Regional chain head hopes to announce new owner before too long

Berean Christian Stores filed for Chapter 11 bankruptcy protection last month, with management at the Cincinnati-based regional chain expressing confidence that the business would continue under a new owner.

Announcing the June 9 move, Berean President Bill Simmons told Christian Retailing he expected a purchase would be completed by the end of July, ensuring that the company would be “adequately capitalized well into the future.”

Details of one bid were included in the papers filled with the U.S. Bankruptcy Court, Southern District of Ohio in Cincinnati, Simmons said, with an auction possible if other interest in a purchase was forthcoming.

Court documents in the Chapter 11 proceedings included a list of Berean’s top 25 unsecured creditors. Totaling almost $6.5 million, the list was headed by Thomas Nelson ($824,000) and rounded out by Union Gospel Press ($74,000).

Simmons said the chain filed for bankruptcy protection after months-long discussions with vendors had failed to secure an agreement for continued operations.

“It’s not the perfect outcome, but we believe that it is the best outcome we can hope for in the situation that we find ourselves in,” he said.

The legal moves mark a big change of fortunes for the chain, that just three years ago started a new chapter in a long history. With backing from private equity from JMH Capital, Berean management bought out the then-16-strong chain—which dates back to 1934—from Standex International Corporation.

The new owners embarked on some rapid expansion, taking on a number of longtime independent stores—among them former CBA chairman Chris Childers’ Macon Christian Store in Macon, Ga.; Wayne Pence’s The Living Water Christian Bookstore in Kokomo, Ind.; and Ward and Anita Wells’ Wellspring Christian Bookstore in Louisville, Ky.

Within a couple of years, Berean had grown to 26 stores but cut that number by a third earlier this year, to18. The closures included the three former stores of Childers, Pence and Wells. Another store in Temecula, Calif., is in the process of being sold.

Simmons said Berean’s troubles began last fall when it presented a restructuring plan to its lenders, whose requirements prompted Berean to take “pre-emptive action” and pay off all bank debts. That impaired Berean’s ability to pay its suppliers.

Since then the company had pursued “multiple avenues” and been in regular discussions with its 160 vendors, Simmons said. “We had an incredibly high level of cooperation from most of the key vendors in our industry,” he said, but it had “not been possible to get everyone on board” with a plan for going forward.

Though Berean had been affected by the economy “it’s not that there hasn’t been positive cash flow.” Berean’s growth had been leveraged on debt that became “a foundation of sand as the economy fell and the lending markets changed,” he said. “I don’t know (if) that was a mistake. There are millions of people who have learned the same lessons across the country.” But there was “certainly a cautionary tale” in what had happened, he added.

Distributors, retailers ‘lose out’ on sales to unfair competition

Nigeria

The Christian retail channel in Nigeria continues to be negatively impacted by e-mail scams that have targeted U.S. evangelical bookstores in recent years, according to a leading member of the industry in the African country.

Sylvester Ejeh—owner of Edysyl, a bookstore, distributor and publishing house in Nigeria—told Christian Retailing “the majority of Nigerians suffer image problems overseas because of few that are involved in scams.”

“Sometimes merely introducing myself as a Nigerian turns off prospects,” said Ejeh, Christian Trade Association International’s (CTAI) vice chairman.

“Most of the time we are not given the opportunity to prove ourselves because (we are marked) as fraudsters. But I can tell you that most of us are genuine businessmen and businesswomen who have the fear of God and are ready to be ... good (Christian product) distributors and representatives.”

Melissa Mitchell, director of loss prevention for LifeWay Christian Stores, told Christian Retailing the Christian retail channel currently does not have a system in place to report Nigerian scams—which have featured bogus e-mails from there requesting help with Bibles from Christian bookstores in the U.S. The scam artists typically use fraudulent credit cards to pay for the Bibles, so the retailers end up responsible for replacing the funds.

