Parable Group CEO Steve Potratz Talks of Plans for 1500 Christian Book Outlets

April 1, 2005
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An Exclusive Authorlink Interview With Steve Potratz
CEO of the Parable Group

By Doris Booth

April 2005

The Parable Group, a marketing consortium of 220 independent Christian bookstores, plans to turn its own marketing and operating success into a pervasive chain of franchised Christian bookstores. CEO Steve Potratz aims to have "a branded presence" in 1500 communities within the next 6 to 7 years. In this exclusive Authorlink interview, Mr. Potratz talks about his ambitious plans and the growing market for Christian books.

"We will have a 'presence' in 1500 communities."

—Potratz

AUTHORLINK: Barnes & Noble currently operates 820 bookstores in 50 states. Wouldn't opening 1500 outlets make Parable almost half as big as the world's largest bookseller in terms of outlets?

POTRATZ: That's not really an accurate comparison. Barnes & Noble operates stand-alone brick and mortar stores. Parable's chain will consist of a combination of stores and other types of outlets. We will have a "presence" in 1500 communities. Our outlets will range from stand-alone stores in small or large towns to units inside of churches.

"The best way to facilitate

 

this new model is by building

a national brand through franchised operations—a brand that really stands for something."

—Potratz

AUTHORLNK: What made you decide to move from a marketing consortium to a franchising operation?

POTRATZ: There is a growing trend for churches to open bookstores within their walls. I had a call just a few days ago from a 1200-member church asking us to place a Parable franchise store and coffee shop inside their facility. We aren't quite ready yet, but there are hundreds of thousands of churches in America, and thousands are already opening this kind of internal store. These are among our target markets.

I've been in Christian book selling business for 35 years. The Parable Group itself celebrates its 20th anniversary this year. For the first time in our history, Christian booksellers have had severe competition from mainstream stores carrying run-away bestsellers such as The Purpose Driven Life. Independent Christian book retailers have suffered from these new market forces.

Over the years, Parable has met a real need in driving top-line growth for Christian bookstores. We do more for our member stores than most franchisors do for franchisees. We have a whole list of services. We help them manage their customer service and provide vital sales tracking and consumer behavior information. Our systems even track a customer's move from one address to another.

When we considered franchising, we asked ourselves, "What does the customer really want?" And we did our research to find out. Our conclusions will drive the new way we begin doing business over the next few years. The best way to facilitate this new model is by building a national brand through franchised operations-a brand that really stands for something.

Our retailers won't be cookie-cutter stores. We want to keep the independent local personality of every store. But you will have a similar experience in every Parable franchise store. You will be able to recognize our branded stores immediately. Each one will deliver a consistent experience and have a broad selection and similar categories. We will also have the ability to create back-end systems throughout the franchise that will help cut costs and combine certain common functions such as accounting. Our central buying capability will enable us to improve our margins and stay more profitable in our ministry.

"We decided to . . .develop

a system that really does work

in the Christian

retailing environment."

—Potratz

AUTHORLINK: Why now? What is different about today's environment that would indicate the time is right for a Christian franchise operation?

POTRATZ: Four years ago, we looked at launching a franchise operation, but it wasn't right for our industry at the time. Meanwhile, we have grown in our knowledge of what we can and cannot do, and we've developed a palatable system. In the traditional franchise model, the franchisor would get a significant fee for services. It didn't work in our market. The fee was usually too high for the small bookseller. We decided to combine our successful marketing model that has worked for 20 years with a modified franchising model to develop a system that really does work in the Christian retailing environment.

In the past five years, the marketplace has changed dramatically. Christian bookstores once had a monopoly on the specific market. We had good margins and sold at full price. Sale pricing was not part of our book vocabulary. Today, with competition from mainstream retailers, Christian stores have been left behind. The big boxes and other chains awakened and were taking the cream off our top. Our traffic was driven away, and without that traffic, backlist sales also slowed.

"Our stores will offer

an inviting place

to sit down with a friend

and a cup of coffee

—a place of community."

—Potratz

AUTHORLINK: In what ways will you compete against the bigger chains?

