Canadian Dollar Continues Slide

David C. Cook Canada Increases Conversion Factor to 20%

The Canadian dollar closed Friday just shy of 90-cent territory, closing at .9111 to the U.S. dollar.

David C. Cook has increased many prices to a 20% conversion rate, though the change is not across the board. At 5:30 PM on Friday, The Action Bible had jumped from 28.99 to 31.99; while Francis Chan’s Multiply and Forgotten God, with a U.S. list price of $14.99, were now pegged at $17.99. However, Chan’s Crazy Love, which also has a $14.99 US MSRP was only $15.99 as of 5:30 PM on Cook’s B2B website. Broadman & Holman titles were also converting at the same rate with The Love Dare an example at the same price point.

For months Cook’s conversion rate had been an attractive feature for stores. With a U.S. dollar costing 1.0976 at Friday’s close, the disparity between that and Cook’s 20% conversion is significant. Canada is considered an extension of the U.S. market for royalty purposes, you can blame literary agents (lawyers in disguise) for that. Historically, Christian publishers did not put U.S. prices on the books themselves until about a decade ago. That change caused customers to be more aware of the pricing differences, and basically drove Canadian customers in the Christian market in droves to buy books from Christian Book Distributors (CBD), Amazon, or a number of denominational niche online vendors.

While a more expensive U.S. dollar does have the potential to bring some online customers back to Canadian brick-and-mortar retailers, a 20% difference has the opposite effect, and drives other customers — and some retailers — to make their purchases in the U.S.

With most bookstores reeling from depressed 4th quarter results and a poor showing in December, the Canadian price hike simply couldn’t come at a worse time. Stores looking to survive in the long-term need to exercise extreme caution in buying; the days of “stack ’em high” mass-quantity displays are over. If the dollar continues on its present trajectory and Canadian distributors can’t or won’t get subsidized pricing from their U.S. partners, the days of free-standing, brick-and-mortar Christian bookstore in Canada are numbered.

Family Christian Bookstore: An Unmatched Selection in the Greater Toronto Area

If a customer can’t find it at the Christian bookstore in Burlington, they haven’t looked.  Family Christian Bookstore serves an immediate market that includes many of Ontario’s largest cities: Burlington, Hamilton, Oakville and Mississauga, just to name a few, with other customers commuting in from greater distances to shop the selection.

As a fellow-store owner, it’s hard not to be green with envy. I think their music area alone is almost the size of my entire store, and when you walk in the front door, you’re struck by the generous amount of space set aside just to make you feel relaxed and welcome.

Jack Huisman didn’t know we were coming, but even though it wasn’t our first visit, he took time out of a most busy day to provide a “behind the scenes” tour of the store’s receiving and sorting areas, as well as the storage area they use for giftware and giftware boxes.

The store is just off the Queen Elizabeth Way, just east of where that highway takes a turn to wrap around the western end of Lake Ontario; a curve that earns the broader region the name, The Golden Horseshoe. With 5,200 sq. feet of selling space on the main floor, plus a discount section, a used book area, and a wall decor gallery downstairs, the store offers a great selection in all departments, but especially in their carefully curated book sections.

The picture below is of the plaque wall of the downstairs gallery, there’s also a print wall with larger pieces. I realized later we didn’t get a picture of the new book fixtures upstairs, that were secured from Upper Room Books when it closed, and feature a very clean, very logical lettering that lets customers know exactly what they’re looking at.

In addition to running the store, Jack heads up the production of marketing pieces for The Barnabas Group, a collection of stores which pool resources to produce a catalogue containing elements from the Cook and Foundation catalogues, the best on offer from Augsburg-Fortress Canada and HarperCollins, along with some unique products as well.  (We’ve done a previous story on this buying group here.)

If you happen to be a consumer reading this, the store is located at 750 Guelph Line (on the west side, opposite the Burlington Mall). It’s worth a visit, and an inspiration to those of us in Christian retail in other places.

The Peril of Commercial Leases

As a Christian, I believe I am called to follow the highest moral ethical standard. This extends to all areas of my business.

I live in a world where others do not believe as I. Still, I believe our faith compels us to “do justice and to love mercy” and that extends to supporting those who — even if they don’t know Jesus — share a high standard of ethics, and to, if necessary, take a stand against those who do not.

My landlord does not share my view of what is “right” ethically or morally.  He subscribes to the rather dominant view in our world that one should get all they can, regardless of who they have to step on to get there. This view has brought him all of the creature comforts you can imagine. I was reminded of this recently when he parked his Jaguar sideways across three parking spaces in front of the building. Life is good.

