Indigo Books & Music is no longer your mother and father’s bookstore.
The willingness to branch outside of selling books has the retailer seeing positive results as it heads into the third quarter of its financial year in early February.
The company’s second quarter financial report released on November 3, 2015 revealed their revenue from general merchandise grow to $62.4 million in September 2015 from $50.9 million in the previous year.
General merchandise saw the biggest revenue increase for Indigo, which includes items such as household furnishings, stationary, toys, music, DVD’s, and electronic devices.
A portion of Indigo’s financial statement annotated in DocumentCloud
Source: Indigo Books & Music
Emily Deveaux, the executive director of the School of Retailing at the University of Alberta says that Indigo has had a “very specific strategy to diversify” over the past year to turn itself into a “cultural department store.” Where customers can purchase more than just books.
In their second quarter investor call transcript, CEO Heather Reisman stated that “We’re really happy with the positive impact of the investments we’ve made, and we feel that Indigo has positioned itself extremely well to continue on this trend.”
So far their strategy seems to be panning out for the bookstore giant.
According to Bruce Winder, who is a retail consultant and co-founder of Retail Advisors Network in Toronto, Indigo realized that their world changed because of Amazon, and at one point were “in the headlights of Amazon.”
For Winder, Indigo recognized that they were not going to win the price war with Amazon, and as a result they expanded to other areas with more exclusive items with better margins. He uses Indigo’s expansion into children’s learning toys as an example of exclusive items.
Emily Deveaux cites Indigo’s partnership with the American Girl doll line, as one of the ways the company has been able to increase revenue. With these kinds of products now available at Indigo she says, “you can see shopper continuously returning to the store.”
This is because “they’re going after a specific customer,” says Deveaux, in particular families with young children.
Indigo is seeing this increase in revenue with a big help from general merchandise, but print still remains at the heart of Indigo’s revenue. Revenue from print may have dropped by 2.5 per cent from Indigo’s overall revenue stream, but it still increased to $134 million in September 2015 from $127.9 million in September 2014.
A portion of Indigo’s financial statement annotated in DocumentCloud
Source: Indigo Books & Music
“I think people still genuinely like having a hard copy of the book,” says Deveaux. She believes there’s a certain psychology involved when someone finishes a hard copy book.
During their second financial quarter the company saw an 8.7 per cent increase of revenue in their large bookstores, and 9.5 per cent increase from their smaller bookstores and a 14.2 per cent increase online.
A portion of Indigo’s financial statement annotated in DocumentCloud
Source: Indigo Books & Music
“The lines are blurred in retail,” says Paul McElhone, the Dean of the Mihalcheon School of Management at Concordia University of Edmonton. As a result, Indigo’s customer needs are changing in terms of what products they want to buy as well as how they are able to buy them.
The layout of the stores plays a major factor in how the company has been able to increase revenue. According to McElhone, the stores tend to put the gifts and specialty items at the front of the store before the bookshelves so customers can cross-shop. Where someone can walk into the store looking for a book and come out with someone else like a candle or a toy.
Indigo’s stores have become a place for “experimentation as much as a place to buy something,” says Winder.
When a company diversifies, it can be more harmful than good if done incorrectly. But Indigo seems to be on the right page to succeed going forward.
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https://www.documentcloud.org/documents/2698851-Indigo-FY16-Q2-Report.html