Why I think Deseret Book chose to cut off Seagull

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My thoughts on "why?"

A little over two weeks ago when I first learned (from multiple sources) that Deseret Book had announced to their employees that they were severing their relationship with Seagull Book & Tape I had mixed thoughts & feelings on the issue. Briefly some of my thoughts were:

I expected that the news would reach the media rather quickly (it can be seen as a sort of David vs. Goliath story; big bad corporate Deseret Book versus the peoples' Seagull). Frankly I'm surprised that it took fifteen days before the Salt Lake Tribune "broke" the story in the local media. I guess my humble readership doesn't extend very far. :-)

I worked for Deseret Book from 1998-2005 and built their online store (the L&F of which has since been redesigned), auctions, ticket, wholesale extranet and Nauvoo Temple Cam sites.

I got to do more than just create websites. I built the infrastructure to implement and integrate Deseret Book's Rewards Club loyalty program. When Time Out for Women began I was able to build a mobile point-of-sale system (from the ground up) that was portable, efficient, easy for volunteers to learn, and fast. I was also extensively involved with surveys and other market research (working with Cathy Chamberlain who came to Deseret Book from Wirthlin Worldwide).

For most of that time I thought I was going to be one that dying breed of people who spend their entire career (largely) with the same company. After the Internet Department was merged with the Information Systems Department, and after a series of turn over in managers, and being passed over repeatedly for promotion, I came to the conclusion that I'd reached the limit of my growth potential at Deseret Book and would need to look outside the company. It wasn't an easy decision to make, and I would consider going back if the right opportunity ever presented itself.

Que saudades.

During the years I was at Deseret Book I think it is fair to say that the retail division always viewed Seagull as a thorn in their side. When Ron Millett was CEO each major division basically did whatever they wanted. Everyone tended to live and work in their own silo (be it wholesale, retail or publishing) and the left hand often didn't know what the right hand was doing. Wholesale never cared how retail would be impacted or vice-versa.

One of Sheri Dew's many accomplishments as CEO (from my viewpoint) was her ability to increase inter-company communication (both from the top down & bottom up to between divisions) and to take a more wholistic global view of what the company is doing and needs to do.

The book industry is a tough business to be in these days. You are selling a low-priced comodity where customers are price sensitive and people are reading less and less than in the past. Many small "mom & pop" LDS bookstores have closed in the past few years. The advent of Amazon.com and deep discounting by national retailers has conditioned people to never pay full price for a book.

Seagull has always been Deseret Book retails nemesis. For years—at least the late '80s through the mid to late 90's—DB Retail held their noses in contempt ("we're a premeire full service bookstore! people will like our stores better!") and discounted (pun intended ;-) the threat that Seagull poised.

Collectively Deseret Book largely ignored Seagull until Seagull had grown to the point that they had taken away a major chunk of market share and had created the perception in the marketplace that Deseret Book was expensive and that they (Seagull) were affordable.

Deseret Book's price matching was instituted in an effort to stem the bleeding and to try and regain the trust that had been lost in the marketplace. Not all customers responded well—in surveys many said that they didn't like having to do the homework ahead of time to be able to know what price match to ask for. (Might as well go to Seagull since they perceived that they'd always be getting a low price there.)

Deseret Book responded to this feedback with a page out of Seagulls playbook. The revised campaign promised that Deseret Book would do the price matching homework upfront so you'd never even have to ask for it. You'd always get the lowest price—except that it would be logistically impossible to always be 100% up-to-date on the rock bottom lowest price of any book being sold in any brick & mortar store or online. And so sometimes someone would find a lower price and DB retail would honor it. And people are generally reasonable and understanding that its impossible to monitor an entire industry completely.

Really, what the "we'll do the price matching for you" had to do was match Seagull's prices. Seagull was perceived as being cheaper. Seagull mailed out regular catalogs that people would see and bring in. If Seagull's prices weren't matched the general public would view the marketing campaign as a fraud. When Deseret Book matched Seagull's discounts Seagull would often discount a little bit more deeply to stay ahead.

Naturally you'd expect this marketing campaign to increase gross sales, but if you are matching your deep-discounting competition's prices out of the chute on everything you both publish it shouldn't come as a surprise when your net margins go (way) down.

After some internal debate it was decided that there would be two different sets of retail prices, one for "competitive stores" and the other for "non-competitive stores." (I'm not joking about the "competitive" versus "non-competitive" labels. I imagine that is still how Deseret Book referrs to them internally to this day.)

