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A stalwart of Canadian book retailing for more than two decades, Indigo Books & Music Inc. is in a state of upheaval unlike anything the company has seen before, causing worry in the publishing industry.

In just three months, Indigo IDG-T has seen an exodus of much of the senior leadership team. Since early June, its founder, chief executive officer and president have all left the company, while nearly half the board has been replaced after four directors resigned. One of the departing board members, Dr. Chika Stacy Oriuwa, said she had experienced “mistreatment” at Indigo and had lost confidence in the board’s leadership.

Just a year ago, Heather Reisman – the founder and face of the company – cemented her succession plan, appointing then-Indigo president Peter Ruis as the new CEO, and declaring in a statement that by becoming executive chair of the board, she would continue “to drive Indigo’s vision and growth strategy while also remaining deeply involved in the business.”

Now, neither Ms. Reisman nor Mr. Ruis remain at Indigo, though Ms. Reisman’s husband, private-equity pioneer Gerry Schwartz, remains on the board as the company’s controlling shareholder. Indigo’s president, Andrea Limbardi, has also left, taking a new job as CEO of Reitmans (Canada) Ltd.

Until a new Indigo CEO can be found, the company’s chief financial officer and general counsel are now running the business day-to-day.

The changes follow years of red ink. Indigo has lost money in four of its past five fiscal years, including a nearly $50-million loss in 2023 that it attributed partly to a debilitating cyberattack last February. Its stock price has fallen from more than $14 per share five years ago, to less than the price of a cup of coffee at one of its in-store cafes. Recently, a company controlled by Mr. Schwartz – Trilogy Retail Holdings Inc. – extended a $45-million line of credit to Indigo.

While it has been years since the company focused on books alone, with pricey skin creams, pillows and candles now lining its shelves, Indigo continues to hold a significant share of the book market in Canada – even amid Amazon’s seemingly unassailable dominance. And the recent turmoil has left Canada’s book-publishing industry wondering what Indigo’s future will look like, and what it means for them.

“The concern is enormous,” said Ken Whyte, founder of Toronto-based non-fiction book publisher Sutherland House. “It comes up in the first five minutes of every conversation I have with anyone in any part of the publishing industry.”

In a statement to the Globe and Mail this week, Indigo spokesperson Melissa Perri said the board of directors is “laser focused” on its search for a new CEO, and that the company is “committed to being a force that supports and reflects Canadian culture.”

Most publishing executives interviewed for this story said they had faith in Indigo’s support for domestic imprints, and cited strong relationships with its buyers. But Indigo’s sheer market power and marketing heft mean that continued instability could have deep consequences for Canadian literature.

Don Gorman, the publisher of Rocky Mountain Books and national sales representative for imprints including Greystone Books and TouchWood Editions, said the recent upheaval at Indigo is a reminder that the sector is structured “like a Jenga tower. If one block is pulled, Canadian publishers and Canadian authors, in particular, will definitely suffer.”

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It is difficult to establish how much of the book market in Canada is controlled by Indigo. Industry association BookNet Canada does not disclose company-specific information. And the picture is further muddied by Indigo’s largest competitor: a 2022 Heritage Canada report said that data on online book sales “is notoriously incomplete, in part because Amazon does not report its Canadian sales in any detail.”

Still, there are hints of Indigo’s dominance in Canada, beyond just the sheer reach of its 170 stores nationwide.

Because of its sheer size, much of the country’s distribution infrastructure is built around it. “The Indigo situation is a big worry, even for the independents, because the supply chain could become unsustainable if Indigo exits,” said Michael Neill, owner of Mosaic Books in Kelowna, B.C. and the developer of software for independent book stores. Anecdotally, he said his understanding is that independents account for just 15 per cent of major publishers’ revenue.

Last February’s cyberattack made the industry’s dependence on Indigo crystal clear. As the attack disrupted Indigo’s ordering system, sales plummeted for numerous imprints, especially for new books whose promotion cycles depend on Indigo’s in-store visibility.

