it’s not me, it’s you two.

13 07 2012

for the first time in my life i’m unemployed.

well, maybe not technically unemployed – i think the government would categorise me as “under-employed”, which looks better in their stats.

you’d better go get a triple venti with a pre-warmed mug for this one…

but before i start:  why am i writing all this?  “it’s just a former client, move on!”, some of you might say.  sure, they are, and i am.  but there’s also a tale i feel like telling, part history, part drama, part bitchfest, but above all about how my views of two people have changed so dramatically over the last year, not just during this recent Final Cut.  generally i choose to stay isolated from most of the internal machinations of my clients.  it took the collapse of REDgroup last year (and a loss of $4.2k) to spark my curiosity, starting with my ‘Seeing REDgroup’ posts over a year ago, and gathering more perspective from various people involved since then.  it’s been quite an eye-opener.  this post alone has been two months in the drafting.  so without further ado…

when i moved to Melbourne 12 years ago, i had some casual work lined up with my just-become-former Sydney employer, and another client, both for electronics design stuff.  it would be enough to get by until i worked out something more permanent in Melbourne.  however within a month of arriving, my best friend Tony invited me to his employer to meet and discuss helping them through some difficult times the company was encountering with their IT setup.  i spent a few months doing that, and figured that would be it.  small business IT was something i was apparently capable of, though until then i’d had no intention of becoming self-employed in it!

12 years later, last May, that client called to say that my services would no longer be required, thank you very much.  it was a big and mostly unexpected gut punch.  as they unfortunately still make up two thirds of my income, it’s also a major OH FUCK moment, and has indefinitely postponed our European trip planned for September this year (thankfully we hadn’t quite booked flights that probably would’ve been non-refundable).

i say mostly unexpected, because although i’d just spent the previous two months making a raft of proposals to revamp various aspects of their IT (which they described as “excellent”), things had then gone very quiet.  a date for the next conference call to discuss timeline & costs came and went without a phone call.  a couple of my emails to the MD had gone unanswered.  i proceeded with preliminary planning regardless.  i should have picked up the phone, but in retrospect my suspicion is that moves were already afoot to choose a new IT provider.

Darth Maul and his apprentice Jeronimo are the new part-owners, directors and top level hands-on managers of the business, snatching it from the jaws of Administration last year following the appalling collapse of REDgroup Retail.

some background:  Darth Maul brought the business’s retail concept to Australia in ’95, and then sold his interest in 2004.  After Maul’s departure, Jeronimo was co-GM alongside my friend Tony, however both moved out of those roles after a couple of years, though headed in entirely different directions.  Jeronimo moved up and up into the Angus & Robertson owner, and thence into the newly formed REDgroup Retail, encompassing Angus & Robertson, Borders, & Whitcoulls book retail giants, as well as this business, my “Client # 1”.

in fact Jeronimo’s rise was quite impressive, reaching the level of Managing Director through to late 2010, and encompassing other director roles including Group Commercial Director prior.  I’m guessing one of the primary concerns of “Group Commercial Director” is to come up with answers to questions like “How do we make more money?” and “What do we do about sagging book sales?” and “WTF are we gonna do about these damn eBook things?” (A&R and Borders didn’t get eBook/eReader religion until early 2010, by licensing the ready-made Kobo system).  As Darth Maul himself once stated in his weekly wisdom email missives, it takes a certain kind of person and skills to not just survive, but thrive in that environment.

Jeronimo resigned from REDgroup a month or three before it went into Administration in February 2011.

Darth Maul, as his pseudonym here might suggest, has somewhat of a reputation as a lion or bull when it comes to business.  nevertheless, I found him quite straight forward, pleasant and fair to deal with most of the time. however it was the staff who truly bore the brunt of Maul’s management style.  according to some reports, staff would be bullied, belittled or berated mercilessly, often in front of other staff to the point of tears, until they complied with Maul’s Way.  it was almost always the stick, rarely the carrot, whether he was right or wrong.  no one enjoys working for a bastard.  the offices of Client # 1 became a far nicer place to be after his departure in 2004, and again in 2006 when Jeronimo moved up in the world.  that’s not just my opinion.  and the business continued to be profitable without their hands-on management.

