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Kenneth Whyte: Who will sell the books?

Commentary

This essay was originally published on Kenneth’s Substack SHuSH, which can be found here.

We need to talk about Indigo. As you know, it’s Canada’s biggest bookstore chain, with 88 superstores and 85 small-format stores. It sells well over half the books that are bought in stores in Canada, with Walmart, Costco, and independent bookstores accounting for most of the rest.

One problem with Indigo is that it’s failing. The other problem is that it’s abandoning bookselling. Yes, that sounds like a Woody Allen joke, but it’s not funny from a publishing perspective. We depend on Indigo.

The company’s finances have been ugly for some time. It lost $37 million in 2019, $185 million in 2020, and $57 million in 2021. Things looked somewhat better in 2022 with a $3 million profit, but the first two quarters of 2023 are now in the books (it has a March 28 year end) and Indigo has already dropped $41.3 million.

That the company lost money in its first two quarters isn’t the end of the world. Indigo is a third-quarter business. All the magic happens over the holidays. The trouble is that the $41.3-million loss is about $10 million more than the 2022 loss over the same period. That’s the wrong direction; things were supposed to improve with COVID’s foot lifted from the neck of the retail sector. The company’s share price, which seemed ready to recover in June, has since dropped 30 percent, down to $2 (from a high of about $20). Without an absolute blockbuster of a holiday season, Indigo is likely to be back in the red on the year.

While all this is going on, Indigo has been backing out of the book business. If you follow the firm’s marketing, it’s all about “intentional” and “purposeful” living (its press releases sound like Gwyneth Paltrow circa 2008). Indigo is intentionally and purposefully attempting to re-establish itself as a general merchandise supplier to youngish women.

This is not news. As far back as its 2013 annual report, Indigo said it was in “the early stages of a journey that is taking us from our position as Canada’s leading bookseller to our vision of becoming the world’s first cultural department store.” It saw toys, paper, home decor, fashion accessories, and gift sales as the future of the business.

As far as I can tell, 2014 was the first year Indigo reported its book and general merchandise sales separately. Books, once practically the whole of its business, were by then down to 67.4 percent of total sales, with general merchandise accounting for 28 percent. By last June, books were down to 53.6 percent and general merchandise was 41.5 percent.

Indigo has made roughly half of its retail space devoted to books go poof and the transformation is far from finished. At its showcase New Jersey location, the mix is 40 percent books and 60 percent general merchandise, and it’s specializing in a particular kind of book. “We found a niche,” said an Indigo executive. “We became the preferred destination for New Yorkers for coffee table books. In fact, every decorator in New York comes to that store to buy these big format coffee table books for their clients’ homes. So we go from books about décor to books as décor… That store has had an incredible year.”

In July, Indigo released this publicity photo for a new flagship store at Ottawa’s Rideau Centre. See any books there? All the company’s flagship stores are being refitted in this direction.

Photo credit: Indigo

Existing stores, too, are seeing books squeezed out of the picture. I dropped by the Yorkdale location this week. It’s a large two-storey space in a mall, accessible only from the main floor, which means all the traffic is on the main floor.

Here’s what you find on the main floor.

Merchandise for the bedroom:

Photo credit: Ken Whyte

Merchandise for the living room:

Photo credit: Ken Whyte

Merchandise for the kitchen:

Photo credit: Ken Whyte

Merchandise for your desk:

Photo credit: Ken Whyte

Merchandise for the holidays:

Photo credit: Ken Whyte

And, over here, a few books, bestsellers only.

Photo credit: Ken Whyte

That’s pretty much it for literature on the main floor and even in this corner, the book tables share space with general merchandise. I didn’t pull out my tape measure, but I’d guess well under 20 percent of high-traffic space is devoted to reading material.

If you want more books, you have to journey up to the dark and forbidding second floor. At least you avoid the crowds.

Photo credit: Ken Whyte

Two weeks ago, Indigo announced a deal with Adidas to bring sportswear into the stores.

