Anyone who’s bought used books on Amazon has probably come across Thrift Books. It was launched in 2003 as a pure Amazon seller. Today, with its own website and sales through other channels, its annual revenue has grown to $150 million. It is the largest used book seller in the world.
Thrift Books CEO Mike Ward has been with the company since its inception. I recently spoke with him about the business, industry and logistics of selling tens of millions of books each year.
What follows is the audio of our entire conversation and a transcript, edited for length and clarity.
Convenient e-commerce: Tell us about Thrift Books.
Mike Ward: A lot of people bought a book from us on Amazon and didn’t realize where it came from. We believe we are the largest online used book seller in the world.
Our headquarters are in Seattle. We have eight distribution centers in the United States. We employ approximately 900 people and have annual sales of approximately $150 million. We were founded in 2003 — literally in the founder’s living room. An opportunity then presented itself, namely that Amazon was opening up its APIs to third-party sellers like us.
CEP: At the time, was your vision to sell only used books?
District: No. One of the founders worked at a large thrift store in the Seattle area. He had access to used books. This was the genesis of the idea. As we got older, we decided to stay focused on the books. We’ve gotten pretty good over the years. But at first it was a coincidence.
CEP: Revenues of $150 million a year are staggering. That’s something like 25 million individual titles per year. Is it correct?
District: Yes. We expect to sell about 25 million units this year. And yes, that is a staggering number.
CEP: Where do you find 25 million books a year for sale?
District: We buy them mainly from our partner thrift stores. We also have partnerships with libraries, where we retrieve some of their out-of-circulation items. For the most part, we partner with charities and thrift stores like Goodwill and Salvation Army. Goodwill, for example, takes donated books, stacks them and places them in very large boxes – five feet by five feet by five palletized boxes that go into semi-trucks. We buy these pallets by the pound in these thrift stores. Then we bring those trucks to our facilities where the books are processed to determine which ones are salable.
Our employees grade them carefully so that buyers know the quality of each book. There are a lot of books coming in that are not in salable condition. To sell 25 million pounds a year, we buy millions of pounds of books every year – we may buy 300 million pounds of books this year.
CEP: Are the books mostly fiction, non-fiction, or a mix?
District: It’s a mix. In Silicon Valley we will get a decent supply of computer programming books and the like. Seattle provides many high quality books. A lot of fiction comes out of it. The book we have seen the most since January 2018 is “The Da Vinci Code”. We have seen 147,000 copies of this book. Next on the list is “Twilight,” at around 138,000 copies. “Dr. Atkins’ New Diet Revolution” is tenth on the list.
CEP: How do you decide if you’re going to try to sell a book?
District: There are two parts to this. The first is how do you decide to sell it? The other part is at what price? So these are both heavy tech issues. At the entrance, when we introduce the book in the inventory, we will scan the ISBN of each book in state of sale. We use algorithms that constantly learn, improve and correct themselves. Algorithms look at each item’s sales history and then predict demand.
CEP: Did Thrift Books develop these algorithms in-house?
District: Yes. I don’t know of any out-of-the-box software that creates an algorithm to decide what to list, what not to list, what to keep, what not to keep, what to list, and what not to. When we started the company, we had no algorithm. We trusted the marketplace, which at the time was just Amazon.
Over time we started to get smarter about it and started using algorithms. The other side is after a book is listed. We update the price dynamically all the time. There is standard software that does this, but we think our algorithm is better and probably a bit faster. But it took years to develop.
CEP: Thrift Books launched on Amazon. But now you have your own e-commerce site which I understand has more sales than Amazon. How did you do that?
District: A lot of effort for a lot of time! When we first created our website, we were happy when the first sale came. We were happy to have 4-5% of our sales there. Over the past five years, we’ve grown our website from 10% of overall sales to well over 50% today. The best advice I can give your readers is to understand very, very well the marketplaces you are selling on. Understand the exact profit you receive from the items you sell there.
Take a look and make a tough decision on what to list. Amazon has made it clear that it’s more interested in higher priced items. Amazon’s commission structure confirms this. If you’re selling a high-priced item on Amazon, the fee can be 15-20% of the price. For low-priced items, it could be 50 percent. So, rank all SKUs in terms of profit. Then make a tough decision. Is it worth continuing to be listed on every marketplace?
Building a website takes time. You can’t do it overnight. It took us five years to get to the size we have today. It takes investment and patience.
CEP: In those five years, how have you been able to get people at Amazon to go to ThriftBooks.com instead?
District: We have taken a traditional approach to generating sales on our website. We bought advertising from the usual suspects, like Google. But we’ve been very careful not to overspend those advertising dollars.
CEP: Is your website a custom e-commerce platform?
District: Yes. We use Microsoft technology — Microsoft SQL server and Microsoft code base. We are fully integrated into Microsoft’s technology stack. But the code is entirely written in-house. We don’t use any of the biggest website platforms. Ours is built from the ground up on Microsoft technology.
CEP: Your business sells books. But, beyond the books, you’re also a savvy e-commerce merchant. Our readers are also traders. Any words of wisdom for them?
District: Go ahead, be very smart and trust the data. I remember when, at Thrift Books, I brought articles to the post office. I was here. We have succeeded by relying on data and technology. At its core, online retail is a technology business, no matter what you sell. It gets bigger every year. There is room to grow.