On the surface, it seems obvious: customers who are interested in buying a book about major media properties like Daredevil or rock stars like Kurt Cobain might also be interested in related merchandise—or vice versa. But at major chain bookstores, items such as CDs, DVDs, video games and toys generally fall into the "sidelines" category, handled by a buyer who may be isolated from the book buyers. And while the chains are increasingly stocking licensed merchandise, they have trouble displaying it all in one place.

Though Barnes & Noble and Borders have both experimented with grouping graphic novels, tie-in-books and fiction, usually in special promotions tied to a major film release, they don't regularly display books with related media products. That rule was suspended for Harry Potter—to which they dedicated sections featuring a wide range of merchandise—but it hasn't laid the groundwork for more aggressive cross-merchandising for other titles.

Still, there are signs that these policies might change. As DVD releases become bigger marketing events, the popularity of manga and anime continues to rise, and smaller chains find success in cross-merchandising a broad range of titles, there is growing evidence that books and licensed merchandise can sell well together, not only when a movie is released, but also in ongoing programs.

Glimmers of Synergy

In a climate where book sales generally are struggling, vendors like Diamond Comics point to cross-merchandising as a way to lure new readers and entice current customers to buy more. "To keep their customers loyal, the more aggressive chains want up-to-date packages that can include books, soundtracks, posters, toys, even statues," said Kuo-yu Liang, Diamond's v-p of sales and marketing.

For instance, as movies based on Marvel comics have become popular, Waldenbooks has stocked related merchandise, such as role-playing games and superhero-themed HeroClix toys from WizKids. "We had a lot of success with Spider-Man, grouping HeroClix with books and other products under environmental signage," said Allison Elsby, genre fiction category manager at the Borders Group, noting that Borders stores now carry some licensed products as well.

Barnes & Noble is also testing the cross-merchandising waters with Marvel-related products. The chain is in talks with Diamond Comics, which sells almost every sort of product line, about a multimedia holiday promotion tying in to Spider-Man, The Hulk, X-Men and Daredevil. The promotion may also include graphic novels about characters that haven't appeared in recent film productions, as a way to expand the readership for those lines.

Marvel's graphic novel distributor, CDS, is also encouraging B&N to include DVDs on the display, even though CDS doesn't distribute the DVDs themselves. "We're seeing the marketing push behind DVD releases rivaling theatrical film, so it's a big opportunity to repromote the books," said Stanley Cohen, v-p, director of sales for CDS. For its part, Marvel has also noticed that the release of DVDs based on Marvel characters has boosted sales of related graphic novels, according to publishing sales manager David Jay Gabriel.

But so far, the major chains have built only limited cross-merchandising promotions around DVD releases, even though the Spider-Man DVD grossed a staggering $144.4 million in its first weekend last November, in a period that otherwise saw flat performance for books. But getting major chains to make the link in stores is difficult. "A lot of the retail stores are set in their ways: graphic novels go in one section and DVDs go in another," said Gabriel.

Organizational Barriers

"For retailers, cross-merchandising is a risk because they have to devote physical floor space to it," said Esther Margolis, publisher of Newmarket Press. "Online, it's much easier," she said, noting that Amazon.com e-mailed every customer who bought the special X-Men 1.5 DVD to let them know about Newmarket's Art of X2 book. Though Margolis hopes that retailers will devote space to the book for the X2 DVD release during the holidays, most chains still resist grouping books and DVDs, not to mention other sidelines.

"Bookstores are perfectly suited to sell books, but not necessarily other products," observed Eric Kettunen, publishing product manager at graphic novel distributor Viz. While that's changing, product display remains a genuine issue. "You want to put it all together for the consumer, but it's difficult to accommodate the wide variety of merchandise," said BGI's Elsby, explaining that a chunky toy box, a tubular wall scroll and a thin, flat paperback are tricky to display on the same shelf. "We try to partner with our vendors to develop packaging," she added.