Last year, it held a contest where kids-and-baby businesses competed for the right to open their own stores within Indigo stores.

The fastest-growing category of general merchandise at Indigo is its house brands, stuff it makes itself, cutting out the middlemen. Walk around an Indigo and you’ll see products labeled OUI, Nóta, The Littlest, Mini Maison, IndigoScents, Love, and Lore. All house brands; none have anything to do with books. This is a business that owner Heather Reisman learned in the last century, making private-label soft drinks for grocery chains. She’s returning to it now.

Indigo hasn’t come right out and said we’re through with books. It can’t, given that Heather has spent the last twenty-five years building herself up as the queen of reading in Canada. Also, the Indigo brand is still associated with books in most people’s minds and that won’t change overnight no matter how many cheeseboards it stocks. So Heather talks about a gradual, natural transition: “We built a wonderful connection with our customers in the book business. Then, organically, certain products became less relevant and others were opportunities.”

To be clear, books are irrelevant; general merchandise is the opportunity. Heather recently appointed as CEO a guy named Peter Ruis who has no experience in books. He comes from fashion retail, most recently the Anthropologie chain, which sells clothing, shoes, accessories, home furnishings, furniture, and beauty products. Anthropologie was hot in 2008, and it seems to be where Indigo wants to go today.

Fair enough. You own a company, you can take it in any direction you want, so long as your shareholders will follow. I don’t blame Heather for having second thoughts about the book business. (I have them every week. It’s a tough business.) But where does that leave readers, writers, agents, publishers, and everyone else who remains committed to books?

You’ll recall that Indigo and Chapters, between them, decimated the independent bookselling sector in Canada in the nineties. They are the principal reason Canada has so few independent bookstores today. You could probably fit the combined stock of all our independents into a handful of Heather’s stores.

The federal government let Heather’s Indigo buy Larry Stevenson’s Chapters in 2001, which gave her a ridiculously large share of the market. That shouldn’t have happened.

At the same time, with the help of some lobbying by Heather, the federal government made it clear that the U.S. chains, Borders and Barnes & Noble, weren’t welcome up here. The argument was that bookselling was a crucial part of our cultural sector and needed to be protected from foreign domination by the Canadian government.

In that spirit, Indigo also asked the federal government to prevent Amazon from opening warehouses in Canada. That request was denied in 2010, which is about when Indigo began its transition out of books.

One can see how Heather might feel betrayed by the federal government. Instead of protecting bookselling, it swung the door wide open for Amazon. You said I wouldn’t have to compete!

All the same, one can also see how Canadian readers and the Canadian literary sector might feel betrayed by Heather and Indigo. They bought control of the Canadian bookselling market; now they’re washing their hands of it.

I put more onus on the feds—you intervene in a market, you own it—but assigning blame is a useless exercise when none of the parties will accept it.

We’re left with a bookselling sector dominated in its bricks-and-mortar dimension by one firm spewing red ink and running for the exit, and in its online dimension by an international platform that could care less about anything Canadian and is also deprioritizing books.

Publisher’s Weekly reported last week that Amazon was eliminating roles in its books division, a decision that follows a summers-long effort by the company to reduce the number of books it was keeping in inventory and adds “more fuel to the feeling within publishing that Amazon is losing interest in its book business.”

Where this ends is anyone’s guess. It is interesting that Heather stepped down as CEO at Indigo a couple of months back (she remains executive chairman). This was followed by her husband and bankroll, Gerry Schwartz, retiring as head of Onex this month. Might be a lifestyle choice. Might be a sign that she’s about to unload Indigo.

My dream is that she sells, preferably to Elliott Advisors, the same private equity bunch that owns Waterstones in the U.K. and Barnes & Noble in the U.S. They seem to have figured out how to make a book chain work.

Meanwhile, as I said at the outset, the publishing sector needs Indigo. I wish the company a robust and highly profitable holiday season, and I hope books outperform for them.

