Last Thursday Family Christian Stores (FCS) announced they will be closing all 240 locations in 36 states, liquidating their inventory, and laying off over 3,000 employees.
It is a sad day for Christian retail. In this case, the only surprise is that it came so soon after their previous bankruptcy reorganization.
In February 2015 FCS suddenly declared bankruptcy and it was not until June of that year that the terms of their reorganization were finalized. I wrote about this frequently here, here, and here. The bottom line is that, in the end, FCS was able to wipe away over $120 million in debt and was able to buy $20 million in consignment inventory at 70%-90% off the wholesale costs.
In other words, their reorganization allowed them to start over with “free” inventory in their stores and without debt.
In the last 18 months, since the court approved reorganization, they had two Christmas seasons to replenish their coffers, so to speak. FCS had projected sales of $216 million for fiscal 2015. Until more is revealed I cannot speculate what their sales have been in the last 18 months…other than to state the obvious…it wasn’t enough.
What Happened?
There is a crucial question of whether the business model of the retail Christian store is structurally broken, or whether it was just FCS’s model.
Did the management of post-bankruptcy FCS do the things necessary to try to stay in business that you see from other retailers—closing unprofitable stores, focusing on more profitable merchandise, etc.? In June ’15 they had 266 stores. Now they have 240, according to the press release. Apparently they did close a small number of locations and moved some others. But what about all the other aspects of retail? A proper product mix to meet the needs of their customers? Top level staff training in stores? Reduced overhead at the top levels of corporate management?
FCS was given a great opportunity for a reboot with their bankruptcy. They no longer had any debt. They had a large cash infusion from their suppliers who provided inventory which they never had to pay for.
And yet I quote from excerpts found in the FCS letter to vendors, “Despite improvements in product assortment and the store experience, sales continued to decline. In addition, we were not able to get the pricing and terms we needed from our vendors to successfully compete in the market.” This is, in part, laying the blame on the publishers and vendors for the decision to close. There wasn’t much the suppliers could or were willing to do to further support FCS. The publishers, vendors, and banks walked away from over $120 million during the bankruptcy. They had already “contributed” significantly and gave FCS the opportunity to continue to be an important factor in the Christian community.
Before anyone declares Christian retail is “dead” we must first answer the above “what happened?” question. I know of many Christian retail bookstore operations that are healthy and strong so be careful of blanket claims of Armageddon.
However, as I’ve said elsewhere, there is no question that Family Christian’s closing will have a “deleterious effect on many communities which have relied on their local store for their Christian products, whether it be a greeting card, book, or Bible.” There may be a number of cities where the business will simply go to another Christian store. Unfortunately, in places where they were the sole outlet the impact will be felt.
If there is a permanent structural problem in the Christian retail store model, it is a shame. This has been a long-standing industry serving the Christian market very well. For example, people making a lifetime purchase of an expensive Bible, want to see and feel it before buying one. This can’t be done online. The gift section carries products that are not found in other retail stores. The greeting card line is not replicated on Hallmark or American Greetings racks. But books and music are easily found online or in a church’s bookstore at significant discounts.
Since I began my career in Christian retail I truly believe that the local store can be “the supply sergeant in the Lord’s Army.” It is the place where a bible study leader can compare multiple studies to find the right one for their group. It is a place where a church can get the supplies they need for Sunday’s service and weekday ministries. A place where a pastor or a seeker can review hundreds of books on various topics. I have also said it is a place where there is an ecumenical meeting every day, but no one realizes it. Every flavor of the Christian church passes through the doors of a Christian bookstore – all shopping the same aisles.
Retail is Always in Flux
There is no question that brick and mortar stores are in the midst of disruption. Some would call this disruption “The Amazon Effect.” On Friday J.C. Penney announced the closing of two distribution centers and 140 store locations (approximately 15% of the chain) while also offering early retirement packages to 6,000 employees. They are not alone. The Limited closed all 250 locations in January. Wet Seal announced the closure of all 171 locations. American Apparel all 110 locations. Last year Macy’s announced the closure of 100 underperforming stores. Kmart will be closing 108 locations and Sears 42 locations (and sold their Craftsman brand to Black & Decker).