POTRATZ: Selection is very important! Every consumer research survey we have done says consumers want selection.

AUTHORLINK: Will you be working directly with publishers to stock your stores?

POTRATZ: We're looking for a broad base of publishers, not just the top ten. We will work with as many as we possibly can. However, to keep costs low, we'll buy most of our titles through distributors. They perform a critical function in our new business model. If we worked with 100 publishers directly, we wouldn't be able to hold down costs. We'll probably work with ten or more publishers directly, and buy from the other 90 through whatever distributors our stores choose, such as Ingram or Anchor.

 

AUTHORLINK: Distributors such as Ingram, however, don't carry titles published by many micro publishers.

POTRATZ: True, but Ingram sends Christian publishers with less than ten titles to a sub distributor like Faith Works. And we will buy through that channel.

AUTHORLINK: What will be different about independent Christian bookstores that have become part of the Parable franchise?

POTRATZ: You'll see a lot more emphasis on books than you have seen in past. You'll see a great selection in a more consumer-friendly store. You'll be able to easily find what you're looking for. Our stores will offer an inviting place to sit down with a friend and a cup of coffee-a place of community.

"Some stores will carry

 

16,000 titles or more. . ."

—Potratz

AUTHORLINK: How many titles will you carry?

POTRATZ: Store titles will vary by footprint. Some stores will carry 16,000 titles or more; smaller stores might carry a few thousand titles. Our initiative is for all Parable stores to carry a core list of 2700 titles. In the past we concentrated on depth of inventory. Now we'll concentrate on breadth too!

AUTHORLINK: You've been quoted as saying that many of your outlets will be "kiosks," rather than actual stores. Is this true?

POTRATZ: We haven't yet defined the number of brick and mortar stores we will have, but there will be many. Our overall sales approach is to have multi-channel integration. For example, we may have a church store that carries only 600 titles. But we can also install an ordering kiosk that enables the customer to order anything he or she wants from our online store at Parable.com.

AUTHORLINK: What unique strategies are you taking to sell more books?

POTRATZ: A really fun example is that the publisher Thomas Nelsen is working with our individual stores to produce a Bible we can sell for a dollar. Our stores sold 11,000 of these Bibles last week. I'm really excited about what independents can do when working with churches. My personal goal was to sell 10,000 Bibles in one store, and we surpassed that. The Christian store is beginning to find its niche.

It's thrilling to see Bibles in all the mainstream stores. Barnes & Noble has 16 linear feet of Bibles on display. But most of our Parable stores will have double that. Purchasing a Bible is one of the most confusing purchases one can make. Consumers need to know that we at Parable are the experts in that area.

AUTHORLINK: Some members of the marketing consortium may not be happy with the franchise operation. How do you respond to that issue?

POTRATZ: Anytime a change takes place you will have some people jump on board. Others will wait and see, and some will not move. That is to be expected with any shift in leadership or market direction. Very few of our consortium stores have declined our franchise offer. We have a stable base of stores, and for those who opt out of the franchise, we will continue to provide marketing services.

"We're opening franchises

and converting existing stores

to begin operating as

a franchised chain this summer."

—Potratz

AUTHORLINK: What is the timeframe for developing the new Parable chain.

POTRATZ: We're opening franchises and converting existing stores to begin operating as a franchised chain this summer. Through the end of 2005 we'll be concentrating on the conversion of our member stores. The real growth will come in 2006. The public name of our stores will be Parable. Existing store names will combine with Parable. For example, The Bookery will initially become The Bookery, a Parable Christian store. Eventually the names will be reversed, so that Parable dominates, but the original store name will never go away.

AUTHORLINK: Is the Christian book market itself growing?

POTRATZ: The market has doubled, yet many independents are experiencing flat sales. The growth has come from mainstream outlets. I believe that this year we will start to see Christian independents turn around.

AUTHORLINK: Is Parable ready to compete with the mainstream stores?

POTRATZ: You bet we are! When the next big Christian bestseller hits, we'll be there, ready to make the sale.

 

—Doris Booth

 

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This post was written by Doris Booth