CBA addressed the issue with a workshop on loss prevention during the International Christian Retail Show in 2006.

“It is difficult to know who their target will be at anytime,” said Ejeh, who buys products from all around the world. “No particular industry is free from it.”

CTAI President Jim Powell added: “Christian publishers in America were the major victims only a few years ago, but they’ve learned from the experience.”

He told Christian Retailing that a typical Christian store in Nigeria “can purchase through a local wholesaler most of the products it requires.”

“Of course, Nigerians and everyone purchase through the Internet,” said Powell, noting that scams have also come from Indonesia. “But for a retail store in America to become an important supplier to an individual or store in Nigeria defies economic sense.

Powell added that American Christian retailers are not the only victims of the scams. “Christian distributors and retailers in the country (where) the product are shipped to also lose out from lost sales and unfair competition,” he said.

Ejeh encouraged Christian stores to be vigilant regarding Nigerian scams. “The Christian retail network (must) insist on a particular mode of payment that cannot be reversed,” said Ejeh, who noted that prospective buyers from his country can be verified through CBA Nigeria.

Christian retailers, suppliers are preparing for tomorrow

Though a diamond anniversary typically involves a lot of looking back, the Christian products industry has an eye on the future as it gathers for its 60th annual summer bash in Denver, this month.

While the International Christian Retail Show returns to Denver, July 12-15, in the thick of a tough economy that seems set to shrink booth spaces and attendee numbers, CBA President Bill Anderson remains upbeat about the association’s summer convention.

He and other leaders see reasons for optimism as suppliers and retailers grapple with the challenges of multi-channel demand for Christian resources and the impact of the revolution in digital content.

Since the first CBA convention in the 1950s, not only has the industry seen vast growth in the quality, marketing and packaging of books, music and other products, these shifts have occurred to reach changing customers, said Anderson.

“Our industry has been quite willing to be innovative and expand into other formats to help people understand God’s Word,” Anderson reflected, naming an explosion of music genres, Bible translations and fiction as examples. “None of these are inexpensive undertakings, but have required significant investment by our industry.”

In addition, he said last year’s Operation Worship Bible campaign—which put the Scriptures into the hands of 340,000 U.S. soldiers—attracted thousands of new customers, demonstrating the power of Christian retail working with like-minded suppliers.

The campaign, coupled with efforts to boost store traffic and CBA initiatives that are giving people reasons to shop Christian retail, are behind Anderson’s optimistic outlook.

“As consuming as these demanding times can be, let’s not get stuck looking only at today, nor be duped into mistaking this as the future,” he commented. “We will come through this. Good times always follow bad times. We will emerge stronger retailers.”

To Mark Kuyper of the Evangelical Christian Publishers Association (ECPA), the fact that Christian retailers are still here is a credit to the foresight of the CBA pioneers who saw the need for more industry cooperation.

“Sixty years ago, there were Christian establishments popping up around the country, but they weren’t communicating,” said ECPA’s president. “There’s much more connectivity and collaboration between all elements of the industry than there was 60 years ago because, basically, everyone was operating on their own.”

However, even forging a future cooperatively poses a formidable challenge. With overall retail sales declining 4% the first four months of 2009, cutbacks at retail stores, publishing houses and suppliers have been common.

Other rapid changes in society are dictating that businesses employ both turnaround and growth-mode strategies, said Anderson, who acknowledges that creating new opportunities in some areas while cutting back in others can feel confusing and inconsistent.

“We are not going to get out of this recession in a hurry,” he said. “But anyone positioned to take advantage of little opportunities will be better off than those who are being so careful not to risk anything, and in the process don’t make anything.”

Though Anderson was referring to retailers, others face similar trials. Times are tough for publishers on the front lines of what Kuyper sees as the industry’s leading change point—a coming digital revolution.

While Kuyper said the economic downturn will work itself out, a recent report showing e-book sales shooting up from 5.7 million to 15.9 million during the first two months of 2009 indicates a major trend.