Retail business is often a fragile venture. Physical stores are not the only ones subject to disruption. Online operations are also at risk. For example, NastyGirl.com, an online apparel company, grew from a home-based eBay business in 2010 to nearly $100 million in sales in six years. And yet in November of last year they declared bankruptcy and the brand was sold for $20 million.
Remember, however, that store closures make the headlines, not store openings. For example, Walmart will open, relocate or expand 59 Walmart and Sam’s Club locations in 2017. These openings will employ about 10,000 people. Nor did I read much about the successful years of T.J. Maxx and Marshalls which have plans to add 1,300 stores in the U.S. and Canada.
An hour before this FCS news broke, I was talking to a friend about the difference in leadership by those who are entrepreneurs and innovators and those who are more “standard” business managers. Sometimes entrepreneurs and innovators are not good managers and good managers are not always innovators. But those who are able to lead and nurture a culture of innovation are the ones we read and write about. In retail, it can no longer be “business as usual” or the consumer will go elsewhere.
What Now?
Every author is asking “how does this affect me?” Answer? For the majority of authors, probably not much.
Top level, bestselling authors, were in the stores, but the inventory selection did not run deep. FCS also carried a limited fiction section, bestsellers mostly.
In its heyday Family Christian was as much as 10% of a Christian publisher’s business. Now it is a small fraction of that.
Those who publish Bibles (HarperChristian, Tyndale, B&H, Crossway, etc.) will lose a major sales outlet. An irreplaceable one. But that doesn’t really impact authors either. But it does hurt our publishing partners. While hard news for the publishing industry to absorb, I suspect most companies had limited their financial exposure to FCS. Yet, any loss is regrettable.
I hope that there won’t be a chain reaction of subsequent bankruptcies or undue financial stress on publishers or gift suppliers. For example, due to the 2015 bankruptcy of FCS, Gospel Light Publishing lost $143,000 and had to declare their own Chapter 11. They later sold their curriculum assets to David C. Cook Publishing.
It is also a sad day for 3,000 Family Christian employees and their families. Pray for them too.
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Steve, thanks so much for this article. I own a small Christian retail chain in Texas (3 locations) all of my stores are located in malls. (Major malls might I add with extremely high rents) yet we are doing really well. I started the store at 19 years old because I was frustrated that stores like FCS and lifeway did not appeal to millinenials. Christian Retail is a very good industry. Most stores just aren’t evolving from old ways. (Sadly like most churches aren’t evolving) people are tired of religion and want true genuine relationship with Jesus Christ. My generation in particular. (I’m 24) we love Jesus and we are bold about it but we don’t typically by books and cds. 85% of my sales come from Christian apparel, jewelry, and gifts. 15% from bibles. FCS definitely lacked on apparel and gifts and that’s what people are seeking. The days are over for corny Christian shirts. People want lifestyle apparel that they can wear everyday that expresses their faith.
Lastly the fact that FCS is owned by multi millionaires. They should have had integrity during their bankruptcy to take care of those vendors. It affected our industry as a whole really bad. I know of 10-15 vendors that were affected to the point of almost closing.
Jaylen,
Tell us more about your stores and their locations so we can let people in your area know about you.
At the point they reorganized they needed to have shed at least 40% of their non-performing stores. As an former operator of a small chain of bookstores, it is the non-performing stores that kill a chain. If the 80/20 rule applies to FCS, they should have about 50 cash cows in their portfolio and someone with cash, retail knowledge, and the ability to renegotiate rents could have a very strong thriving business.
Agreed. Although, in some cases it may have been too expensive to break the lease and close that operation. The real estate side of the equation is one that is often overlooked by those observing the success or failure of a retail store.
