Closing the book on one vision of Indigo Books & Music

November 10, 2011 by · 1 Comment 

It is becoming more apparent with each successive move that Indigo Books & Music, along with its CEO, Heather Reisman, sees no future in bookselling.

At the beginning of this year, the company implemented a 4% co-op fee on all books sold through at its stores, replacing the previous model, in which publishers paid for co-op individually. This made a number of industry watchers nervous because, it was assumed, if Indigo were to dictate placement rather than publishers buying space for individual titles that might not otherwise be afforded prominence, the chain would give preference to surefire bestsellers purchased in large numbers. These concerns were not ill-founded. If you want to see the effects of the new co-op regime in action, take a jog over to the Indigo-owned World’s Biggest Bookstore in downtown Toronto, where one single title, Walter Isaacson’s biography of the late Steve Jobs – a recent “Heather’s Pick,” and one of two books that appear to be driving Reisman’s retail philosophy at the moment* – has placement in practically every prominent space at the front of the store (on the walls, table displays, free-standing shelves, and at the front cash), as well as appearing in significant numbers on tables and stand-up displays in both the business and biography sections.

Then in March, the company announced it was replacing president Joel Silver with Tedford G. Marlow, a former executive at such bookish companies as Urban Outfitters, Neiman Marcus, and Saks Fifth Avenue. Soon after Marlow’s appointment, Indigo announced it was planning to make significant changes to the product mix in its stores, decreasing the amount of floor space devoted to books in favour of space for more lifestyle-oriented products (read: candles, desk lamps, and tchotchkes). These, it should be noted, would be designed for Indigo out of a studio in New York.

At around the same time, Indigo changed its returns policy, saying that it would re-evaluate the industry norm of ninety days before stock could be returned, with underperforming titles facing potential return in as few as forty-five days. Such “underperforming” books would not, of course, be ones like Isaacson’s Steve Jobs, but rather titles from smaller Canadian houses that were ordered in lower quantities and then placed spine out on the shelves. (If you think this constitutes the dictionary definition of a “self-fulfilling prophecy,” you’re probably not far off.)

At the time, Reisman told Publishers Weekly that the changes were necessary to compete with the drop in book sales resulting from customers’ migration to e-books: “In order to continue to be in the physical book business, we must add other product which feels like it fits with our journey because if you don’t and you lose 20%, 30% of your business to digital, you can’t stay in business.” Indigo’s “new mission,” Reisman told PW, would be “to enrich the lives of our customers. We are transitioning from being a bookstore to being a store that enriches the customers’ lives.” However, when all is said and done, Reisman, who styles herself as the company’s “chief booklover,” insisted, “Books and reading are at the heart and soul of Indigo and always will be.” (My emphasis.)

That was back in April. Cut to late afternoon this past Tuesday, when much of the publishing industry in Toronto was focused on that night’s ceremony to award the 2011 Scotiabank Giller Prize. A press release was sent out announcing that Kobo, the e-reading company in which Indigo holds a majority stake, is being sold to the Japanese e-commerce outfit Rakuten for the astounding sum of $315 million (U.S.).

The deal, from which Indigo stands to receive between $140 and $150 million, initially seemed like a tech story and little more. But that was before an article in the business section of today’s Globe and Mail suggested that Reisman does not intend to use the new money to bolster the bookselling side of her business, but rather to funnel it into the development of lifestyle products. In the Globe article, Marina Strauss writes that as a result of the Rakuten deal, “Ms. Reisman is in a stronger position to make acquisitions and expand non-book ventures, to offset Indigo’s shrinking book business. She will invest heavily to shore up her new product design and development studio in New York City, which is focused on home decor and gift items.” The article states that Indigo forecasts book sales to account for only 50% of its revenue in “a couple of years,” down from 75% now.

What is remarkable about the Globe article is the way brand strategist Anthony Campbell analyzes Indigo’s divestiture of Kobo. Campbell points to the incipient appearance in Canada of U.S. discount chain Target, and suggests that Indigo’s new direction will help them maintain “focus” to be competitive in the coming retail landscape: “It is a big challenge – there are a lot of retailers in this [lifestyle gift and home decor] space and it is where the world is going for a lot of other brands … Target’s been doing it for a long time, and they’re going to be in Canada in a short while. Heather & Co. is seeing that future … She’s getting ahead of some of her competition in this move.” Note what the presumed competition is: Target and other lifestyle retailers. The space in which Indigo operates, according to Campbell, involves interior design and decor. Nowhere do books even enter the equation.

Of course, Reisman may indeed be ahead of the game in her move to reinvent the Indigo brand. A report commissioned by the Australian government’s Book Industry Strategy Group pointed to Indigo as a potential model for Australian bookstores to follow if they wish to remain profitable while confronting the “paradigmatic change” thrown up by the advent of digital reading. An article in the October 4 edition of the Sydney Morning Herald states:

While there was no ”silver bullet” for booksellers, the report singles out Indigo, Canada’s largest bookseller, which promotes books as a ”lifestyle,” not a product. It sells giftware, children’s toys, video games, music, gourmet food, and even flowers and is an example of an independent bookseller leveraging people’s affection for books.

But it seems ever more apparent that Reisman is unconvinced of “people’s affection for books.” Her assertion that Indigo is “transitioning from being a bookstore to being a store that enriches the customers’ lives” leaves aside the notion that books themselves are capable of enriching people’s lives. But given the precipitous drop in the number of books people are actually buying over the counter at bricks-and-mortar bookstores, both large and small, the move to diversify her stores’ product mix may prove to be a wise business decision in the long run. The big-box bookstore model was likely unsustainable anyway, something Gordon Lockheed foresaw in a 2001 article for Dooney’s Café, right around the time that Indigo merged with its then-competitor, Chapters:

What nobody has considered, in the general rush to declare Heather Reisman a culture hero and save Chapters/Indigo, is the possibility that as a machine for selling books and making money, Chapters and its successor doesn’t seem to work. It is becoming painfully obvious that the only real economy of scale Chapters/Indigo enjoys is the muscle it wields in dictating terms to suppliers. From the beginning, Chapters bled red, and there isn’t much evidence to suggest that Chapters/Indigo can make money today …

What was true a decade ago is even more true in the digitally obsessed present. Perhaps a sharp right turn into lifestyle products will alleviate some of the burden from the company’s bottom line. However, it appears less and less likely that books will remain “the heart and soul of Indigo” in the new order of things.

*The other is Starbucks’ CEO Howard Schultz’s Onward, also a Heather’s Pick.

Comments

One Response to “Closing the book on one vision of Indigo Books & Music”
  1. Alex says:

    Great post Steve, but it should have been filed under “No Shit.”

    As bad as we’ve heard things are for the small, indie booksellers, I’d rather be running one of those than a chain of big box bookstores. There’s no future for them. Just think of all that space and overhead … for books!