Indigo boss sees retail renaissance
Reisman predicts better fortunes for brick-and-mortar book stores
Despite the glut of store closures, downsizings and outright failures in the retail market, Heather Reisman sees a coming retail renaissance for the bricks and mortar stores that remain enticing enough to keep customers coming through their doors.
The founder and chief executive of Indigo Books & Music Inc., points to the company’s results as proof of its tenacity in a mass-market book industry under siege: U.S. big-box chain Borders went bankrupt and closed in 2011, and surviving rival Barnes & Noble has just reported its fourth-consecutive quarter of declining sales. Meantime, wider discretionary retail in Canada is going through a sea change brought on by online commerce. The past six months have seen the closure of 133 Target stores, 66 Future Shop stores and 59 Blacks Photo stores, while businesses such as HMV and Staples have reduced their square footage.
Indigo’s fortunes seem to be improving, however. The retailer saw its same-store sales rise 6.5 per cent in its latest fiscal year, and in-store traffic grew by two per cent last year despite an 11.7 per cent surge in its online sales division.
Indigo recently bumped up the number of books being sold at a 40 per cent discount to 100 titles from 40, but Reisman said the move was not made due to competitive pressure from Amazon or mass merchants like Costco, but as a means to reward and keep drawing in loyal customers.
“It wasn’t a function of competition,” she said after the Toronto book retailer’s annual general meeting of shareholders on Monday. “It legitimizes the investments we have been making.”
To enhance its stores in recent years, Indigo has opened a number of American Girl doll boutiques in larger urban locations, in addition to improving its selection of toys, decor and gift products.
Bruce Winder, a Toronto-based retail consultant, believes Indigo has led the way in Canada in terms of how retailers are trying to become “experiential” trying to provide an environment that customers like and want to return to for reasons beyond what they want to buy.
“People can pick up a book online if they want to, but they still want to go somewhere for an experience and have some community with people,” he said. “Stop at one of the coffee shops, maybe read a book.”
Stores also help foster impulse buying in a way that retailers, landlords and publishers would appreciate, he added. “I just don’t believe the opportunity for higher-margin impulse sales is there in the same way online as (it is) in those good brick-and-mortar stores,” as people browse aisles filled with wooden shelving and book tables rather than screens.
That said, Indigo has let leases expire at some of its larger stores in Toronto and Vancouver to move into slightly smaller spaces, but ones that are still quite large.
“There is nothing in our portfolio today that we would not want to sustain,” Reisman said, adding the company will look to enlarge some Coles stores into its mid-sized IndigoSpirit Book and gift stores in some smaller Canadian markets where Indigo has no stores.
“Landlords want retailers that drive customers to their mall. The most exciting thing that they see is not only (our growth), but the passion that the consumer has for the brand.”
While some customers might be confused by the disparity between Indigo’s store prices and its online prices, which the stores do not match, Reisman says it reflects the simple reality of an industry that was turned on its head by Amazon when the Seattle Internet behemoth began selling books online in 1995.
“In everything but books, prices are exactly the same online (at Indigo.ca) as they are in store,” she said. “Books have this idiosyncratic reality where Amazon priced books from the beginning at literally pennies above cost. We needed to meet that, because that was the competitive reality.”
But landlords, publishers — and perhaps most critically, customers — seem to accept the realities of socalled “omnichannel” commerce, Reisman added.
“We say to customers: ‘It’s very simple. This business would disappear if we had to sell books at online prices.’ Indigo could not continue to exist.
“You can’t have the availability of all those books, all those (sales) people in those beautiful locations — you can’t do that and not make any money. The majority of people will appreciate that reality.”
Publishers have also been hit by ongoing book store closures, with fewer points of sale in which to offer their products. With the burden of discounts shared between publishers and retailers, discounting a whole new range of books at the store level may not sit well with publishers.
“We do always have concerns about how discounting tends to work in the market,” said Carolyn Wood, executive director of the Association of Canadian Publishers. “The big discounting on bestsellers tends to reinforce those titles as bestsellers and the number of books that have a presence in bricks and mortar stores gets narrower. Indigo
People can pick up a book online... but they still want to go somewhere for an experience and have some community. Bruce Winder, a Toronto-based retail consultant