For vendors, that can mean going back to the manufacturer to suggest design changes. Many action figures now come in a case that can stand freely or hang on a peg. Diamond's Liang has also negotiated with manufacturers for help in combating another potential problem: theft. "I'll approach a retailer with a trading card game that's selling in the millions, and find they're worried about a higher theft rate from the younger target demographic," said Liang. "So we'll suggest, 'what if we made the package bigger?' And we'll go back and forth to make it right."

Cross-merchandising also presents an organizational problem, given that the products fall into multiple categories, which are often handled by multiple buyers. "Getting a large number of people in a huge organization to coordinate is difficult enough, but suppliers and buyers in different categories often operate on very different timetables," said CDS's Cohen.

Of course, the categories themselves are not always clear. When Newmarket recently was selling three movie tie-ins to B&N, the film buyer bought The Art of the Matrix (2000), while a graphic novel buyer handled The Art of X2 (May) and Hulk: The Illustrated Screenplay (June). Meanwhile, at Borders, the graphic novel buyer took all three. At Virgin, How to DJ Right (Grove Press, Apr.) was betwixt categories when PGW national accounts director Elise Cannon recommended placing it alongside the Pioneer turntables in some stores. "I just send a copy of the book to every category buyer, then urge them all to build lateral in-store connections," she said.

More complicated was Newmarket's book series linked to products from Republic of Tea. B&N originally placed the book in the café, but the store's accounting system required customers to purchase it at a store register rather than ringing it up with their latté. For the second volume, B&N put the tea canisters next to the books in its "Success" display case, but "that was very unusual," said Margolis.

DVDs can pose additional issues. Some Waldenbooks outlets have lease terms that specifically restrict them from selling DVDs at all because they are located in malls that might also contain DVD specialty merchants, according to BGI's Elsby. Furthermore (surprise!), toys and assorted merchandise are often nonreturnable. "When you buy a shipment of toys from Japan, you own them," said Liang. Elsby agreed: "It's a danger for retailers" who are used to being able to return unsold books.

Advantage: Smaller Chains

On the whole, smaller chains have been much more active and innovative. Virgin maintains its edge by stocking a wide variety of up-to-the-minute merchandise in its 23 North American locations and vigorously cross-merchandising.

Starting in 2002, Virgin introduced a series of new fixtures that showcase books, CDs, DVDs and other products in a single display that Virgin custom-designed for maximum flexibility. "Each month we select a popular culture theme—a key movie like Lord of the Rings, or a particular artist like Kurt Cobain—then we program the fixtures and send photos out to the stores," said Dave Alder, senior v-p, product and marketing at Virgin. "It's given us stronger cross-purchasing sell-through than ever before."

In its largest stores, Virgin mounts three or four multimedia displays per month. Additionally, the chain runs a monthly storewide theme, like "Best of British," which recently incorporated 600 CDs, 300 DVDs and 70 books, plus copies of the London Sunday Times.

While Virgin's smaller size helps, the chain's ground-up programming philosophy also differs from the major chains. "We actively undertake cross-format meetings among product groups," said Alder, who noted, "we have product and marketing folks actually sitting in one area together." Virgin avoids "cookie-cutter" standardization by encouraging local feedback from stores. "It's probably 60/40 from us to them," said Alder.

Virgin's cross-merchandising strategy targets its enthusiast demographic. "We tend to get a more dedicated, fanatical customer, who wants a combination of different product categories," said Alder. "The way Virgin frequently rotates its merchandise surprises customers and keeps them coming back," said Kevin Votel, PGW's v-p director of national accounts. CDS's Cohen added, "Virgin is very receptive to new merchandising opportunities, especially in DVD."

Book merchandising varies by store location. In Boston, Virgin avoided a formal book department altogether by shelving books in other sections according to category (e.g., film books with DVDs; jazz books with jazz CDs). Still, the large book inventory in the Times Square store in New York City demands a separate section, putting even more emphasis on multimedia displays for cross-merchandising.

