increase in income, they have either to find the source of such income or stop digging the hole. Delaying it until the actual bankruptcy would do no good to anyone. If it is clear it is impossible to operate viable business with the projected expense level, then it's better not to waste more time and money on it.

And using derogatory terms like "whining" towards people trying to run real business and explaining their real-life challenges in factual manner only betrays your utter unwillingness to consider the subject seriously. No wonder you're using a throwaway account.

"Although the major effects of the increasing minimum wage won't be felt for a while, we've chosen to close now instead of waiting for two reasons. First, the minimum wage has already increased from $10.74 per hour to $11.05 (as of January 1st) and it will increase again on May 1st to $12.25. Continuing to pay the higher wage without any corresponding increase in income will expend the store's cash assets. In essence, the store will have less money (or inventory) six months from now, so closing sooner rather than later makes better business sense. But more importantly, keeping up our morale and continuing to serve our customers while knowing that we are going to close has been very painful for all of us over the past three months. Continuing to do so for even longer would be horrible. Far better to close at a time of our choosing, keep everyone's sorrow to a minimum, and then get on with our lives."

Source: the article.

Note: The raise to $11.05 is a 2.9% increase, and from $10.74 to $12.25 is a 14.1% increase. The 3% won't kill them right away, but the 14% would hurt quite a bit more.

"But the number of bookstores goes down by one, and the volumes available are not available in the library. So the community has lost something too."

Maybe some sort of collection could be set up to have Bay Area public libraries buy out as much of their stock as possible?

That isn't it, there is a cap on the number of volumes the libraries will keep. And of course the folks who frequent used book stores don't always have access to the Internet or a credit card and a fixed address to order from Amazon.

"That isn't it, there is a cap on the number of volumes the libraries will keep"

I'm sure there is. Having said that, the Bay Area has at least a dozen public libraries, large and small. Add in public university and community college libraries, and that number could be as high as 20. It's not inconceivable that 20 libraries could absorb a single bookstore's inventory. The inter-library loan system works well enough that those books are effectively available to the entire Bay Area community.

That's not counting all the books they'll sell to private individuals in their going-out-of-business sale, and of course the libraries will pass up buying things they already have.

If you're going to buy something in the sale anyway, it might make sense to contribute that money to a common fund so libraries can buy those books and make them available to the community. Win-win.

I know it's only one of the points, but it's not true that ebooks are still "rapidly rising in popularity" - while they do seem to continue to become more popular, the trajectory has clearly slowed. It seems, generally speaking, that we're nearing if not already at a stable rate of ebook market share (on a revenue basis, at least w/r/t the US and UK markets, the only ones I can claim to watch closely.)

For point 1, while I don't have the data, I would be very surprised to find out that over the course of "decades" book sales (or even just print book sales) have "declined", especially given the rate of population growth. What has, 100%, happened is that sales have moved online, for the commodity reason you mentioned, and Amazon's inclination to deeply discount titles to gain market share (which they now are moving ever-so-steadily away from).

It seems that business was go well since the author writes "2014 was the best year we've ever had." But as you point out in a tough market with massive competitors and fixed prices it's hard to absorb a 39% payroll increase. Wish I could look into the future and see what business would replace them in that space... I'm cynically imagining a Starbucks or some ultra-hoppy brew pub.

I read that as more “even our best year was borderline” – further down the page they mention that the general manager was making $28,000/year and the profit in 2013 was roughly $3,000. It's possible for both “best year we've ever had” and ”still not enough to make it work” to be true at the same time.

>should know better than to generalize from one sample

It isn't simply looking at one data point; there are economic fundamentals that demonstrate that this will occur. Just grab any Econ 101 textbook. Granted, it isn't a straight-up loss, as there is some income re-distribution that occurs, putting more money in the pockets of low-wage earners.

It's never been clear to me why this is so controversial. If I have organized my business around the fact that I am getting $10.50 worth of production from workers that I pay $10.00, then suddenly I have to pay those same workers $14.00, the math no longer works. Someone will be out of work, or I'll be out of business, period.

The implicit assumption as far as I can tell is that you, as "nasty business owner", are making much more than 50 cents of margin on your employees' hourly labor and that minimum wage hikes will make you eat that cost. I haven't looked closely into the studies put forth, but it is repeatedly mentioned that studies show that unemployment (and partial employment) doesn't go up when the minimum wage increases.

> Someone will be out of work, or I'll be out of business, period.

Incorrect, unless you're very inefficient and your competitors are efficient. If you are operating at maximum efficiently, you'll raise your rates to $14.50 and your customers will pay it or go without, no other competitor will be able to sell for less than that without losing money. It's more likely you'll go out of business because your competing businesses allocate their capital more effectively, surviving on smaller profit margins. At worst for the customer they will pay the same effective rate after the wage increase.

Despite all that, their next-door neighbor, Dog Eared Books, had their best year ever in 2014 and that's been true for the past five years. Maybe it's because Borderlands has a narrower focus?

First, Dog Eared Books has a broader audience (Borderlands added mystery at one point, but going beyond that isn't feasible for both space and focus/curation reasons).

Second, just because they had their best year ever doesn't mean that it was what an objective observer would call a "good" year. Odds are very high that they're already looking at these same issues and trying to figure out how to get past them, but with different strengths. On the upside for them compared to Borderlands they have a broader base, but on the downside they may not have the same kind of genre-based support. I'll call location a wash, since both are in Mission.

On the downside for them, I suspect they don't have as much genre support, in that SF/F readers and authors do often try to support their few remaining genre bookstores. If I want a signed copy of my favorite author's new work, I'm likely either getting it directly from the author, ordering it from Borderlands, Uncle Hugo's (Minneapolis) or DreamHaven Books (Minneapolis, limited hours), or purchasing it from a bookseller at a SF convention because that seller has also been at a convention with those authors.

Finally, if you'd told me that a bookstore owner/manager was making less than $30k/year in San Francisco after 15 years in business and with an operating profit of $3000 for the year, I'd have to call that business unsustainable at least in California and particularly anywhere in the Bay Area.

http://blogs.reuters.com/great-debate/2009/05/14/thousands-l...

This is a deliberate attempt by the owners of the bookstore to make press about the minimum wage causing them to close down. As apparently Alan and Judy are owner operators, doing very little business so hopefully not requiring much external labour, this is a slightly contorted argument. Who would complain that they are not paying themselves the minimum wage and couldn't they structure it so they were not employees of their own partnership?

The unfortunate fact is that the owners have so far been able to exploit this location poorly. Valencia St around that block is now very highly sought after with numerous new glitzy businesses opening up in the last few years. If they were lucky enough to own the property or have a transferable lease they would now have an opportunity to make a huge profit on selling it to someone willing to cater to the yuppie crowd. The fact that this is not referred to in the blog post is quite disingenuous.

Another bookshop that closed down in SF was much more honest about the reasons without a weird political agenda: http://missionlocal.org/2015/01/a-heaven-for-books-moves-on/

If one takes a right wing point of view then the fact that the space will now be used more efficiently is definitely beneficial, so if the minimum wage were to blame then must be good ;)

From the point of view of the left, the question might be whether the bookstore should be subsidized to provide a living wage to its employees and owners. This is rather difficult to support as it is unclear that there is any benefit accrued to anybody beyond a sort of nostalgic effect of having a rather empty bookshop on a busy street, and if that space should be subsidized it should be made more widely useful.

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