REINVENTING Indigo - A True Story
Indigo Books & Music Inc. - The Sense of Taste, Elegance & Class
Did you recently come across Conestoga Mall, a regional shopping centre in Waterloo, Ontario? If you did, you couldn’t miss its brightly lit tenant: Indigo Books & Music Inc. ("Indigo").
And what is not to like? The store is beautifully designed and superbly decorated. Books, Magazines, Toys, Baby Products, Wellness Products, Paper Products, Electronics, and Gifts – are all skilfully displayed and placed with taste and finesse across the spacious isles. And all that browsing that you can do while sipping on a resident Starbucks’ cappuccino… how uncanny!
Indigo’s website mentions that Heather Reisman is the “Founder, Chair and CEO of Indigo, Canada’s largest book, gift and specialty toy retailer, and co-founder of Kobo, a leading global eReading company”. Less descriptive is the fact that Heather single-handedly consolidated a highly fragmented bookstore market in Canada – in its entirety!
In addition to acquiring most of “mom and pop” shops, Heather Reisman also took over W.H. Smith and Coles bookstore chains – after the two merged into Chapters. So, by the time the acquisition of Chapters was complete in 2001, Indigo became a true Canadian monopoly - with no competitive pressures from coast to coast to coast…
The Past
Yet even the best-laid plans sometimes go wrong. Amazon, Indigo’s online bookselling competitor – did not expect to make a profit on books in the late 1990s. In 2001, amazon was even almost destroyed during the dotcom crisis - but survived. And online bookselling hasn’t been the same ever since.
Source: CNBC
In comparison to other competitors, Indigo did much better than Borders, which filed for bankruptcy, or Barnes & Noble - that was acquired by Elliott Management Corporation in August 2019. This is in part due to Heather Reisman’s intense grit and tenacity - which lead to numerous transformations...
The most obvious rebranding was linked to Indigo’s becoming a “cultural department store” – offering greater value to its customers. The company even demonstrated an increase in revenue that was driven by growth in general merchandise, with lesser dependency on book sales.
It worked, at least for a few years, thanks to Indigo’s ability to cut costs, and reduce its cash burn. Unfortunately, in 2019, it stopped working, and Indigo saw a drop in operating revenue once more…
The Present
COVID-19 hit Indigo hard. Indigo temporarily closed all its retail locations on March 17th, 2020, and laid-off 5,200 of its retail employees. And on Apr 33, 2020, Indigo announced that:
“The ongoing COVID-19 pandemic is expected to have a material impact on Indigo’s business, operations and financial performance for fiscal 2021, the magnitude of which cannot be quantified at this time because of the significant uncertainty associated with the extent, duration and severity of the pandemic itself, and with the government restrictions, effects on consumer behaviour and other factors associated with or resulting from that pandemic, many of which are beyond the Company’s control”
Nobody could have predicted COVID-19. Which makes me wonder why my sincerest attempts to help Indigo during the late 2019 - were completely ignored and utterly dismissed.
In my previous post entitled: REINVENTING Booking - I wrote about many companies that missed the opportunity to REINVENT. And I mentioned that it’s particularly troubling since 97% of all CEOs & BODs are not receptive to outside advice!
By the time Indigo’s shares began to trade in 2019 at the levels of 14 years ago, I decided to act. Numerous emails & phone calls to Indigo were made! But despite my sincere efforts to help Heather Reisman to turn things around – all I’ve got back was a polite reply from her secretary… about how busy Heather is.
And yet the agonizing slide in Indigo’s share price continued. The emphasis on the bottom line and the cost-cutting didn’t help anymore. Not that such strides went unnoticed. But without a meaningful top-line growth and with the Revenues still sliding – the Toronto Stock Exchange (TSX) spoke loud and clear…
With the share price dropping beneath $1.00 all penny-stock companies are facing the threat of being delisted from TSX and placed on TSXV. The Toronto Stock Exchange is the senior equity market, while the TSX Venture Exchange is a public venture capital marketplace for emerging companies. At the time of today’s closing, Indigo traded on TSX at $1.23
So, in late 2019, I wrote to Heather and said: “I will be deeply honoured to meet with her and to help her to turn-around the negative pressures of the stock market”. And I added: “You have been working with the outside advisors for years, yet I can’t even imagine how disappointed you must be with the lack of RESULTS! So, why not to meet with me and hear my ground-breaking and innovative proposal?”
