Friday, August 10, 2007

High Voltage: Australian Publishers Upset by A&R Policy

Angus & Robertson is one of the two largest booksellers in Australia. The company has a long tradition of retailing across the country and operates a combination of corporate owned and franchise stores. Until recently, the company was owned by WH Smiths who sold the company to a private equity group, Pacific Equity Partners. A&R, together with Dymocks the other major book retailer, has been mentioned as likely buyers of the Borders operations in Australia and New Zealand. PEP wants to build a larger retailer and take the company public within the next two years.

There is no current news about the Borders sale situation but A&R has stirred up some controversy in outlining their new vendor management policy. By the way, can you imagine anything (other than If I Did It) that the publishing industry could do that would land it on the national news over here? Reported in this story is A&R's new policy to have publisher's pay for shelf space if their unit sales aren't at a sufficient level to be self-sustaining.
Australian publishers are reeling, after being told one of the country's biggest bookstore chains won't stock their books, unless they pay up thousands of dollars within weeks.The publishers are calling it blackmail. The company, the old established Angus and Robertson, says it can't afford to stock books that don't generate enough profits.
According to Mary McCaskill, President of the Australian Publisher's Association, publishers there are reeling at this 'unprecedented' step by A&R. She suggests this is a classic supermarket tactic where suppliers pay up front for shelf space.

Michael Rakusin of Tower Books comments:
[The letter] arrived on my table on Friday afternoon, and it said, very simply, 'The amount of profit we make out of Tower Books has not been sufficient to justify keeping your books on our shelves. Here is an invoice for just slightly shy of $20,000. Please pay it by the 17th of August. If you don't pay it, we will have no choice but to de-register you as an authorised supplier.' In other words, we won't buy your books anymore.
Further arguments in opposition to the new A&R policy were the old chestnuts suggesting that A&R is anti-indigenous publishing, against the small guy and other pointless arguments. The company itself is not quoted in this report. Here and here are two blog articles about the same story.

In my old home town newspaper The Age (tomorrow) they quoted from the actual letter mailed to some 40% of A&R vendors:
A&R said more than 40 per cent of its suppliers fell "below our requirements in terms of profit earned" and A&R would be "rationalising our supplier numbers and setting a minimum earnings ratio of income to trade purchases". The letter demanded payment of a sum that "represents the gap for your business, and moves it from an unacceptable level of profitability, to above our minimum threshold". If the recipient failed to pay, it would be removed from A&R's supplier list.
Suggestions that award winning books from small publishers such as Carpenteria will be hard to find in A&R stores are inaccurate and belie the fact that A&R is saying that almost half their stock is loss making. Why doesn't this penetrate? Why is A&R obliged to carry this risk? Furthermore, doesn't the continuation of this loss making activity put the money making 60% at risk? I was once told by a director at a large UK retailer who told me that 40% of their vendors received less than three invoices per year with less than five titles per invoice. (Many with only one title and one invoice per year). It cost them £10 to process each invoice which far exceeded the margin on the sale of each book. Nutty.


From BeattieBookBlog a long response from A&R General Manager Dave Fenlon that includes the following:
As a commercial business, we have the right to make decisions about which suppliers we do business with. In our negotiations with suppliers, we are the customer. Unfortunately we cannot work with every publisher in Australia, particularly if the relationship is not commercially viable for us.To give you some context, we currently have 1,200 suppliers to our business and have sent letters to 47 of those whom we hope to hold discussions with over the coming weeks. The payments we have requested from those suppliers represent a gap payment for profits that were lost or costs that were incurred as a result of our commercial relationship with those particular suppliers.We are trying to operate a successful bookstore chain and if we cannot strike a balance that allows us to maintain our retail operations, the impacts on the industry will be far greater if we are forced to close stores or drastically cut down titles.Again, let me assure you that this is not about penalising authors. It is about establishing commercial arrangements with our suppliers that are viable for both parties and that allow us to offer the best value to our customers.

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