Indigo makeover continues

Apple shops, international stores

TORON TO • Indigo Books and Music Inc. is rolling out Apple Inc. technology shops within its large bookstores and plans to open stores outside of Canada, chief executive Heather Reisman said Tuesday, as the chain weathers what she called a “very difficult transformation.”

The strategies are part of an ongoing drive at Canada’s biggest book chain — which initially had the prophetic words “and More” at the end of its name when it first opened in 1997 — to further extend the non-book categories it has always carried.

Along with the rest of the industry, Indigo has seen traditional book sales at its 236 stores slowly erode in recent years amid competition from mass discounters, online book sales and digital books.

Ms. Reisman told shareholders at the company’s annual meeting in Toronto that Indigo’s new in-store format at its large stores will shift “from one main shop into a series of shops,” to house categories including home, style, paper, tech, design, baby and kids toys.

In addition to 40 onsite Apple shops selling iPads, iPods, Apple TVs and accessories, Indigo will become the exclusive supplier of Poppin office supplies in Canada and boost its assortment of health-related technology for personal use.

It will take 18 to 24 months for the full effect of the strategies to be reflected in the company’s results, she said, but noted it is beginning to take hold, as the retailer saw margin improvement of 2.25% in 2012.

“General merchandise categories are now growing well into the double digits and gaining momentum every month,” Ms. Reisman said.

“We are learning every day about what works and what doesn’t as we transform from being essentially a bookseller to a rich general merchant with books at our core.” The company will also put more resources into its own in-house design lab, which it opened two years ago to develop proprietary products. “Proprietary products are essential to achieving profitability moving forward,” she added.

The overall drive to boost non-book merchandise is evident in Indigo’s book sales, which now account for 78% of overall revenue, down about 10% from five years ago.

digital book sales growth is also abating after a period of rapid early adoption, now accounting for 20% of book sales, up only slightly from 18% last year, Ms. Reisman said. Though it would seem Apple iPads would undercut sales with that of Indigo’s partner and former e-reader subsidiary Kobo, she said Tuesday the two are “not at all” in competition.

Fiscal year revenue slid 4.4% to $893-million from $934-million. The trend is mirrored in the broader industry, which saw sales fall 4.9% in Canada last year to $973.8-million, according to the industry association BookNet Canada. It also said the e-book market appears to be plateauing in Canada; paperback books accounted for 58% of purchases in 2012, hardcover 24% and e-books 15%.

“It makes perfect sense to sell iPads beside Kobos,” said Bob Gibson, a retail analyst at Octagon Capital in Toronto.

“Some books sell really fast and some sell only once a year and sit and take up that square footage — and they need to do something with all that square footage.”

He was less enthusiastic about Ms. Reisman’s plans to open bricks and mortar stores outside Canada in roughly two years, as was veteran Toronto-based retail consultant John Winter.

“I am puzzled where they would put the new stores given the global context,” Mr. Winter said of the initiative, about which Ms. Reisman provided scant detail beyond a plan to extend international sales online.

“Where would you go?” Mr. Winter said. “People are not buying books as much as they are downloading them or buying them online.”