A Dustup Down Under

There's a tempest brewing down under.

In last Wednesday's edition of the Sydney Morning Herald (SMH), entertainment writer Susan Wyndham broke a story about a letter the biggest bookstore chain in Australia sent to its small to medium publishers.

A copy of the letter from Angus & Robertson (A&R),
dated July 30, was almost breathtaking in its "unmitigated arrogance." Its author, Charlie Rimmer, the Commercial Manager for the A&R Whitcoulls Group, announces "some changes to the way we manage our business." He goes on to explain that "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."

I'm going to stop here for a moment to dwell on the concept of
"we have far too many suppliers." We're talking about a bookstore, folks, not a supermarket. These aren't vendors of green peas, where one brand might easily be substituted for another in a recipe. These are books, B-O-O-K-S, not freaking widgets.

But, wait, there's more . . .

To correct this lack of profitability, Mr. Rimmer attaches an invoice to each letter, giving the publishing house six weeks to PAY THE DIFFERENCE to provide A&R with what they BELIEVE is an acceptable level of profitability.

Along with the invoice comes the threat. If the publishing house fails to respond to this extortion, "we will have no option but to remove you from our list of authorised suppliers."

And like the old Popeil commercials, we're not finished yet . . .

Rimmer includes a new contract with a laundry list of expectations including a standard rebate (with room for growth), a minimum marketing commitment and the expectation of a 5% daily interest rate on any funds not received by the 7th of each month following a quarter close.

And, finally, the piece de resistance . . .

Rimmer graciously offers a ten-minute appointment at a time of his own choosing to discuss these matters.

Sweet Mercy!! The brazenness of this missive left me speechless.

The following day, August 9th, the Sydney Morning Herald provided not only a photocopy of the actual letter but a copy of a response to Mr. Rimmer by one of his suppliers, Michael Rakusin, director of Tower Books. The response is so wonderfully to the point that I'm simply going to direct you to the link so that you can read it yourself here .

Angus & Robertson has 180 bookstores in Australia and, according to its website, an 18% share of the Australian retail book market. Its sister company, Whitcoulls, has 76 stores in New Zealand and, according to the website, "a 40% share in books, 30% share in personal stationery and 25% share in the video/DVD markets." In May, 2004, both companies were purchased by Pacific Equity Partners, an Australian investment company.

On August 9th, ABC News reported:

Around 160 publishers have been sent letters from Angus and Robertson, some with invoices and some with invitations for a meeting to discuss the sales performance of their books.

Marie McCaskill from the Australian Publishers Association [APA] has told ABC local radio in Sydney it's an unprecedented step that suggests an alarming trend.

The APA is not calling for a boycott of A&R at this time. However, if you read the comments on the SMH website [over 185 of them at last count], Australian readers are taking personal stands on this issue. Commentator after commentator promises to take his/her business elsewhere.

Some thoughts.

The SMH reported that Pacific Equity Partners is considering bringing A&R public. This effort might be an attempt to improve margins before a public offering. Of course, a public relations disaster like this is not likely to help the company's public image.

Another thing that occurred to me as I read the letters was that this sounded like the kind of power Wal-Mart is reputed to wield over its vendors. Perhaps A&R thought that its size in the Australian market gave it the clout to pull a stunt like this. How dumb was that?

ABC News reported that no one from A&R was available to speak to them, "but the company has issued a statement saying it has extended the date for negotiation by two weeks. Angus and Robertson also says it is committed to stocking a wide range of titles and supporting Australian literature."

Dave Fenlon, general manager of A&R, wrote to Crikey, an influential Australian blogger on the arts. In part, he said, "I understand that Crikey and its readers are alarmed by the negotiations that Angus & Robertson is currently seeking with a number of its suppliers. I also understand that the correspondence sent to some of our suppliers has caused offence . . . I completely acknowledge that the tone of this correspondence was inappropriate."

Do ya think?

Go here to read the entire letter to Crikey.

It appears the sharks are circling the Australian bookstores as well as their American counterparts.