The criteria for determining which stores were competitive and which weren't was fairly simple: the deciding factor was almostly exclusively whether or not there was a Seagull Book & Tape in the region.

In my opinion Deseret Book's decision was undoubtedly motivated by discounting, though I don't expect them (for legal reasons) to come out and say that. Seagull is who they have to price match. You can afford to give up 8%-10% of your wholesale business (which is what DB management told their employees on June 27th that Seagull represented) if you can reign in your discounts on the retail side (scaling back from 40%+ discounts to a mere 10%-20% will give a big boost to the bottom line). In this analysis the decision could make financial sense even if you generously assumed that no one who ever bought Deseret Book products at Seagull would switch to shopping Deseret Book.

Deseret Book does still sell some titles to Walmart who will discount them deeply, but Walmart doesn't buy anywhere near their full product line, sticking mostly to the A-titles, titles Deseret Book can expect enough volume on to be able to afford to discount deeper anyway.

I think for Deseret Book's viability as an ongoing concern, after years of losses, this was a smart business move. I'm actually impressed that they thought it through, (hopefully!) ran the numbers, and made what I'm sure was a very tough decision. That shows leadership, forward thinking, and an overall unified strategy that hasn't always been there in the past.

On the other hand I think this may be a death warrant for Seagull and it is sad to see competition being run out of the market, especially when Seagull's offense is essentially offering people lower prices. I tend to think that, in the LDS bookselling industry, Deseret Book does have a monopoly. But I imagine a court would construe the market much more broadly if Seagull were to bring an anti-trust lawsuit. (I agree with the comments on Kent Larsen's the Motley Vision blog.)

Deseret Book can't collude with Seagull to fix their prices, so instead we get silly pronouncements by DB executives to the press implying that this is all a big to-do over Seagull's lack of appreciation for Deseret Book's marketing materials. Of course that is genuinely an irritation that DB marketing has with Seagull, but that hardly seems to be a sufficient reason on its own to divorce yourself from a tenth of your entire wholesale business.

While I don't think Seagull will be able to reconcile with Deseret Book in the short term, perhaps they can take heart in knowing that Deseret Book reversed its decision not to sell to Walmart after a year or two when they realized they needed the money.

One route for Seagull to survive would be to find another company that already has a wholesale relationship with Deseret Book that would be willing to act as a middle man. Obviously a middle man is going to have to add their own overhead into the price (meaning Seagull wouldn't be able to afford such deep discounts), but then Seagull would retain access to the 50% of the products on their shelves that they are poised to lose, Deseret Book would have the wholesale business, some middle man could pocket some change, and only the customer would lose out—though perhaps not in the long run (in a sense) if it keeps both Deseret Book and Covenant in the publishing business.

Neither Deseret Book nor Seagull Book & Tape have been willing to stock Mormon's Book yet, so perhaps my loyalty should lie stictly with the various independents who do carry it. :-)

—Michael A. Cleverly

Comments

Andrei Bolkonsky: [ mail | www | link ]

Thanks! This blog post was refreshingly even-handed and level-headed in comparison to the parade of nincompoops on the KSL.com message board.

Thu, 13 Jul 2006, 23:49

Kent Larsen: [ mail | www | link ]
Michael, your analysis is clearheaded and very persuasive. And the information that Seagull's purchases are 8-10% of DB's publishing sales is a great confirmation of what I had estimated.

I do have one small correction: A Motley Vision is NOT my blog (you referred to Kent Larsen's blog), it is a group blog in which I am one of six participants.

I should also point out that Seagull may be able to get a portion of Deseret Book's product by purchasing from the national market (either Deseret Book's distributor or the two national wholesalers, Ingram and Baker & Taylor). For books purchased this way they will get close to the same discount.

Unfortunately, Deseret Book only sells nationally those products it considers to be not specifically LDS titles. Those that are meant mainly for the LDS audience (books by General Authorities, for instance) aren't available this way.

You are right that Seagull needs someone to basically act as a wholesaler for these books. I think the LDS market as a whole would be better off with such a wholesaler, and I posted about the need for a wholesaler a few weeks ago!

Again, thanks for the informative and clear-headed post. I hope this gets resolved sooner, rather than in a few years.

Fri, 14 Jul 2006, 07:28

Matt: [ mail | www | link ]

I should post some comment, but my thoughts are not gelling properly. I agree with Kent, but for different reasons.

