At Lightbulb we use the term "brand destruction" to describe avoidable business brand blunders. These incidents recall the Japanese ritual suicide known as hara-kiri (切腹).
Rarely do we come across brand destruction as clear as the July 2007 letter from Angus & Robertson bookshops (A&R) to its book suppliers who A&R says provide "unacceptable profitability". The key paragraph in A&R's letter states: "As a consequence we would invite you to pay the attached invoice by Aug 17th 2007. The payment represents the gap for your business, and it moves it from an unacceptable level of profitability, to above our minimum threshold."
You need to read the A&R letter to get the full impact. The A&R letter, a reply letter from Tower Books Pty Ltd (one of its suppliers), and over 90 reader comments have been collected here by the Sydney Morning Herald. For A&R there has been other negative news coverage, including a story on the ABC Radio National's PM program.
This corporate hara-kiri incident comes from the big end of town. A&R is part of A&R Whitcoulls Group Holdings Pty Ltd. That company is owned by private equity firm, Pacific Equity Partners. PEP's website states: "Angus & Robertson is the most recognised book retail brand in Australia with 180 stores Australia-wide and an 18% share in the Australian book retail market". A&R is unrelated to Angus & Robertson Publishers, which since the late 1970s has been part of News Corp.
A&R's extraordinary brand destruction incident prompts many Lightbulb questions:
Even assuming the message in A&R's letter had to be given, why use a letter? Surely a conversation would have caused less shock and may have opened a dialogue.
What level of compliance with the written letter did the people at A&R seriously anticipate? Did they anticipate criticism? If so, did they prepare for it?
Are the people at A&R not aware that in new media "oops" news spreads like a virus? (Search "oops" in Google and you'll get 35 million results.)
How would you rate the approach taken by A&R as regards business risk management?
Lightbulb agrees with Allan Fells, A&R has not breached trade practices law. Lightbulb's concern is also not about A&R's commercial terms. As discussed in our footnote, such terms are common. There can be a separate debate about whether they are "fair".
Here our concern is with the method and content of A&R's communication. Our commentary and questions indicate our view on A&R's letter in terms of ethics and plain business common sense.
Update: 10 August 2007:
A&R has responded. Its long response to Crikey states: "I completely acknowledge that the tone of this correspondence was inappropriate, and I appreciate the opportunity to set the record straight on our intentions."
Update: 15 August 2007:
The Australian Publishers' Association on 10 August criticised A&R saying its members have received demands from A&R which range from A$1,500 to more than A$45,000.
As of today there are over 250 comments at the Sydney Morning Herald's Entertainment Blog post on A&R's blunder.
Update: 23 August 2007:
Of the now 277 comments at the post, many are from current and former employees of A&R. They express shame and criticism about A&R's upper management. One states: "Congratulations to Tower books on their opposition to A&R's stupidity."
It is common practice among major retailers to demand various types of fees from
suppliers. Those commercial terms include the following types of payments demanded and received from suppliers - slotting fees, dump bin placement fees, pay to stay fees, advertising costs, introductory allowances, in-store demonstration costs, paying for discounts offered by the stores and paying for gondola ends (in supermarkets these are the shelves that face the checkouts at the front and meat and dairy at the back - see photo).
These types of terms as used by Coles and Woolworths in Australia were discussed by Mark Dapin in Shelf Importance, writing in the Sydney Morning Herald "Good Weekend" magazine, 9 July 2005. The article quoted Geoff Cutler, adviser to suppliers regarding supermarket promotions : "By the turn of 2000, floor space for promotions was so expensive that Woolworths was charging its suppliers A$100,000 for one week's use of gondola ends in NSW."