Written By DEVIKA SINGH
Pune-based Agarwal Business House, the largest franchisee of Crossword Bookstores, acquired the book retail chain from Shoppers Stop this week. It plans to expand the bookstore’s retail footprint and focus on the omnichannel play.
Crossword Bookstore In Panjim (PC: Wikimedia Commons)
Agarwal Business House (ABH) has set an ambitious growth plan for Crossword Bookstores it is acquiring from Shoppers Stop and is optimistic about turning around the loss-making venture despite concerns about the industry-wide decline in sale of books.
The company, while expanding the retail store chain to new geographies including tier-II cities, also plans to push higher from the digital channels.
However, the focus of its strategy to revive the loss-making venture is making it again a book-first brand, Akash Gupta, Managing Director – Agarwal Business House, said.
“The focus is going to be back on books and we are going to be a books-first brand catering to the real reader as that’s what consumers expect out of Crossword Bookstores,” he added.
The bookstore chain currently draws about 60 percent of its revenue from book sales and the rest from toys, stationeries, and other accessories. ABH plans to reduce the share of other categories to 30 percent in the next two years while increasing book sales.
ABH, a family-run business, is the largest Shoppers Stop franchise for Crossword Bookstores and operates 40 stores of the brand across the country, more than the parent company’s tally of 26. Including all other franchisees, Crossword Bookstores presently operated 70 stores.
“We have reached a size where we are even bigger than the company in terms of store count. Considering that we have been in this business for the last 20 years, and are passionately involved in the whole book trade, hence, it was a natural transition for us to acquire the brand and take it ahead,” said Gupta.
Founded in 1992 in Mumbai, Crossword Bookstores was acquired by the departmental store chain Shoppers Stop in 2005. The retail chain has been operating in red for a while now and its losses had been piling up year on year. According to the Shoppers Stop Annual report for FY21, the company reported a net loss of Rs 12.91 crore in the financial year 2021 (FY21) as compared to a net loss of Rs 12.45 crore in FY20. The pandemic further hit the business and the company had to close down 12 stores during the year. The sale of the business is part of Shoppers Stop’s strategy to focus on its core business.
The departmental store chain sold the business to ABH at a gross valuation of Rs 41.6 crore. Shoppers Stop will initially divest a 51 percent stake in the retail chain (expected to be completed within 15 days) and another 39 percent in the next 12 months.
The turnaround strategy
Despite Crossword Bookstores’ underperformance over the years which reflects the industry trend, ABH is confident of reviving the business within a year. The company has set out an ambitious chart for the retail chain going ahead which involves foraying into new geographies and building an omnichannel presence.
“We are confident that we will be profitable within a year given our experience of over 20 years in this segment,” said Gupta.
Its dismal performance in the last few years does not faze the new owner, who says “book stores require passion and entrepreneurial structure and cannot be run out of a corporate structure”.
“The most important thing is that it requires people who are passionate about books,” he adds.
Gupta claims that the 40 stores run by them as a franchisee were profitable at EBITA level (earnings before interest, taxes and amortization) as well at the net profit level, and hence, they have the expertise to revive the sinking ship.
Under this strategy, ABH plans to launch about 20-30 stores this year, half of which will be in its current locations while the rest are in tier-II cities. The company will launch these stores in its three formats – flagships stores, brand stores, and express format which are smaller stores of 1,000 square feet.
As part of its digital initiatives, the company plans to increase sales from e-commerce which currently contributes 5 percent to its business.
“We are targeting 10-15 percent from the digital channel in a couple of years,” Gupta said.
The company plans to “build a truly omnichannel experience” for readers.
“Whether consumers visit our store, our website or app, they should get the same Crosswords Bookstores experience,” said Gupta.
Riding into headwinds
Although ABH is optimistic about the newly acquired business, experts said odds were stacked against the company, given the industry-wide trend.
“There are two big trends in the industry. Book reading culture has declined very rapidly as people spend more time on screens. While the number of publishers and books being published has risen in India of late, the business has also moved to the online channel,” said Devangshu Dutta, founder and CEO of Delhi-based retail consultancy Third Eyesight.
Owing to these two trends, the sale of books has declined in recent years. Even large corporations such as Reliance Industries and Future Group tried their hands at the book business but exited quickly. Reliance Industries had introduced its chain of bookstores TimeOut in 2008 but eventually closed down the stores. Future Group, similarly, had experimented with Depot.
Gupta, however, stresses that these businesses failed because of the corporate structure, and a more ‘ hands-on approach’ is needed for books. He cites recent Nielsen data to prove his point about increasing readership.
A survey by Nielsen Book India conducted just after the lockdown was lifted last year showed consumers were spending more time reading books. Both reading and audiobook listening were up, increasing by a substantial seven hours weekly on average to as much as 16 hours per week, according to the survey report.
Dutta agrees. “To make a success out of this business, a brand has to become an authoritative source on the books for the customers. It is about what it can add to the customer experience besides selling books,” he said.
Salespeople, Dutta said, were an important part of this journey and have to be knowledgeable about the books as it is a very “involved purchase”.