Journalists reporting the appointment yesterday of administrations to RED Group, the parent company of Borders, Angus and Robertson, Whitcoulls and Calendar Club, have been pointing to online sales as the cause.
I think that they have been too quick to feed off the line put about by publishers and others in the book space.
While I am no expert on the finances of RED Group, I suspect that the appointment of administrators came about because of debt levels, flat retail, the challenges of online book sales and, importantly, the impact of migration of print to digital.
The other factor is the challenges for the Borders brand. The UK group closed in 2009. The US group last year released the Kobo reader, three years after Amazon entered the space. From 2007 until last year, Borders was not attracting revenue from the rapidly growing digital books business. This is business which has been growing exponentially for the last three years. In fact, growth in sales of digital books has taken off just the same way growth in the sale of digital music did around six years ago.
While I am no expert on the Borders business, I would speculate that the migration of sales from print to digital has been a bigger factor in the appointment of administrators to RED Group here in Australia and the filing of chapter 11 bankruptcy in the US of Borders over there.
The RED Group story is a story Australian newsagents ought to watch and study as it unfolds. I am certain that in the analysis we will find insights which are useful to us as we contemplate what the newsagency of the future may look like. I say contemplate as if newsagents are doing this. Unfortunately, too many are not.
Newsagent continue to build shop fits which are suited to ten and more years ago, shop fits which are not flexible and with large fixed magazine departments. There are too many shop fits with fixed location and too big newspaper displays. Too many newsagents operate loss making newspaper home delivery businesses. Too many newsagents act as warehouses for stationery rather than buying on a just in time and more commercially viable basis. In short, too many newsagents are not adapting to changed conditions.
Maybe RED Group in Australia and Borders will trade out of their situation. That is, after all, the goal of chapter 11 in the US and administration here in Australia.
In the meantime, I hope that the news of yesterday is a wake up call to newsagents to look carefully at their business plans. If they take the bait and believe that the problems are due to online sales of books they they will not do this. If they accept that the problems for Borders and Angus and Robertson are, in part at least, caused by a migration from print to digital then they they will consider their future and revise their business plans as a result.
The potential for negative impact of print disruption on our channel is considerable. Not planning could be a fatal business mistake. Planning for it could uncover the best business opportunities for newsagents in decades. I think that the opportunities for our channel, or some in the channel at least, are excellent.
Footnote: From what I can tell looking at the ASIC website, the Supanews group is not currently affected by the RED Group issues. However, media reports suggest otherwise.
We are promoting the Priceline supported marie claire beauty brand extension with tactical placement in a full face display unit next to marie claire itself. We also have a pocket placed with our volume weekly titles – we cycle a range of titles through this high traffic weekly location with good success. I am pleased with the allocation by Pacific Magazines – it is respectful of the sell through of the parent title. Too often brand extension supply quantities do not reasonable reflect sales of the parent title, leaving us with a cash flow challenge.