“The processes for digital are so different that it has implications throughout the publishing industry,” said Kuyper, noting that his association’s annual Pub U training event this fall will become webinar-based.

KEYS TO THE FUTURE

The digital arena has attracted attention from such retailers as the Parable Group, which has implemented several initiatives this year in addition to enhancing its Web site, according to Melanie Strouss, Parable’s marketing and merchandising strategist.

The group implemented a new e-mail program for its 64 franchises, driving traffic to those stores; although the group’s same-store sales declined 4.4% for the first four months, one-third of its retailers saw sales increases. It has also used webinars for training and sharing insights, which Strouss said have helped participants reduce costs and enhance marketing efforts.

And, although member numbers have shrunk from 118 last November to 97 this spring, Strouss said Parable receives 60 to 70 leads a month from people interested in opening a Christian bookstore. It had approved three new stores by early May.

“We feel this focus on digital and technology will help us in all areas of the business,” Strouss said.

Surviving until the downturn ends will take more than electronic adaptability, though, said Mark Scott, president of LifeWay Christian Stores. He thinks adjusting operations to the new economic “normal” might well be the key.

“No one knows exactly what that new ‘normal’ will look like in the future because it’s a moving picture,” said Scott, whose 153-store chain expects continued growth this year. “But the key element right now is doing the basics well and maintaining adequate liquidity. The difficulty in securing financial capital for small businesses will be a significant challenge to our industry in the years ahead.”

A veteran consultant says the industry still needs to improve on its collective approach to problem-solving.

Although acknowledging that the current downturn is leading people to consider new ideas they wouldn’t have considered when times were better, Jim Seybert laments an “individualistic” approach to problem-solving.

One example he cited is the way the industry collects and disseminates data on the sale of consumer products.

“I had a supplier contact me recently looking for reasons why a title that was selling well had suddenly dropped from one of the best-seller lists but not another,” Seybert said. “In considering the many possibilities for why this could have happened, it became clear to me and the publisher that our current systems still need work.”

Another change Seybert foresees is a growing desire by Christian readers for nontraditional titles that may be considered less “safe,” with new perspectives on such topics as social issues, environmental concerns and global politics.

Seybert said it could be argued that publishers will adapt to this more readily than retailers—which could make Christian stores less attractive to customers looking for nontraditional titles.

BUCKING THE TREND

Despite this year’s struggles, the fact that some retailers are reporting banner receipts presages a better future when the economy perks up again.

Not only did Mardel’s sales increase approximately 10% the first third of 2009, the Oklahoma City, Okla.-based chain has opened five stores in the past year, with a sixth slated for the third quarter. That will boost its total to 33 outlets in six states.

Mardel has also implemented a new design in a half-dozen stores, reconfiguring layouts, moving some merchandise and prompting positive customer reaction, company President Jason Green said.

While Bibles have led the way, the chain has also seen increased sales of financial books by such veterans as Ron Blue and Dave Ramsey, although value consciousness has many customers looking for lower prices.

“Right now the biggest challenge is, how do you grow a business where demand is strong but price pressure is strong and cost containment is tough?” Green said.

Looking to the future, Mardel’s president said the industry has to determine a better way to maximize awareness of the benefits of mutual support and top-of-mind awareness among consumers.

While big box stores and others have gained market share from Christian retail, Green longs for the day when people thinking of buying a Bible or other product first consider Christian stores.

“I don’t know the right strategy, but it’s going to involve retailers and suppliers seeking ways to grow the channel and do it in a healthy manner,” he said. “There has to be awareness of that and work … to improve the health of the industry.”

George Thomsen echoes that sentiment. The director of church-owned The Harvest Store, Thomsen said more publishers need to acknowledge that Christian-operated stores are the best evangelists for their products.

