By Jane Nethercote|
Aug 09, 2007 12:00AM |EMAIL|PRINT
Cough up or you’re dumped.
Book publishers and distributors choked on their cafe lattes when they were issued the ultimatum recently by Australia’s largest book chain, Angus & Robertson, which is owned by private equity group Pacific Equity Partners.
Crikey has got its hands on a copy of the original letter sent from ARW Group Commercial Manager Charles Rimmer to Tower Books — and the scathing response from Tower Books’ director Michael Rakusin. The correspondence (see below) is a good read.
Rimmer told some book companies that, in order for A&R to achieve “a minimum earnings ratio of income to trade purchases”, any distributors whose book lines were falling below the necessary profitability mark could either pay the difference or say goodbye.
In the same missive, A&R supplied a handy invoice to show sub-profit publishers the exact price of admission; amounts were said to range between $2,500 and $20,000, reports The SMH .
It was the first that these publishers had heard of the new arrangement. “We would have been willing to negotiate with Angus & Robertson but we weren’t given that invitation,” says Rakusin. Instead we got a “like it or leave it letter”.
Other publishers on the receiving end include Thames & Hudson and Walker Books, which produces children’s books like Where’s Wally? and Guess How Much I Love You.
Hardly esoteric titles without mainstream appeal so it’s interesting that A&R chose to alienate book publishers with this blanket approach rather than simply homing in on their unprofitable titles.
The indignation and concern at the move has been unprecedented, says Andrew Wilkins, publisher the Weekly Book Newsletter and Bookseller+Publisher magazine. ”We have never received a response like this to any other issue in recent times. It’s been extraordinary.”
As a result of the heavy-handedness, several publishers and distributors are planning to refuse to make the payment, according to WPN. “Others are considering their options, with a number seeking legal advice.” The ACCC has been mentioned. The Australian Society of Authors is calling for a boycott.
One thing is clear: the range inside A&R will get smaller. Customers wanting titles like Tower’s Rich Dad, Poor Dad will need to order them in.
But will distributors comply with A&R’s one-off requests? Of course, says Rakusin. “We have as much duty to our authors as to the bottom line.” However, they would probably need to purchase such books on “terms favourable to us”.
A&R has responded to publishers’ ire with a statement that the move was designed to “ensure best value for consumers”.
The book chain has been struggling for years to find a model that really works for them. Perhaps supermarketification will be the right way to go despite the limitations of the approach: consumers wanting cheese can choose another brand at the supermarket but readers wanting Harry Potter won’t be sated by a generic wizard fantasy.
In the end, customers will decide whether a reduced range at reduced prices is their book bag.
We contacted Angus & Robertson for their further response today but didn’t hear back before deadline.
Here’s Rimmer’s letter to Tower Books. (Click on the pic for a larger PDF version of click here ):
On 6 August, Rakusin responded:
Dear Mr Rimmer
We are in receipt of your letter of 30 July 2007 terminating our further supply to Angus & Robertson. As you have requested, we will cancel all Angus & Robertson Company orders on 17 August and will desist from any further supply to your stores.
I have to say that my initial response on reading your letter as to how you propose to “manage” your business in the future was one of voluble hilarity, I literally burst out laughing aloud. My second response was to note the unmitigated arrogance of your communication, I could not actually believe I was reading an official letter from Angus & Robertson on an Angus & Robertson letterhead.
My reply to you will perforce be a lengthy one. I hope you will take the trouble to read it, you may learn something. Then again, when I look at the level of real response we have had from Angus & Robertson over the past six or so years, I somehow doubt it.
The first thing I would say to you is that arrogance of the kind penned by you in your letter of 30 July is an unenviable trait in any officer of any company, no matter how important that individual thinks himself or his company, no matter how dominant that company may be in its market sector. Business has a strange habit of moving in cycles: today’s villain may be tomorrow’s hero. It is quite possible to part from a business relationship in a pleasant way leaving the door open for future engagement. Sadly, in this case, you have slammed and bolted it.
