[LINK] "How Indigo plans to become the world’s first “cultural department store”"

[rfmcdonald]

Carol Toller's November 2014 Canadian Business article, recently reposted at MSN, makes the case for Canadian bookstore chain Indigo's ability to transition to a new viable model of sales.

Heather Reisman[ . . ., t]he CEO of Indigo, the Toronto-based retail chain that built its business selling books, has been working frenetically to shore up plummeting sales: The company’s revenues have dropped for three consecutive years, with the most recent fiscal year ending in a $31-million net loss on revenues of $868 million. When she launched the company in 1996, Reisman called books the “heart and soul” of the business. But times have changed, and while books may be the heart and soul of the chains, they’re no longer the bread and butter.

To bolster sales, Reisman has been working to reinvent Indigo, which operates 92 superstores and 131 small-format stores under the Indigo banner, as well as Chapters, Coles, Indigospirit, SmithBooks and The Book Company. Over the past several years, the company has been quietly introducing stationery and gift items, but in the last year, Reisman has begun moving far more quickly to fill the stores with non-book items, expand its toy department and introduce exclusive lines like American Girl. (The chain opened its third doll boutique at Ottawa’s Rideau Street Chapters this month and plans to roll out up to 15 in total across the country.) Customers can still pop in to thumb through the latest Donna Tartt or Stephen King novel, but these days Indigo shoppers are just as likely to pick up a faux-fur-covered hot water bottle, some seasonal dinnerware or a cheerful print to hang in their family room, to name just a few of the new, affordably aspirational houseware items the retailer now offers. Reisman has taken to referring to Indigo as the world’s first “cultural department store,” a name that helpfully underscores the Oprah-esque lifestyle the chain has begun pushing: safe, tasteful, stylish—and, of course, well read.

At its annual general meeting in June, Reisman divided the company’s history into three distinct eras: T1 was Indigo’s initial, book-focused phase, which began when it opened; T2, a five-year transition phase, beginning around 2010, that saw the chain move into e-reading and the digital world; and T3, which marks the start of a “whole new Indigo.” T3 is now arriving, she said, and Indigo is heading into “true takeoff mode.” If it soars, Reisman will have transformed her flagging bookstores into a new commercial niche that some industry observers call a retailing first. What people who scoff at the candles and throws miss is that Reisman doesn’t really sell books. She sells taste.

The cash-strapped chain is facing some mighty headwinds. Indigo closed three high-profile stores in Toronto this spring, including the city’s iconic World’s Biggest Bookstore, which it had inherited when it purchased rival Chapters in 2001. Those that remain are devoting fewer square feet to books and more to the company’s eclectic mix of lifestyle offerings. Books still represent two-thirds of Indigo’s revenues, but sales have been trending downward over the past few years (unit sales were down by more than 3% in 2013, although they saw a small, unexplained uptick last quarter), as retailers across Canada experience what Reisman described as “meaningful sales declines.”

Dig into Indigo’s recent financial statements, and there are also signs that the transformation Reisman initiated five years ago is beginning to pay off. Revenues from general merchandise have risen by about $33 million over the past year. With the help of a certain sizzling-hot toy property and the chain’s steady move into a dizzying array of non-book items, same-store sales were up 8.3% at the company’s superstores during the first quarter of this fiscal year. (Things are going less smoothly at the small-format stores, such as Coles, where it may be difficult to squeeze in a whole department store. Same-store sales were up just 1.9%, following a 5% overall decline the year before.) Although Indigo won’t say what its target books to non-books product ratio is, it’s clear they haven’t reached it yet.