Feeds

The internet ate our homework

Borders, Angus & Robertson were already struggling

Reducing security risks from open source software

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. ®

Eight steps to building an HP BladeSystem

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
White? Male? You work in tech? Let us guess ... Twitter? We KNEW it!
Grim diversity numbers dumped alongside Facebook earnings
HP, Microsoft prove it again: Big Business doesn't create jobs
SMEs get lip service - what they need is dinner at the Club
Bose says today IS F*** With Dre Day: Beats sued in patent battle
Music gear giant seeks some of that sweet, sweet Apple pie
Amazon Reveals One Weird Trick: A Loss On Almost $20bn In Sales
Investors really hate it: Share price plunge as growth SLOWS in key AWS division
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
prev story

Whitepapers

Top three mobile application threats
Prevent sensitive data leakage over insecure channels or stolen mobile devices.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.