The
Ingram Empire
Ingram Book
Group Scans for Growth, As Rivals Grab Core Market Share
FROM PUBLISHING
TRENDS (MARCH 2003)
The
last decade must have felt a little like the spin-cycle
hit Ingram Industries Inc., that constellation
of “books, boats, and bad drivers” (as one wag has put
it) that began as an old-economy barging concern and
now controls a large share of the book, spoken audio,
and other product pipeline keeping 21st-century e-tailers
— and plain-old retailers — humming. Today the Nashville-based
Ingram is one of America’s largest privately held businesses,
spanning book wholesaler Ingram Book Group; digital
fulfillment unit Lightning Source; barge operator
Ingram Marine Group; and the Ingram Insurance
Group, which covers high-risk motorists. But the
spin-cycle brought billion-dollar spinoffs, high-stakes
management minuets, and one first-class case of federal
regulatory whiplash: that would be June of 1999, when
Ingram Book Group nixed its plans to be acquired by
Barnes & Noble, under ominous signals
from the FTC. Few in the business will forget
the uproar over this proposed vertical integration —
nor the predicament Ingram found itself in as its plans
unraveled. “The middleman was being cut out,” as Ingram
Book Group Chairman John R. Ingram told the press
when the $600 million acquisition was unveiled, “and
we’re the middleman.”
“It
was a bit of a watershed for us,” James Chandler,
the book group’s Chief Commercial Officer, tells
PT. Major customers B&N, Borders,
and Amazon had all been ramping up their own
distribution capabilities. Rival wholesaler Baker
& Taylor added space of its own. Relations frayed
with some independent booksellers, Ingram’s traditional
forte, who returned to regional wholesalers such as
Koen, Bookazine, and BookSource
(who stood ready to fill the orders as fast as — or
faster than — Ingram). And thus began a long journey
down the road of corporate milestones and realignments,
amid a “protracted period of heightened risk and uncertainty”
— as Business Week put it —all while struggling
to “pull the rabbit of a new growth business out of
the hat of a mature enterprise verging on decline.”
Driving
the ‘Cadillac Supplier’
Ingram’s
market position in a nutshell? “Business is going down
a bit,” says George Gibson, President and Publisher
of Walker & Company, “because there was a
time when all of Barnes & Noble went through Ingram.
Now B&N comes directly to us for backlist. There
was also a time when Ingram handled all of Amazon. Now
Baker & Taylor handles a lot of it. But if you’re
looking at Ingram’s core customers — bookstores — our
business with Ingram has probably gone up.” Gibson and
others say that despite industry shudders, Ingram’s
reputation remains largely unscathed. “They’re still
the gold standard as far as wholesale is concerned,”
says one publishing official. “Ingram is the Cadillac
supplier,” says another. “Since I’ve been aware of them
in the mid-’70s, they’ve been the best company in the
industry. Period.”
Not that it has been easy. In 1999 Ingram axed 110 jobs
at its Oregon distribution center, then shuttered five
facilities in a “comprehensive realignment” culminating
in last summer’s opening of the Chambersburg, PA mega-center.
This 650,000–sq. ft. shop was deemed “the largest single
investment we’ve ever made” and promoted as a symbol
of Ingram’s “substantial reinvestments in the book industry.”
When all was said and done, eight distribution centers
had become four — Chambersburg; LaVergne, TN; Fort Wayne,
IN; and Roseburg, OR — and an ominous number of the
company’s veteran staff had gone out the door. (Reports
swirled of yet more layoffs as PT went to press.)
Yet the company’s reinvestments, Chandler says, do not
end there. Early 2000 saw the launch of state-of-the-art
automation at Ingram’s Nashville-area distribution center,
and in 2001 Ingram began rolling out new inventory management
software, allowing significant automation of the daily
review, replenishment, and buying decisions on over
700,000 titles. Moreover, Ingram has added access to
60,000 medical reference titles through distributor
J.A. Majors; 250,000 music titles via Alliance
Entertainment; and 70,000 Spanish-language titles
from Grupo ILHSA, the Argentine bookselling chain.