More to the point, however, we have watched our business with Angus & Robertson dwindle year upon year since 2000. We had to wear the cost of sub-economic ordering from you through ownership changes, SAP installation, new management, and stock overhang. In summary our business with you has dropped from over $1.2 million at the end of 2000 to less than $600,000 in 2007.
You would be quite correct to question whether our offering to the market had changed in any way. The answer can be derived from the fact that during the same period our business with Dymocks, Book City, QBD and Borders continued to grow in double digits, our business with your own franchise stores has grown healthily, and our overall business during the same period has grown by more than 50%.
Six years ago we were allowed to send reps to your company stores and do stock checks. Then these were “uninvited” and we had to rely on monthly rep calls to your Buying Office. Subsequently even that was too much trouble; your Buying Office was too busy to see us, so we were asked to make new title submissions electronically. Every few months the new submission template became more and more complex. This year, we have been allowed quarterly visits to your Buying Office at which we were to be given the opportunity to sell to all your Category Managers. At the first, we did indeed see all of the Category Managers – but they didn’t buy any of the titles offered. At the second, one Category manager was available, and again no purchases resulted. At the last (only last week), two Category managers attended. Through all of this, your overworked and under resourced Buying Department never got to see, let alone read, an actual book. While one may be forgiven for believing that Angus & Robertson is actually a company purveying “Sale” signs, I do believe you are still in the book business?
That Angus & Robertson is struggling for margin does not surprise me. It amazes me that the message has not become clear to your “management”: there are only so many costs you can cut, there is only so much destiny you can put in the hands of a computer system, there are only so many sweetheart deals you can do with large suppliers. After that, in order to prosper one actually has to know one’s product and have an appropriately staffed buying department. Most importantly, one has to train sales people of competence. You will never beat the DDSs at their cost cutting game, you will only prosper by putting “books” back into Angus & Robertson. And it would seem to me paramount to stop blaming suppliers for your misfortunes, trying ever harder to squeeze them to death, and actually focus on your core incompetencies in order to redress them.
How a business that calls itself a book business is going to do without titles such as the Miles Franklin Prize winning book or titles like Rich Dad Poor Dad (according to this week’s Sydney Morning Herald it is still the fifth best selling business title in Australia nine years after publication) is beyond me. And how in good conscience Australia’s self-purported largest chain of book shops proposes to exclude emerging Australian writers who are represented by the smaller distributors, is an equal mystery.
We too have expectations Mr Rimmer. We have had the same expectations for many years, none of which Angus & Robertson have been willing to deliver:
That we are treated with equal respect to the larger publishers within the obvious parameters of commercial reality;
That your Buying Department is able and willing to assess our books with equal seriousness to those of the big publishers and buy them appropriately;
That you recognise the fundamental differences between the smaller distributors and the larger publishers and stop demanding of us terms that we are unable to deliver;
That you would support and help develop Australian literature.
Had you made any effort to meet these expectations you would have found the niche we should have occupied in your business, as have all other book shops, and you would have found our contribution to the profitability of your business would have been dramatically different.
In summary, we reject out of hand this notion that somehow, even giving you 45% discount on a Sale or Return basis, with free freight to each of your individual stores, where we make less than half of that on the same book, puts us in the “category of unacceptable profitability”. We have seen Angus & Robertson try this tactic before – about 12 years ago Angus & Robertson decided that unless we gave them a 50% discount, they would not buy from us any longer. We refused. Angus & Robertson desisted from buying from us for seven months. We survived, Angus & Robertson came back cap in hand.
We have seen Myer effectively eliminate smaller suppliers. We survived and prospered but look at the Myer Book Departments today.
We have seen David Jones decide that it had too many publishers to deal with and to exclude the smaller suppliers. We survived and prospered but look at the David Jones Book Departments today.
David Jones and Myer sell other goods; Angus & Robertson does not.
That the contents of your letter of 30 July are both immoral and unethical, I have no doubt. That they probably contravene the Trade Practices Act, I shall leave to the ACCC to determine. (Five percent interest PER DAY !!!)
If you wish to discuss any of the contents hereof you may call my secretary for an appointment at my office in Frenchs Forest. I shall be marginally more generous than you and at least allow you to pick a convenient time.