REINVENTION VIA MANDATE

‘The whole mandate was reinvention’

Inside the decisions that reshaped Ingram Content Group after the FTC ended the company’s sale to Barnes & Noble 22 years ago

n his recently published book, “The

I Family Business: How Ingram Transformed the World of Books,” local writer Keel Hunt sketches out the history and evolution of what is today Ingram Content Group, a holding company for publishing services ventures that employs more than 4,000 people around the world. In this excerpt from the book, Hunt details the aftermath of the company’s attempted sale to Barnes & Noble, which was torpedoed by the Federal Trade Commission in the spring of 1999. It was time to reset and reinvent parts of the business, especially when it came to equipping itself for the digital age.

Reflecting on the collapse of the B&N deal, John Ingram says: “My way of dealing with the disappointment was to figure out, ‘Okay, what do we do next?’ I am much happier and more settled when I have a North Star and I’m working hard to aim myself and the organization in that general direction. I think part of our success has been that I have a bit of an innate sense about that, and then I combine it with a strong organization to help filter through the stuff I come up with that is wrong or bad. I’ve told people that I think our success has been based on the fact that I’m an entrepreneur inside the organization and I have a sense about things — and I think I’m usually directionally correct about it. Of course, I’m not always right. But hopefully I’m right more often than not.”

At the start of the new millennium, Ingram had annual sales of over $1 billion and shipped 115 million product units a year. It was certainly not a business on the edge of collapse, or anything close to that. As John noted in one interview, “Ingram remains a strong company today with solid customer relationships and a loyal base of associates. For now, we plan to continue operating independently. We will continue to evaluate any opportunities that will help us better adapt to marketplace changes and strengthen services to our customers.”

All true. But Ingram still had some serious thinking to do about what its future should be in a rapidly changing book business. The shifts roiling the industry — including both consolidation at all levels of the publishing supply chain and the increasing efforts by companies to improve their own distribution capabilities and so reduce their reliance on Ingram — would require some fresh innovation from the company’s leaders.

By January 2000, following three decades of steady growth and penetration into new market segments, Ingram Book Group’s total employment stood at 4,450 across all its companies and divisions. This work force was mostly deployed in eight major facilities — seven distribution centers plus a returns center — across the North American continent. But with the broader industry in a sustained peri-

od of evolutionary change, Ingram was seeing its competitive landscape transformed.

The failure of the B&N-Ingram deal sent ripples throughout the industry. Several market competitors announced adjusted plans in its wake. Baker & Taylor announced its intentions to double its own warehouse capacity. Amazon, anticipating the threat posed by a B&N-Ingram combination, had already decided to build warehouse capacity in Reno. Leaders at the ABA announced they would launch an online bookstore, called Book Sense, later in the year. And Barnes & Noble itself announced it would build a new distribution center in Memphis, Tennessee, and another in Reno, Nevada. It expected to have the facilities, each totaling approximately 350,000 square feet, online by the next summer. The company also announced a 50 percent expansion of its existing one-million-square-foot-capacity warehouse in New Jersey. [Ingram Book CEO Mike] Lovett explains: “We had wanted to keep B&N out of the distribution business. But B&N then made the strategic decision to build its own distribution center network. B&N had always been able to buy books directly from publishers for slightly less than they paid Ingram. Once they had their own distribution network, they could schedule deliveries to stores according to their own needs, and otherwise come close to duplicating the services that Ingram had been providing. The result was a large direct hit to our sales.”

In response, Ingram executives began looking hard at the geographic deployment of its regional warehouses, their efficiencies and location, and how they were staffed. Their business would need to become more nimble, newly focused in its response to a changing landscape. The “new world order” of digital commerce plus changes in the physical book trade made necessary a new staffing and investment strategy. The notion of right-sizing now entered the company’s operating vocabulary.

Reporting to John, Lovett presided over these changes as CEO. Lovett remembers the Ingram Industries board meeting in June 1999: “The question on the table was, ‘What are you going to do now?’ John and I said, ‘We are going to reinvent the Book Group.’ We had too many distribution centers and too many people. As some strategy folks pointed out, it is very difficult to downsize a distribution business due to volume shortfalls, because cost-cutting involves closing distribution centers, which causes further volume losses and weakens the rest of the network. But we did in fact downsize and reorganize. And we made it work. I don’t think we ever lost money, but it was tight.”

Out of these discussions emerged a new topography for Ingram. What had been eight major Ingram facilities in 1997 became only four by 2004. In addition to three existing distribution centers — in La Vergne, Tennessee; Fort Wayne, Indiana; and Roseburg, Oregon — the new distribution topography included a brandnew distribution center in Chambersburg, Pennsylvania, which incorporated the operations of a nearby returns center. With 665,000 square feet of floor space, this new center had its grand opening on June 27, 2002.