“(Christian retailers) see the vital role of Christian resources in the lives of Christians and how they support the church,” said Thomsen, whose store is part of Harvest Christian Fellowship in Riverside, Calif. “I think people need to take a hard look at that and realize the significant role that stores play. Individual stores aren’t going to buy pallets or skids of books like the mass merchants or category killers, but they’re the ones who are going to represent that product.”

Like Mardel, The Harvest Store has bucked the trend lately, reporting double-digit increases—including a 27% jump one month—during the first quarter. Thomsen attributes that to a strong congregational base and good business practices, adding that there isn’t a “magic bullet” for Christian retailers.

No matter what the ministry purpose, he said churches looking to open stores must remember the necessity of operating them like a business. That became apparent last February, when First Baptist Church of Houston closed its 16-year-old store. The Garden Bookstore had been managed by Church Bookstore Network President Geni Hulsey.

“I don’t see it as a psychological setback,” Thomsen said. “If anything, it’s a wake-up call to reality.”

The Munce Group, which includes more than 75 church bookstores among its 550-plus members, is in “a very solid position” to meet the future, said Kirk Blank, Munce’s chief operating officer. The marketing group reports that it has a large number of stores—411 or 75% of its membership—that “have no competition within a five-mile radius of their stores.”

Recent meetings between Munce and its vendors “point to a growing market share” for Christian retailers “as this economy has forced the general market to reduce titles,” Blank added.

Another profitable retailer with an eye to the future is the cutting-edge Skia Store, located in Bentonville, Ark., not far from the headquarters of retail giant Wal-Mart.

Unlike many Christian retailers, Skia doesn’t stock many gifts and looks to teens and adults under 40 as its primary customer base.

The formula has worked. Since opening in April 2007, the store had been seeing growth of 40%, although that rate dropped in half this year. Thanks to teens and twentysomethings in its music department, the store’s sales in that area have remained strong and provide approximately 20% of its overall revenue.

Whether the store is a 21st-century prototype remains to be seen, though. Owner Bill Beyer admits he has the opposite problem of many Christian retailers. Older customers often avoid Skia because they think its skate shop, coffee shop and other amenities are primarily geared to young people.

Still, reaching that generation poses a major challenge; if the industry keeps aiming at the typical demographic of women 35 to 54, it will miss younger people with different tastes, Beyer said. Others are picking up on this idea, such as the thirtysomething businessman he is advising on opening a Skia-like store in Tennessee.

“I believe God is pulling some retailers to focus on the younger generation because they haven’t been shopping in (Christian-owned) stores,” Beyer said. “God gave us a heart for the new generation, but somewhere in between you’ve got to be about a balance between attracting (them) and the older generation.”

INDEPENDENT STRUGGLES

Though the industry may need to prepare for the digital wave to come, a longtime retail consultant says the old-fashioned attributes of customer service and relationship-building will help Christian retailers prepare for an eventual turnaround.

Britt Beemer thinks that bodes well for independents, which he said generally have closer customer ties. Beemer said that, coupled with targeted direct-mail offers, will pose a successful strategy in coming days.

“That’s one area that gives retailers in a smaller-size retail base an avenue if they’ve done a good job of maintaining a database of customers,” said Beemer, chairman of America’s Research Group. “Those offers do come at an expense, which is slightly lower margins, but at least you’re generating traffic in the store.”

Beemer, who has done a pair of surveys for CBA in recent years, said Christian stores have struggled for years with locations in second- or third-tier shopping centers with dwindling traffic.

While crediting Family Christian Stores and LifeWay with a more proactive approach to location, Beemer said independents offer the more attractive feel of individual ownership. In the past year he has sensed a revival in this sector, saying many consumers are tiring of chains.

“I still believe in today’s Christian environment people walking into a store where the owner of the company is there often is a reassuring point to a lot of shoppers,” Beemer said.

A pair of independents who have been battling sales declines this year aren’t so sure.

