One reason why independently owned bookstores have a tough time competing with BN is that they have a higher cost of equity. In this lecture, Aswath Damodaran of NYU estimates the cost of equity for a New York indie bookstore to be around 14%, while it’s only 8% for BN. This analysis makes the manner in which Kepler’s raised money from 20+ investors in 2005 look smart. The investors provide the diversification that Kepler’s can’t get from the public market like BN does. If you want more reading on the subject, click here, though I recommend the watching the lecture over reading the linked chapter.

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