Darth Maul sends out a weekly email (also published on an associate’s website) to chosen disciples, containing a distillation of his business wisdom.  He paints himself as honest, straight forward, hard-nosed but humane, and always striving to operate with the highest of integrity.  he even does a bit of volunteer community work.  it’s impossible not to think highly of Darth Maul if one judges him purely through these emails.  one presumes that he also tries to inspire these qualities in those he mentors.

Tony died in 2007 in palpable, inconsolable fear that when he returned from his long vacation, Maul was rumoured to become involved in the business once again (and eventually did, at a distance at least).  in previous years i would often have to endure long sessions of Tony debriefing/destressing from the torment he felt in that business at Maul’s hands.  clearly it takes two to tango, and if you’re desperately unhappy in a job then you should leave, but alas he didn’t, and the stress he endured over six years consumed most of his day-to-day life, with ramifications way beyond just his work-life, even after a year or two of professional psychological help.  the difference in the perspective they held of each other, and the lack of genuine communication of grievances, is instructive – Tony died nursing major psychological wounds at the hands of Maul, whereas Maul actually demonstrated he was human in his heart-felt eulogy at Tony’s funeral / memorial service, oblivious to the fear and loathing Tony harboured for him in his last few years.  if Tony had his way, Maul wouldn’t have been allowed that opportunity to speak – we deliberated this in planning his memorial service, but felt it wasn’t our place to deny his request; after all, such events are largely for the benefit of those left behind rather than the deceased.

anyway, in mid-2011 Maul & Jeronimo ride in to save the day.  they discarded the GM that Jeronimo himself selected several years earlier who had continued to keep the business profitable and who’d worked hard to rescue the business from Administration.  at the same time the staff were denied any stake in the new business entity – they’d gone to considerable lengths and cost to arrange themselves as co-buyers of the business in an earlier failed attempt to buy the business out of Administration.  lovely.

it didn’t go unnoticed by some staff that they were now under the management of one of the key personalities at the highest levels of hands-on management to preside over REDgroup’s demise.  gone too a few months later was the IT Manager, who’d served the business as long as I had, and served it above & beyond the call of duty.  he received his Dear John phone call on his birthday while on extended and serious sick leave.  arguably the business didn’t need him any more, but if you take one look at the dysfunctionally over-worked stress-ball who already shared and was about to assume the remainder of his responsibilities for their ERP system, i’d re-think that decision.

at a Sunday lunch with most of the staff (minus Maul, Jeronimo, the Bitch Buyer, and the StressBall) a few months ago, i’d never seen their morale so low, despite their retail season just completed being entirely successful.  they were distressed by the treatment of the former GM and IT Manager, denied equity in the new business despite being ready to sign, and resented being micro-managed by REDgroup’s failed chief head-kicker.  micro-managing the staff of a business that was one of only two profitable entities in the entire REDgroup  was a major slap in the face – these were the people who made the business worth buying out of Administration in the first place.  Maul & Jeronimo weren’t the saviours they might wish to paint themselves, at least not in the sense that the business needed them specifically.  credit where credit is due for pulling together the deal that ultimately did bring the business out of Administration, but frankly anyone could have stepped up to buy the business, and it would’ve resumed being just as profitable.  being charitable, it smacks of the knee-jerk reaction of a guilty conscience not wanting to ever re-live the agony of a business in death throes, by “trying harder next time”.

perhaps sensing the low morale, or simply being reminded after a successful season that his old comrades weren’t stupid, this year Jeronimo embarked on an inspiring process of consultation, re-thinking and streamlining of the entire business’s processes, and I was included in that to the degree possible for an outside entity.

however the flip-side of all this warm fuzzy consultation were re-worked position descriptions and annual employment contracts.  i’m told that demands and responsibilities placed upon staff had never been higher, the conditions that defined “Success” higher, and only token if any pay rise (bear in mind there probably won’t have been any pay rises since at least Q2-2010, a year before entering Administration, now over 2 years ago.)

so it probably won’t come as a shock that the exodus continued, only lately it’s those choosing to jump, rather than those of us who were pushed.  the warehouse manager and the bitch buyer, both staff members since the late 90s, have given notice, preceded by the NZ manager in February.  just this week another staff member gave notice.  they won’t be the last.  so far, and including me, 10 staff (or long term consultants like myself) are now gone.  besides Maul & Jeronimo there’s only about six left.  that’s two thirds of the business’s Experience Bank gone in less than a year.  the success of this doggedly profitable business is now under serious threat as it enters its second year.