“I don’t know if we are seeing much of that,” said David Rooker, manager of The Scroll Christian Bookstore in Tyler, Texas. “We do have our loyal customers, but seem to be losing traffic steadily. I suspect that the Internet and location have a good deal to do with it.”

Rooker identifies the availability of the Internet and cheap prices as causing a shift in many customers’ buying habits. A dramatic decline in music sales has affected everything else, including incremental sales that often go to other channels, he said.

There are some bright spots at The Scroll, such as a modest uptick in April after double-digit declines the first quarter, which may be partially due to increased sales of remainder product. Hoping to drive traffic, the store has also added used homeschool curriculum and started a “Round-up Program” to benefit the community.

Calling the latter a good public-relations move, Rooker explained that store staff suggests customers round up their purchase price to the next dollar, with the difference going to area charities. Not only have customers been enthusiastic about the idea, but it also could raise more than $2,000 a month, he said.

Amy Spears—the CEO and one of three partners who bought the Christian Book Cellar two years ago from the seven families who owned it, renaming it Living Water Christian Books & Gifts—said 2009 sales at the Covina, Calif., store have also declined dramatically.

That has affected inventory levels and finances, leaving the partners to try to determine cost-effective ways of marketing the store. One customer attraction is the store’s new, low-cost ministry services room, used by Bible study and church groups.

The biggest hurdle confronting her store—and the industry—is the widespread expectation of low prices, Spears said.

Retailers and shoppers are receiving a little bailout relief of their own—thanks to new promotions by suppliers. Responding to the changing economic landscape, gift companies and publishers have been helping stores attract value-conscious customers.

Revenues for Christian retail stores have recently fallen, according to leading consumer researcher Britt Beemer.

His America’s Research Group (ARG) found just 5.8% of the population visited a Christian bookstore in a survey for its bimonthly Consumer Mind Reader report for March. That was slightly down on the figure for January, and compared to 7.6% for the same period last year.

The publishing newcomers behind Christian fiction phenomenon The Shack are hoping for a repeat success in the music world.

Windblown Records, a new division of Windblown Media—the company formed to publish William P. Young’s novel after it was turned down by more than 20 established publishers—has released My Beautiful One. The 12-track CD features instrumental arrangements of worship songs by Chris DuPré.

Big Idea Inc. has changed hands again. Boomerang Media LLC and GTCR—one of the leading private equity firms in the country—recently announced the acquisition of the principal U.K. and U.S. subsidiaries of Entertainment Rights, including Big Idea and Classic Media Inc.

U.K.-based Entertainment Rights purchased U.S.-based Classic Media in 2007, which bought Big Idea after the company filed for bankruptcy in 2003.

In partnership with GTCR, Boomerang Media plans to invest up to $200 million to build its franchises, with VeggieTales as a key brand in its global portfolio, company officials said.

Two leading charismatic publishers have restructured their operations to ensure their long-term viability.

Six months after filing voluntary bankruptcy, Harrison House Publishers in April announced “a new beginning” for the Tulsa, Okla.-based company.

John Howard—who continued to serve as vice president and publisher after Christian publishing veteran Jonathan Merkh recently joined Howard Books—has left the company founded by his father.

Howard announced his resignation, effective May 1, in mid-April as Simon & Schuster revealed plans to move Howard Books—its Christian imprint—to Nashville from West Monroe, La.

The Evangelical Christian Publishers Association (ECPA) has decided not to repeat its consumer-focused Christian Book Expo (CBE)—for now, at least.

Following dismal attendance for the March 20-22 event at the Dallas Convention Center—where registrations were a tenth the 15,000 that had been projected—the publishers group has canceled its provisional 2010 booking of the venue.

But interest in the idea—intended to help raise awareness of Christian books—remains strong among some publishers who participated, said ECPA President Mark Kuyper, who announced the no-go at the association’s Executive Leadership Summit (ELS) and Annual Member Meeting at the Sheraton Carlsbad Resort & Spa in Carlsbad, Calif., in April.