Once upon a time, there was a corporate retail chain that sought to renege on their commercial leases among other things. My experience is that a bankruptcy action would selectively permit them to break and abandon leases they didn’t want. They knew which stores performed and which stores didn’t before the initial bankruptcy filing. It should have been easy for their very astute law firm to shed specific (losing) leases through the bankruptcy.
Secondly, if a lease isn’t paid look what happens. They are EVENTUALLY evicted and OWE some money (back rent, legal fees, etc.) SO WHAT to an organization who isn’t going to pay the bill anyway (that debt can easily be discharged by the court). They even petitioned the court and obtained permission to keep CONSIGNMENT merchandise without paying for it that they clearly knew did not belong to them further breaking their word(remember back when this used to be called… stealing) so the breaking of leases shouldn’t have been a problem in this climate. So much for moral obligation.
Lastly, bankruptcy action stays (stops) foreclosure and collection actions. So, particularly if you are not planning for the long term, why not stay in all the stores, rent and hassle free, and collect as much CASH as you can while the bankruptcy proceedings slowly wend their way. Retail 101; sales without (or very minimal) cost of goods or overhead expense are MOSTLY profit. Eventually they closed all stores, went online with the free goods while wholesaling some bulk lots of merchandise, all at deep discounts. This further hurt the honest mom and pop retailers, causing even some more of them to suffer or lose their family business. This looks like a main culmination of the story that seems like all is lost.
But wait, there is a third act twist. A very astute businessman with a great reputation, experience in HONEST retailing and an innate desire to see good triumph over evil may be moved to save the day. He may have even wondered why, over his life, he has been trained in such diverse disciplines that now show themselves to be perfect for such an immense task. He has stepped in when other faltering operations were dying and brought them back from the brink of death by applying the lessons learned in that lifetime of diverse training, these were just practice.
So by researching, (perhaps bankruptcy records or vendor cooperation) the top locations and bringing together a solid plan with a totally modern business model a nucleus (say 10/20 or so) of a new chain of Christian stores could emerge. There is large and powerful support out there for a mission of this type that the astute businessman is unaware of. Don’t fear the reaper (age). This would only be the beginning…..
https://www.youtube.com/watch?v=yen7UVKTWC0
Please click on this CBA (Christian Booksellers Assoc.) link and find another store near you. https://cba.know-where.com/cba/
Find (us) little guys who are holding on to the Gospel and our bookstores. Shop at these stores!
I’m not asking that you never shop Amazon again… I am asking you to maybe be intentional about shopping outside of your screen once a month, maybe. Go to a local shop and spend $15 or $20. These bookstores will treasure you & your business more than you know.
They (we) have hung on while Family got free merchandise and could sell it for 50% off -or more sometimes! We are doing our best to do our best and be wise & good stewards. We try to be price competitive, even when the odds are stacked against us by a behemoth company “that was too big to fail.”
Come & check us out! Please.
Well said Ann!
Tell us where your store is and a little about it so we can promote your efforts.
Thanks, Steve! I own Logos Bookstore in Kent, Ohio. My store is part of the Association of Logos Bookstores.
I will truly miss FCB. I love knowing that I can stop in on my way to a birthday party and find a perfect gift. Where will all my fellow Christian procrastinators and I go?? 🙂
However, I will say that a few friends have mentioned that they stopped going because they were uncomfortable with all the upsells being offered during checkout. Those you have a difficult time saying no tended to avoid going there. I wonder how much business they lost vs gained from that policy?? Hmm…
As an owner of local Christian bookstores, one of which has closed and the other is about to, I believe that the problems being experienced by FCS and other stores nationwide lie in these four areas:
1. The millennial generation does not buy or read books. Having grown up with the internet, they have been trained to “Google it” for the answers the seek. Studies show (see the book “The Digital Invasion” by Dr Archibald Hart) that this generation lacks the ability for deep cognitive reasoning due to this. Hence, they are not buying many books. Those from age 30-60 are so busy trying to raise their family, make ends meet, and survive in this crazy world are not finding time to read, and the remainder of us in the 60+ category who still buy and read books… need larger print. Yet the publishers continue to release regular or small print for almost all new printings.
