REDGroup collapse to impact on independent bookstores

Independent bookstores face an uncertain future after the shock collapse of REDGroup Retail, which owns bookstore chains Borders and Angus & Robertson.

The company, which has been placed in the hands of administrator Ferrier Hodgson, has 169 Angus & Robertson stores, 61 of which are franchised, and 26 Borders stores, most in Victoria.

The group employs about 2,500 staff, with Ferrier Hodgson saying trading will continue as normal.

Henry Rosenbloom, founder and publisher of Scribe Publications, says REDGroup’s owner Private Equity Partners is partly to blame for the company’s downfall.

“The managers were bovver boys who alienated all their inherited knowledgable staff (who left), made appalling decisions about stock selection and presentation, and tried to treat books like potatoes,” Rosenbloom says.

“They never listened so their business declined drastically and they ended up trying to sell giftware instead of books.”

“It’s a very good example of why bookselling is not a corporate business – it’s a hands-on, detail-intensive business with low profit margins. Only people who love it and know what they’re doing can make a success of it – internet or no internet.”

Tony Nash, chief executive of Australian online bookseller Booktopia, says the collapse of REDGroup is unfortunate but represents an opportunity for local ecommerce agents.

“Obviously there will be market share redistributed to other companies if they no longer exist,” he says.

“There is a lot of talk about overseas online bookstores like Amazon but hopefully Australians will ask if there are any local operators or independent bookstores.”

Nash points out the role independent bookstores will play in the future. With smaller ranges and more personable staff, he argues that the bookselling industry will survive but on smaller scale than previously.

“Most independent bookstores are owned by people who are quite passionate about books. The service and knowledge is at a higher level than what you get at Borders,” he says.

“Overseas online retailing isn’t imposing a threat on us. In fact, it’s helping us. We have a good time and we think the economic model is right to offer Australians some value,” he says.

Peter Strong, executive director of the Council of Small Business of Australia, says if Borders stores close landlords will be left with huge empty spaces, which will push up rents for other stores located in major shopping centres.

“A lot of people have said ‘this will be good for you’ as an independent, but not necessarily,” he says.

“First of all the administrators will have a fire sale so everybody will be flocking there for books. It’s just an indication of how volatile it is.”

“As someone who owns a competitive bookshop it doesn’t mean things will get better. Landlords are not decreasing rents even though retail turnover is down. It’s a big sign of what’s happening in bricks and mortar and just shows off how bad things are.”

Prices are also a huge factor with Nash pointing out that booksellers can no longer get away with charging high prices for books when consumers can go online and buy the same product for as much as 50% less.

Nash says the market will have to change and he sees more manufacturers selling direct to customers.

“I think the future of retailing is changing. My prediction is that you’re going to see more manufacturers just selling books directly and they’ll just move online because that’s where all the people are going,” he says.