Copperfield’s Books operated six retail bookstores — four new and two used — in five locations in Sonoma and Napa counties in Northern California. Founded in 1981, it enjoyed thirteen unbroken years of growth, and owing to the absence of serious competition, came to dominate the bookselling market in its two county area. By 1995, Copperfield’s seven retail outlets posted sales approaching $9MM. Borders and Barnes & Noble then entered, Internet book retailing began its rapid rise, and literary reading rates declined nationwide. These developments curtailed Copperfield’s revenue growth, eroded its profit margins and market share, and led to closure of several stores.
After the death of a founder in 2002, Copperfield’s board promoted its Marketing Director, Tom Montan, to the position of CEO. He inherited a top-heavy organization in which 22% of the company’s payroll was attributable to the corporate office, an amount in excess of industry averages and by 2003, equal to 7% of annual revenues. Montan needed to curtail the erosion in revenues and profits, deal with a shortage of capital resources, and assess existing and prospective store locations. He began by cutting costs and adopted a goal of growing chain-wide sales from $8MM in 2003 to $15MM in 2007, hoping to spread corporate overhead expenses over a wider trading base.
The case opens as Montan debates whether to close an existing downtown Napa store and open a new Napa store in a shopping mall two miles away. He hopes to replicate the format and scale of his upscale Santa Rosa Montgomery Village location, yet Napa’s demographics differ from Santa Rosa’s. Other options include: entering new market territories, more rapid deployment of an Internet distribution center, or trying to capitalize on the fast-growing market segment for used and rare books.
What are the fundamental elements of Copperfield’s Books’ strategy? Which of the five generic strategies do you believe Copperfield is pursuing? How well is it working?