i’m hearing in my head Henry Rosenbloom’s words “bovver boy managers” and “brutalist regime” in relation to the tactics REDgroup used to postpone its death in its final years.  “condescending prick” is another term that’s been used to describe Jeronimo, by someone I know is able to get along professionally with almost anyone.

but lets not reserve all the booting for Jeronimo.  this business leases a second warehouse, which they’ve been intending to sub-let to “a friend of the business” (‘FotB’ henceforth).  an unexpectedly wise temporary staff member from this FotB inspected this second warehouse, and identified a potentially significant workplace health issue.  it’s probably also the case that when some staff members from FotB laid eyes on this proposed new home, said “bugger this, it’s a dump and we won’t work there!”.  either way, it was significant enough for the MD of FotB to wish to retract his Letter Of Intent to lease the warehouse/office.  in immediate response, Darth Maul – who’s been a close friend of the MD of FotB for probably close to two decades – threatened to sue if he didn’t proceed to sign a rental contract.  unless Maul slipped in some sticky clauses, both surely would have known a LoI wouldn’t have been legally enforcable, but bizarrely the MD of FotB decided it was better to keep a “friend” who was willing to sue him to enforce the LoI, and then split his own business into a separate warehouse and office, rather than stand up for himself, legally if necessary, and say goodbye to a total arsehole of a “friend”.

it would seem Jeronimo has learned all the worst lessons from his mentor Darth Maul, too few of the positive ones, and despite whatever part he had (or didn’t have, but would surely have observed & had to approve of) in REDgroup’s demise, continues not to realise that being a head-kicker and condescending prick is neither attractive nor guaranteed to be profitable.

it’s like they view Doing Business as a mathematical equation with a bunch of variables that can be tweaked, in order to achieve a maximum result, but without any consideration of how those variables are known to interact.  10 out of 16 staff/partners gone.  how’s that approach working out for you, guys?

anyway, back to me.

i don’t have any specific knowledge of what lead Maul & Jeronimo to make this decision, despite asking.  Jeronimo says it wasn’t an easy decision to make.  presumably he’s referring to the number of years i’ve served them and the common departed friend who brought us together originally.  so lets run through some obvious possibilities…

i doubt my distance from Melbourne really has much to do with it.  in the 3 instances in 6 months where on-site attendance was necessary, they received it from the organisation i’d arranged to provide it, and received it as promptly as it takes to drop everything and drive out to their outer backwater suburban location.

maybe it’s about business risk, or professional indemnity insurance, or IT staffing redundancy, and all that good stuff you theoretically get from a larger IT consultancy, or maybe they just see themselves as being in a league deserving of IT support from a larger organisation, rather than the perceived risk of what would happen if i were run over by the proverbial bus?  i say perceived, because i’ve been providing service to them for 12 years so i think i’ve demonstrated some solidity, reliability, and wise navigation through myriad IT issues, and the organisation i’d arranged to provide onsite support would easily be able to step in.

in response to Jeronimo’s curiously vague question (as part of the comprehensive review of the business & its processes, & answered in my proposal) “Who should provide IT support to us?”, i acknowledged the obvious vested interest I had in answering the question, and stated my ability and commitment to continue doing so for at least the next 2 years, and that i was looking to make a career adjustment after a coupe of years along with a relocation to the NSW Northern Rivers; which to me seemed suited to the minimum period of time he’d indicated after which they might wish to sell the business.  when I expressed my disappointment that they’d not discussed or negotiated on any of the issues that obviously lead to their decision, Jeronimo’s response was characteristically vague and self-contradictory:

“The decision we have made is based on our assessment of the challenges we face and how we think we are best served to deliver them. I did not take into account your “palm tree” , I long for the same thing and it was never an issue. I gave this long and considered thought and summed up your proposals which were excellent as well as the opportunities elsewhere. I did not see the need to re-engage as i had the information i needed to decide. We have no intention to sell the business but we’d like to be able to sell  if it came up and therefore want our infrastructure and support ready for that time.”

