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Value Investors: Could This Stock Be the Amazon of Canada?

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Indigo Books & Music (TSX:IDG) is Canada’s largest book, gift, and specialty toy retailer, with store locations in all 10 provinces and online sales through the company’s website and mobile applications. The company is a leading gift destination with an extensive selection of books, paper, toys, baby, and lifestyle products. The company’s digital platforms feature an extension of the in-store shopping experience, with an expanded selection of book titles and general merchandise.

Digital platforms business potential

Indigo’s digital platforms provide customers with a seamless shopping experience. These platforms are an extension of the in-store shopping experience with an expanded selection of book titles, eBooks, and a broad assortment of paper, baby, and lifestyle products. These digital platforms provide a rich user experience and promote customer loyalty and repeat purchases with an engaging experience that encourages customers to return frequently.

Further, the company’s digital platforms offer a wide range of shipping options along with easy returns. The company’s mobile application also offers a number of time-saving and stress-reducing features, such as managing wish lists, scanning any product in store for online purchase, and shipping to the customer’s home or to a gift recipient.

In 2020, the online channel represented approximately 17% of the company’s revenue. However, the company experienced a significant acceleration of online sales fueled by retail stores closures and government stay-at-home orders in response to the COVID-19 pandemic. The company‘s online channel continues to experience significant growth in comparison to the prior year.

Popular loyalty programs

Indigo’s loyalty program allows members to earn and redeem points online and in-store, seamlessly. This program engages members through mass promotions and targeted one-to-one promotional offers, as well as invitations to exclusive events and member-only shopping experiences. The program offers an members immediate discount on eligible products, free shipping and the ability to earn points on almost every dollar spent at the company’s Canadian stores and website.

Loyalty programs are important in generating significant customer commitment and value. In addition, the programs enable the company to better understand Indigo’s customers. The company monitors and evolve the program constructs and communications to ensure the programs meet business objectives.

Diverse product categories

Indigo currently has an active list of approximately 200,000 book titles purchased from more than 25 major publishers. In addition, the company offers over 12 million titles through Indigo’s digital platforms. The company is also committed to becoming the premier year-round gifting destination in Canada with a curated assortment of home, baby, toys, and electronics products.

Optimization strategies

Indigo employs inventory management strategies to analyze sales data to maintain adequate inventory levels, make inventory adjustments, and maximize full-price sales through the company’s retail and digital channels. The company is a leading destination for developmental and technology toys and baby books.

The company’s design and global sourcing team develops proprietary merchandise exclusively for Indigo. Products developed by the design and global sourcing team are designed to improve the breadth and quality of products offered by the company.

Indigo is following a path to profitability similar to There could be massive upside ahead for this stock.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Nikhil Kumar has no position in any of the stocks mentioned. David Gardner owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon.

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