Fri, 14 Jul 2006, 08:36

Michael A. Cleverly: [ mail | www | link ]
Kent, how precinct you were with your post on the need for a true wholesaler ! I agree wholeheartedly. I've updated my post to correct the reference to A Motley Vision (thanks for the clarification).

Fri, 14 Jul 2006, 08:59

MC's Daddy: [ mail | www | link ]

It seems sad to me after reading your impressions on the events taking place in your former employment that you have not yet learned wisdom. The problem for you was never intelligence. At least not directly. Your intelligence gave you many admirable abilities. You could slap something together to accomplish a complex task like DTPOS in a matter of hours. You could manage projects and network massive amounts of information yet what did it all accomplish in the end. It turns out that in the end, professionals with more ‘wisdom’ than you had to be brought in to remove your work and replace it with something that was manageable, robust and scalable. You yourself were incapable of accomplishing this task and so you left. No doubt you are proud of your work at Deseretbook. It probably pains you to know that that work is being remove from Deseretbook’s systems as fast as humanly possible and at great expense. It will soon be purged like a cancer, forever remembered in derision. If you could ever see past your arrogance, you might one day make a fine IT Professional. To this day, you remain a hacker.

Fri, 14 Jul 2006, 15:02

MC Fan: [ mail | www | link ]

I can probably pretty well guess who "MC's Daddy" is, and all I can say is he is a first class jackass.

After a year and a half 95% of Michael's stuff is still running strong. The 5% that was replaced was bought from an outside company at incredible expense for less functionality. That's the way an "IT Professional" does things I guess.

Fri, 14 Jul 2006, 15:18

MC Fan #2: [ mail | www | link ]

As another individual who was present to witness much of what Michael wrought at DeseretBook it was done when NO budget was given to any such projects and the infrastructure the entire company revolved around was a homegrown hack of it's own. Many of Michael's projects were sought after by upper management due to the fact he could provide resolution to issues in short amounts of time.

Michael and others on the web team spent countless hours and resources working to ensure that the projects we worked on provided the company with a strong return on investment, which most of the "IT Professionals" couldn't come close to matching because they were far too focused on being able to point and click their way through life.

Fri, 14 Jul 2006, 15:23

Andrew: [ mail | www | link ]

I find the contradiction that "accomplish[ing] a complex task" = "accomplish[ing] nothing" hilarious.

This type of "wisdom" serves only to reaffirm my estimation of self-proclaimed IT Professionals--most of whom can accomplish nothing without constant vendor hand-holding, while wasting countless department and company resources.

Just say no!

Fri, 14 Jul 2006, 15:44

MC Hammer?: [ mail | www | link ]

Andrew, I think you will be fixing your computer with a hammer from now on if your IT "Professionals" read this blog!

Good luck! :)

Fri, 14 Jul 2006, 15:56

Michael A. Cleverly: [ mail | www | link ]

The "MC's Daddy" and "MC Hammer" comments above were both posted from 64.147.152.13, which is the primary IP address for Deseret Book's corporate offices.

I would appreciate it if everyone (but especially Deseret Book employees posting comments from Deseret Book while on the clock at Deseret Book) would show the common courtesy of using their real names.

Incidentally I am flattered to be called a hacker .

Fri, 14 Jul 2006, 16:03

Ben: [ mail | www | link ]

I wonder what Deseret Book would think of those comments from their employees done on company time.

I'm sure Julie's nice new web filter could tell her exactly who the idiot was.

Fri, 14 Jul 2006, 16:18

MC Hammer?: [ mail | www | link ]

That wasn't a threat. My apologies to Andrew if it was taken that way. Just trying to bring some humor into the situation.

I'll fix Andrew's computer anytime he wants. I'll even provide the hammer! (insert smile, knee slap, or maybe a little guffaw) ;)

IT "Noob" (because you can always learn something new!)

Fri, 14 Jul 2006, 16:22

Ben: [ mail | www | link ]

Michael, I agree with most of your comments in this story. I have no love for Seagull, but it's easy to take their side in this kind of David vs. Goliath match, especially since DB aka Gospelsaurus Rex likes to throw their weight around in the LDS book market.

As a believer in the free market, I defend DB's decision to sell to whoever they want at whatever price they want. However, as an LDS book consumer I see it as a further wound to the already struggling market. Its been quite a while since I dropped a bunch of money at a Deseret Book store like I did before the DB/Bookcraft merger. I see the past consolidation and current competition-breaker as just hurting LDS consumers overall.

