Christian retailers adjust to maximize their strengths

For those involved in Christian retail, the recent economic crisis was just the latest in a series of major challenges that continue to change the face of the industry.

Christian retailers begin another year not only in the midst of a global financial slump, but also with a new national political climate that some suspect may not be as accepting of many of the conservative values they hold dear.

But while veteran industry retailers, suppliers and support organizations predict 2009 will be a very tough year, each segment of the industry remains hopeful, looking for bright spots and planning to make it through.

“While there is great doom and gloom in the media about the economy, we know that people are looking for places to have authentic, meaningful, memorable, relational retail experiences,” said CBA President Bill Anderson. “Christian retailers need to keep looking for fresh ways to create compelling experiences in their stores that attract customers and keep them coming back.”

That challenge is not new. Many Christian retailers have faced years of steady declines in traffic and sales, in part due to a loss of customers and revenues when Christian best-sellers like the “Left Behind” series and The Purpose-Driven Life gained attention—and shelf space—in the general market.

While the increased availability heightened awareness of Christian products and increased overall sales of the biggest titles, it was a Catch-22 for Christian retailers.

As more books and music became available at Wal-Mart, Barnes & Noble and airports everywhere, Christian stores found it hard to match their convenience and visibility.

Christian retailers suffered another blow when technology made Internet buying so easy and convenient that many of their customers stayed home—or came into their stores to look around, then went home and ordered what they wanted online. The music industry’s turning digital impacted in-store sales of Christian CDs as well.

These combined trends have seen a huge shakeout of independents closing, comparable to the historic shifts in other industries such as hardware and grocery stores. In Canada, R.G. Mitchell Family Books, the largest distributor-retailer of Christian literature north of the border, went bankrupt last September. A string of longtime U.S. retailers have closed their doors or sold to chains.

National and larger retail chains comprised a third of CBA’s 1,731-member store numbers at the end of 2008. A further 46% were single-store and small-chain independent retailers, with 20% church, camp, campus, direct mail or online retailers.

Big picture, bright spots
Christian retailers experiencing struggles are certainly not alone. In 2008, major chains such as Mervyns, Linens-n-Things, Levitz, Sharper Image, Circuit City and Lillian Vernon all filed for Chapter 11 bankruptcy protection. Big bookstores Barnes & Noble, Borders and Books-A-Million posted losses in late 2008 over the same sales period of a year before.

But it is not all bad news. The buffeted Christian retail industry is taking steps to move forward, with new growth being seen in the church-store segment and online sales. Meanwhile, brick-and-mortar stores are also finding creative ways to bring traffic back in the doors and cutting costs to maintain their presence in the market.
The general consensus: Stores just have to work harder and smarter.

“The next year or so will be very challenging for all retail, including the CBA industry,” said Mark Scott, president of LifeWay Christian Stores, which opened several new locations in 2008, ending the year with 152 stores. “(But) given the difficult economic climate, products which inspire and encourage consumers will do well.”

Perhaps the biggest bright spot in the Christian retail landscape is the fact that the extreme pressure is molding retailers into savvy businesspeople. Although ministry remains a key aspect, retailers are also becoming marketing experts, promotions directors, accounting whizzes and cost-cutting pros.

“In terms of our stores, there are bright spots and there are dark spots,” said Parable CEO Steve Potratz, who himself owns two stores. “If a business is built on sand/credit, it’s going to be in trouble right now. If it was built with cash and has cash reserves, then the storms are just part of life and it can weather them.”

Potratz said he has seen a lot of stores doing some “really wise cost-cutting” in order to stay afloat. In his own two stores, Potratz has saved tens of thousands of dollars by re-examining his expenses and making changes, such as changing to voice over Internet protocol for his phone service and renegotiating his rent contracts.

“When a lease comes up, I can move out or they can give me a lower rate,” Potratz said. “Things like that have helped me save. I’m not hearing this from everybody, but there definitely are stores that are down in sales, but profit is actually up because they have managed their expenses well and had a good foundation.”

LifeWay’s Scott said that sticking to the basics and responding quickly has been keeping LifeWay stores in business.

“We are very focused on doing the basics of retailing well, meeting our customers’ needs, being more agile,” Scott said. “In such a dynamic marketplace, we are working even harder to monitor product performance and customer behavior—then respond quickly. If something is working, we want to build on it fast.  If not, we want to adjust or abandon more quickly.”

Controlling inventory
Retail consultants agree that reducing expenses needs to be a major strategy for staying viable in 2009 and beyond.

“Retailers should take a harsh look at cost reduction,” said Philip Clements, managing director of Cathedral Consulting Group. “This is a harsh environment, and we must be rigorous in our evaluation of costs,” said the former Coopers & Lybrand senior executive whose consultancy last year offered advice to Christian retailers in a special report on the industry.

“Another critical item is orders to be put in place,” he said. “Retailers need to reduce inventory and sell everything possible at the end of the year and January. The re-orders must be very selective against what customers really want in the coming year. Inventory should no longer be carried just because of bulk discounts. Inventory carry is very expensive and a part of cost reduction.”