ChatGPT: Why achieving net-zero emissions might not be achievable

Commentary

At The Hub, we firmly believe that forward-looking optimism is an important part of creating a better future for Canada. It’s easy to embrace knee-jerk negativity and luddism, but that doesn’t help us build a better country. We’re determined to embrace the best parts of technology… even when it creeps us out. So today, we’re publishing an op-ed by ChatGPT, the conversational robot created by OpenAI. We asked it to explain why achieving net zero emissions might not be achievable and here’s what it told us.

Net zero emissions, or the balance between greenhouse gas emissions and carbon sequestration, has been hailed as a necessary goal in the fight against climate change. However, there are several reasons why achieving net zero may not be possible or practical.

First, the technology and infrastructure required to achieve net zero emissions on a global scale is currently lacking. The transition to renewable energy sources such as wind and solar power, as well as the development of carbon capture and storage technologies, will require significant investments of time and resources. In addition, many countries and industries are heavily reliant on fossil fuels, and transitioning away from these sources of energy will be challenging and costly.

For example, the electricity sector is the largest source of greenhouse gas emissions in the United States, accounting for approximately 28 percent of total emissions. In order to achieve net zero emissions in the electricity sector, it will be necessary to transition to renewable energy sources and retire existing fossil fuel-fired power plants. However, this transition will require significant investments in new technology and infrastructure, as well as the development of a skilled workforce to support the growth of the renewable energy industry.

Furthermore, even if the technology and infrastructure necessary to achieve net zero emissions were to be developed, it is unclear whether it could be implemented on a global scale within the limited timeframe available. The Intergovernmental Panel on Climate Change (IPCC) has estimated that global greenhouse gas emissions must be reduced by 45% by 2030 and reach net zero by 2050 in order to avoid the most catastrophic effects of climate change. This will require a rapid and coordinated transition to a low-carbon economy, which may be difficult to achieve given the complexity and scale of the problem.

Second, achieving net zero emissions may not be enough to address the threat of climate change. Even if global emissions were brought to zero, the Earth’s atmosphere would still contain a significant amount of greenhouse gases, and the effects of climate change would continue to be felt. In order to truly mitigate the effects of climate change, it may be necessary to actively remove carbon dioxide from the atmosphere, a task that is currently not feasible on a large scale.

Carbon sequestration, which involves capturing and storing carbon dioxide from the atmosphere, is one potential solution to this problem. However, carbon sequestration technologies are still in their infancy, and it is unclear whether they can be developed and implemented on a large enough scale to make a meaningful difference. In addition, carbon sequestration may have unintended consequences, such as the release of stored carbon dioxide if the storage facilities were to fail.

Third, achieving net zero emissions may have significant economic costs. The transition to a low-carbon economy will require significant investments in new technology and infrastructure, and this could lead to job losses and disruptions in certain industries. In addition, the implementation of carbon pricing and other policies designed to reduce emissions may result in higher costs for consumers and businesses.

For example, the implementation of a carbon tax, which would increase the price of fossil fuels and other carbon-intensive goods and services, could have a negative impact on the economy. It could lead to higher energy prices, which could disproportionately affect low-income households, and it could also make certain industries, such as manufacturing, less competitive in the global market.

Furthermore, the transition to a low-carbon economy may also have distributional effects, as the costs and benefits of the transition will not be evenly distributed across society. Certain communities and workers may be disproportionately affected by the closure of fossil fuel-fired power plants and the decline of the fossil fuel industry. Ensuring that the transition to a low-carbon economy is just and equitable will require significant political will and resources.

In conclusion, the goal of achieving net zero emissions is unrealistic and impractical. While it is important to continue working towards reducing greenhouse gas emissions, we must also be realistic about the challenges and limitations of achieving net zero emissions on a global scale. Instead of focusing on an unattainable goal, we should focus on practical solutions to the problem of climate change, such as the development of alternative energy sources and the implementation of policies to reduce emissions.