“It’s not the strongest of the species that survives nor the most intelligent but the one most adaptable to change”- Charles Darwin.
About three years ago a respected Brazilian CEO of one of the most iconic Brazilian bookstores complained publicly that the “Black Friday” event was destroying the Christmas sales. You can read his declarations here.
Of course, he took into consideration much broader issues than merely Black Friday, such as poor infrastructure and complex tax and regulatory environment in the country. But it doesn’t matter if taxes are too high, if competition is unfair or if prices are too low. One either adapts, leaves the game, or even worse, is ousted from the game.
Humble beginnings, incredible history, challenging times
The first Cultura bookshop was founded by Eva Herz in 1947 in Brazil. It started as a book rental service for Germans that would move and reside in Brazil at that time. Two years later, Eva would give up on the rental service and start her own small bookshop. Later, in 1969, her son Pedro Herz would take over and transform the company into a destination for books and culture aficionados. The business grew and in 2017 Livraria Cultura overtook the Brazilian operations of the traditional retail chain FNAC, which ended up paying 36 million euros for the Brazilian company to take over its activities and shops in the country. The capital injection, however, wasn’t enough for Cultura to put their finances in order.
Last week, the popular Cultura bookstore chain filed a judicial recovery settlement which was accepted by the Brazilian court. The agreement was solicited to freeze the company’s debt and avoid further protests and bankruptcy requests. The restructuring costs which includes store closures, layoffs amid other actions will cost something approximately 60 Million Brazilian Reais, or 16 Million USD.
Let’s not blame it on Amazon
Amazon entered Brazilian market 6 years ago under the leadership of Mr. Alex Szapiro. Back then, Amazon sold only books.
I still remember when Valor Economico, a relevant business magazine in Brazil, published an article stating that the most significant book chains and stores sought legal help to limit Amazon’s participation and operations in the country. But it didn’t work out, and while these chains still await Congress to bypass a regulation that does not allow discounts over 10% of the face value of a book during its first year of publication, Amazon seems to be thriving and growing by leaps and bounds.
Amazon has announced a significant collaboration with Reserva, a well-established Brazilian fashion brand and has recently started selling electronics and applications. Brazilians love the user-friendly Amazon website and all conveniences offered by the company.
Bookstores aren’t in dire straits because of Amazon. Amazon, on the other hand, is indeed thriving because book chains neglected technology for a long time. There is no such thing as a silver bullet.
The truth is that bookstore owners have ignored the technology revolution and now they are paying the price.
An outlook on book sales in Brazil
- The book market shrank 7% and 9% in 2015 and 2016 in total revenues respectively
- In 2017 book market saw a recovery growing 3.2% in revenues compared to 2016
- Total volume sold from 2016 to 2017 grew from 40 million units to 42 million units
- Total revenue book market in 2017 was 1.7 billion reais (approx. 453 mln USD)
According to a late research made by Pro Livro, an institute that contributes to the betterment of Brazilian readers:
- 30% of the Brazilian population has never bought a book
- 44% does not read books
- 56% are “readers” and read on average 4.96 books a year
Quick Outlook on the Digital Commerce Market in Brazil
- Total Ecommerce Revenues grew from 2016 to 2017 by 7.5% despite the economy turmoil
- Market total revenue for e-commerce reached 47 billion reais, something around 12 billion USD
- Total e-commerce orders: 50 million
- Books and magazines represent 8.3% of the total volume
- Among categories purchased from international sites, book is the 10th category and represents only 10% of the total volume
Source: Ebit report
The data above doesn’t show us the whole picture. But it helps us get a notion of the bookmarket in Brazil and probably other countries that face the same challenge.
But similarly to the fashion business, I believe there is a huge opportunity for independent bookstores. A recent study by Colliers International shows how modern retail stores are growing in Central and Eastern Europe. In Romania and Bulgaria, the growth for modern retail stores peaks 20%. But carefully read what I just wrote. “Modern Retail Stores”, not “outdated” retail stores.
How to survive and (maybe) thrive?
1) One size never fits all
Bookstores have traditionally occupied territory in a particular neighborhood. Members of that community, in return, created a very peculiar relationship to that bookstore.
Instead of thinking about “scale” why not invest in having a deeper connection with the members of the community in different neighborhoods? Why not understand who the main customers are, learn their consumption patterns and what they truly value about that specific shop? What sort of relationship do they have with the neighborhood? Why not invite your main customers and co-create the ideal shop with them? Do you think it’s a utopian idea?
Then Check how E.ON, a private energy company that focuses on renewable energies has redesigned their customer experience together with their customers.
2) Be here, when I need it.
We, as customers, are more impatient and demanding than ever. “Think with Google” has recently reported an upsurge in “near me” searches for particular items.
Why not make use of available data to create strategic partnerships with restaurants, pharmacies, theaters, sports stores, airlines or even by having a proactive approach and using search engines to its full potential to drive a foot traffic to your brick and mortar stores?
The “near me” upsurge in searches is more common for urgency items but with creativity and great people working together, I’m positive bookstores could benefit from it as well.
What is the purpose of having a brick and mortar bookstore? Is it only to sell books?
Once you understand who visits your shop, you might as well be able to craft unique experiences, events, celebrations for your visitors. Ryan Raffaelli, Assistant Professor in the organizational behavior unit at Harvard Business School, studied how independent bookstores would survive and thrive in the Amazon Era. He found that independent bookstores offering a wide range of events with the goal of putting people together are indeed doing very well.
4) Data and Millennials Movements
The British retailer, Missguided was born as a pure online player. Fast and forward to this day, Missguided, a fashion brand targeting women aged 16-35 proved it can genuinely understand and listen to their customers. Missguided has now two brick and mortar shops. All product curation is based on years of research of their customers and demographics needs and then translating it to the offline shops.
The company also promotes a movement called #BabesofMissguided. It’s a powerful marketing tool and a free advertising for the brand, brought to its full potential when promoted by the right influencers and followed by thousands of their fans.
You don’t need to be a genius to understand that the world is shifting to cloud solutions. Sure, you might disagree and argue that your legacy systems are critical for your operation and that it is imperative to have control over data, security, servers etc.
But I’d like to challenge that. Many large companies have already migrated their email services to G-suite, Sendgrid or other cloud services. Isn’t it wonderful to have the emails infrastructure taken care by professionals and specialists? Why should you worry about your email or have a dedicated server?
The same rule applies to e-commerce platforms, CRM’s, ERP systems, etc.
Be different, don’t be boring – because these are unforgiving times!
In my opinion, bookstores such as Cultura, can use the approach above and get a better understanding of their customers and preferences through data. Based on that they can create different movements (e.g.: #Donateabook), collaborate with influencers, customers and craft unique experiences based on what customers need and desire, rather than using the one-size-fits-all approach.
Last but not least
If you can’t find inspiration within your industry, look outside of it. Be curious, be humble, ask questions, investigate. Have managers working side by side with the youngsters. Make them visit technology shows, watch speeches and talk to technology suppliers and companies alike.
The World is full of outstanding examples of companies that are successfully transforming the way they work and how they operate.
There is no doubt that Cultura bookstores will come out stronger of this crisis.
However, courage, curiosity and passionate people are required.