Yesterday Biblica, an international Bible society, announced that they are looking for a buyer for their Tennessee-based Send the Light distribution division. STL purchased Appalachian Bible Co. in 2005 making it the largest Christian distributor in North America. Spring Arbor, another Christian distributor had been bought by Ingram Books several years earlier.
As a company that has made the attempt to get into distribution to help other Catholic stores, we can understand why STL isn't succeeding. As a distributor, as opposed to a wholesaler, you are purchasing product from a wholesaler who gives you an extra discount, usually 10%, for buying in bulk. This 10% is typically your entire margin and things such as shipping and credit card fees come out of that amount.
For example, as a distributor I want to buy a book from a publisher that retails for $10.
The publisher would typically give a 40% discount to stores but would give a distributor 50%. So this leaves $5 for each title as gross profit. He will then sell the title to a bookstore for $6 leaving him with $1 per book. From that dollar he will need to deduct shipping charges, credit card fees if the bookstore uses a credit card and all of his other costs if distribution is his only source of income.
When you are buying in large enough quantity and have enough stores buying from you this arrangement can succeed. Ingram and Baker and Taylor are two good examples. The problem is that with such thin margins any drop in buying by bookstores, like if there is a recession, means that your tiny margins are going to dry up unless you find something else that has a higher margin to offset the loss in your low margin sales.
Problems with STL appeared last year when it closed three of its four warehouses and moved to Elizabethton, TN. STL also announced a new print-on-demand service which should help them improve their margins.
CEO Doug Lockhart, using standard corporate speak, announced that there was no set deadline for the review, “and if a suitable ownership partner is not identified, we will continue to operate the business and work to build on the strong foundation we've established.”
If your company has a strong foundation, why the heck would you sell it? I predict that STL will eventually get sold piecemeal and absorbed by the other large distributors. Ingram has had Lightning Source, a print-on-demand service, available for almost a year already.
I hope that this announcement serves as a warning to others who want to try the distribution model. Appalachian fell in 2005, its buyer is on the chopping block five years later, Spring Arbor couldn't last as an independent and was bought up by a secular distributor, we tried on a much smaller scale to serve the Catholic world and I know of at least one other distributor that failed before we started. Our efforts lasted three years and brought our company losses all three years.
I believe that it is possible for a Catholic distributor to succeed but ONLY AFTER the Catholic retail world is on firm footing. Ask any vendor and most store owners and they will tell you that right now it isn't. I'm not sure how to go about fixing this problem. The Catholic Marketing Network has been offering workshops at its conferences for years but Alan Napleton has said that he feels like he is just offering “Retailing 101” year after year without seeing much progress.
So where do we go as an industry? Offering professional consulting to stores seems tempting but I'm doubtful that stores that are already run poorly will be willing to pay someone to tell them how to get right. Maybe offering online classes would work but someone is going to need to put out the time and money to get that started. Any ideas?