Great deals come at a big price

February 25, 2011: The bells tolled for Borders and Angus & Robertson this week, and the experts were quick to explain why this was inevitable. One passionate retailer warns against the self-fulfilling prophecy contained in such analysis…

The following contribution was originally forwarded to the editor of another retail trade website who, commenting on this week’s major retailing story, the demise of Borders/A&R, ‘fessed up that they buy all their books from a leading offshore/online retailer, going on to make the perhaps simplistic assumption that the popularity of the online channel was the reason for The REDGroup’s failure.

Specialist book retailing is victim to a similar ‘pincer movement’ to specialist photo retailing. On the online side, the book retailers have Amazon and others. We have B&H and others. On the local side, the book retailers have Big W and others offering a flat 35 percent off RRP for popular titles. We have Big W and others offering 10 and 15 cent prints. So we thought the thoughts contained here were worth sharing with a larger readership than one:

‘I  would like to refer to your article today regarding the possible demise of Borders/Angus & Robertson. I am sure there is more to the picture than just online competition for the book business,  however we can be sure it is a major factor in this somewhat sad outcome.

And while this letter is in no way an aggressive response to your words, perhaps you need to stop and think a little deeper before you  write such influential lines as: …”I buy all my books from amazon.com….”.      It is understandable that a saving up to 50 percent on purchase price is attractive to all consumers, but there is a bigger price to pay in the big picture; one that none of us may be able to afford in the fullness of time.

Before going further, it probably should be stated here that Borders/A&R may have suffered from weak management (we don’t know) or a business model that did not come to terms with rapidly changing consumer values; however they are local and they do give employment to a lot of Australians, probably more so in an indirect and hard-to- measure sense. From that point of view, they are a valuable brick in the great wall of retailing, which collectively is Australia’s largest industry – certainly the country’s largest employer, and the complex system that drives innovation, staff training and a giant web of industries that hang off it; [your publication] being one of thousands.

Retailing also is the greatest purveyor of the great god of cashflow and liquidity with unimaginable sums of money being delivered to the Australian banking industry daily.

It is a brave organisation that pulls even one brick out of that wall and weakens it, as eventually the resulting tsunami of change can engulf all of us. What has taken the energy of a nation 50-years to build up, can come crashing down in a remarkably short time. None of us can function in isolation and as the worst happens, all of us will pay a very heavy price.

But to focus on Borders/A&R again, there is no doubt all other circumstances notwithstanding, they are the victims of the long-standing Australian tradition of paying a premium for products and services due to a variety of reasons based on our isolation: they charge more because they can; they have to service a huge country for a small market; the cost of ringing a dollar in the till in Australia is more than in most developed countries;  taxation here is higher than in many western countries;  rents here are as high as almost anywhere in the world for a smaller turnover; all things being equal; bank charges and government regulations eat into ever-diminishing margins; essential utilities are raising their prices faster than average retail growth – and so the list goes on.

Nothing is ever as simple as it appears on the surface.

And as more people are seduced into saving a dollar in any way they can, they may find that the small fire they light to keep warm in a cold winter of discontent, can become a raging bushfire that consumes them and their future, and possibly the future of their kids if things go pear-shaped – which is highly possible.

That said, consumers should insist on fair value and good service, aided and abetted by modern technology, together with a good personal experience when they buy . But that needs to communicated to suppliers and retailers by influential people such as yourself, who can be instrumental in raising the bar of performance and being the catalyst for the changes necessary to keep the retail heart beating soundly in Australia.

Despite the success of our raw material exports, Australia is sitting on the edge of a precipice looking at a vast ocean we don’t want to fall into. It will be up to all of us to drag Australians back from the edge and generate a healthy economy that gives us all the special things in life that make it worthwhile, including the ability to afford the small premium we need to pay to live in such a superb environment.’