Ingram Book Group Scans for Growth, As Rivals Grab Core Market Share
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.”
