Marketing, February 26, 2001
Gerry Schwartz does something special: He makes damaged or downright doomed companies look so attractive that some larger entity just has to buy them.
This didn’t happen with Celestica, the chunk of IBM that Big Blue spun off. Schwartz bought it, and now the thing just keeps making money.
But it happened with Canadian Airlines, and it happened with Chapters. As soon as Schwartz expressed any kind of interest in either company, some other corporate entity just had to thwart him, or try. That kind of transferable cachet, a kind of Midas touch, is something marketers ought to figure out. If there were some way to harness the envious acquisitive frenzy Schwartz’s mere interest in a property arouses on an individual consumer level, stuff would practically sell itself.
Actually, there is a name for that. It’s alchemy — turning lead into gold.
Take Canadian Airlines. You might think Canadian’s shareholders would have been eager to see Schwartz buy the company, that they would have taken his interest as a sign of hope in a dark time: an opportunity for the gimped hulk to soar, instead of flapping pitifully along on a wing, a prayer and several banks’ worth of hyperextended credit.
But all Schwartz’s interest did was arouse Air Canada from its slumber long enough for it to lean on the federal government to look the other way while it bought its competition.
Everybody knew this country couldn’t support two real airlines. Laker and Wardair proved that. Greyhound was the punchline to an old joke about air travel — “an airplane is a bus with wings” — that started as a bad idea and became a bizarre mix of the medieval and the Soviet. (“We’ll get you from Toronto to Vancouver in 24 hours...or your next trip is free.”)
Thanks to the Air Canada-Canadian debacle, we don’t even have one airline. We have a lumbering monument to inefficiency, stupid corporate arrogance and bad, almost criminally mendacious advertising; Air Canada’s 180-day commitment was the best campaign Via Rail ever had.
At least this time, it seems, shareholders won’t make the same mistake twice. Canadian Airlines may have been unsustainable in its pre-purchase incarnation, but at least it didn’t bend the spine of the entire civil aviation industry in Canada before it was swallowed.
Chapters managed to drive numerous perfectly good bookstores out of business (Britnell’s and Lichtman’s in Toronto, Duthie’s in Vancouver). It also acted as a kind of black hole for publishers and authors; if Chapters was unlikely to order a book, its chances of getting published evaporated. The company’s Pegasus distribution unit is its own special nightmare — an M.C. Escher-like optical illusion into which books get shipped, aren’t paid for, and from which they get returned to publishers without ever having been in a retail outlet.
Chapters Online is even stranger: an e-business where every dollar of sales costs $1.12 to produce. Who — even in the daffiest depths of e-tailing e-diocy of 1999 — could have looked at that model and thought it made sense? Larry Stevenson, apparently, the same guy who was trying to persuade Chapters shareholders that a big-box appliance retailer (Future Shop) made a better prospective owner than a book retailer.
The Chapters board kept warning shareholders about “risk” and “uncertainty” and all kinds of other bad stuff about the Trilogy bid. Each dire warning from Chapters reminded me that people in the publishing business never moaned and bitched about Indigo the way they did about Chapters. And I never heard consumers talk about buying books at Indigo as being a baffling ordeal the way they said it was at Chapters.
In a brutal twist on Robert Fulghum’s saccharine bromides of a few years back, it seems all you need to know to make a name for yourself as a corporate titan you learned in kindergarten — being a selfish, greedy brat in a sandbox. No toy is worth a second look until one of your little playmates grabs it.
There are probably about eight different, worthwhile and immediately applicable pointers in that weird saga that would improve corporate management and marketing techniques. But if they’re collected into a book, you’d better hope Chapters is out of business, or you’ll never be able to buy it.