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BUSINESS
SEPTEMBER 29, 1997 VOL. 150 NO. 13
BOOKISH INDIGNATION
ENTREPRENEUR HEATHER REISMAN OPENS A
MEGASTORE IN HER ONGOING CHALLENGE TO
MEGACHAIN CHAPTERS
BY MARGARET FELDSTEIN
The story has all the elements of a blockbuster novel with Hollywood potential.
Call it Indigo: The Saga of a Tough, Savvy Businesswoman Who Squares Off
Against a Powerful Corporate Titan to Inject New Competition into a Retail
Industry. The heroine faces a barrage of negative propaganda, government
hurdles, lawsuits, private detectives who tail her every business move. She
fights back, loses a big battle, plots a new strategy, then fights back some
more. Make it a cliffhanger; leave open the possibility of a sequel.
Look for Indigo soon in a real estate development near you. Or else go to
Burlington, Ont., where the first branch of Indigo Books & Music, the
megastore brainchild of stubborn Heather Reisman, 48, opened last month.
The 20,000-sq.-ft. operation is the start of a new superstore chain that
Reisman plans to increase to 30 outlets across the country before the year
2001. It is also the latest episode in her ongoing battle with Chapters, the
400-store book megachain that controls 30% to 40% of Canada's $1.25
billion market.
These days, both Reisman and spokesmen for Chapters have nothing but bland
things to say about each other. But the struggle between the two antagonists
was one of the bitterest to shake the genteel book industry. The roots go back
to 1995, when the federal Competition Bureau allowed the country's two
largest existing chains, Coles Book Stores and SmithBooks, to join in an
unprecedented merger to form Chapters. Many insiders believed the deal was
approved to provide a strong contender to face imminent competition from
powerful U.S. companies like New York-based Barnes & Noble and
Michigan-based Borders Books, Music & Cafe, which pioneered the
megastore concept.
Sure enough, eight months after the merger was completed, Reisman
announced that she would enter the superstore game, with Borders as her
partner. The joint venture required approval by the federal Investment Review
Board. Chapters chairman David Peterson, the former premier of Ontario, and
ceo Larry Stevenson immediately decried the idea as an assault on Canadian
culture. Peterson claimed that the U.S. partner would use its central
computerized inventory system to cut off Canadian book suppliers. In February
1996 the Investment Review Board nixed the venture. Four months later,
Peterson sold his 20% share of Chapters to Barnes & Noble for an
undisclosed sum. (Stevenson insists that the U.S. firm's participation is
"passive.")
Reisman was battered but unbowed. She was, after all, a powerful business
presence in her own right. Married to Gerald Schwartz, chairman and founder
of the multibillion-dollar leveraged-buyout firm Onex, she founded her own
consulting firm before serving for two years as president of Cott Beverages, the
soft-drink company. There she got high marks as a corporate chieftain but was
criticized for failing to file an insider-trading report on a $1.6 million profit she
made in 1993. She was never charged with wrongdoing, and left Cott in 1994.
Her run-in with Chapters left her more determined than ever to carve a niche in
an industry she says she loves. The fight, however, was far from over. After
Reisman scraped up $18 million to start her new, all-Canadian chain, Chapters
slapped her with a lawsuit that attempted to block the hiring of a former
Chapters mid-level manager, claiming that this would give Indigo access to
proprietary information. Reisman launched a $22 million countersuit, arguing
that Chapters' aim was to limit competition in book retailing. She also charged
that Chapters had been in secret cahoots with Barnes & Noble when
Stevenson and Peterson lobbied against Borders. Chapters has dropped its
lawsuit; Reisman is continuing hers.
What Chapters and Indigo outlets have in common is volume--some 100,000
titles--and about 30% Canadian inventory. Reisman is trying to bring a different
style to the equation, something like "Martha Stewart meets the megastore."
Indigo's Burlington store houses the now obligatory cafe and overstuffed
armchairs for browsers, but they are considered part of what Reisman calls a
"complete retailing environment." Meaning: the furniture and accessories like
bookends are for sale. Indigo stores will carry CDs (angled toward what
Reisman sees as her customers' life-style: classical, jazz and, of course, blues),
and a computerized gift-selection service is planned. Will Reisman's effort to
bring her customers "a different view" translate into a winning national formula?
As they say in the blockbuster-novel biz, wait for the next chapter.
--Reported by Shannon Kari /Burlington |