(aside)

I do find it extremely funny that the only responses to this blog from DB employees come in the form of "little man" attacks on Michael's past work. If this is the kind of people making up Deseret Book's IT department I have great pity on the company.

Fri, 14 Jul 2006, 16:42

Dennis: [ mail | www | link ]

Very interesting thoughts expressed here. As far as I am concerned, there is no question that DB is using the marketing cooperation problems as a cover up to deny Seagull access to a large enough percentage of inventory to slowly squeeze them out of business and eliminate the competition eventually.

On the other hand, I have little sympathy for Seagull, since they are already doing exactly the same thing to other smaller publishers that DB publishing is doing to them--not ordering from Publishers they don't like or want in the business. Eborn Books is a good example. Someone should call Seagull's corporate office and ask them why they don't buy new titles from Eborn Books, and they will start to sound like Deseret Book sounds. Such hypocrisy is disgusting. If Seagull goes down, it will be because a bigger bully pulled their own strategy on themselves.

Sun, 16 Jul 2006, 18:00

Alan: [ mail | www | link ]

Michael, I enjoyed reading your thoughts. I actually think you did a good job or looking at both sides of the issue. I found some of the DB employee comments confusing. I am not sure why they, the unnamed DB employee(s), felt the need to attack you. I thought you came off sounding Pro DB for the most part. I wonder what is next, threatening phone calls from DB HQ to you or your family?

I am not a DB fan but also have no loyalty to Seagull (although I will pick Seagull to shop at if I have to). I agree that DB has the right to do whatever they want with their product. As much as it may seem heavy handed of DB, like many of their other actions towards other LDS booksellers, they are in business to make money. I think most people just expect more from DB because the LDS church owns them.

Tue, 18 Jul 2006, 13:44

Abe: [ mail | www | link ]

Wow. You've got to be kidding me--this is what all the fuss is about?

Everyone's talking about how the Deseret Book bigwigs are in an uproar over this blog posting, and how it was full of confidential priveleged information, and how the ensuing comments were packed with flame wars between defenders who actually worked with Michael directly and self-conscious what's-his-name in IT who could never quite figure out how to use Michael's code...

And this is it?

How anti-climactic.

What is everyone so worked up about? I thought Michael's comments were pretty fair, and don't seem to contain anything that anyone who was paying attention didn't already know.

Seriously--good for DB for finally getting off the fence, and deciding that they are a competitive business, and not just a money-hemorrhaging altruistic friend to everyone.

And good for Seagull to try to do what they can to fight it, and try to get the whole story out.

If Deseret Book would just admit that they made a smart business decision (and if their IT department could possibly reign in some of their sillier employees), this would all blow over.

Nice blog Michael. Everyone else go back to work.

Wed, 19 Jul 2006, 01:04

Lin Richardson: [ mail | www | link ]

Michael: pHr34k1n6 |-|il4r10u5 d00D!

But seriously, nothing is more dangerous than a wounded animal... and from where I sit, DB should be sufficiently embarrassed... or perhaps just a bit tender in the ego. And this chiefly through the incapacity of thought (and/or wisdom) evinced by their employees.

Sounds like and HR problem to me... d00D.

Wed, 19 Jul 2006, 22:15

Random Guy: Leonard: [ mail | www | link ]

In case you were wondering, this thread is still being passed around. Nicely done!

Unfortunately, the bad taste is still circulating with it. It's guys like the MC that give Utah citizens and church jobs a really bad name and why the church has to advertise Salt Lake IT positions up here in Oregon instead of among the locals. Seems the locals, like Michael have learned better. Congrats on spreading the wings Michael. I haven't read the rest of your blog, but hopefully you've landed in a best-practices company that handles server infrastructure, network infrastructure, project management, database administration, development, QA, and support in different departments by specialists in their field. A place where representatives from each team work together, on a core project team to accomplish a goal. A place where growth can happen in a synergistic environment. A place where replacing the old is viewed as progress and continued innovation rather than an insult to previous versions. (Note for MC, a DOS machine in todays world is almost useless. Windows NT and 9x are dead technologies with scalability and reliability in the crapper. Don't see anyone faulting Bill Gates for implementing any of those though do ya? They were the best there was when they were released.)

Life gets a lot more fun, a lot more relaxed, a lot more productive and the workplace seems like a breath of fresh air once you find that kind of quality growth environment. Best wishes for your continued success.

Tue, 30 Oct 2007, 01:14

Adam: [ mail | www | link ]

interesting post.

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