Indigo hopes new store concept will win back customers after cyberattack, inflation

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This article was published 30/08/2023 (1130 days ago), so information in it may no longer be current.

TORONTO – When Indigo Books & Music Inc. opens the doors to its forthcoming location in downtown Toronto’s Well building this September, shoppers will immediately realize the space is more than a bookstore.

A blue Citroën truck dating back to the 1950s will sit by the entrance serving pastries, coffee, beer and wine. There will be nooks dedicated to home fragrances, plants and popular Japanese graphic novels known as Manga.

A listening booth will offer up stacks of records to buy and a jukebox to sample jams, and other areas will be abuzz with 1980s pinball and Pac-Man machines for gamers.

The 16,000 square-foot store — the first using the retailer’s new urban concept — will be a play on the company’s long-held strategy of blending books with lifestyle products, but for chief executive Peter Ruis, it will also be a test.

Indigo is entering a new chapter, its first without Heather Reisman, who built the retailer into a dominant Canadian chain and mall stalwart with 171 stores and counting under the Indigo, Chapters, Coles and Indigospirit banners.

Reisman, who was chief executive until 2022 and is known for bestowing “Heather’s Pick” stickers on her favourite books, retired from the board on Aug. 22.

Her departure came on the heels of a debilitating cyberattack that downed Indigo’s website for weeks, forcing the company to eventually rebuild its e-commerce presence, and as four of its 10 directors left the board, with one attributing her resignation to a “loss of confidence in board leadership” and “mistreatment.”

While most customers stuck with the brand after the February attack, which was carried out via ransomware software known as LockBit, the company reported it lost $50 million in its last fiscal year and put some of the blame on the incident.

Ruis took it as a sign that “we’ve got to work a little bit harder.”

“Naturally, when you close something down for a little bit of time, you lose a few customers on the way and you have to beckon them back,” he said.

“The good news is each week, more of them come back, but it’s definitely, I would say, still a challenge for us to get everyone back.”

The question facing Ruis is how he can rebuild confidence from consumers, said Donna Smith, the director of Toronto Metropolitan University’s School of Retail Management.

“A fancy assortment is very shiny and it’s the glitz of retailing,” Smith said, “but building trust with your customers is the real essence and that’s what I think he has to do.”

Some of the consumers who haven’t returned to Indigo aren’t necessarily harbouring ill will from the hack. Many are just price-conscious shoppers looking for any way to stretch their budget as inflation remains high, Ruis noted.

“We can’t expect to be a choice when people are struggling to pay their mortgages, so we’re very focused on that and very conscious that we need to give them a fantastic value,” he said.

“Everyone’s incredibly time poor and we know that the Canadian economy is not in its best place, and everyone’s a little bit depressed about interest rate rises and cost of groceries, etc., so you know you need to provide some an attractive reason to get outdoors and to get into the stores,” he said.

It’s not the first time he’s leading a company through a period of immense change. Ruis has spent 30 years in the retail sector, jumping to Indigo’s president role in 2021 from womenswear chain Anthropologie URBN Group, where he charted an international expansion.

But the Englishman’s biggest plaudit came at department store John Lewis, where he served as its executive buying and brand director and transformed the chain from its traditionalist roots into a fashion destination with soaring apparel sales, designer collaborations and buzzy Christmas ads.

Ruis’s vision for Indigo centres around each store being a “cultural emporium,” borrowing an approach from Tokyo stores selling books, magazines and music.

Expanding merchandise is a good strategy for getting people to spend more time in stores and thus, make more purchases, but it needs to be matched with ample staffing, said Smith.

“One of the difficulties in retail today is that the front-line staff are shrinking and a lot of retailers are falling behind … in really giving them the training that they need to bring the customer to the finish line, to close the sale,” she said.

“The staff they have are pleasant, but I don’t see a whole lot of them.”

More could be added to the baby section, where she figures new parents are most likely to need recommendations or answers.

When shoppers visit the Well store in particular, Ruis said the hope is that they’ll stumble onto something exciting and then wind up lingering as they buy a coffee, browse housewares or pick up one of the thousands of books on hand.

As many consumers adopt e-readers and Indigo stocks more products ranging from bedding and Barbies to sex toys, toasters and vitamins, some might wonder if Indigo will leave the book business behind.

On that front, Ruis is unequivocal, even if books make up a slim majority of the business at 55 per cent compared with lifestyle products at 45 per cent.

“Never, absolutely never,” he said, when asked if he envisions a day when Indigo doesn’t sell books.

And despite stocking loungewear, hats, bags, socks and even pyjamas, which Ruis said have been a hit, he maintained “we’re not going to become a fashion store.”

The company, he said, is simply “making sure that as we move into lifestyle, it’s additive to our books, it doesn’t detract from our books.”

This report by The Canadian Press was first published Aug. 30, 2023.

Companies in this story: (TSX:IDG)