“Some momentum was inevitably lost on several campaigns,” said Iris Tupholme, the senior vice-president and executive publisher of HarperCollins Canada. She cited Jessica Johns’s Bad Cree and Monica Heisey’s Really Good, Actually as two domestic books that lost momentum. “It was difficult – very difficult.”

The cyberattack led to a “very dark month, let me tell you,” said Susanne Alexander, the publisher of Fredericton’s Goose Lane Editions. “Orders essentially dried up.” Goose Lane scrambled to expand its own online presence and to work more closely with independent stores to compensate for the sales drop.

While many people buy books on Amazon, publishers say other channels are often much more important for browsing and discovery. Along with the growing influence of social media such as Instagram and TikTok (or BookTok, as the app’s reading-related content is known,) Indigo remains a powerful marketing engine. Whether stores are hosting an author event, giving a prominent display to a new release, or bequeathing a coveted “Heather’s Pick” designation, many titles depend heavily on Indigo’s profile to draw in readers.

Windsor, Ont.-based literary press Biblioasis worked so closely with Indigo on the 2019 release of Mark Bourrie’s Bush Runner, that it took input on the cover design from one of its buyers, said founder Dan Wells. While Biblioasis usually has a higher share of sales from independents than from the chain, that was an example of Indigo’s influence.

“We did a lot of promotional work, but Indigo getting behind it the way they did helped make it,” Mr. Wells said.

Examples like that are why this issue matters to publishers, Mr. Whyte said. “Because if Indigo isn’t around to do that, nobody else is.”

Indigo spokesperson Ms. Perri wrote in a statement that the company’s support for authors and publishers is “unwavering.”

“Our Board has also reiterated its strong commitment to seeing Indigo re-emerge as a strong force in Canadian culture and business and will have more to share when the CEO search concludes,” Ms. Perri wrote.

Still, readers have been forging closer relationships with small Canadian publishers and local bookstores in recent years, Ms. Alexander said. During the pandemic, subscribers to Goose Lane’s regular newsletter surged from the hundreds to the thousands.

“In some ways we are seeing a stronger group of independent retailers as a direct result of COVID,” Ms. Alexander said.

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Rewind to early 2001, and Indigo was not the force it now is. Chapters Inc. had dozens of superstores across the country, and 200 small-format stores under brands such as Coles, SmithBooks and The Book Company. At the time, by contrast, Heather Reisman’s fledgling chain had just 15 stores. But in February of that year, the two companies merged to become the country’s largest book retailer.

That scale came partly from consolidation. Chapters CEO Larry Stevenson had acquired smaller chains, pressing for Competition Bureau approval partly by arguing that Canada needed a strong retailer, should a U.S. colossus such as Borders or Barnes & Noble decide to look north.

Of course, a much bigger threat loomed over the 49th parallel. As Amazon moved into Canada, Ms. Reisman saw the need to diversify. Over the years, Indigo began selling more and more general merchandise – everything from baby furniture to cookware, toys and fashion accessories.

“Those who are dedicated to bookselling at Indigo are enthusiastic about it. They just don’t have anywhere near the floorspace that they used to, and they’re not buying in the volumes that they used to,” Mr. Whyte said. “They’re becoming a diminishing presence.”

There are examples in the industry of things moving in the other direction: after leading a turnaround at British chain Waterstones, seasoned book retailer James Daunt took over as CEO of Barnes & Noble in 2019, and set about narrowing its focus away from non-book-related merchandise. He also gave store staff more power over book orders, allowing them to respond to local demand. Sales are up, and the chain is opening additional locations.

“The hope, of course, is that is what will happen with Indigo,” Mr. Wells of Biblioasis said. “ … There are a lot of excellent people there that care deeply about books in all the right ways. And I think if they were actually allowed to do what they do best, Indigo would be in a much better position.”

With reports from Joe Castaldo