Hastings, a nationwide chain of 147 stores, also puts books in other departments on a regular basis—such as books on guitar-playing next to the guitars. "By co-locating it for the shopper, we introduce our product to more eyes than would necessarily see it in the book department, particularly with newer and younger readers," said John Merklein, Hastings's director of book operations.

The chain builds space for "sidelines" directly into its store layout, particularly when it remodels. The marketing team also formulates a monthly cross-merchandising plan. For Lord of the Rings: Return of the King, Hastings will allocate eight to 12 feet for all books and related merchandise in its storefront "Hot/New" section.

In 65 newly remodeled stores, Hastings has also built a "Lifestyle area" that includes graphic novels, video games (both sell-through and rental), related magazines and video tie-ins. With annual growth of graphic novel and video game sales in the double-digits for the chain, it made sense to put them together. "As some product lines, like music, begin to deteriorate, you need to find an avenue to drive foot traffic and business to make up the shortfall," said Merklein.

Manga Mania

The 400-pound gorilla of cross-merchandising is manga. According to Bill Schanes, Diamond Comics v-p of purchasing, manga has grown from a $10 million business to a projected $100 million business in five years. Moreover, customers who buy manga tend to buy lots of related merchandise on a regular basis. "While movie tie-ins are tied to a release date, we're seeing steady, continuous growth in graphic novels," said Hastings's Merklein.

Otaku is the Japanese word for a hardcore collector and that's what most manga fans seem to be. As a result, Diamond Comics has been able to sell licensed merchandise to some of the major chains for the first time. "It's still in the test phase, so it's too early to talk about it, but they're being very aggressive," said Schanes.

For retailers, merchandising manga (graphic novels) and anime (DVDs) is an obvious area of opportunity, since they feature the same characters and the DVDs come out as often as once a month. "They're absolutely the same demographic, nearly the same size, and have a similar look and feel," said Schanes. "In the U.S., anime is crucial because young fans often discover new characters through film and TV," said Viz's Kettunen.

Manga fans tend to skew younger (as junior as six to eight), which brings in new readers who might otherwise avoid bookstores. And as Diamond's Liang points out, "somebody has to take those kids to the store, so you increase adult foot traffic as well." Refreshingly, girls now make up roughly half of the manga market. "The influx of young girls in the last five years is just phenomenal," said Marvel's Gabriel.

The U.S. has just begun to tap the resources of the Japanese market. And for nearly every title, there is a wealth of licensed merchandise. Still, BGI's Elsby urges caution on three fronts: 1) the marketplace is being flooded with product, so a retailer has to be careful to distinguish itself to maintain growth; 2) expertise is crucial, as customers can be particular about ancillary merchandise; and 3) success in Japan doesn't always translate to the American market. One Piece by Eiichiro Oda (Viz) may have sold 80 million units in Japan, but it is still being tested here. Likewise, "some of our bestsellers genuinely perplex our Japanese vendors," said Elsby.

Those concerns create added value for a company like Diamond, stresses Liang, because they stay on top of all the merchandise and buy directly from Japan, which allows them to offer exclusives. "We have access to small product runs so an aggressive buyer can own it outright," said Liang. Likewise, Schanes stresses the importance of staying current: "The key is get in early and get out early."

A Brightening Future

In the next six months, the major chains are likely to implement a number of initiatives to get their cross-merchandising programs up and running. How soon and to what extent they will be able to adopt models like those at Virgin or Hastings depends not only on the success of pilot programs, but on a willingness to embrace a new business model. As chains struggle with book sales, it may not be easy to take the long view on a massive scale.

So what will it take to make it happen? "I think you need to have a dedicated staffer in the retail environment whose job it is to look for opportunities on both sides of the aisle, as it were," suggested PGW's Votel. At Joseph-Beth Booksellers, it all began with an individual manager who took it upon herself to bring cross-merchandising to her Lexington, Ky., branch. Paula Gray, a night stocker, single-handedly built up a graphic novel section, then added CDs, DVDs, art books and gaming cards. It was a big hit, and now buyer Brian Delambre is "cloning" that model on a test basis in other stores. "When it's all in the right place together, sales jump," he said.