My very last note to Heather Reisman before COVID-19 included just a single sentence: “Let me walk with you for only 10 minutes inside ANY of the Indigo stores and I will point to WHAT IS MISSING!”
Undoubtedly, in many of my posts, I frequently mention that a good Advisory Board (AB) can add value and broaden the horizons of CEOs. And ABs can benefit any organization: large, or small. In many cases, advisers with a non-retail background can improve understanding of companies’ challenges, risks, and growth drivers – especially during a major disruption.
Well, COVID-19 is such a disruption. And I always say that asking for advice is the sign of STRENGTH, not WEAKNESS! Steve Jobs did it, and so can others!
To be frank, for quite some time, I couldn’t understand why Heather Reisman is not more open-minded and not willing to listen to outside advice. After all, she is not facing a “hostile” BOD – far from t! Heather is at liberty to do what she wants as the controlling ownership of Indigo resides in the hands of her husband, Gerald Schwartz.
Gerald Schwartz owns 56.8% of Indigo’s stock and in his own right, is also the founder of ONEX Corp. where he occupies the position of Chairman, President & Chief Executive Officer for ONEX Corp. and Chairman & Chief Executive Officer for Onex Partners (a subsidiary of ONEX Corp.).
ONEX is one of the greatest Canadian Private Equity success story and according to ONEX’s website: “Founded in 1984, Onex invests and manages capital on behalf of its shareholders, institutional investors and high net worth clients from around the world. Onex’ platforms include: Onex Partners, private equity funds focused on larger opportunities in North America and Europe; ONCAP, private equity funds focused on middle market and smaller opportunities in North America; Onex Credit, which manages primarily non-investment grade debt through collateralized loan obligations, direct lending, and other credit strategies; and Gluskin Sheff’s actively managed public equity and public credit funds. In total Onex’ assets under management, today are approximately $33 billion, of which approximately $6.0 billion in shareholder capital”
The Future
Jose Luis álvarez, a Senior Affiliate Professor of Organizational Behaviour at INSEAD once said: “The best time to plan for contingencies was yesterday. The next best time is now”.
In REINVENTING Booking I shared my thoughts about The REINVENTION PROCESS and I mentioned that it varies from company to company. Shaped by extensive life experiences, my pattern recognition abilities allow me to see how to maximize business offerings & profitability. And looking at existing problems with a pair of fresh eyes - often brings a set of creative solutions, that were never even considered in the past.
Each company’s challenges are unique and so are the solutions to their problems. However, my REINVENTION PROCESS is always the same. It’s like a 5-legged stool that includes:
· OPM – Using Other People’s Money
· Push/Pull – Adding New & Untapped Revenue Streams
· Noncustomers – Focusing On New & Untapped Market Segments
· Business Model Innovation – As Important As Technologies Behind It
· Operating Advisor/Mentor – Hands-On Assistance With Strategy AND Execution
In this post, I will only describe a single stage of my REINVENTION PROCESS linked to acquiring noncustomers. I worked with many companies in the past and some have done very well by analyzing their customers with granular details. Logically, they are selling their products and services to existing customers they thoroughly scrutinized. And yet, I firmly believe that there are HUGE and untapped opportunities to generate new revenues by focusing on …. noncustomers!
Indigo’s Noncustomers
In my post: The Opposite - When In Doubt, Ask This Question! I wrote about a simple technique that I use to question various plans, strategies, and assumptions. More often than not, the cracks can be spotted by asking for the… opposite. For example, if the conditions highlighting why a certain logic works are spelled out – the simplest way to add clarity is to ask: under what conditions the stated logic wouldn’t work?
In the case of Indigo, the company is catering toward a very specific market segment: the book readers. And what is the exact opposite of the BOOK READERS? The answer: it’s the BOOK WRITERS!
And what do all the aspiring writers need the most? Well, it’s their Literary Agents – to represent the authors to the publishers…
Indigo already knows EVERYTHING there is to know about the book publishing industry. What it needs is the millions of authors it can represent to the right publishers and to hold the authors’ hands - throughout the entire process…
And to prove my point, let me tell you a true story… Last year, I decided to write a book dispelling fake-news about job losses related to Artificial Intelligence (AI). In August 2019, my book: “AI BOOGEYMAN - Dispelling Fake News About Job Losses” was published! And in the process, I learned a great deal about the book publishing industry…
If I was looking for a single adjective describing the book publishing industry, it would have been: FRAGMENTED. I quickly lost count of all the publishers, literary agents, self-publishing platforms, publishing services, and so many additional industry participants… that I had no clue existed!
