To work with books in Brazil, where reading habits are somewhat limited, is a risky business. To offer physical books at a time when e-books seemed to be gaining ground in the publishing market was a bold decision. To rely on delivery logistics for the entire national territory, in a country of continental dimensions such as Brazil, based on a minimal setup operating within a university library, verged on madness.
TAG Experiências Literárias (or TAG Literary Experiences) decided to bet on three things simultaneously and, six years after it emerged as a books startup, it is approaching annual revenues of BRL 40 million. International expansion is on its plans, albeit in a preliminary study phase, to be made possible in a 2-year horizon – possibly starting in other Latin American countries.
This week, the company is also launching a new product. In an interview with LABS, TAG’s co-founder and CMO Arthur Dambros said the platform will start offering a business and self-improvement book-subscription service. “It is a new startup within the company, from a project that was already incubated with us,” he says. Initially, the new club is going to be presented only to current subscribers. In the first week of August, it will be extended to the general public.
TAG was founded in July 2014, in the southern Brazilian city of Porto Alegre, when business school classmates Gustavo Lembert and Tomás Susin, together with Dambros, decided to update the idea of Círculo do Livro (Book Circle). A partnership between publishing houses Editora Abril and Bertelsmann, Círculo do Livro became popular in Brazil in the 1970s and 1980s by selling books in a monthly-subscription model. Together, the three founding partners invested BRL 10,000 to set up the website, buy books and shipping boxes for the first 65 members of their club.
Six months later, the operation had barely reached more than 100 subscribers. Were Brazilians really so averse to books? Retratos da Leitura, a broad survey on reading habits in Brazil, whose most recent edition is from 2016, indicates that 50% of Brazilians never bought a book and 44% do not usually read. The average number of literature books “willingly read” by each person in a year is very low: 1.26.
TAG saw social media as an opportunity to reach Brazilian readers
But TAG saw opportunity in another shared characteristic among Brazilians: their engagement on the internet, particularly their social media usage, one of the highest in the world. When the firm decided to focus on digital marketing to reach its readers, it found its ace in the hole. With the little money it had, TAG invested in promotional content on Facebook and Instagram. It also partnered up with online influencers and booktubers, as youtubers who discuss literary works are known, and ended 2015 with 1,500 subscribers – a nearly 15-fold jump.
TAG’s growth was achieved through pure bootstrapping, as it did not raise money from external investors, and only reinvested its own capital. Dambros estimates that, at the beginning of the operation, he and the other partners – who currently include Álvaro Englert and Pablo Valdez – invested a total amount of BRL 90,000 before the business broke even.
Today, the firm sends books to 55,000 subscribers in 2,629 Brazilian cities from all states, and employs 110 workers. In 2019, TAG grew 38% and reached revenues of BRL 36 million. Since March, the membership base has grown by almost 15%. Shelter-in-place measures required by the pandemic boosted the value of delivery convenience, e-commerce and leisure activities at home, such as reading. TAG benefited from all three aspects.
The pandemic also brought uncertainties to TAG
On the other hand, Covid-19 brought along the economic crisis and cuts in inessential spending by consumers. TAG saw its subscription churn increase, particularly in the first weeks. “We had to close our physical store for a month, and deliveries were affected,” says Dambros. The rate of successful and on-time deliveries dropped from 97% to 94%. “Three percent seems a small decrease, but it represents more than 1,500 customers.”
The company also assembles books and operates a logistical and storage warehouse, activities that are currently run in São Paulo, so quarantines also reduced productivity in the first two months of the pandemic. “Uncertain of whether our kits were going to reach subscribers, we asked publishers to release ebooks, so that our customers could read the digital content before their boxes arrived. And we decided to keep the ebook subscription option after the pandemic”, explains the CMO.
Despite having a physical book as its core product, TAG considers it sells a service through experience. “We are compared to Netflix, but we have a publishing plant, a warehouse and an assembly line”, he quips.
The firm’s products include an app and different types of subscription
Much of the customer experience is digital, especially on the Cabeceira app, which registers almost 200,000 downloads. Through it, readers can discuss books and talk about literature with other members, as well as set goals, calculate and monitor the pace of their reading, and discover new titles.
TAG currently offers two types of subscription. The first one is TAG Curadoria (Curatorship) (BRL 55.90 plus a delivery fee per month), in which a renowned author or personality from the world of letters is invited to select the book of the month. Since its inception, writers such as Peruvian Nobel prize-winner Mario Vargas Llosa, Nigerian author Chimamanda Ngozi Adichie, and Brazilian best-selling authors Luis Fernando Veríssimo and Martha Medeiros, have already acted as TAG’s curators.
Recent kits included The Third Life of Grange Copeland (1970), by American writer Alice Walker, picked by Jarid Arraes; A Good Man Is Hard to Find and Other Stories (1955), by U.S. Southern-gothic author Flannery O’Connor, chosen by Martha Batalha; and Nigerian Chinua Achebe‘s masterpiece Things Fall Apart (1958), selected by Alberto Mussa.
TAG Inéditos (Unpublished) (BRL 45.90 plus a delivery fee per month) is the other model, in which the company selects successful books on the international market, translates them first-hand, usually concentrating on contemporary titles, best sellers, thrillers and so-called “page-turners”. In 2020, the club already sent The Brightest Sun, by Adrienne Benson; and Born a Crime, by South African comedian Trevor Noah, host of The Daily Show, a U.S. news-satire program.
TAG’s origins are in Curadoria, but Inéditos, which appeared in 2018, already represents 53% of total subscribers. The business book club will be the third subscription option.
Every TAG subscriber – or “taggers” – receives a monthly box with a surprise book, a magazine, a bookmark and a “literary treat”. Members of Curadoria receive an exclusive hardcover book edition and more background about each literary title.
TAG’s international expansion has been studied for two years now
In 2018, TAG was the recipient of The Quantum Innovation Award at the London Book Fair, and since then expansion plans to other countries have entered its radar. Dambros explains that these are medium to long-term sketches, still outside the company’s immediate strategy, but that they are advancing through probing possible local partners. The firm seeks markets similar to Brazil, in which the cost of digital media is not so high and in which access to bookstores is small – “probably Latin America”.
“In Europe and the United States, digital channels for acquiring customers are much more expensive. The ratio between this cost and a subscriber’s lifetime value may make it not worth it”, he explains. “We’d like to go to a country where readers dynamics and our business model propositions are similar and may work.”
Causes that TAG defends – such as the value of reading, the importance of libraries and a sense of community among customers – are central to its business model. According to Dambros, the club is not just a group of people who happen to receive the same product at home. “We understand the book as a door to an exercise of otherness, to a reflection on the world and to access diversity,” he says. “We offer a space for dialogue, openness and welcoming, books and reading are a justification and basis for that. There lies our strength.”