So, that my commitment is not rock solid beyond 2 years wasn’t a problem, but it was.  Ah huh…  This is from a person who would probably describe himself as a “straight shooter”.  i think that’s what politicians call a Non-Answer Answer.  obviously the real reason lies elsewhere.

btw, that email conversation was also CC’d to Darth Maul, who despite our long history together, has not said or written a single word to me on this matter – no “look, here’s how it is” or “mate, we love what you’ve done for the business for so long, but we just need to go in another direction”, or even “Anthony, we’ve had issues with XYZ and just don’t think you’re meeting our needs any more”.  nothing.

nothing, except for Maul’s next weekly wisdom email titled “Kill those sacred cows”.  ouch.

but if I know Maul & Jeronimo, it’ll almost certainly be about money – *everything* they do, or don’t do, comes back to money, and they’ll proudly claim that to be a virtue no matter what the circumstances.  one can’t help but be attracted to the “managed services” IT consultancies that have proliferated in the last several years, one of whom they’ve now chosen over me.  many of these larger consultancies offer unlimited support on a per-seat/computer rate per month, often on a long contract period.  that deal typically includes reactive support for when things go wrong, preventative maintenance, and automated monitoring of systems.

however it usually leaves out an entire category of IT support, which I call the “Giving a shit” category:

  • when a staff member joins an organisation, or simply moves to a new/different PC, there’s a bunch of guff that one must go through – all that ‘first fun’ crap setting up a new user profile that Windows and its apps typically throw at you.  my clients rarely have to face that, because I do it for them, because I learned long ago that it’s 50/50 whether “normal people” get totally freaked out when they see that unexpected barrage at the start – they usually forget they once had to go through it on their own home PC 3 years ago (or had their teenager do it for them).
  • it goes without saying that i pre-emptively take care of Windows & software updates, largely as part of sound security policy, and because staff too often don’t notice that so many software updates cunningly install unwanted crapware if you’re not paying attention.
  • when someone moves a computer to a new desk, I’m the one who comes along afterward and makes all the cables tidy.
  • when servers need updating and rebooting, i always wait until after hours, so as to minimise the impact on the client’s business.
  • when i notice something not quite right in the look or feel of anything i’m doing, it usually triggers a brief investigation or a mental note, in case it’s a symptom of some unrevealed or unreported problem.

when you’re working to a money-clock with calls from other clients mounting up, this level of service or vigilance is too easily ignored.  unlike previous management, Darth Maul & Jeronimo have decided that’s not worth paying for, whether they realise they were getting it or not.

maybe it’s because i don’t send invoices regularly enough?

maybe it’s because i’m not a rabid Collingwood supporter who likes to schmooze with my clients after hours?

maybe it’s because i didn’t pull any punches in my ‘Seeing REDgroup‘ blog posts?  ( which were necessarily based on publicly available information & personal observation – it’s not like any of the smartest minds in the room are talking )  i’ve no idea if Jeronimo ever read them, but Darth Maul probably did – i emailed him a link to my ‘The Future Of Calendars’ blog post which directly followed the ‘Seeing REDgroup’ 4-parter (asking for his thoughts, which he kindly provided, dismissing the whole idea of software calendars & seemed content with a business model that’s as sure to dwindle as the years roll on as books have already).  late last year he made at least a couple of half-joking references to me being a ‘anarchistic troublemaker’, or words to that effect, and the likely source of that opinion would surely be this blog.  in retrospect, when Maul “half-jokingly” refers to you as an anarchistic troublemaker, it seems you’re pretty much screwed, even if it doesn’t impact at all on the service you provide.

or maybe it was my quip to Jeronimo last year (before I was fully aware of his position in REDgroup!) about “men in suits 20km away proving to be a greater risk to the business than a gap in their data backup regime”.  oops ;)

the most disappointing thing is that despite asking for more tangible reasons for their decision, i’ll probably never know for sure, because they just didn’t have the balls to say so.

so what have i learned from all this?

clients / customers never last forever, and i knew from the get-go last October that having all my eggs in 2 baskets (clients) after leaving Melbourne was a risk, and I should’ve applied myself much more to that task.  one tantalising and substantial lead here in Sydney came up, then went dead, then resurrected itself but then died again just as suddenly, all of it being a big waste of time waiting for something to happen, before eventually moving on.

another reason i held myself back from diversifying my client base was that in all honestly i’d not seriously considered / recognised the possibility that they were looking elsewhere for IT support.  with 20/20 hindsight i ignored or discounted warning signs as to what was going on.  i assumed i’d get the work as i had for the previous 12 years, and that for the next 6-9 months i’d be busy to capacity implementing this once-in-5-years refresh of their IT infrastructure.  such are the decisions / risks of the self-employed.

