When the Great Recession dealt another blow to an already struggling industry, Todd Karr, founder and Chief Enchantment Officer of The Miracle Factory, LLC, knew that he had to pull something spectacular out of his hat if he wanted to survive.

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In 1997, Karr began his small publishing business selling high-end coffee table books about magical history and the masters of illusion who make it. Karr found success wholesaling his $100-$200 artisan books to magic shops around the country and retailing to individuals all over the world. However, after the expansion of Internet-enabled online retailing, the magic industry, including The Miracle Factory, changed forever.

The beloved corner magic shops that had equipped the world’s tricksters for decades began closing their doors. Brick-and-mortar magic stores could not compete with the prices and selection of gigantic online retailers.

The Miracle Factory’s business depended on the shelves of these brick-and-mortar shops and saw its individual distribution orders drop from as high as 1,500 books to as low as 300 books. Even after The Miracle Factory joined the digital revolution, price-gouging among online retailers threatened to edge smaller competition out of business.

Jackie Matthews: When did you first feel the crunch of the recession?

Todd Karr: I felt the impact of the recession when it first hit in 2008. Because the core audience of my products buy them as luxury items, the orders from wealthier clients kept coming in; but the people who had to stretch to afford a $150 book stopped buying. My books were nonessentials—the first things to go when tightening a budget.

JM: How did you react to the drastic drop in book sales?

TK: The recession got my wheels spinning, spurred me to reinvent my business. I diversified into lower-cost products. I started making research CD collections that sold for $15-$30 and DVDs that ranged from $25 for a single disk to $100 for a three- or four-disk collection. The first CD I produced was Rusdusk and His Cardistry, about an early 20th-century magician who wrote this magazine The Cardiste that pioneered card magic. A little over two years later, I have 60-70 of these lower-cost items available.

JM: How did your customers receive the new company direction?

TK: It reenergized my business! I gained a whole new stream of clients for lower-priced items. Distributors also wanted the new line of products. Existing clients who could not afford my more expensive books were now buying from me again, and the clients who could afford the books were now buying my CDs and DVDs too as add-ons to larger orders.

JM: What do you think distinguishes companies and businesspeople who make it through the recession from those who do not?

TK: Smart people, people who are going to do well, are people who keep up with the times, people who innovate and keep up with technology. The recession prompted me to redo The Miracle Factory website and develop better promotions. The Miracle Factory has a Facebook page, Twitter account and VIP email list. I know guys out there who don’t have a website. Today, you have to continue to stay aware, stay educated and master the new ways of marketing. Through The Miracle Factory website, I’ve digitized magic literature, created an instant magic bookshop. It’s a completely electronic way of opening a retail shop that does not cost a cent.

JM: We are still in the midst of the recession with consumer spending remaining low. What are you working on now to stay ahead of the game?

TK: I’m waiting to see where downloading technology goes, whether PDFs become easier to read or everything has to be re-typeset into eBooks. People today want things instantly. They feel inconvenienced if they have to wait even two days to receive their products after they order them. I went to Bed, Bath & Beyond the other day and there were two different models of eBook readers on the counter as impulse buys. They are becoming a standard thing like pocket calculators. I’d be a fool not to jump on this.

JM: Do you see any distinct challenges for the future?

TK: Piracy—the mindset of “I can’t afford, but I want, so I’ll just steal.” I build so much artistry and care into the imagery of each product to make people want the original. And if I create downloads through a particular reader’s eBook software, then the software can protect it electronically.

JM: Do you have plans to expand?

TK: Before the recession, I had plans to wholesale to major bookstores around the country, but then they started losing business and shutting down. Now, I might revisit that idea but with my lower priced items at $9.95. Because I sell to a micro-niche market, I can sell a book for $150 that would go for only $50 in a major bookstore. For big bookstores, quantity is the way to go, not higher-end.

JM: Why not switch entirely over to digital media? Why keep making books?

TK: After the first few months of the recession, after that first drop in sales, a funny thing happened and sales increased. People were buying products they perceived as an investment. They liked the security of a tangible item. Also, people splurge to treat themselves, to make themselves feel better in tough times. People perceive my books as art objects to be put on display above cheaper magic books or hotter names or newer titles.

Reach Jackie Matthews here.