Over the next decade, that 4,000-plus head count in 2000 would prove to have been a high-water mark for staffing across the Book Group. By 2010, employment across the Book Group would shrink as the company restructured itself in order to compete and remain profitable in this new environment. These adjustments were painful for many Ingram associates. The company provided severance assistance and also, in many cases, offers of new employment at other Ingram facilities across the United States, but of course such transfers were impractical for most of those whose jobs were eliminated. It would be another decade before Ingram’s total employment returned to its pre-2000 levels.

Lovett understood the human effects of these changes on Ingram associates and their families, even as he and John and the rest of the executive team knew that this reorganizing of facilities was essential to do.

“This exercise was not for the faint-hearted,” Lovett recalls. “As we began the terminations, I remember saying, ‘I hope we don’t have to get good at this.’ Later, I corrected myself. I ended up saying, ‘I’m glad we got really good at this.’ By which I mean that we found ways to treat everyone with as much dignity and respect as possible in difficult circumstances.”

As of mid-2020, the four-location array that emerged from the restructuring remains the heart of Ingram’s domestic infrastructure, together with the added capacity of a publisher distribution warehouse in Jackson, Tennessee, and extensive print-and-ship capacities at the four Lightning Source print-on-demand facilities.

Despite the reductions in staff and physical locations, Ingram’s business footprint would still be national and its delivery times to retailers would remain impressive. To remain the leader in customer service in the book industry supply chain, Ingram had to continue to provide the most titles, in the fastest manner possible, and at a price that made the most economic sense to a retail bookseller. The needed efficiency improvements were made possible by both acquisitions and technological innovations. All this would bring, in turn, new types of service and a transformation of the enterprise for a new century.

Jim Chandler would play an important role in the reinvention of Ingram. He’d grown up in southern California, where his father supervised the openings of Bank of America offices across the Golden State. After college, Jim Chandler’s early career was in book retailing — first with the Pickwick Bookshops in Encino, then with the B. Dalton chain (by then part of Len Riggio’s bookselling empire), later with the publisher Bantam Doubleday Dell, and then at HarperCollins. His first encounter with Ingram Book was during his stint at Pickwick, in the late 1970s, at an open house hosted by the Pasadena wholesaler Raymar after it was bought by Ingram in 1976.

Ingram remained a presence in Chandler’s career for years after that: “For me, Ingram was always about a culture of service, going all the way back to the Raymar merger. Ingram was a lifesaver for me as a retailer. They then became even more of a lifesaver when I was in Minneapolis with B. Dalton and we ran some fairly aggressive advertising campaigns to try to counter the impact of Crown Book’s discounting. Carol McIlwain, who ran Ingram’s telephone sales operation in La Vergne, pulled my butt out of the fire many times, making sure that we were in stock on all the advertised titles in the various markets we served.

“Then, in New York with Len Riggio, we did a lot with Ingram, in terms of making certain that we could use justin-time delivery to help counteract the impact of trying to reduce inventory holdings at a time that we were pretty heavily leveraged. That was another real lifesaver in terms of being able to manage a business with less inventory than we’ve had previously.”

In 1997, Chandler left HarperCollins and finally joined the company that had played such an outsized role in his career to that point. His initial assignment as part of the executive team at Ingram Book was to grow the international exporting business, which was doing about $30 million in annual sales at the time.

“I ran international full time for about six months,” Chandler recalls. “We’d set an audacious goal of tripling the business in three years, and we beat it.”

Chandler was then given a succession of larger assignments, including the dual role of president of Ingram Book and chief commercial officer. When the right-sizing of the distribution operations under Lovett was in full swing, Chandler became Lovett’s right-hand man. This was a challenging time for Ingram, with the bookstore chains beginning to shrink; with Borders as well as B&N building their own distribution systems; and with online retailers like Amazon looking for ways to eliminate intermediaries.

Chandler explains: “To get any of this shrinking business, you had to sharpen your pencils to the point of almost no profitability. We had to have a complete breadth of inventory, systems and service that were second to none, and distribution and transportation operations of extreme efficiency. But good customer service wasn’t enough. To be able to maintain our business, we needed to grow our international business, our library business, and any other areas that we could come up with. Lovett and I went through a tremendous exercise of simplifying the business, reducing the number of warehouses, enhancing transportation, and trying to grow the business anywhere we could. The whole mandate was reinvention — very solid, strategic reinvention of the business.”

The Ingram team understood that merely shrinking their employee head count and eliminating distribution centers wouldn’t be enough to ensure a solid future for the company. New areas of growth were essential. So Lovett, Chandler and the rest of the team pushed hard on inventing new ways of serving Ingram’s customers — both the booksellers who represented the downstream half of the book industry supply chain and the publishers who represented the upstream.

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D Content Group that the book business is dying. The holding company for various distribution and publishing services ventures and nearly 5,000 people in 2020 had the best year in its half-century history. Here, in lightly edited excerpts from a conversation with the Post’s Geert De Lombaerde, Ingram details some of the drivers of that performance as well as what lies ahead for the business.