A survivor’s tale: How former A&R franchisees are looking for the next chapter

Six months after the failure of REDgroup Retail, the forgotten victims of the collapse – the former franchisees of 127-year-old book chain Angus & Robertson – are dusting themselves off.

A long-time A&R franchisee Edith Mitchell says her store in Morayfield, Queensland has been keeping its “head above water” since its parent collapsed in February. She’s hoping for a good Father’s Day and Christmas to compensate for a “woeful” year in retail.

Mitchell is one of dozens of former A&R franchisees who have taken another chance on franchising, this time with Collins Booksellers, which now has more than 70 stores across the country just years after emerging from voluntary administration.

For Therese Appleby, the franchise owner of bookshops in Maroochydore and Kawana Waters, the relief at signing on with Collins is palpable. She says she feels she’s come to the end of a long rollercoaster ride.

“It was really hard because our trust levels were zero,” Appleby says.

“But it was my husband who first went, ‘That’s where we’re going.’ I’m really excited about where this industry is going to go.”

But not everybody is so upbeat.

Small Business Minister Nick Sherry provoked an angry reaction in June by saying that in “five years, other than a few specialist booksellers in capital cities we will not see a bookstore, they will cease to exist.”

Sherry later told SmartCompany that “bricks and mortar bookshops and book printers around the world are feeling the pressure of the changing environment more than any other part of the supply chain” and book retailing “in particular is feeling the presence of large international organisation in the Australian market through online sales.”

Soon-to-be Collins franchisee Edith Mitchell says people were “floored” by the comment.

“I don’t think he could have chosen a worse time,” she says, adding that technology such as e-Books have become a major part of her planning and “anyone who doesn’t agree with that has blinkers on.”

A tough market

Sherry wasn’t the first person to point to the headwinds facing the book industry – it’s just that a small business minister doesn’t normally talk so tough to their constituents. But blind Freddy might have said the same, pointing to the thousands of job losses from the REDgroup collapse through the closure of its big-box Borders chains and the bulk of its A&R stores, and the high Aussie dollar luring customers online in an already tough retail environment.

The troubles were also writ large when book distributor Scribo announced its closure in June, citing the closure of REDgroup and expectations that offshore online sales and increased competition from international wholesalers would accelerate in the short to medium term.

The Nielsen yearly snapshot of the book industry for 2010 also showed that the volume of books sold edged up 0.4% to 66.2 million, but the value was down 4.2% to $1.28 billion, due to discounting.

Nielsen says the collapse of REDgroup is “being felt in the market” although it’s too early to say what the long-term effect will be, with all eyes now on Christmas and Father’s Day.

Dymocks chief executive Don Grover is also cautious, citing recent Nielsen figures showing book sales had dropped about 18% in the month of June.

“Generally speaking the market is still very tough,” Grover says.

Dymocks has increased market share since REDgroup’s collapse, but it’s a larger share of a smaller pie.

REDgroup’s collapse played a role in that contraction, but Grover remains upset over parallel importation rules that require local stores to sell books printed here rather than import copies. The Rudd Government pleased the publishing industry by retaining the practice, but booksellers argue they add to the pricing discrepancy between local stores and online offerings.

Grover says another challenge is those blockbuster book series – Harry Potter, Twilight, the Stieg Larsson trilogy – that have underpinned sales for years have more or less come to an end.

According to Nielsen, fiction accounted for 28% of last year’s sales, while non-fiction was 48% and children’s books were 24%.

Still, Grover says Dymocks sales are up year-on-year, and is upbeat that once new stores are opened the positive trend will continue. Dymocks has about 17% market share with 70 stores nationwide.

“While the dollar is inflated, retailers will be under pressure,” Grover says.

“But we’re still being valued for loyalty programs and knowledgeable staff. People are still coming in, and they’re still buying. And as long as we do our job well, that’ll continue.”

And Daniel Jordon, CEO of the franchisee-owned Collins, says the company’s recent purchase of 20 A&R stores and talks with other franchisees can be seen as a vote of confidence in the book industry.

“We are mindful of challenges in the current retail climate and within bookselling, but we’re positive and buoyant in our outlook,” Jordon says.

He expects more publishing phenomena to come our way, and says the “soft approach on discretionary spending” is driving the slowdown, rather than J. K. Rowling farewelling Harry Potter once and for all.

Collins is also focusing on its online offering, social media and the Australian launch of eReading company Kobo. And Jordon says this month’s Collins conference was centred around giving franchisees tools on improving profitability.

Inside the collapse: Former A&R franchisees tell

So while it’s all systems go for Collins and Dymocks, other former A&R franchisees have another take.

Hamish Cameron now runs Paperback Merchants in Albany, after splitting from A&R following REDgroup’s collapse and renaming his store.

Cameron considers himself one of the lucky ones because his was a month-by-month contract, so when the business fell over he was able to cut ties with the administrator more easily than the others.

According to Cameron, who saw three owners under his 11 years with A&R, the writing was on the wall for REDgroup in 2010, with sales figures well down on previous figures.

Indeed, some franchisees who joined A&R as franchisees at the end of 2010 have complained that they wouldn’t have signed up to the business last year had they known REDgroup was going to collapse just weeks into the start of 2011.

Therese Appleby, the franchise owner of Maroochydore and Kawana Waters stores, says she was not made aware of any problems when signing up last November.

“Everything they gave us stacked up,” she says.

“They certainly didn’t give us any indication that there were issues, otherwise we wouldn’t have gone ahead.”

Cameron is angry and disappointed by what happened.