“It’s a shame the business could be run so badly,” Cameron says. He says the management “refused to listen” to concerns and there was a distinct lack of planning and vision.
And he’s sad that that there are no more Angus & Robertson stores. While the online A&R and Borders business was bought by Pearson Australia last month for an undisclosed sum, A&R stores in particular have quite a history, with the first store opened in Sydney in 1884.
It’s a sentiment echoed by Morayfield franchisee Edith Mitchell, who spent more than two decades with A&R and admits to being surprised when the parent collapsed.
“It’s been like a family,” she says. “It’s like you’ve lost an important ingredient out of that family group.”
But Hamish Cameron says going independent hasn’t delivered a demonstrable bump in sales in the newly independent store either, because the retail environment is “so slack”.
Another owner-operator, Kevin Young of Burnie in Tasmania, was still awaiting a resolution when contacted by SmartCompany last week. Young says he chose not to take up the Collins offer and is hoping for an agreement with Ferrier Hodgson shortly.
The collapse of a company which had 20% market share is all the more remarkable given it was fingered as a float candidate as late as last year. Its Borders business, which entered Australia in the late 1990s, was once feted as a business that would turn book retailing on its head – the big-box stores, where customers had almost limitless choice and were encouraged to linger rather than feeling pushed into buying something, were seen as the way of the future.
In a report by administrators Ferrier Hodgson released last month, which revealed that an offer for the Borders network in April was rejected, REDgroup directors are said to have cited the following for reasons for the company’s collapse:
Generally concurring with the directors’ reasons, the administrators nonetheless had a few additions:
Morayfield owner-operator Edith Mitchell says the former owner, Pacific Equity Partners, “didn’t have an appreciation for the book industry in general” and treated it much like any other industry.
Others, such as Henry Rosenbloom, the founder and publisher of Scribe, put it this way one week after the collapse: Borders and A&R stores “regularly added 10% to the publisher’s recommended retail prices for new releases”.
He also drew attention to “poor customer service, a lot of out-of-date stock, odd or poor selections of new titles, and a lot of non-book items where customers used to find books.”
“Why you’d go into Borders to buy barbeques I don’t know, but that was apparently part of their business,” he wrote.
During a low-profile second creditors meeting held earlier this month, creditors voted in favour of a deed of company arrangement from REDgroup directors that will see all the company’s assets gradually sold off and proceeds returned to creditors.
A similar proposal was approved at a meeting in Auckland.
The meeting was held just days after the closure of the final REDgroup bookstore, the much-loved Reader’s Feast in central Melbourne. Administrators say stock sales have been sufficient to pay in full all employee entitlements, totalling $11.7 million.
Under the DOCA, unsecured creditors including landlords and trade creditors are expected to be paid just three cents in the dollar.
The administrators did not find any breaches of directors’ duties, and found it was unlikely REDgroup was insolvent for any material period prior to its collapse.
While the job of administrators is always a thankless task, there is some anger among former franchisees about the way the process was handled.
Mitchell says over the past six months sales have probably fallen at least 20%, and the administrator’s decision to not fully honour gift cards stripped public confidence in the business.
While Ferrier Hodgson was within its rights to do so, the public backlash was vocal and this decision was highlighted by the 25 A&R franchisees who sought to be relinquished from their franchise agreements earlier in April. (Gift card holders have since been urged to register as unsecured creditors, with administrators tipping a dividend of between 25 and 50 cents in the dollar.)
“Administrators could have handled things a lot better,” Mitchell says. “We were the last people to hear about things.”
Still, Mitchell has no regrets about staying putting put during the administration, rather than seeking to break the franchisee agreement, particularly now she has signed with Collins.
“I felt there were better ways of going about things,” she says.
Soon-to-be Collins franchisee Therese Appleby also believes she did the best thing by sitting tight. Just months after joining A&R, Appleby says she didn’t believe she had enough information to join the breakaway franchisees. “I had no idea what to do,” she says.
While she says business has fallen off since REDgroup’s collapse – “a lot of people think we’re closed,” she says – Appleby is confident of better times under the Collins brands.
She says Collins will offer greater incentives to sell eBooks. “I think these guys are looking at it with a more progressive eye.”
Not only that, Collins is owned and run by franchisees, so “they’ve living in the real world when they make decisions.”
Appleby is philosophical about the role played by Ferrier Hodgson.
“The franchisees were a commodity; we were just something else they had to sell,” she says.
“Administrators are a bit like solicitors – they can’t go in with any emotion. That’s their job, to look after creditors. They’ve done their job and it wouldn’t have mattered who owned my store.”
Still, Appleby says she had to stop closely following the process. “It’s taken a lot of time out of the stores. Staff morale was very low.”
“I’m happy to close the door, move on and go back to enjoying working here again.”
Smart Company is a sister publication to The Mandarin, catering to Australia’s entrepreneurs, small and medium business owners and business managers.