What surprised me the most, however, was how little interest there is there in non-fiction. Yet after hundreds of conversations, I realized that fiction may lead to a sizeable Hollywood contract and that the entire book publishing industry is salivating about the prospects of selling the movie & TV rights to various studios. The KISS Principle (Keep It Simple Stupid) of the Literary Agents is quite simple: in the era of binge-watching – content is the king!
IMHO, the subscription fees alone from the “Indigo Agency Services” could be substantial in their own right. But such revenues would pale in comparison to the commissions collected from Netflix, Amazon, Hulu, Disney, HBO, Showtime, Starz, and hundreds of subscription-based specialty channels. In fact, if I wanted to list all such content-hungry businesses – my list would have been much longer than this entire post…
So, to put it in perspective, it’s worth noting that the pile of cash that Apple sits on today – is greater than the cash of all the conventional movie studios, combined! And what about the revenues from running hundreds of online courses on how to become an author in the first place?
But selling books is only one battle in a much bigger war between online vs. retail businesses. In my “AI BOOGEYMAN” book, and in my post entitled: Is Jeff Bezos Darth Vader of Retail Industry? - I pointed out that If Walmart just tries to be “like” Amazon, it will lose 70% of possible revenue streams.
So, instead of needlessly competing for a slice of remaining 30% - I often recommend generating huge secondary and tertiary revenue streams – all linked to retail’s unique factor endowment. Need a hint? Indigo is a part of established shopping centers. Considering that shopping centers generate much bigger foot-traffic than individual tenants – smart retailers like Indigo can take advantage of such a gift! But I digress, so let us leave the discussion about the additional revenue streams for a different occasion…
I’m at that stage in my life where I don’t care about BOD politics and water-cooler gossips. Nor do I offer fake flatteries to CEOs. All I care about is how to solve CEOs' problems & deliver results. So, I am in the business of joining Advisory Boards/BODs of the most innovative companies all around the world. And as one of the ultimate BusinessAI? veterans on the planet w/ over 30-yr hands-on AI expertise, I also bring supreme business savvy to separate the wheat from the chaff.
As an Operating Advisor/Jack of All Trades, I work with VC/CVC/PE funds and the companies they support - at a granular as well as strategic levels. And in addition to focusing on organic growth, my ground-breaking RedCarpet? revenue acceleration strategies include Design, Structure, Finance, and Deployment of Opportunistic Joint Ventures. It is delivered at no cost to the client company, as we leverage “other people’s money” - an ingenious alternative to costly acquisitions…
My turnkey approach helps to raise 10X more capital at 1/10 of the cost and it is based on structured finance expertise. We financed over $1B of Renewable Energy projects in the past and now apply our expertise to the Finance, Healthcare, Fintech, Construction & Manufacturing sectors. And if our unique value innovation does not generate the desired results - we do not get paid…
What I learned over the years is that it is not just technology innovation, but also the exponential increase in the value offered to clients at a much lower cost – that makes all the difference. Yet I see too many companies focused on pushing their product out the door – while losing ~70% of additional revenue streams.
My proprietary “The Push, The Pull and The AI Bull?” process, generates huge secondary and tertiary revenue streams. Such a strategy is scalable and sustainable – resulting in significant revenue smoothing. It allows me to tackle rapid innovation issues; disruptive marketing strategies; operational efficiency improvements; brand enhancement; and securing growth capital.
In some cases, I step-in as an interim CEO to significantly accelerate scale-up and expansion. The emphasis is on EBITDA & Revenue Acceleration, Margin Enhancement & Opening New Channels in diverse markets. Unique pattern recognition abilities allow me to see what is still missing & how to maximize business offerings & profitability.
SELECT ACCOMPLISHMENTS: Using AI in CT medical diagnostic, financial fraud detection, solar PV, wind, WTE, energy efficiency, etc. Finance skills: equity, non-recourse debt, balance sheet financing, and tax equity. I also took a tiny startup public, building a $135MM enterprise & received grants from NRC & DND. Academic R&D collaborations included: UW, UofG, UofT, and MCC Consortium in Texas.