Steven Beattie exposes a remarkable arrogance from Australian book chain Angus and Robertson. The hubris was directed towards small to medium-sized distributors. According to The Sydney Morning Herald, Angus and Robertson is now demanding that distributors pay between A$2,500 and A$100,000 to keep their books stocked in the stores. In a letter from ARW Group Commercial Manager Charlie Rimmer to Tower Books’s Michael Rakusin, complete with attached invoice, Rimmer wrote:
We have recently completed a piece of work to rank our suppliers in terms of the net growth they generate for our business. We have concluded that we have far too many suppliers, and over 40% of our supplier agreements fall below our requirements in terms of profit earned. At a time when the cost of doing business continues to rise, I’m sure you can understand that this is an unpalatable set of circumstances for us, and as such we have no option but to act quickly to remedy the situation.
Accordingly, we will be rationalizing our supplier numbers and setting a minimum earnings ratio of income to trade purchases that we expect to achieve from our suppliers.
The letter caused Rakusin to respond with a lengthy letter of his own, which reads in part:
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 !!!)
As Beattie observes in his post, Tower Books is hardly the runt of the litter. It handles the Australian distribution for DC Comics, the Hachette Book Group, the Overlook Press, and many more.
Angus & Robertson Chief Operating Officer Dave Fenlon responded to all this at Crikey, attempting to set the matter straight. Fenlon confessed that “the tone of this correspondence was inappropriate” and observed that A&R had sent letters along the lines of Rimmer’s to 47 of its 1,200 suppliers. (By contrast, New Matilda reported a few days later that A&R wrote to “more than 160 local publishers giving them just over two weeks to shell out thousands of dollars.”) Fenlon wrote:
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.
If a bookstore chain uses such strongarm tactics towards a particular distributor — perhaps the only distribution conduit for a particular author — how is an author not penalized by this? (Rakusin also responded to this letter, observing, “How does Mr. Fenlon explain the incongruity between his claim that he has 1200 suppliers and has sent letters to only 47 of them when the Australian Publishers Association says that more than 70% of APA member publishers have been contacted by A&R, either directly or via their distributor?”)
I plan to do more digging on this story. Not only does this reflect a troubling scenario comparable to the AMS bankruptcy earlier this year, but this could very well set an international business precedent. If an Australian bookstore chain can get away with sending unexpected invoices sent to distributors, demanding a premium payment because the profit margin is not as staggering as they desire and effectively blackmailing distributors, what is to stop a bookstore chain in another country from attempting the same?
© 2007, Edward Champion. All rights reserved.