Eason: back in the black

Eason: back in the black

When Conor Whelan came into Eason, the privately owned bookselling business, in September 2009, it was in a more precarious state than many realised. Mid-financial crash the company, backed by 260 shareholders, lost €21m (£19m) for the year ending 31st January 2009. It controversially withdrew its staff’s Christmas bonuses and was under “severe” pressure to repay its loans—and it was on the cusp of a digital revolution that would take a swipe out of the 197-year-old business’ core categories: newspapers, magazines and books.

At the time, the 63-chain store (35 owned, 28 franchises) had no central buying and stockholding system, no long-term marketing strategy and an “unsustainable” cost base. “I look back at when I joined now and say, ‘Wow, that really was a perfect storm’,” Whelan says. “Not only were we dealing with a recession but our core categories—particularly books and magazines—were in decline. We were hit with ‘double digitisation’: books and magazines were moving to digital content. So we needed a strategy— for both business transformation and retail transformation—and we needed it critically.”

One of Whelan’s first undertakings upon accepting the role of c.e.o. was to commission a €60,000, warts-and-all marketing survey of Eason customers to see what they really thought of Ireland’s oldest bookselling chain, which has a 40% share of the bookselling market in the country. “I was waiting with baited breath for the results, wondering if it was going to be a challenge too far,” Whelan confides. “When [the survey results] did come back they said we were not seen as an innovator, and customers thought our stores were tired and jaded. However, it wasn’t all bad, customers also said: ‘You’re still trustworthy and reputable.’ So there was just enough for us to hang on to.”

One of the guarantees the former managing director of Spar Ireland secured from the board before taking the role was that there would be money to invest in refurbishing the estate. “That was the strategy that I signed up to, that was the strategy me and the team developed and, to be truthful, I wouldn’t have been interested in the role otherwise,” he says. “What attracted me was a programme gearing up for this.”

Talking shop

As part of the “retail transformation”, Eason embarked on a €30m investment programme, spending €12.5m on new IT systems and the remaining €17.5m on refurbishment of its 20 largest stores. Nearly €4m of that sum was pumped into its 61,000 sq ft flagship O’Connell Street branch in Dublin, and an extra €1m is earmarked to transform its lower ground floor next year.

The “tired” and worn-looking dark carpets and clunky display units of the flagship’s 11,500 sq ft ground floor have been replaced with wooden floors, slick grey tables and fresh lighting, and to add a sprinkle of retail theatre, next to the Irish history section a “tram”—reminiscent of those that used to run through Dublin—has been installed, next to an area marking the centenary of the Easter Rising in 1916.

The transformation of Eason’s flagship comes a century after the building in which it is housed was razed to rubble during the Easter Rising, launched by Irish rebels in a bid to end British rule in the country. The centenary inspired a flurry of publishing on the topic and the retailer boosted its sales by running a string of commemorative events.

As well as refurbishing its estate, Eason’s “retail transformation” has involved installing a number of complementary categories into shops to draw in new customers and to deflect pressure from the embattled books and news products. To this end, “Artemis” children’s zones were installed in 2011; an “Emotion” gift department in 2012; and “Easonology”, a “mind-challenging” area, in 2013. “Department 51”, targeting young adults and selling designer stationery, followed in 2014 and its “Monogram” and “Craftworks” sections were completed last year. Sales through the dedicated sectors account for 6% of the company’s store turnover in Ireland.

To boot, a relaunched e-commerce site is also now making a positive contribution to the business, Whelan says, with online revenue up 33% last year. It now accounts for 5% of its business and 10% of its book sales—up from 1% six years ago. It sells e-books through an affiliate partnership with Kobo, although e-book sales are “modest and moving backwards,” Whelan admits.

The chain had at one point flirted with investing in its own e-reading device, but the company’s chief is glad he backed out of the decision, admitting it would have been a “mistake” because “the technology moves too fast—no sooner would we have brought one out and it would have needed updating”.

The bottom line

The turnaround of the business hasn’t all been geared around investment, though. The “business transformation” at the company also required an unpopular €8m cost-cutting programme and restructure, involving redundancies and staff pay cuts of 5%–10%, which were only restored to their former levels in May.

Nevertheless the plan has paid off: last year Eason made a profit for the first time in Whelan’s tenure after increasing sales by 9% to €147m (£126m) and returning a profit of €1.2m (£1.03m) in the year to 31st January 2016, up from a loss of €2.7m (–£2.32m) a year earlier. As in the UK, the company was aided by a boost in print sales, although considering Nielsen BookScan figures included sales from new entrants Wordery and The Book Depository, Whelan estimates growth in the Irish print book market in 2015 to be around 2% in volume, and 3.75% in value.

Looking forward, the company is embarking on a new three-year plan to sustain growth, particularly focused on its omnichannel offering, under group head of marketing Brendan Corbett. To that end it will launch a new click and collect service in January, alongside a new rewards app for its loyalty card. It also wants to work more closely with publishers to maximise midlist sales and reduce returns under a new books strategy. “We really want to be that book destination, which we were for a lot of people as they grew up with the brand,” Corbett says. “We also really want to solidify our reputation as Ireland’s best bookseller and as the voice of recommendation in Ireland.”

Whelan hopes to open more stores—“one a year would be a good target”—and confirms the company is on track to retain its profitability this year, with single-digit growth in revenues so far in 2016. However, with 70% of the company’s book stock bought from the UK, and with 10 of its stores based in Northern Ireland, Whelan is cautious of the potential impact the Brexit vote and Donald Trump’s anointment as US president- elect could have on the business.

The deflationary effect of a weak pound poses a particular risk to the company’s revenues. “I am confident about the publishing in the run-up to Christmas, but Brexit concerns me,” Whelan says. “Post- Brexit [referendum], there has been a softening of consumer sentiment. Ten of our stores operate in the UK and 70% of our books are bought from the UK, so that uncertainty will have a big impact. Cross-border trade will impact on our revenues and it is harder to deliver on our cash margins when we are selling books, on average, 10%–15% cheaper. Obviously it means we need to pass on as much of the benefit to our customers as possible, but we have a very fixed cost base. That’s a challenge.”

However, on a more positive note, he says that if the uncertainty continues, the chain will have to sharpen its business intelligence. And when asked to name the two most important aspects of the company’s turnaround, Whelan says: “Bringing people with you on the journey is imperative. That and having the funds to invest.”