Perhaps at no other time have booksellers felt a need for a sense of belonging than at this threshold of a new millennium, where store closing announcements are as common as paperbacks in a drugstore, and competition is as thick as agents at a promising author's debut. In the Christian bookstore industry, where chains and marketing groups grab most of the headlines, Lemstone Inc., a 58-store franchise operation in 26 states, historically known for its mall-driven gift sales, is quietly reinventing itself in a way that may breathe new life into its book sales.

The headquarters for Lemstone sits just outside Chicago on the outskirts of Wheaton, Ill., one of Christian publishing's "holy cities" (Tyndale House, Crossway and Christianity Today are just a few companies located here). The 21-year-old privately held corporation, which is theonly Christian retail franchise group in the United States, opened with a company store and two franchises in 1982. It's unabashedly mission-minded, as storeowners share "a burning desire to reach others for Christ in the marketplace," according to franchise materials. It's a profitable marketplace: according to CBA, the nationwide market for evangelical products now exceeds $3 billion annually, and is growing.

Location, Location, Location

Although Lemstone stores had a challenging 2001, with sales down 1% overall and 5% same-store, it was a good year for its books. Book sales increased to 24%, making this the best performing category for the past 18 months, v-p of operations (and son-in-law of cofounder and president Jim Lemon) Rusty Bland told PW. Key in Lemstone's reinvention strategy is moving its franchises from their mall settings to strip malls and growth corridor locations, which should continue to boost book sales. "In the strip mall locations we have now, books are a higher percentage of sales," Bland said, adding that he expects half the Lemstone Christian Stores to be in strip malls in five years.

Lemstone traditionally found success in malls during the '90s because of its emphasis on gifts, which accounted for 35% of its sales. But in the past several years, gift sales softened and mall overhead skyrocketed, Bland said. Malls as strong locations peaked in the late '80s and early '90s for Lemstone and, "although we continued to see strong sales growth through the mid-'90s, we also saw costs in the malls increase dramatically too," Bland said. "In hindsight, we should have started our move away from malls in the late '90s."

In the new locations, Lemstone Christian Stores will carry a broader selection of books, and "the broader the selection, the higher the book sales," Bland said. Although gifts are still Lemstone's overall largest category percentage-wise, "gifts tend to be something people cut out of their purchases when things are tight, and books are a steady growth scenario," Bland said. He also noted that in strip mall locations, a destination-oriented shopping pattern dominates, and books are more destination-oriented product types. Bland said shopping has been dramatically shifting out of the malls and to the Wal-Mart and Target strip mall centers in the past two years, and "for our future, this will be great, but at the moment it has a negative impact on our sales."

Steve Pickering is one of the mall store franchisees who is contemplating making the move because of high occupancy costs. In the Cedar Rapids, Iowa, store he opened in 1989, he carries about 3,000 titles in 1,400 sq. ft., and did $653,000 in 2001, 30% of which was book sales. Other stores, like Lemstone's second largest franchise in affluent Carmel, Ind., are already in a strip center but will expand floor space. Owner Joni Blickendorf, who opened the Carmel location in 1993, had sales of $905,000 out of 2,000 sq. ft. in 2001 and plans to move two storefronts over this summer and expand to 3,500 sq. ft. Forty-five percent of her sales are in books (3,500 titles); book sales were up 27% in 2001. She plans to increase her book selection in the new space, because in Carmel's highly educated community, "if someone hears about a good book, they come in and buy 10 copies to give their friends," Blickendorf said.

A Store by Any Other Name...

Ironically, the reinvention plan that relocates stores and improves book performance will also take "Books" out of the Lemstone name. Company strategy calls for Lemstone Books to change to Lemstone Christian Stores, which increases stores' presence as religion retailers. "A customer in her car doing 50 mph requires a clear message of who you are," said Bland. He admitted there is the potential for scaring away non-Christian customers, but he was quick to note, "the loss of other potential customers, because they don't know who you are, is too compelling to not make the change."

Not all existing stores embrace the name conversion. Some, such as Blickendorf, told PW that if they add Christian Stores to their signage, they will scare away potential customers, and she's choosing to go with Lemstone after her expansion to keep her presence more neutral in her community.

The name change is already in place with new stores, who are required to use it. Franchise owner Vic Sneed, who opened his strip-mall-located Lemstone Christian Store in November in Stanford Ranch, an upscale Rocklin, Calif., community, said it would be "ludicrous" for him to use the old name Lemstone Books with Borders and Barnes & Noble just minutes away. "We wanted to market ourselves from the very beginning as a Christian store," Sneed said. In the short time the 2,000-sq.-ft. franchise he operates with his wife, Jan, has been open, books account for 25% of sales and Bibles for 15%. They anticipate doing $400,000 their first year.

Future Strategy

At the moment, Lemstone seems to be treading water, growth-wise. Lemstone closed four stores and opened four in 2001. However, Bland said he is optimistic about this year for the corporation, because "in higher unemployment markets, franchising thrives." Lemstone's list of prospects interested in opening a franchise store has tripled since September 11, Bland said, and the company is receiving about 130 inquiries and three applications each month. He noted that Lemstone has cut its advertising budget geared toward potential franchisees in half by moving all of this advertising to the Internet.

Although Lemstone is focused on new store openings, Bland said the company is also exploring conversion franchising, although it's still working out the kinks (i.e., will stores have to change their names?). Bland noted, "In some cases, an annual or five-year service contract might be preferred." In the independent-dominated CBA market, "We like to say people want to own their own business, but they don't want to be on their own," said v-p and cofounder Phil Darr. Lemstone franchise owners tend to be white, married couples in their mid-40s, are typically evangelical and mission-minded (want to share their beliefs with the general public through their business) and come from a variety of careers. Investment is usually $210,000—$287,000, and stores range in size from 1,600—3,000 sq. ft. Franchise owners receive assistance with everything—market analysis, operational help, promotion and advertising materials and strategies, employee training and negotiating lease terms. Owners make their own purchasing decisions, although Lemstone offers optional frontlist buying from major publishers. Lemstone also has regional seminars and an annual convention every August in Chicago.

Lemstone seems to have found a niche in book retailing that works, and its reinvention that drives new book sales will likely be watched with interest by CBA publishing houses. Meanwhile, store owners seem content. "We could never have done it without Lemstone's help," said Sneed. And Pickering added, "There's an obvious success that franchising affords. They make the mistakes once so I don't have to make them again."