Ten months after declaring bankruptcy and four months after receiving court approval of its new business plan, Family Christian Stores is working to regain the trust of its bruised creditors and to prepare for the holiday season. The 258-store chain, based in Grand Rapids, Mich., has the support of publishers, though most say they are dealing with the retailer more cautiously and on stricter terms.
Dwight Baker is CEO of Baker Publishing Group, one of Family’s largest creditors, which FCS owed just over $449,000 when it declared bankruptcy in February. “We are actively selling them books,” Baker says. “We’re eager to restock them as quickly as possible, because they badly need to improve their selection” in order to get up and running full speed again. Though he would not provide specifics, Baker says, “We’ve signed them to a new contract, as a new customer” under more restrictive terms. “We’re also being careful with credit limits.”
Generating revenues is not Baker’s only motivation in working with FCS again. “We see supporting them now as our contribution to the cause. It’s an investment for the sake of [keeping] Christian retailing in communities that would not have local options without them.”
When Family reorganized as a nonprofit in 2012, Baker disagreed with the view that Christian retailing itself is “insufficiently missional.” He points out that “selling Christian books is a service to the church—it doesn’t need to be sanctified. I hope they don’t reemerge with that nonprofit script—the fact that that was in the approved plan discouraged me.” Baker adds that he had been troubled by the “level of disdain for vendors” FCS demonstrated throughout the bankruptcy process.
But overall Baker says he “wouldn’t have changed anything [about the outcome]. Their merchandising plan justified the sale, and we’re trusting that to attract customers.” Meeting the objectives of the new merchandising plan will mean significant change, he says. “They had a history of poor customer service, so they now have to become customer focused and stop driving customers away by asking them for contributions when they come into the store.”
The New Family
Just those types of changes have been set in motion, according to Steve Biondo, FCS senior v-p of human resources. Though Family is retaining its nonprofit status and charitable mission, Biondo admits that the active solicitation in stores prior to the bankruptcy brought negative feedback and probably drove some customers away. He says store staff will no longer buttonhole customers. “We are only promoting our opportunities for giving passively,” with displays, videos, and a new line of apparel and gear called Product on a Mission—designed “to outfit customers for adventure, maybe missionary trips abroad, or just exploring other countries.”
Signage tells customers which charitable endeavors their purchases will support, such as “feeding one person in Guatemala for a month,” Biondo says. He notes that “during the bankruptcy we came under some criticism for giving away money when we weren’t meeting our obligations. But that money came from donors—none of it came from operations.”
Biondo concedes that the chain lost customers because of poor product mix and stale offerings during the bankruptcy process. “We’re sorry that happened, and we know we have to fight to get those customers back. Right now it is urgent to reestablish our supply chain.” FCS’s fiscal year ends on January 31, and although he could not provide numbers, he says, “We know our accounts are down, but they are recovering.”
Family has closed eight stores, based on their profitability and proximity to other stores, and Biondo says each remaining outlet will be more focused on its own community, with a “holiday readiness plan”—including training and product assortment—that is tailored to its local demographic. The product mix in all Family stores will show a new emphasis on gift lines—jewelry, home decor, apparel—that goes beyond the holidays. “We’re responding to consumer interest, but yes, they do have a better profit margin,” Biondo says. He emphasizes that Bibles, books, and children’s products will be as important as ever. There also will be more staff recommendations and better endcaps.
Reinvesting in e-commerce and developing a new strategy for online sales is also on the horizon, Biondo says. “We eventually will reengineer our site, but even now we’ve made it easier for customers to buy with fewer click-throughs.” Family has also hired a new chief marketing officer, Curt Andrews, who starts on November 30.
Along with Baker Publishing Group, other companies are helping rebuild that supply chain. Tom Knight, senior v-p of sales for HarperCollins Christian Publishing (which, among publishers, was owed the most money from FCS, $7.5 million), says the way HCCP does business with Family “has changed substantially. We are in contact with them a lot more, and more cautious. We help manage their open-to-buys, especially in this critical season.” Calling the chain a critical partner, Knight says Family is important not only as a sales channel, but “as a way to serve our authors. We want [FCS] to be successful.”
While Knight thinks it’s good that Family is organized as a nonprofit and supports charitable projects, “they still must make money,” he says. “And most retailers and publishers in this business do the same thing—we do.”
Mark Taylor, president of Tyndale House (which Family owed $1.7 million), says, “We jumped back to fairly standard trade terms with them quickly, though there has been some haggling over how much credit to extend.” As a member of the creditors’ committee, Taylor says, “I was close to what was happening. I was eager for them to survive, and for a while it was touch and go whether they would. It’s to our advantage they do, despite having to take big write-offs.” Business began “humming along as before” as soon as FCS made the 503B9 payment that was stipulated by the court to pay publishers what FCS owed them for product delivered in the 20 days before they filed for bankruptcy, Taylor says. “And even during the bankruptcy proceedings, they placed significant restock orders, paying cash.”
Fred Evans, senior v-p of sales at B&H Publishing, which was on the hook for more than $500,000, was even more sanguine. “We’re doing business with them again on terms that are very similar” to before the bankruptcy. “Although it was painful, it’s in the past, and we need to move forward.” Evans says Family needs to focus on “the foundational products—Bibles and books—and their core customers. If they get that right, they’ll be fine.”
Publishers agree there was no upside to having FCS collapse, noting that it is highly unlikely any other outlets, including the Christian independent bookselling network, could have made up for the chain’s absence. “Unlike the ’70s, ’80s, and ’90s, there are very few communities with more than one Christian bookstore. Their going under would only benefit Amazon,” Taylor observes.
Dwight Baker agrees. “Family’s closing would not help other stores” and certainly would not be good for the industry overall. “The Borders experience showed that while some of that business went elsewhere—to Amazon, B&N, et cetera—some of it went nowhere. The ‘vaporized customer’ just disappeared.”
Curtis Riskey, executive director of CBA, the Association of Christian Retailers, says that “because FCS remained in business during its reorganization, the overall impact on indies and other chains” was minimal. Some 2,200 stores carry “a significant proportion of Christian books and related products,” according to CBA; about half of them are CBA members.
Asked whether the bankruptcy had damaged the Christian publishing and bookselling enterprise, Riskey says, “Anytime a distribution channel loses stores or market share it’s a negative impact. However, I think these kinds of radical shifts also drive innovation. Some midsize publishers and companies are having difficulty with the lost receivables, and we may see other corporate reorganizations and consolidation among the publishing and supplier communities.” But Riskey believes that, in the wake of the bankruptcy, “leaders will be more creative balancing their business strategies to ensure the broadest distribution of content.”
Publishers continue to value the Christian retail channel, Riskey says. “They know that a network of viable Christian stores is critical for both mission and business growth. Business, especially retail, is in the domain of human relationships, and physical stores are able to connect with readers that way.” Of the general health of Christian retail, Riskey says that after years of attrition, “the number of Christian store closures has stabilized.” He cited a net loss of one store in 2014, with 21 closing and 20 new stores opening.
This summer, the Evangelical Christian Publishers Association conducted a confidential survey that measured the impact of the FCS bankruptcy on the industry; results were only released to ECPA members. Figures from the Association of American Publishers monthly StatShot program showed sales in the religion segment down 4.9% through September compared to the first nine months of 2014. Revenues reflect reports by nine companies and distributors.