On November 4th I wrote this scathing piece on Indigo and Kobo partnering up to kick the crap out of the Canadian book industry. Four days later Indigo’s CEO announced they sold Kobo to an e-Commerce giant in Japan. Coincidence? I think not. Damage control after my valid points. (Kidding.)
Not that this is funny. The real story here is that Indigo (i.e Chapters, Coles, and Smithbooks) plan on using the money from Kobo’s sale to expand its “non-book ventures.” They’ll be scaling back on books as their primary focus, making them a mere 50% of what they sell. Which means serious cuts on what they stock.
To Back Up:
The eReader/eBook powerhouse, Kobo, spun out of Indigo not two years ago, with Indigo retaining 44% ownership of Kobo. It was Indigo’s way to keep on making money off of books as readers shifted from buying print books to buying eBooks. So why on earth would she sell it?
She told Canadian Business the sale was simply about getting a “stupendous return on our investment, and I don’t know anything that could be better than that.” I do: a means by which to make a lot of money in selling eBooks. Indigo’s shares in Kobo seem worth WAY more than the $115 million they netted. I didn’t understand why she was so okay with letting it go, but the best explanation is that Indigo is getting out of the eBook racket out of necessity. They simply couldn’t afford to compete in the eBook market on a global scale, because they’d need over 100 million in capital to continue competing with the big global players. And the blow means Indigo has to change who and what they are to keep the money coming in.
The plan? To use the money from Kobo’s sale to drastically change how they operate and what they sell. So there you go, our country’s biggest bookseller plans on not really focusing on selling books anymore. “We must and will fundamentally transform Indigo” she says, “We made the decision to fully transform Indigo into a whole new kind of retailer and e-tailer.”
She’s saying that book sales aren’t that great, so Indigo’s plan is to “Expand non-book ventures.” That’s not a great thing to hear your country’s biggest bookseller say. “We have to grow very considerably to balance off what we lose in our book business.” And she won’t be snail-ish about it either. “Within 18 months” they’ll have their new ball rolling. Indigo currently operates with a focus/inventory of 75% books and 25% “housewares” like picture frames and coffee mugs. Their new plan is to go 50-50. That means they’re not a bookstores anymore, in my opinion. They’re a housewares store with books. And, I’ll guess, they’ll only be stocking hot-sellers and mediocre books by big publishers paying for the precious space.
“We caught the wave on e-reading and had a tremendous success with Kobo. I see Indigo as that kind of innovative platform, and we’ll do it again.” There’s something ominous about that statement. I feel like there’s more to this story, and she’s about to whip out some kind of serious gamechanger. My initial gut feeling, before hearing her rationale, was that she had something sneaky and huge up her sleeve. Like a new eBook arrangement, or maybe even a plan to sell Indigo to some even-bigger giant corporation that already has an eBook arrangement in place. In any case, Heather did state that she has a “10-year pact with Kobo [that] ensures Indigo a‘meaningful share of Kobo’s profits on electronic-book sales in Canada.”
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