put these two together, and in my own mind at least it seemed like a reasonable excuse for procrastination.  bugga.

although i helped out Maul with some trivial IT stuff in the year or two that followed his departure from the business in 2004, it didn’t lead to any recommendations / referrals (me ditching his numpty business partner-at-the-time for being such a PITA probably didn’t help).  at any rate it’s another reason not to care about burning this bridge here now.

i’d not seen these two characters in a larger context until I sat down and laid it all out here, and accumulated other first-hand accounts, and combined it with the exodus currently in progress.  in that light, i’m actually happy to have nothing more to do with them, because i no longer have any respect for either of them.  Jeronimo appears to be incapable of reflecting on his own actions to see what part he might have played in the staff exodus in progress in his new venture, nor on the demise of REDgroup (at least not evidenced by the way he’s conducting himself so far).  all his fingers point outwards.  and Darth Maul, well, there’s Darth Maul, and there’s the picture he paints of himself every week – about all i will say is there’s some overlap.

it’s also given me a kick up the arse to get my website & other social media presences up to scratch, with a matching business card, and above all, a renewed commitment to stoking some new fire into my self-employment / business.

i’ve always felt a little guilty that i’ve never had to lift a finger to acquire my clients, most of whom i’ve served for many years.  its also been an extremely rare event to lose a client – client “churn” is a foreign concept to me, and I can recall losing only two clients in 12 years.  alas, now i will have to become accustomed to “breakfast networking” and other self-promotion for which i’m not well suited!

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‘The Iconic’ & the changing face of online retail – stage 2

6 07 2012

this article in Business Insider by Alan Kohler covers the new (6 month old) start-up Australian online retailer The Iconic.

 

The Iconic is a full price, premium service online-only retailer of clothes & shoes for men & women, with prompt and FREE overnight delivery, focussing on Australian brands, and they’re also gradually developing international brands, and have a generous returns policy.

 

this is a significant development – most online retailers target discounted prices but charge shipping.  it’s a major challenge to incumbent bricks-n-mortar retailers, especially Myer & DJs, who now can’t whinge that those mean and nasty overseas online retailers aren’t charging GST.

 

supposedly The Iconic is doing well.  time will tell if they’ll continue to thrive, or if they’ll need to compete on price against newer discount online retailers (the new retail arena will be online).  but doing a deal with Australia Post, who are desperate to stay relevant and profitable in a world of plummeting snailmail, is a master stroke of business acumen.

 

“the internet” isn’t just challenging bricks-n-mortar retailer’s cost model, it’s fundamentally altering what we consider to be The Retail Experience. there’s so much shit we just don’t need to physically walk into a shop & see with our own eyes any more before deciding to buy it. an increasing amount of stuff that we used to consider as “retail” will be relegated to “warehoused” status & bought online – we’ll make our decisions to purchase, or not, NOT based on the physical experience, but on personal recommendations from friends, social networks, 3rd-party reviews, and good old fashioned “virtual retailing”. taking up space in a shop, with minimum-wage humans trying to flog it is just becoming less necessary for more stuff.

 

the pain of transition has only just begun for bricks-n-mortar retailers.  they have almost nowhere to go (other than shrinking), and they’re paying top rent in massive shopping centres.  the retail landlords are also going to be whipped here.  i hope you don’t have shares in Westfields, Gandel, AMP Capital Shopping Centres, Mirvac, Centro, Stockland and the like – the writing’s already on the wall for them.

 

certainly there’ll be a continuing need for bricks-n-mortar retailers, after all everyone needs to educate themselves as to what size they are :p, and there’ll probably always be a market for the hands-on retail experience, as well as certain niches where hands-on buying is still desirable.  but i think it’s fair to say we’re moving out of the first phase and into the second phase of online retail.  the first was books, media, gadgets, some clothing & shoe brands, and niche products, growing from insignificance to significance & making bricks-n-mortar retailers whinge but do little to adapt or compete.

