The internet ate our homework
Borders, Angus & Robertson were already struggling
Part 2 What went wrong with Borders? The story so far is that a mouse is eating an elephant.
According to my own back-of-the-envelope calculations as well as a more serious report from Frost & Sullivan, online shopping accounts for about five per cent of the Australian consumer’s retail dollar.
That’s enough to cause private equity firm REDgroup to put its bookstore chains, Angus & Robertson and the Australian Borders brand (dumped by Borders US some years ago, but eerily synchronized with Borders’ Chapter 11 back in America) into “voluntary administration” (the Australian equivalent of Chapter 11).
At this point, neither have stopped trading, with administrators Ferrier Hodgson hoping to sell the two brands – including both house-owned and franchise stores – as going concerns.
Nobody doubts that Australian book retailing has been under competitive pressure from international operations. Because of absurd territorial copyright laws, Amazon in America is able to get books to Australia before local publication, and because of publishers’ price-fixing powers (which in most industries would be illegal), Amazon ships books from America cheaper than the local store can get them.
So it’s all down to the internet, right? Look a little deeper.
Ever since the “global financial crisis”, two other factors have put the large chains under pressure.
The first is a simple retail squeeze. Even though most Australians would think our economy “dodged a bullet” after 2007 – we avoided the bank collapses seen in the UK, and managed to keep big companies afloat without the huge bailouts pursued by the US government – most consumers have remained extremely wary. For whatever reason, retail spending was extremely soft in 2010.
For bookstores, this was unexpected: they had a long run of growth up to 2009.
The second is a simple question of management. “Private equity” deals were once all the rage in Australian financial markets. The model was simple: make a takeover offer for a stock exchange-listed company, take it “private” (ie, delist the company from the stock exchange), load the company with debt, and whack on a metaphorical coat of paint before floating the company to gullible investors.
It only works, however, if you’ve got a bubble to ride on. When interest rates are rising and stock exchange investors are wary, the private equity model fails.
Management was also behind the conversion of a former powerhouse brand – Angus & Robertson – into a sad imitation of “big box” retailing.
Angus & Robertson stores under REDGroup looked like remainder dump bins. Instead of being able to browse for anything and everything, customers were offered whatever happened to be available in bulk and at a discount – but not enough of a discount to challenge the supermarket bookshelves. When Woolworths could squeeze a publisher down to $15 retail for a Harry Potter, why would customers go to a bookshop to buy it at $20?
In other words, the discount strategy forced on Angus & Robertson was neither fish nor fowl: not quite enough discount for the biggest bestsellers, sold in stores that had nothing of the former bookshop experience.
Australian journalists and analysts have been quick to accept the excuse that “the internet ate my homework” to account for Angus & Robertson and Borders (Australia) being placed into administration.
In doing so, they give the owners a chance to avoid a microscope being put on their own decisions and management. Competition from the Internet is only part of the story. ®
Borders has failed to learn anything from Amazon
I went in to one recently looking for a number of books. I couldn't find anything on my list.
Was there a nice terminal I could bang the title into to see what was in stock? No (my small Uni [Poly] library had a couple of these 15 years ago). So I had to hunt down an actual expensive, busy, can-only-serve-one-customer-at-a-time human.
After I'd asked the guy to look them up and he confirmed they didn't have any of them, that was it. Why didn't he offer to order one? Get it delivered to my house tomorrow morning? Get it delivered to the shop so I could pick it up during lunch (better than missing a packet)? "Is it a present? We can have it gift wrapped and on their doorstep tomorrow morning." "Should have some in soon, can I call / email you?"
All of these could be automated.
Hell, they could just use Amazon. The shop would still get a cut and I'd be a damn site more likely to visit it again.
How are they supposed to compete with the wonder of Amazon when they take no advantage of having a high street presence beyond that of any other shop?
Australia is popular this year.
Am I the only person who has noticed the number of australian articles on the Reg has been quite high recently?
If I recall correctly, the "absurd territorial copyright laws" mentioned in the article makes it illegal for businesses to import any book into Australia that hasn't been published by local publishers for two years. (This two-year period can be fudged and extended with reprints and new editions.) All in the name of saving the jobs of Australian publishers.
Hence the steep price of books.
I recall this law was called into question some years ago but the powers that be decided it should stay.
Ironic that this protectionist law will now contribute to the loss of jobs of store-front staff. Perhaps even more than the number of publisher jobs than were "saved" in the first place?