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Margo and Kathie Smith, partners of Hull's Family Bookstore.
Margo and Kathie Smith, partners of Hull's Family Bookstore.

Case Study

What to do when big boxes undercut you Add to ...

THE CHALLENGE

Bookstore partners Margo and Kathie Smith exchanged surprised looks as they pushed their carts along Costco’s book aisle.

Multiple piles of Pastor Rick Warren’s book The Purpose Driven Life were stacked about 20 copies high and selling for about 5-per-cent less than their bookstore’s wholesale cost. Only a few weeks earlier, one of the sisters-in-law noticed copies of The Shack were selling at Wal-Mart, again at a substantial discount from suggested retail.

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While price wasn’t everything, it certainly was something, and something an increasing number of cash-strapped consumers were paying attention to. The Christian bookstore owned by the Smiths had been the retailer of choice for such titles, so how might the pair respond to having some of their hottest religious titles sold en masse by the big boxes?

THE BACKGROUND

In 1996, the Smith family bought Hull’s Bookstores, a three-store retail chain based in Winnipeg. The operation, which also included stores in the southeastern Manitoba town of Steinbach and the northwestern Ontario city of Thunder Bay, was a prairie institution that had served churches and para-church organizations for almost a century. The stores sold a variety of products, including books, Bibles and commentaries, as well as compact discs, sheet music and assorted gifts such as wall plaques and devotional aids.

They also sold Sunday school curriculum and assorted novelty products for boys and girls clubs. For decades stores such as Hull’s had the market to themselves. They were different from mainstream retail – there was a steady supply of customers who wanted what they sold. The proven formula generated retail success and vocational purpose. Given this history, the Smith family was confident it could keep the Hull’s Bookstore legacy going well into the 21st century.

THE PROBLEM

Not long after the Smiths purchased the store they became increasingly aware that the competitive environment was changing. One of the emerging challenges was related to big-box retailers, such as Wal-Mart and Costco, which noticed some religious titles were actually doing major volume – Rick Warren’s 2002 book, The Purpose Driven Life, for example, had sold more than 30 million copies by 2007. Other titles, such as William Young’s The Shack and Bruce Wilkinson’s The Prayer of Jabez, had logged similar results and, not surprisingly, they were also spotted on the shelves of several big-box stores.

Ergo: If the product sells, the big box wants a piece of it, regardless of whether it’s vitamins, patio furniture, radial tires, or Bibles. Big boxes wanted a piece of the action, even if it meant selling the products as loss leaders. For small Christian bookstores such as Hull’s, the implications were potentially devastating. Why would someone bother to make the trip to a specialty bookseller to pay more, when they could go to a big box and pick up the same title for less, while also picking up a pair of sweats, a giant bag of corn chips and a couple of cases of pop?

THE RESPONSE

So what do you do when a big box cherry picks some of your bestselling products? Consider doing what the Smiths have done: Grow some new fruit and move some orchard boundaries.

The Smiths have diversified beyond books by adding new lines of Christian giftware, including decorative plaques. They have also sought to move some historical “boundary markers.” While the pre-Smith Hull’s was traditionally focused on serving Manitoba’s and northwestern Ontario’s evangelical community, the Smith-era store has increasingly sought to stock books that speak more of the “languages” of today’s diverse church.

Whether the customer is Catholic, Orthodox or Protestant, to name but three of the largest language groups, the bookstore is seeking to reach all Christians regardless of denomination.

Margo Smith remembers one moment that in many ways defined for her what this new direction looks like: three customers – a Roman Catholic nun, a middle-aged Hutterite man, and his young child – all standing side by side in front of the Bible section, all three united in the same quest to find the right Bible. It’s moments like these that inspire the Smith family as it seeks to reposition the store while holding true to a vocational calling to prepare and equip today’s believers for works of faithful service.

Special to The Globe and Mail

Reg Litz is a professor in the Asper School of Business of the University of Manitoba.

This is one of a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Your Business website.

 

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