Inventory is a constant hot topic among retailers because carrying too much depletes resources, while not having the right mix on hand drives customers away. CBA last fall tested a “Custom Model Inventory Tool,” whose goal was to help stores reset inventory to increase sales, profitability and customer satisfaction.

“A key component is enabling retailers to provide broad assortments controlled by available cash to maximize ‘long-tail’ or backlist sales while ensuring the right product is on the shelves to increase sales,” Anderson said.

While results varied, one store with $700,000 annual revenues participating in the test experienced a 12.8% increase in book sales last August over the same month in 2007, and a 16% increase in store sales overall using the new tool, Anderson said.
At press time, testing was still underway, but Anderson hoped stores would be able to try the program in 2009.

Another way Christian retailers can win is to take their penchant for ministry and use technology to touch base with their customers inexpensively and often, as well as schedule creative, inexpensive promotions that drive traffic back into the stores.
Potratz said some Parable-franchised stores and others that belong to the marketing group have started holding drawings for laptops or small electronics where customers have to be present to win. Stores have seen an increase in traffic because of the giveaways. Other independents are also trying to be creative in drawing consumers in the doors.

“We keep in touch with our customers,” said Dennis Lovvorn, co-owner of New Covenant Christian Bookstore in Shelby, Tenn. “We do several events a year to keep our name in front of our customers. We have ‘Moonlight Gladness,’ instead of ‘Moonlight Madness,’ and on that night only, we offer specials, exclusive purchases and discounts. We also have other events throughout the year to keep reminding them that we’re here.”

For Lovvorn, sales maintained in 2008 and may even be up slightly once holiday numbers are tallied. It has taken “long hours and bending over backwards to take care of our customers,” he said, but he believed that the tough times could actually be good for Christian retail because customers concerned about what’s happening will seek out Christian books.

“I think it will drive a lot of people to the Word because they’re so concerned about what is happening in our culture,” Lovvorn said. “In tough times, the church does better.”

Retail support tools
The squeeze has also pushed many in the industry to take more seriously the need for better training and good data, veterans said. Historically, retailers enjoyed being more ministers than business people, and the industry was behind the times in terms of technology and statistics gathering.

Anderson said CBA’s new industry e-learning platform coming this year, which will deliver training and product knowledge directly to stores and frontliners via the Web, “will create significant cost savings for suppliers and welcome product sales training for retailers.”

The retailers trade association is also offering the CBA Consumer Intelligence program that will provide ongoing and in-depth looks at consumer behavior and attitudes. Developed in cooperation with R.R. Bowker’s new consumer research resources, this program “will help retailers see customer and product trends developing,” Anderson said.

The Evangelical Christian Publishers Association (ECPA) is creating new tools to heighten awareness of Christian products among consumers, such as more open access to its best-sellers lists—which authors and others can now post on their own Web sites and blogs—and promote greater attention for award-winning products.

For Christian retailers who want to stay in business, finding ways to stick together could be the key. Branding, franchising, joining marketing groups and networking are crucial elements for success.

“I anticipate that we will see independent retailers, chains and retail groups coming together in unprecedented ways,” Anderson said.

“Connecting with other retailers in ways where you can maximize your efficiency through groups like Parable or Munce or with CBA is vital,” ECPA President Mark Kuyper agreed. “Anything you can do so it reduces the amount of energy you have to put in is going to be imperative because there are limited dollars for staffing and marketing.”

The Munce Group based in Indian Rocks Beach, Fla., provides marketing support for nearly 600 stores in the U.S. and Canada and has seen its number of stores remain “fairly consistent over the past three years,” according to Chief Operating Officer Kirk Blank.

While there was no magic bullet, he said, “we have unique strategies that allow independent stores to compete online and in-store,” Blank said.

“We are currently seeing a shift in consumer behavior to purchasing at their local store,” he added. “We have been promoting the importance of  ‘the local Christian retail store’ proactively on our Web sites, our promotional catalogs, proprietary items, and in-store.“

The group has also enlisted the help of authors and artists such as Max Lucado, Karen Kingsbury, Stormie Omartian and Third Day “to spread the word that local independent Christian retailers make a significant difference to communities.”

Blank said Munce was operating from a “position of strength” in representing “the most independent Christian stores, the most regional chain accounts and the most church bookstores.”

In addition to making connections, stores also need to figure out what they offer beyond the best prices and top-selling products, Kuyper said. “One of the best things a Christian retailer can be doing is communicating to their audience what is unique in terms of who they are.

“High customer contact is going to continue to be important. Without that, you lose some of your distinctive.”

Customer connections
Technology also plays a role in connecting well with customers.

“I think we’re going to see increased attention given to using new technologies to reach potential customers, connecting them to the product and the stores,” Anderson said.

Still, retailing in 2009 is likely to remain an uphill battle.

“When even longtime customers come in and say, ‘I believe in you, I support you, I just can’t continue to buy from you,’ that’s a reality that is hard to face,” said leadership author and industry consultant Jim Seybert.

“However, there are other industries of specialty items that have moved off to general market retail that still have a good collection of strong independent stores—health foods, for example, or auto parts. You can buy most at Wal-Mart or online, but there is still a good collection of independent stores that have bucked the trend.

“Even with the current trends, I don’t see an end to independent Christian retail, but I see it continuing to look different.”

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