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Revitalizing a Canadian Icon: Indigo Books & Music's Strategic Pivot Amid Privatization Talks

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Lauren Miller

April 19, 2024 - 10:47 am

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Indigo Books & Music: Navigating the Turnaround and a Shift to Privatization

As Canada's premier book retailer Indigo Books & Music Inc. nears a pivotal transaction that may result in privatization, it's clear from observations within their Toronto stores that the company is under a transformative phase. An exploration through the aisles of Indigo’s Eaton Centre location reveals a profound shift: where once Epsom salts and body lotions occupied the wellness section, now one finds an array of literary treasures and quaint novelties, ranging from cat- and corgi-shaped book lights to magnifying glasses and portable lap desks.

The once vibrant children's area, which used to house the expansive American Girl doll emporium, is now behind a red velvet curtain marked with a closed sign – a testimony to changing times. These expensive dolls and their accessories have been offloaded at discounted rates as of March.

Details of these changes, and a strategic transformation plan initiated in the latter part of the last year, remain sparse. This reticence coincides with the disclosure of a nearly $50 million net loss in Indigo's recent fiscal year-end report. Shareholders are now at a crossroads, deliberating if the future of Indigo lies in remaining public or transferring ownership to a holding company linked to its principal shareholder.

The perspective of Joanne McNeish, an Associate Professor at Toronto Metropolitan University specializing in marketing, is that strengthening Indigo financially is crucial at this juncture. McNeish sees it as the beginning of a long road, suggesting it may take approximately five years for Indigo to turn around its fortunes. It is a consensus among marketing experts that this path could likely see books reclaimed as the retailer's focal point and prompt reconsiderations of store layouts and overall store count.

McNeish questions the necessity of maintaining two levels in the Eaton Centre storefront, highlighting the importance of efficiently utilizing every available inch of floor space to effectively showcase and sell products.

Indigo's journey forward may largely depend on the outcome of a May shareholder vote, which concerns an offer from Trilogy Retail Holdings Inc. and Trilogy Investments L.P. of $2.50 per share in cash – an increase from the initial $2.25 offer made in February.

The proposed deal received the endorsement of Indigo's board in early April and is pending shareholder approval to proceed. Trilogy is under the ownership of Gerald Schwartz, founder and chairman of Onex Corp., who possesses 56 percent of Indigo’s shares. Schwartz is also the husband to Indigo's founder and CEO, Heather Reisman, who herself holds close to five percent of the company's shares.

If this transaction, which would result in Indigo's departure from the Toronto Stock Exchange, is successful and wraps up as anticipated in June, it will mark a new, arduous chapter for the company's leadership to tackle.

Grant Packard, an associate professor of marketing at York University and former interim chief marketing officer and vice-president of marketing at Indigo, disclosed the complexities of making the business profitable. Citing low book margins, fierce competition from e-commerce juggernaut Amazon, and a cyberattack that disabled some of the company’s services for weeks, he emphasized the challenging environment Indigo has been navigating.

Understanding the magnitude of the challenge ahead requires delving into Indigo's storied past. From its inception in 1996, Indigo promptly rose to become Canada's beloved bookstore, expanding its presence from malls and plazas to the world of online retail. Reisman's vision was to cultivate a sanctuary for bibliophiles, eager to purchase her curated "Heather's Pick" selections.

Packard’s characterization of Indigo’s target consumer is someone who cherishes time spent within the stacks, likening the experience to an ideal getaway or a cinematic escape. However, he acknowledges that while many Canadians identify with this sentiment, an even greater number do not.

Changing consumer demographics, coupled with competition from Amazon and the popularity of e-readers, compelled Indigo to diversify its offerings. Items such as cozy socks and whimsical mugs complemented books well, but other products like sex toys, furniture, and upscale jams represented a marked departure from the brand's core identity.

According to McNeish, the endeavor into perishable items like high-end food sauces didn't align with the quality image Indigo aimed for. She emphasizes that Indigo's intent was never to operate as a discount bookstore.

This brand diversification commenced under Reisman's leadership but gained new vigor with Peter Ruis, who had formerly pioneered efforts at John Lewis and Anthropologie. In 2022, Ruis succeeded Reisman as Indigo's head, prior to her transition to the role of executive chair, anticipating her August 2023 retirement.

The lead-up to Reisman's planned departure saw considerable board reshuffling with four of Indigo's 10 directors exiting their positions. Chika Stacy Oriuwa publicly cited mistreatment and a "loss of confidence in board leadership" as her reason for leaving.

Reisman, who resumed her CEO role last September, has yet to address Oriuwa's claims directly. She has, however, unveiled a business transformation strategy aimed at "fully re-energizing" the company's engagement with its customers.

Since the announcement of this transformation plan, Indigo conducted staff layoffs in January. Reisman mentioned that the company has redirected its focus back to books while working to "rightsize and rightshape" its general merchandise offerings – implicitly acknowledging past misalignments with consumer expectations.

When inquired about their plans moving forward, Indigo expressed that they are embarking on "meaningful work" to revolutionize the business and refresh their product lineup. In an email, the company enthused about the central place of books in Indigo's mission and their continued venture as the ultimate purveyor of gifts for book lovers, offering an expertly curated selection of lifestyle and stationery products.

In an April correspondence to Indigo's customers, Reisman hinted at further initiatives like the reintroduction of in-store digital inventory search kiosks, an enhanced schedule of events, additional seating in stores, and forging partnerships with cafés to replace vacancies left by Starbucks. At the Eaton Centre store, a Columbus Café & Co. has now occupied the space formerly housing the in-store coffee shop, welcoming a steady patronage already indicative of a positive response.

McNeish views these recent successes as a foundation upon which Indigo must now build. She maintains faith in Reisman's capability to steer the company, attributing to her an innate managerial instinct and a profound understanding of book retail, fueled by her own passion as a reader.

Packard, on the other hand, speculates that critical decisions await regarding the optimal number of stores to maintain, their effective use, and strategies for enhancing Indigo’s online channels. His counsel insinuates such maneuvers could steer the company towards a stability capable of weathering market fluctuations and unforeseen events – such as pandemics or cybersecurity breaches – thereby providing a buffer that allows for innovation and experimental business approaches.

This report by The Canadian Press was first published on April 19, 2024, offering an in-depth analysis of Indigo Books & Music Inc.'s current state and prospects for the future within an ever-evolving retail landscape. As the company stands on the precipice of a significant transformation, the industry watches with keen interest to witness the resurgence of a Canadian icon in the literary world.

For additional information and to follow Indigo's ongoing developments, readers are encouraged to visit The Canadian Press' online resources.

The Canadian Press