Amazon Warehouse Could Lead To Indigo Sale
The Globe and Mail is reporting Amazon is poised to open a warehouse in Canada. This is news.
Wind Mobile — a company backed by Egyptian money — set a precedent earlier this year when it was allowed to set up shop in this country in order to foster phone-market competition even though its structure flies in the face of Canada’s foriegn ownership rules.
It is news because it means Amazon could dominate on-line sales of general merchandise in Canada. The Bay and Canadian Tire would be screwed.
It is news because it would mean Canadian Heritage would finally clarify the ownership provisions in the book trade that have been fuzzy ever since Simon and Schuster set up in Canada and Little Brown Canada went away.
But it is huge news because it gives Heather Reisman — owner of Indigo/Chapters and Coles — the opportunity to sell her chain of ‘cultural department’ stores thereby, dodging the bullet everybody knows is coming.
Think about it.
The chain has too much square footage and it inherited some bad leases during the Chapters merger. It is in a sector with low margins and insane returns. Attempts to diversify have been mixed – toy sales have been successful but Pistachio has failed. The online book business has been hemorrhaging money. And the digital wave hasn’t even hit yet. If Tower Records and Blockbuster are any indication, big-box bookstores need to prepare themselves for the day when the customers don’t come in anymore.
If Reisman wanted to sell (she isn’t getting any younger) no Canadian in their right mind would buy. The chain is an extension of her personality so the price would likely match her sense of what things are worth rather than what they really are, and her shoes would be too big to fill. The place basically operates in her image. None of her peers would take that on. That leaves foreign investment or a sale.
And getting out now would be perfect timing. EBooks are still less than 10% of publishers sales. The iPad has yet to land. Canadians are still reluctant online shoppers. Indigo is probably worth the most it ever will be right now.
The only unknown is Reisman’s own commitment to the company. She doesn’t have to sell. She has the money to turn all the Indigos into Dean&Deluca-style emporiums four times over (your Jamie Oliver cookbook with the knife-set and the cooking pans). She likes hosting salons and being at the centre of the book scene. Can she give up being culturally relevant? I think she can. She is shrewd enough to walk away. On the other hand, her husband owns a whack of cinemas in this country. If moneymaking was the only thing that mattered to them, the couple would have dumped that stake long ago.
Canada Heritage — your move.
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