CASE: Analyzing Marketing Opportunities: Indigo Books & Music

The story of Indigo Books & Music is one of constant renewal. The company Indigo started in 1997, but the makeup of the company started during World War II.

In 1940, the Coles brothers started a bookstore in Toronto. The Coles name was synonymous with booksellers in Canada for most of the 20th century, including the creation of the world's largest bookstore in Toronto. Around the same time, the United Kingdom-based bookseller W.H. Smith opened stores in Canada and grew.

As the Internet began its ascent in the mid-1990s, Coles and W.H. Smith merged to become Chapters Inc. and around the same time Indigo Books & Music opened its first location in Burlington, Ontario. In 2001, Chapters and Indigo merged, using the Indigo name but still keeping the Chapters name in some stores up until a few years ago.

Since then, Indigo has made multiple attempts to stave off the barbarians at the gate for the bookseller industry in Canada. And those barbarians take many different forms, from online giants to societal trends.

Overall book sales in Canada have been flat for a number of years. In 2021, BookNet Canada tracked sales of almost 53 million books sold at total value of $ 1.1 billion. Combined, the sales of Juvenile and Young Adult subjects accounted for the majority of the market share at 41.3%. In second place, Non-Fiction made up 32.7%, and Fiction occupied the third place at a 24.9%.

The Canadian Book Consumer survey (2021), a quarterly survey conducted by BookNet Canada querying Canadian readers about their book purchasing behavior during Covid-19 pandemic. For more than half of Canadians, COVID-19 is now no longer impacting their book buying and borrowing.

Another report from IBIS World predicted a decline in industry revenues for booksellers in Canada, due to what it called "... high levels of external competition from online retailers and e-books, which offer alternative and more affordable channels through which consumers are able to purchase industry goods."

So, it's not only behemoths such as Amazon that Canadian booksellers like Indigo need to be wary of, but even the local library that increasingly offers print and digital alternatives for consumers to digest books at a fraction (if any) of the cost of a book in a bookstore.

In response, Indigo has introduced a number of new product lines; many would consider them to be brand extensions (see Chapters 9 and 10). These products include home accessories like blankets, pillows, and throws; and infant products like stuffed animals and bottles. There now seems to be more space in Indigo stores for water bottles, stocking stuffers, and kids' toys than for books. This is partly due to the changing nature of the book customer. With more options, consumers now use technology and choice to sometimes delay purchase decisions. Consumers can go into a bricks-and-mortar bookstore like Indigo, browse through a book, and order the same book through Amazon at a cheaper price, to arrive at their home within hours.

Indigo started shipping products from its website around the time of the merger with Chapters, but it has always struggled with shipping times. Offering delivery in weeks when competitors offer it in days has been a real hindrance.

As sales numbers and share price continued to tumble since the merger, Indigo has had to focus on other aspects of its business. The company started hosting events at stores, including what one would normally expect from a bookstore: book signings. But the company needed to attract a younger audience, so it started hosting children's events where kids and their parents would come to the store to play games, read books, and interact with Indigo products. During March break, Indigo often hosts daily events to provide parents and kids a break from their spring break.

According to the Canadian Book Consumer survey, about eight in ten Canadians believe that it's important for society to have physical bookstores for people to visit 76% of all respondents and 79% of buyers. The reasons why Canadians visited physical bookstores are:

to browse books to pass the time (24%),

to browse for books to buy (21%),

to browse book deals or sales (20%), and

to browse new releases (20%).

Realizing the advantage of a physical presence in the market, Indigo began opening larger stores, concept stores, and other formats in order to better engage with customers. Creating experiences included creating special shops: from Indigotech stores selling phones and technology to American Girl Doll boutiques that offer everything from dollhouses to hair and makeup services (for the dolls).

Indigo has also focused on being a good Canadian citizen, another way to differentiate it from large online adversaries. While it is challenging for Indigo to offer same-day delivery, it can focus on Canadian authors and children learning to read in Canada. For Canada's 150th birthday in 2017, Indigo honoured Canadian authors by selling books and collections focused on authors from the Great White North.

The Indigo Love of Reading Foundation, Indigo Literacy Fund Grant, and Indigo Adopt-A-School all display a commitment to give back to a community that, it is hoped, become future book consumers. The Foundation has raised more than $29 million for schools in Canada since its founding in 2004.

In 2011, Indigo entered the world of loyalty programs by introducing the Plum Rewards program. The bookseller seemed a little late to the game of customer tracking and rewards, and the Plum program was seen as a good but not great program. In 2019, the company announced plum PLUS, a higher-end loyalty program that charges a $39 fee but provides discounts on most purchases.

But as the ideas increase, the numbers continue to fall. The company's stock price flirted with $21 per share in early 2018, but early 2020 it had fallen close to the $3 mark. And with every quarterly reporting noting a decline from the previous period the year before, one wonders how much longer the biggest Canadian bookseller can survive.

But according to Indigo CEO Heather Reisman, there is actually hope in these declining numbers. The company embarked in 2020 on a cost-cutting mission, looking in all places for ways to reduce expenses, whether in administrative, operating, or general areas of the company. The goal, it would seem, is to be sleeker and more efficient and to make the best out of the infrastructure it currently possesses.

In 2022, Indigo reported net earnings of $3.3 million compared to a net loss of $57.9 million in 2021. Revenue increased $157.6 million or 17.4% to $1.06 billion from $904.7 million last year. Revenue growth was driven by the success of Indigo's omnichannel business, with the first good push of recovery delivered by the Company's retail channel and an ecommerce business that nearly doubled since the onset of the pandemic. Specifically, the online channel sustained incremental growth of 98% to fiscal 2020 sales levels. Demonstrating evolving omnichannel behaviours, Indigo's digital platforms are also increasingly where customers begin product discovery, bolstering in-store conversion.

In February 2020, Reisman said, "We are in the early stages of a fundamental repositioning of Indigoone that will fully build on our customer affection for our brand but that will allow us to thrive in an environment which is totally different from the one we were 'born into.'"

However, what that new position will be is still up for interpretation. As you know, there is a lot to be done in marketing before worrying about advertising or selling. Your experience so far in the areas of marketing research, consumer behaviour, business-to-business interactions, segmentation, and customer relationship management should guide you in helping Indigo Books & Music Inc. to escape the world in which it was "born into."

With the questions that follow, you are given a blank page on which to make the changes necessary to achieve success in the bookselling market in Canada.

3. Assess Heather Reisman's statement in terms of what you know about positioning from Chapter 7 (25 points).

4. Make a market segment for a consumer and a business segment for Indigo's new position, using your assessment from Question 3. Provide the necessary characteristics in order to ensure that you have properly segmented the market (20 points)