 

the second phase is the likes of The Iconic (and the overseas equivalents they’ve modelled themselves on) squarely aiming at bricks-n-mortar retailers on their own national ground, with the incumbents pissing into the wind trying to maintain both bricks-n-mortar and online presence.  the bricks-n-mortar retail scene will shrink, it’s inevitable.  there will be howls of pain and Special Pleading from the usual suspects, and they should be dismissed just as for blacksmiths, shoe repairers, milkmen and door-to-door insurance salesmen.  also during this second phase certain technologies will emerge that facilitate online retail to fill in the gaps and uncertainties of buying without first touching – high resolution monitors, laser biometric scanning, hand-held projectors, global size scales, and $deity knows what else.  i give it less than 10 years.

 

the third phase is where bricks-n-mortar retailers shrink to niche markets, up-market, bargain-basement, and to cater to those who insist on dragging their bestie or significant other to the mall for some good old fashioned retail therapy just like it was “back in the day”.  everything else will be a Star Trek-esque materialisation of goods at the front door within a day of a few points at a screen (not clicks, not touches), and this whole retail ecosystem battle will start afresh – online.

 

and that’s without considering the impact of 3D printers, which will wreak a whole new flavour of havock all on their own.

 

i guess it poses some interesting questions for urban culture.  what will the masses do instead of trudging up & down shopping malls as much as they do now?

 





Australian Book industry, retailing & parallel import restrictions (PIRs)

5 01 2012

the Australian Book Industry Strategy Group released its report a couple of months ago, and Bob Carr, board member of Dymocks, lays down a baseless dismissal of it on his Thoughtlines blog, and while he’s at it takes a few snide shots at a few book industry types, including Henry Rosenbloom of Scribe Publications, who rises to the bait adequately (I get the feeling these two have been barking at each other from opposite sides of a flimsy fence for several years now).

Bob’s suggestion:

Here’s the better course. Let the market work. Allow Australian bookshops to purchase books from the cheapest source, an overseas or a local publisher. Liberate them to compete with overseas sites that don’t pay a GST when they sell books into the Australian market.

as i said in part 2 of my ‘Seeing REDgroup’ posts, i agree, it’s naive folly to ask for the Australian government to drop GST on book sales. (instead, in this era of rapidly growing citizen importation from offshore online retailers, Australian Customs should be drastically lowering the duty &/or GST exemption threshold (from its current $1000?), back to similar or lower levels prior to the introduction of the Liberal Party’s GST, and slapping a GST invoice of every box that comes into the country from offshore retailers.  in other words, welcome to Part 6278 of Globalisation.

but the most infuriating aspect of Bob Carr’s argument is that he has no answer to the reality that a substantial proportion of the income that Australian publishers – and their authors, and printers, etc – derive from the parallel import restrictions would be lost by their abolition!

i posted a comment in reply to Bob’s post, and another commenter summed up my argument nicely (if a little incredulously).  check it out.  i wanted to reply, but for whatever reason further comments on the post have been disabled.  i don’t like my argument either, but my point is, what’s the solution?

ideologically i hate the notion of the PIRs (which if you don’t know, force Australian retailers to buy books – be they Australian or from overseas – from Australian publishers, rather than directly from overseas publishers, resulting obviously in a substantial increase in the shelf RRP), just as much as i hate the notion of territorial copyright, but it’s not as if PIRs on books is unique to Australia.  The USA and UK, who have similar restrictions, would just love it if Australia dropped its PIRs and all our book retailers bought directly from them – its one less middleman in the RRP equation that gives them more cream on top.  They’re not even thinking about dropping their own PIRs, btw!

undoubtedly books would be cheaper in Australia if we didn’t have the PIRs.  but at what cost?  at what consequence to Australian publishing and authors?  many, if not most, Australian-authored books serve mainly an Australian audience.  as such, throwing them to the ‘wolves’ of USA-based authorship deals, whose figures are based on the assumption you’re aiming for the USA or UK-sized markets, rather than Australia’s comparatively minuscule market, just doesn’t add up to a viable income.

having lived through, and successfully come out the other end of REDgroup Retail’s administration period, i’ve become keenly aware of how easy it is to destroy a business – even a profitable one, and how difficult it can be to re-establish it.  my involvement was merely as a minor creditor, a supplier of IT consulting services to one small business within REDgroup.