All told, in-stock title holdings are at an all-time
high, making what Chandler claims is a million titles
available for immediate shipment via Ingram’s iPage
service, its web-based portal for retailers, librarians,
and publishers that’s a repository of account information,
title reference, up-to-the-hour stock availability,
and the like. Most significantly, perhaps, Ingram has
invested in its direct-to-consumer fulfillment capabilities.
Last December, more than 80% of shipments from the book
group were made directly to consumers on behalf of the
company’s retail partners, fulfilling both online and
offline orders. Chandler concedes that this business
is “a significantly smaller percentage of our overall
dollar volume” — shipping one book at a time, instead
of dozens. But it all helped drive Ingram to a “high-water
mark” in 2002: a customer fill-rate of nearly 85%.
Ingram’s international business, now almost 10% of its
revenues, continues to grow, allowing customers in core
markets such as Canada, Australia, and Europe to place
an order on Monday and have the stock by the weekend.
And Ingram Library Services is powering up for
an expanding customer base — periodicals were just added
for this market. Observers point out that libraries
are one of many arenas in which Ingram and B&T regularly
step on one another’s toes. “Ingram has gotten into
the library business in a more aggressive way, and you
could argue that they’re taking business away from B&T,”
says Gibson. “They’re both looking at each other’s marketplaces.”
Topping off these changes at Ingram — in addition to
finally closing down PRI, the publisher distribution
service that never got off the ground — is what Chandler
calls “a whole new generation of leadership.” That includes
Kelley Maier, SVP of Product Management and Marketing;
Julie Burns, President of both Ingram Book Co.
and Spring Arbor Distributors, the company’s
Christian products arm; Peter Clifton, who came
on board in 2001 and is President of both Ingram Periodicals
and Ingram International; Steve Pate,
VP of Sales Support; and Audrey Seitz, VP of
Marketing. This churn has caused a few kinks, but for
some publishers, no major complaints. “Other than the
fact that in this last year we’ve been through two buyers,”
says Paul Harrington, Director of Sales for The
Other Press, “the systems seem to be fine and functioning.”
Others haven’t been so kind, particularly clients of
Minneapolis wholesaler The Bookmen, which Ingram
bought last year and shut down. Some surmised that the
purchase was designed to grab accounts such as Target,
who ended up switching their Bookmen business to Levy.
And some indie booksellers say privately that they feel
betrayed by the wholesaler — they’re a no-growth prospect
— and have bolted.
Then there’s Lightning Source, led by
President J. Kirby Best. Ingram officials have
said that the anemic e-book business crimped the once
heady plans of Lightning, the Ingram division handling
e-book conversions, print-on-demand, and other digital
services. Founded as the POD operation Lightning Print,
the unit was renamed in 2000 and moved out of the book
group to become a unit of Ingram Industries. The company
said at the time that the move liberated Lightning to
forge relationships with numerous distributors in addition
to its file conversion deals with publishers. (Lightning
opened a UK unit in 2001.)
Meanwhile, Ingram Industries brass are no doubt gingerly
guiding all their businesses with the rear-view wisdom
of computer wholesaler Ingram Micro. With
current revenues of $25 billion, the company was taken
public in 1996 amid feverish anticipation among investors.
But the stock plunged 31% when CEO Jerre Stead
announced he was stepping down in 1999, charged with
“flawed optimism” about Micro’s prospects amid vicious
competition — an instructive lesson for the book trade.
Back at Ingram Book, both hands are on the steering
wheel, and eyes are peeled for growth opportunities.
“We’ve expanded the definition of what a middleman can
do,” Chandler says. “Today we can do everything that
a library can do in their back room. We can do everything
that an online retailer can do in an online distribution
center. In many cases we can do things a publisher would
like to do in their own distribution capabilities. Our
whole objective is to sell more to the trading partners
we have.”
©2003
Publishing Trends
