Chapters - History

History

Chapters Inc. was created in 1994 when founder and CEO, Lawrence Stevenson led the buyout and merger of Coles and SmithBooks, Canada's two largest book chains at the time. SmithBooks was acquired from Federal Industries and Coles was acquired from Southam Inc. Canadian General Capital and Pathfinder Capital bought these two chains with the intention of building large-format book superstores comparable to those of the American bookstore chains Barnes and Noble and Borders.

The new company was officially created in April 1995 and the first two book superstores were opened in November 1995. The original superstores were located in Burlington, Ontario and Burnaby, British Columbia.

Chapters quickly changed the face of the book selling industry in Canada. Previously, companies like Coles and Smithbooks had many small stores. Chapters built large box stores with a much larger product selection. Chapters provided chairs and couches for their customers, as well as Starbucks coffee shops, and did not discourage the reading of books inside the store. The company became the largest book retailer in Canada, with 77 superstores branded as Chapters and more than 280 mall-based stores under the names Coles, SmithBooks (formerly the Canadian branch of W H Smith), Classic Bookshops, the Book Company, and Active Minds. However, the SmithBooks, the Book Company, and Classic Bookshops names have been gradually phased and locations have been rebranded as Coles stores in recent years. Canada's first book superstore, Toronto's World's Biggest Bookstore, once part of the Coles chain, was also owned by Chapters and had continued to operate under its original name.

Chapters grew very quickly. It was criticized, however, for several reasons. It was blamed for the demise of several independent bookstores across Canada, especially alternative stores carrying obscure or controversial titles. Although it was said that Chapters also built its business around moving massive numbers of a few bestsellers, the majority of its sales came from backlist titles. As the company's market share grew it represented the lion's share of many publisher's sales.

Chapters did not keep the box book store market to itself, however, with the opening of Indigo. Headed by Heather Reisman, Indigo began to compete with Chapters in select markets and opened 14 stores. Chapters aggressively expanded into online bookselling with chapters.ca to compete with Amazon and also was a majority investor in Pegasus, a book wholesaler. Pegasus was needed to be able to serve the online sales but the business was resisted by Canadian publishers and was not successful. In the autumn of 2000 Indigo launched a hostile takeover. Indigo was able to convince the Competition Bureau that Indigo was not a viable standalone business given the enormous losses that it was sustaining and thus had to be able to merge with the profitable Chapters retail chain. By early 2001, Indigo had been successful in purchasing Chapters, but kept both the Chapters and Indigo brands; subsequently a number of Chapters stores near Indigo locations were closed. In some cases Coles and SmithBooks stores were shut down if they were too close to a Chapters site.

Although there are still some aesthetic differences between the store designs of the Chapters and Indigo banners, they now share many common elements. Moreover, aside from Indigo's larger focus on music, product selection and special offers are not generally distinguishable from one to the other. Indigo has adopted the Starbucks cafes that were in Chapters stores and has reduced the seating areas in Chapters stores and introduced a very wide range of non-book products which had been carried at Indigo