Indigo on the brink

Is Canada’s largest book retailer on the verge of a bright new future? Or a slow tumble to ruin? As founder Heather Reisman retakes control, the Star surveys experts on the chain’s next big move

On Sept. 27, Indigo Books and Music was set to open a swanky, 16,000-square foot, urbanconcept store in The Well, a massive new commercial and residential development in Toronto at Spadina and Front Streets.

Along with a healthy stock of 30,000 books, the new store was expected to come with a plants section, vinyl records shop, jukebox and a pinball machine — all of it signalling Indigo’s continued shift from books to home items and seemingly everything else.

But recently, the company postponed that opening until further notice, without saying why.

The unexpected delay follows the September resignation of Peter Ruis, Indigo’s CEO of 13 months and the subsequent return of Heather Reisman, company founder and namesake of the Heather’s Picks program, who came back from a three-week retirement to replace Ruis as CEO. There have been other changes in the boardroom, too, with four of Indigo’s 10 directors abruptly departing.

Collectively, the moves seem to signal a company that has lost its way — one that is wobbling dangerously as it struggles to regain its footing. Some industry watchers suggest we may be witnessing an abrupt U-turn as Reisman retakes control to steer the company in a new direction.

Wherever the troubled company is heading now, it needs to get there quickly. Indigo has been in turmoil for years and experts say Canada’s largest book retailer must settle on a brand identity that resonates with customers soon if it is to ultimately survive.

“Clients and investors alike need to find out how Indigo sees themselves and how they plan to evolve; whether that’s books or home goods or something else, and who is leading the charge,” said Richard Powers, associate professor with the Rotman School of Management at the University of Toronto.

“Until then, to me, they are on thin ice.”

Indigo, which declined to participate in this story, was founded by Reisman in 1996, and opened its first big box store in 1997 in Burlington, Ont., under the name “Indigo Books, Music & More.” They doubled down on books in 2001, buying their largest national competitor, Chapters, and small-format book retailer Coles. They have since become a $58 million company with 171 stores across the country. Over the next two decades, they gradually expanded their offerings to include magazines, gifts, toys, and home items as eclectic as gardening tools, barbecues and sex toys under their lifestyle brand IndigoLife.

More recently, the company soared through the pandemic and doubled yearly sales to $370 million in 2020. Two years after that, Reisman, then 74, kept her seat on Indigo’s board of directors but ceded her place as CEO to Peter Ruis, a career executive who spent most of his working life in the U.K., most recently as managing director at clothing and home goods retailer Anthropologie.

Ruis came to the job with the apparent goal of further transforming Indigo from a bookstore to a lifestyle brand. He touted the upcoming Toronto location as a “destination and social meeting place, celebrating the best of what Indigo does; Books, Music, Fashion, and Culture … a total lifestyle emporium.”

This year, however, things took a turn for the worse. A large cyberattack in February rendered Indigo’s stores unable to process debit or credit card transactions for several days, with personal information such as bank accounts and SIN numbers held for ransom by criminals who threatened to release them. It resulted in the company losing $50 million in its last fiscal year, worsening the outlook for company stock that had already seen its price decline by 90 per cent since 2018.

Shortly after the cyberattack, four of Indigo’s 10 directors left the board. One of them, Chika Stacy Oriuwa, attributed her resignation to a “loss of confidence in board leadership” and “mistreatment,” in an interview with The Canadian Press. In August, Reisman retired, and then Indigo president and employee of 21 years, Andrea Limbardi, left her post to become president at clothing store chain Reitmans Canada. The next month, Ruis also resigned, prompting Reisman to come out of retirement and replace him as CEO.

While Indigo has not disclosed the reasons for these changes, Richard Leblanc, a professor of management at York University, said their timing may be indicative of friction between Ruis and longtime Indigo executives. His research and handbook on board governance suggests that outside hires are less likely to work than inside ones, especially if they are operating in a new industry and country.

“You can only assume that the problem was strategic,” he said. “Here you had a bookstore selling sex toys and barbecues — it was too Americana, and strayed too far from the company mission and vision of bringing joy to readers.”

