Why Indigo's Boutique Model is Succeeding

IndigoI wrote earlier about a mysterious walled-off section that just went up at my local Indigo, announcing the impending arrival of something called “Indigo Tech.” This morning, there was news in my RSS feed from my friends at Good e-Reader, confirming that Indigo has signed a deal with Apple to carry tablets, Apple TV boxes and other products.

Their write-up also had this intriguing quote:

“Indigo said during a recent investors call that it will revamp many of its large format stores to fall in line with the growing popularity of the store-within-a-store concept at many other retailers. The new physical format store will feel like you can meander through a series of shops, each one anchored by books. Indigo Tech is one component of the new format, alongside Indigo Home and Indigo Kids.”

Yup, that does seem to the direction things are going. Many of our American readers might not realize just how ubiquitous Indigo is in Canada—or it least, in the Greater Toronto Area, where I can personally attest to its prevalence. I have not seen sales numbers for any of these boutique areas, but I’ve seen anecdotal signs that this new model of theirs is working.

Why?Indigo

1. Book-Lovers Really Do Enjoy Having Somewhere to Go

That might seem like an odd statement given the popularity of Amazon and the rise of the showrooming epidemic. But I think many book lovers really do appreciate having Indigo as a hang-out option. No matter where and in what format they might be buying their books these days, they do keep going back there. So having as many products as possible for them to buy—even non-book ones—is actually smart.

2. Multiple Product Options Allows for Greater Price Diversification

With a book-only bookstore, everything is roughly the same price. This means that if you take your kid in there and you say no to a book today, that’s it for buying. But now that Indigo Kids sells book-related toys too, that gives you other options. Maybe you don’t want the $20 hardback, but you’d be OK with an $8 toy. Or maybe you put back the small thing on your last three visits, but now it’s birthday time and you want to buy something even bigger.

3. They’re Using Their Rewards Program Smartly

The Plum Rewards program gives you points for every purchase. They do add up. And people are stupid about stuff like this. We bought a $40 birthday gift for a child at Indigo instead of the cross-the-hallway Toys R Us because we knew we had $5 off. That tiny little discount, which costs almost nothing to their bottom line, got them a sale—and now that they sell bigger-ticket items, that sale is worth more.

4. They’re Offering a Home for Products That Might Not Merit a Separate Store

For instance, consider paper products. I can think of one local store that specializes in this—and one other, which was a brief Indigo experiment called Pistachio, and which went out of business. Now this stuff can have a home on the retail scene without the overhead of needing a whole store to itself. I did see people buying calendar organizers and other paper stuff the last time I was there.

5. Location, Location, Location

These guys are everywhere. There are some standalone locations, but many Indigo stores are located in malls. It’s a very useful place to wait for someone if you’re meeting them for dinner or a movie. And while you are waiting, you might just find something to buy…

There is work that Indigo could do to make the book tie-in aspect even better—I’m still amazed that nobody has put together cookbook gift baskets, for instance, complete with actual ingredients for key recipes, and a coupon for a class (run by the store!) to help you make them. And I think an affiliate system where you could shop a Kobo kiosk in-store for your e-books, with the store getting a cut of anything you buy, would be an obvious next step.

But I also think Indigo’s boutique style is working, and I give them their due props for that. They’re a fun little store, and I think the decision to diversify their tech offerings is a smart one. I’ll be watching to see what they do next.

4 Comments on Why Indigo's Boutique Model is Succeeding

  1. There’s also the question of markup and profit. Books have one of the smallest markups of price of any physical good. That means their cost to produce and go through the system is pretty close to the price they are sold at. That leaves little wiggle room for anyone with most publishers having around 3% profit margin.

    Most other goods can have their cost-to-the-seller price marked up many times of that for the consumer. Some furniture, for example, can have a markup from 100% to 5000%.

    With such a low profit margin on books which never rises and the increasing cost of running a business, book stores get most of their profit from non-book items which do allow markup.

    No physical bookstore can survive on just new books, anymore.

  2. I am still trying to track down pictures of the launch event today, but no one is posting them online and the store refuses to send them to me, instead making me deal with Indigo PR. I have been reporting on bookstores and eBooks for like 5 years, Indigo PR is one of THE worst companies to deal with. They just flagrantly ignore everything.

  3. Michael, it does seem to be a graduated roll-out. I went to my local Indigo hoping for a look, but theres is not open yet. They do have a new , and fairly fancy-looking display of Moleskine notebooks though…

  4. I got the inside scoop

    http://goodereader.com/blog/electronic-readers/the-logistics-behind-indigo-tech

    i talked to the store manager at the flagship store in Vancouver, he told me about all sorts of cool stuff. All indigo reps are only working in that dedicated section and have to go through 10 hours of Apple tranining to be certified. They also did partnerships with fitbit, jawbone, dr.dre and tons of others.

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