His lease includes the clause that is standard in most commercial leases — because no one ever thinks this through or speaks out — that leaves the tenant responsible for all building repairs, including the potentially-expensive heating, ventilation and air-condition (HVAC) system.  In our case, the potential expense is huge because this particular system is no longer manufactured. We found this out two days after taking possession.  Our electrician gave us an estimate of $5,000.  Last week, another electrician gave us a $4,500 estimate. Still too much for us to bear.

Which of you, if you knew about it, would allow someone in your church to rent a residential apartment that included such a clause? Imagine poor Mrs. Smith being forced to pay for new windows for her one-bedroom unit on the fourth floor.  Maybe in Mexico.  Or some third world country. Yet this is so common in commercial leases. There are no tenant rights. All’s fair when renting commercial space.

So suppose you have a tenant who incurs such a liability? And then, six months later their business ceases. (Possibly because of the huge un-budgeted expense.) They walk away leaving the landlord with a $5,000 leasehold improvement and a huge smirk on his face.

And yet, this is the way the system works.

Not for this gray duck.

We’re walking out and shutting down our business.  We have no other option. This week I suggested to a church staff member, “What if a number of local churches pledged to create a ‘war chest’ for us so that we could continue to operate knowing that we would not be brought down by such an expense?”

He just laughed at me. With two exceptions, the local churches in our community really don’t give a damn.

My lawyer told me that most independent business people — many of which are mom and pop operations — sign leases like this because they don’t truly understand how the various clauses of the lease could affect them and their business directly. He took me through another lease — which he described as “the most one-sided commercial document I have ever seen” — and basically said “If this happens…” naming a set of very plausible circumstances; “then this is what your responsibilities are.”

Mind you, this particular document isn’t oblique on this point; the responsibility isn’t masked by legalese. We buy him a new furnace system and he sits in his comfortable office allowing us to do so without a tinge of conscience.

Nor is the 11.3% increase he wants to bring in. And that’s just for the base rent. Everything else is billed separately and over the past five years, those expensive have only gone in one direction. We make out 20 cheques to this man annually, not 12. The base rent is basically his ‘return on investment’ and he has decided to increase his dividends at a time when everyone else is reeling from a tight economy.

He says the reason for this is that the building is “worth more” because it faces the main street. Did he just notice that it faces the main street? The unit, the former CFMX-FM studio, has been facing the main street for at least thirty years. And the rent — his $8 per square foot, plus all the extra expenses — brings the total rent closer to $12 per square foot.

I know of people in U.S. bookstores who are paying $4 and $5 per square foot. No wonder you can’t do business in Canada. No wonder the downtown areas of so many of our cities and towns sit empty. You actually can get blood from a stone; landlords in Canada do it on a daily basis.

Capitalism is based on exploitation. The landlord owns the building. In our town there actually aren’t a number of downtown stores sitting empty, so if we leave, he can easily find another sucker, despite the current economy.

The Amazon model — the company that is equally complicit in putting the local bookshop out of business — is based on warehouse space pricing.  That’s considerably cheaper than the type of real-estate we’re consuming in a strip plaza, and as little as a third of the costs being paid in indoor malls.

I would love to be a building owner. If I had a tenants, there are certain things — the distinct billing of key expenses for example, not the HVAC clauses — that I would probably do the same as he. I would love to be in the position that very, very few are in our industry: The position of owning their own building.

But I’m not a wealthy real-estate tycoon. I chose a different path for my life and it has not at all been remunerative. I am compelled to, as the scriptures say, “bless those who despitefully use you.”  It’s not my first reaction.

In our letter to our staff, suppliers, and local pastors, I concluded this way:

Our continued sixteen years have been an example of God’s provision.   Do you ever wonder what it might have been like to see those five loaves and two fish multiply?  We’ve seen that happen.   But now our resources and our resolve have been stretched to new levels and in the absence of someone to buy out the store, we don’t foresee maintaining the status quo as an option…  

It’s perhaps unfair that the burden of operating a ministry that affects an entire county should rest on the shoulders of one individual family, but we’ve accepted that challenge now for sixteen years, and I trust God has found us faithful.  Some people reach the end of life and regret that they didn’t do more for the Kingdom.  While my life isn’t perfect and I do, in fact, have lots of regrets, at least on this score, I can say with assurance that I gave everything.