despite being a viable entity, the liquidity it needed to see through its next 12 months disappeared last February, never to be seen again (and, surprise surprise, none of those ultimately responsible for REDgroup’s pathetic failure, nor those who owned it, were held accountable or liable for is major debts – everyone else, including me, had to pay for their failure as supposedly competent capitalists).  what followed was a nervous six months of limbo and delicate negotiations to find a new owner for this theoretically profitable business, so long as their pockets were deep enough to fund it over the hump of its annual income cycle.

but it wasn’t just the REDgroup group of companies threatened (and most of them liquidated), and not just small-fry creditors like me effected – it was the entire Australian and New Zealand book and calendar retail ecosystem effected.

this is why i get rather pissy when ideologues like Bob Carr (and several “you tell ’em, Bob!” fans on his website) blithely condemn Australian book publishers, authors, and printers to dire and immediate threat, simply to achieve a “free market” economic ideology (removal of the PIRs) – despite existing in an industry where there is no such level playing field to start with, without coming up with an actual, demonstrable solution or alternative means to support Australian publishers and authors.

sure, eBooks and offshore online retailers (of physical books) are taking an ever-larger bite from Australian publishers & authors lunches anyway, and will – probably within 5 years – kill many of them.  but what’s the point of abolishing the PIRs, other than to THEORETICALLY lower Australian book RRP prices (far from guaranteed, given the New Zealand experience)?  who in Australia benefits from forcing this change in one short sharp shot, when the passage of a few short years will afford at least the opportunity (admittedly no guarantee) of a more organic adaptation of the industry to the quickly shifting landscape of book retailing?  why not give the Australian book industry the opportunity to get its eBook shit together, and allow eBooks several more years to overtake paper books sales, in a way that’s viable for Australian publishers and authors within the scale of Australia’s market?  by then the PIRs will be irrelevant anyway, but the industry will at least have had the years needed to transition.

 





the future of calendars

7 04 2011

“I’m not used to paying for calendars like you do here in Australia”.

Past

In one simple innocent statement, my partner highlighted the outstanding success of applying “pop-up retailing” to calendars, first brought to Australia in the mid-90s by XXXX XXXXX, licensing the USA-based ‘XXXXXXXX XXXX’ brand and seasonal pop-up retailing concept.

Back then, and apparently still in many countries, wall and desk calendars were either low-value things that businesses gave away to their customers, a cunning exchange of vaguely themed utility for under-the-radar advertising; or “high end” products in niche retail outlets.

Nowadays, calendar retailing is worth several tens of $M (in Australia), forged in large part by XXXX XXXXX’s tireless efforts to convince shopping mall managers to allocate open floor space for short term rental where – voila! – overnight in October/November a ‘kiosk’ appears at your local mall lined with every type of calendar you could possibly want.  They made easy gifts, Christmas ‘stocking fillers’ for those whom you just CBF’d buying anything more meaningful.  I’ve received a few over the years!

The trick to getting people to part with up to $25 per calendar, where previously they were free from your local mechanic / dentist / etc – is personalisation and self-expression.  The burgeoning range of wall and desk calendars catered to almost every social niche, from every breed of faithful dog and fluffy cat, to side-splittingly funny Gary Larson cartoons.  A calendar hung in the home or office signalled to others what you were ‘into’, and provoked conversation.  Oh, and you could also record what you had to do next week – if you remembered to look at it.

Present

However I believe that gravy train is slowly running out of steam.  I have no insider knowledge of sales or returns, but my hunch is they’ve been either plateaued or been slightly falling for a few years, a drop that’s either been masked by XXXXXXXX XXXX’s progress toward market saturation (geographically, the number of stores open each Christmas retail season), or unfairly attributed to the 2008 GFC & low consumer confidence statistics.  Or both.  I believe there’s another – perhaps bigger – culprit.

We’re nearly 4 years into the smartphone boom, heralded by the Apple iPhone first available in June 2007.  Until then Palm Pilot, Windows Mobile & Blackberry PDAs & smartphones were the sole preserve of geeks &/or geeky businessmen.  Among countless other things, a smartphone gives you a calendar that typically syncs with your desktop/laptop computer(s) including your corporate email/calendar/contacts system, and actively reminds you of imminent appointments.  Add the outstanding success of the iPad a year ago, followed by viable competition to the iPhone (Google’s Android, Palm/HP’s WebOS, Blackberry, Windows Phone 7) and “suddenly” a whole lot of people have a lot less reason to record their plans on a traditional calendar trapped on a desk or nailed to a wall, especially those intended for the office or home-office.