One cannot fault Indigo’s instinct to diversify its offerings beyond physical books, especially as the world grows more digital every day.

The retailer reported in June that its “general merchandise business,” which includes sales of everything but books, grew by 5.8 per cent year over year; whereas print business sales, including books, declined by 3.7 per cent. But is Indigo in danger of veering too far into the perilous realm of a Canadian department store? Sears went bankrupt in 2017; Bed Bath and Beyond shuttered its physical shops in Canada earlier this year; Hudson’s Bay Company (HBC) is now owned by an American private equity firm.

Lisa Hutcheson, managing partner and strategist at J.C. Williams Group, a retail consultancy, thinks Indigo hit a sweet spot over the last decade, expanding into lifestyle offerings adjacent to reading — Kobo tablets, coffee mugs, and throw pillows and blankets. Now, she fears Indigo’s new offerings, such as beauty products and home furnishings, have become “broad and diluted,” and risk confusing customers. She said that, if the chain’s executives doubt their ability to thrive on just book sales, they should focus on organizing events and building community around their physical stores — partly because, in Canada, online purchases only account for six per cent of total Canadian retail sales.

“People don’t realize the impor- tance of the physical store,” Hutcheson said, adding that even Netflix is planning to open a network of physical stores in the U.S. by 2025 that will offer retail, dining, and entertainment to leverage their shows and movies. “So, organizing book clubs and events to attract crowds to their physical shops would be a clever move.”

Powers, the management professor from Rotman, agrees that resimplifying its brand might help Indigo regain the trust of investors who have struggled to predict the company’s future. Doubling down on books, he said, seems to have worked for Indigo’s American counterpart, Barnes & Noble. The retailer had previously expanded to include blankets, candles, and kids’ science gear throughout the 2010s. But the U.S. chain is now reverting back to concentrating on books, hiring social media book influencers and embracing Booktok, the wildly popular books section on Tik Tok; and allowing store managers to tailor book offerings based on their specific reading communities. Just this year, the company announced the opening of 30 new bookstores across the U.S., including their largest one in years, a 28,000-square-foot shop in Northern Virginia.

In contrast, said Powers, the new Indigo store at The Well (also home to the Toronto Star) sounded like it would be “everything for everyone again,” with eclectic inventory that would make it expensive to run, and require wide-ranging, harder to find managerial talent. s“It’s not uncommon for companies to come back to what made them money in the first place — maybe it’s time for Indigo to go back to books.”

Powers thinks the return of Heather Reisman hints at the board’s desire to do just that — go back to its roots.

“She is probably one of the few people in the country who knows this industry inside and out. If anybody can stabilize the ship and engineer the changes needed to save Indigo, it’s her.”

Leblanc agrees. For Indigo to be successful, he said, it needs to return to tried and true programs like Heather’s Picks and Plum Points (a rewards program for members), both conceived under Reisman with an aim to retain long-term customers. Though one cannot overlook the obvious shakeup ahead: Reisman is now 75, and had already elected to retire earlier this year. Leblanc said the company must have a better succession plan in place for whenever the founder steps away for good.

“Her job now is to groom two or three potential successors; they should be internal, and employees of the brand for 10-20 years: long enough to understand the heart and blood of Indigo.”

For now, Leblanc awaits, along with thousands of readers, for Indigo’s newest downtown Toronto store to open its doors. He thinks that its character — whether in line with Ruis’ vision of an everything-all-at-once emporium, or Reisman’s once-booming, books-first approach, will be emblematic of Indigo’s newest direction change.

“It’s much easier to keep an existing customer than to gain a new one, so the goal for this store should be to have customers say ‘Indigo is back,’ ” he said. Powers agrees with the gravity of the moment.

“Indigo is at a tipping point: they won’t make it if they cannot show investors that their house is in order soon, but their best odds are with Reisman in the driver’s seat.”

‘‘ People don’t realize the importance of the physical store.

LISA HUTCHESON J.C. WILLIAMS GROUP