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ONWARD CHRISTIAN SHOPPERS

Christian merchandise a big seller in big boxes and small alike

BY GLEN A. BERES

Those who think Christian-themed retail is something that thrives only in Bible Belt strip centers, might want to think again. A growing demand for religious merchandise — from Bibles to CDs, apparel to videos — is not only driving the expansion of specialized Christian retailers, it’s also getting the attention of big-box U.S. retail chains.

This flourishing sector rang up an estimated $4.2 billion in sales in 2002, up from $4 billion in 2000 and $1 billion in 1980, according to a 2002 market study by CBA, a Colorado Springs, Colo.-based trade group formerly known as the Christian Booksellers Association. That breaks down to about $2.4 billion sold through Christian retail stores, $1.1 billion through general retail stores and $725 million sold direct to the consumer and through ministry sales channels.

Yet, despite the industry’s tremendous growth through the years, some analysts say it has barely scratched the surface. This business has fulfilled only about one-sixth of its sales potential, according to a study on the Christian market conducted by America’s Research Group, Charleston, S.C., in the fall of 2003.

With 320 units in 39 states, Family Christian Stores is the biggest player in the religious retail sector.

“I don’t know of any other industry that could double its sales overnight and still not be close to its potential,” said Britt Beemer, president of the group. Beemer cites the increasing quality of Christian products and their broadening appeal to a more general audience as important factors in the sector’s anticipated future growth.

One of the growth drivers so far is the aging of the baby boomers, according to the Ventura, Calif.-based Barna Research Group, which studies trends in the Christian market. Boomers are turning to spirituality and the church as they gray, the firm says.

In addition to Bibles and other religious books, Christian stores carry apparel, children’s merchandise, religious school curriculum items, gifts, greeting cards, music, software, videos and DVDs, and church supplies.

According to industry statistics, the typical Christian store shopper is between 30 and 49 years old, white, well educated and earns at least $40,000 a year. Nearly 80 percent are women. About half are Baptist or nondenominational, and over half of them attend organized Christian events four to 10 times per month. More than 75 percent shop at a Christian store at least once a quarter, and 59 percent spend between $51 and $250 per year on these products.

“These types of stores are great tenants to have,” said David Baker, a principal at Baker Storey McDonald Properties, a Nashville, Tenn.-based retail real estate brokerage firm. Baker Storey offers development/redevelopment, leasing, property management and related services to Dillard’s, Harris Teeter, The Home Depot and other clients in specialty centers and enclosed malls in the central Southern states.

“Christian stores offer a wide range of product, draw a regional rather than local customer base and are typically destination retailers that generate traffic that benefits their co-tenants as well,” Baker said.

In 2003 Baker Storey built a $1.7 million, 8,050-square-foot building for LifeWay Christian Resources, the Nashville-based publishing arm of the Southern Baptist Convention. LifeWay leases the property, an outparcel of the East Chase lifestyle center, a 500,000-square-foot development anchored by Target and other major retailers.

Christian store retailers typically look for higher-income, regional traffic areas, Baker says. They are generally situated in “power strip centers” (so-called because they have a big-box retail anchor such as a Circuit City, Home Depot or Target) located near regional malls.

With 120 stores in 22 states, LifeWay Christian Stores is the second-largest U.S. Christian chain.

The sector consists mainly of two big national players, several important buying/marketing groups, an untold number of both large and small regional chains and thousands of independent operators.

Family Christian Stores is the largest retailer in the market by far. The Grand Rapids, Mich.-based chain has 320 stores inside strip centers in 39 states and sells a wide range of merchandise. Family Christian, which posts about $300 million in annual sales, has averaged double-digit revenue growth over the past five years, driven by same-store sales and acquisitions.

Family Christian has grown mostly through new store openings, though it has also made a number of important acquisitions, including the purchase of the 56-store, Fort Worth, Texas-based Joshua’s Christian Stores chain in 1998. Family Christian spokeswoman Tara Powers says the company has slowed its store expansion over the past two years because of the poor economy, focusing instead on relocating stores or closing unproductive ones. (It went from a high of about 350 stores to its present total.) The company is ready to resume expansion now, she adds, though how many units it will open in 2004 has yet to be determined.

“Over the last few months, we’ve opened two stores in Cincinnati and now have seven [there],” Powers said. “We are back in expansion mode and will open new stores this year.”

Most Family Christian stores are in the Bible Belt region of the South and Midwest, as might be expected — the chain is particularly strong in Atlanta, Dallas and Orlando, Fla. But Seattle and California are important markets too. And despite the retailer’s weak presence in the Northeast, that is a region that holds significant growth potential, Powers says.