2. Christian products, including gifts, are the fastest growing segments for purchase in “non-Christian ” or secular stores. When you can stop for gas at a truck plaza and buy a Kerusso t-shirt or Christian CD or book, there is little reasons visit a Christian store.
3. Amazon, CBD, and others have certainly taken a chunk of the business and discounted it to the point that they have devalued books. I doubt they Evan make money on their sales, but in the case of Amazon they have diversified from offering groceries to web services and movies. No need to shop anymore.
4. Fear over the election and economy sharply curtailed surplus spending. Surplus is what is left over after you buy groceries, gas, and pay for the ever increasing rates of health care. There is not much left for most folks, and since buying gifts, music and books is not required, it often doesn’t happen. Even with a new outlook in Washington it will take time for folks to feel free to spend their surplus funds again. Oddly, one area that seems to be somewhat exempt from this is restaurant spending, since it is both comforting and required for most of us to eat.
5. If I may add a fifth reason, it is the change in our church and worship experiences from a didactic or instructional experience to one that is performance based with a goal of making everyone feel good about themselves and their religion. I say religion specifically because church for many has become a form of religion while denying, or omitting the power thereof.
Scott,
You make some good points, however, not to keep repeating myself, but I disagree about your first point. Millennials get a bad rap in a lot of areas that bear no relation to reality, the idea that they don’t read being one of them. Case in point:
https://www.theatlantic.com/technology/archive/2014/09/millennials-are-out-reading-older-generations/379934/
The fact that millennials don’t buy books from Christian books stores says, I think, more about Christian publishing than it says about millennials.
They desrve to close. They are commiting fraud. I went to the store in Cedar Hill Texas and bought a bible, I noticed that it had a gold tag on the lower right side. I just assumed it was for engraving. I got it home and upon closer inspection I seen the tag was a sticker. I peeled it back and SOMEONES NAME WAS ENGRAVED ON THE BIBLE!
THEY PUT THE TAG ON THERE TO HIDE THE ENGRAVED NAME! They then sold the bible at full price not telling consummers that this bible has been engraved.
I am returning the bible today. This IS FRAUD. THEY DESERVE WHAT THEY ARE SOWING.
I definitely won’t go as far as you’re saying that they ‘deserve what they are sowing,’ but I’m incredibly disappointed in the same thing that just happened to me! I purchased a study Bible about two years ago in Arizona that also had that gold tag on it for engraving. I never went and did it but noticed it starting to peel the other day and found another person’s name engraved on it as well! Talk about disappointing! I wanted to call them about it but they’re all out of business now. I’m just sorry to hear this was common practice with them.
I believe some of their prices were to high and many would go else where to buy their books or bibles. Even when they would discount some of their products they would still be high. I think this was part of their problem in managing their stores. So sorry to here that the stores are closing.
I was sad when our local store,’Foothills Bible Book Store’ located in La Mesa, CA was sold to a gentleman who changed it to ‘Family Christian Store’ a few years after he acquired it. It changed from ‘ministry’ to ‘marketing. They began staying open on Sunday’s and I’m sure the daily staff meeting for prayer did not take place (which had been a daily occurrence in Foothills Bible Book Store); personnel did not know their product! No longer could you ask a sales clerk for a book to give as a gift for a friend experiencing grief. Sunday School supplies were no longer loaned to church leaders to enable them to review options in order to meet the need of their group. We need some committed Christians to go back to basics- mom & pop stores with clerks who want to serve their local community. It’s more than ‘The Bottom Line’ of marketing. It’s a ministry we desperately need in today’s communities!