The second-largest Christian retailer is LifeWay Christian Stores, a Nashville, Tenn.-based division of LifeWay Christian Resources. This retailer sells a variety of Christian-themed products inside its 120 stores in 22 states. LifeWay is particularly strong in Texas (where it has 23 stores), Georgia (13), North Carolina (13) and Tennessee (12).

In addition to operating retail stores, LifeWay Christian Resources also runs two of the largest Christian conference facilities in the United States. In 2002 LifeWay Christian Resources had sales in excess of $400 million. Store growth has averaged about 10 to 15 percent yearly. Though the private company would not discuss specifics of its expansion plan, Eric Glover, vice president of business operations, did say the company is in a “growth mode.” He also says that over the next 10 years, LifeWay Christian Resources plans to expand geographically to the entire continental United States and truly become a national retailer.

“There are concentrations of evangelical Christians all over the country, not just in the Bible Belt,” Glover said. “Our long-term goal is to expand to areas where people need biblical products and solutions, and we will consider any location that fits our parameters.”

Other important players, according to industry observers, include:

• The Munce Marketing Group, an Indian Rocks Beach, Fla.-based group of 700-plus independent Christian retailers.

• The Parable Group, San Luis Obispo, Calif. This marketing group is made up of more than 330 independent retailers.

• Lemstone Christian Stores, Wheaton, Ill., a franchise of some 65 stores in 20 states.

• Berean Christian Stores, Cincinnati, which has 19 stores in eight states.

• Mardel Christian & Educational Supply, Oklahoma City, a chain of 19 stores in six states.

• The Covenant Group, based in Spartanburg, S.C., a group of 17 chains with nearly 70 storefronts.

So which products are selling best? According to CBA’s 2002 random sampling of 240 independent Christian retailers, books other than Bibles generated 35.4 percent of sales. Bibles accounted for the next-largest sales slice, at 21.2 percent, followed by gifts (19.2 percent), music (15.2 percent) and apparel/other (9.1 percent). This increasing product diversity is one reason the group opted in 1996 to drop the Christian Booksellers Association name in favor of the acronym. CBA serves 2,431 member retail stores and 673 associate member publishers, record companies and other product suppliers, as well as auxiliary and member chapters in 32 countries. Of CBA’s retail members, 57 percent are independent and 26 percent are chain stores, says Nancy Guthrie, a CBA market analyst.

The broadening appeal of its merchandise has become something of a double-edged sword for the Christian retail industry. While it helps increase overall sales and visibility, it also takes away market share from traditional Christian retailers. Such big-box general retailers as Kmart, Target, Wal-Mart and others have muscled their way in by adding such items as Bibles, religious books, Christian-related videos and CDs, and religious jewelry to their inventory. General market retailers now account for about one-fourth of all Christian product sales, CBA estimates.

General retailers sold more Christian and gospel records than Christian retailers through the first three quarters of 2003, accounting for 58 percent of all Christian music sales, according to industry figures. During this period, general retailers saw Christian music sales decline by just under 6 percent as the economy struggled. Christian retailers, though, got hit harder; their music sales dropped by 15 percent for the period — a clear indication of their shrinking market share.

To compensate and remain competitive, some Christian retailers have resorted to strategies that would have been unthinkable only a few years ago. Family Christian, for instance, decided last August to open its doors on Sunday afternoons, following morning religious services. The move was first instituted in the chain’s stores in the Dallas area; in the fall the company extended those hours to between 12 and 5 p.m. on Sundays in all its stores nationwide.

According to Family Christian, the move was made to accommodate the fact that most households today have both parents working, so they need time to shop on the weekend. Rather than cede those shoppers to general retail stores on Sundays, the company has opted to fight back with Sunday hours.

“This was a decision that we took very seriously,” said President and CEO Dave Brown in a letter to customers on the company’s Web site. “And after prayer, study and counsel from other Christian leaders, we felt it was important for Family Christian Stores to be serving our guests on Sunday for limited hours. The abbreviated Sunday hours reflect our desire to support morning worship time for our employees and guests, while still meeting the resource needs of the community.”

LifeWay Christian Resources has no plans to open on Sunday.

Family Christian says shoppers have been overwhelmingly supportive of the move to Sunday hours; overall sales have increased, the company says, though it will not quantify that increase.

In any case, Sunday shopping hours underscore another reality about Christian retail: It is now part of the retail mainstream.

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