This ubiquity of high-tech calendars has only just begun, and I believe signals the beginning of the end for physical paper calendars.

Future

Sourcing calendars from publishers all over the world, XXXXXXXX XXXX is justified in having the tagline “The Best Selection Of Calendars In The Known Universe”.  But as the retail end-point for many calendar publishers and image banks, XXXXXXXX XXXX’s ability to capitalise on that imagery needs to move with the times – into the digital space.

XXXXXXXX XXXX needs to tackle the smartphone, pad / tablet / slate, & computer calendar reality head on.

Other than the same disease that’s beset most old-media for the past decade, there’s nothing preventing XXXXXXXX XXXX from creating their own software calendar ‘apps’, featuring the same imagery from their paper counterparts.  As a major multi-national paper calendar retailer, they already have the relationships with the calendar publishers & image banks necessary to garner trust to take this step into the digital domain.  It isn’t just XXXXXXXX XXXX who stands to rise or fall on this issue, it’s the entire ecosystem of paper calendar publishing.

Imagine a smartphone app that features all the crowd-pleasing imagery that modern paper calendars are known for, seamlessly integrating into the phone’s built-in calendar system (that syncs with your desktop/laptop computer or office groupware system).

People want to customise their smartphones for exactly the same reason they were willing to blow $25 on a dozen sheets of paper with cool pictures – especially given the ubiquity of Apple’s one-size-fits-all iPhone & iPad where there’s zero ability to ‘theme’ the built-in calendar app.  Part of the appeal of ‘jailbreaking’ an iPhone/iPad is the ability to customise the UI, and – for better or worse – Android and other smartphones offer that ability to customise.

If XXXXXXXX XXXX doesn’t take the lead and bring great themed imagery into digital calendars, someone else surely will.





Seeing REDgroup – Part 4 – A Perfect Storm

8 03 2011

A Perfect Storm

The failure of REDgroup is ‘A Perfect Storm’ writ large.  They were saddled with major debt right form the start, have been financially squeezed from every corner, but more than anything else they’ve compounded their problems with a sequence of bad decisions made by “bovver-boy” managers installed at the expense of losing their inherited experienced staff, thinking that the book publishing and retailing industry would yield to corporate thug tactics, or that consumers would be the slightest bit interested in buying barbecues from Borders.  One could argue that PEP made a mistake even buying the beleaguered (Borders) chain in the first place.  Alas, 20-20 hindsight comes easily.

Books are a sacred miracle of human evolution, representing that quantum leap from storing information only in our heads to be re-told to our descendants in stories, song and teachings, to miraculous devices that are easily and cheaply copied with fidelity, allowing an author, perhaps dead millennia ago on another continent, to speak directly into our head.

But where we buy books (and many other things) from is anything but sacred – most of us don’t give a toss, we just want to pay a fair price, and if Amazon et.al. can sell & ship it to me for up to 50% less than Borders or A&R can, where do you think I’m going to go?  And if I can have a book without a single tree being felled… hello?!?

It was this ‘revolution’ in book publishing that was partly responsible for lifting of the veil of the Dark Ages, a fundamental shift in humanity’s course.  Why should a significant refinement in how books are made, delivered and read also not have a significant impact on society again now? It’s not like I have a vendetta against bricks-n-mortar book retailers, but we simply don’t need as many of them as we used to, and will continue to need less of them as more people buy online and switch to eBooks.  Blacksmiths and shoe repairers died out because we didn’t need them any more.  So too will many categories of brick-n-mortar retailers, and hopefully coal miners.  That’s unavoidable progress.

REDgroup isn’t the first retailer to face the 21st Century and fail.  It won’t be the last.  But relative to its book retailing peers, it fell *now* because it made a bunch of bad decisions by people who didn’t understand the subtle, respectable, low-profit-margin art of bookselling.

And I’ve learned a lesson in being dependant, albeit indirectly, on an Old Media business failing to meet the challenges of the 21st Century.






Seeing REDgroup – Part 3 – A Tale Of Two Brands

8 03 2011

A Tale Of Two Brands

Angus & Robertson have been around way over a century (albeit with a litany of former owners in its more recent decades), with a long and respected reputation for selling quality books in a demure manner by demure middle-aged ladies wearing sensible shoes in demurely designed book stores.  From cities to countless regional towns, they brought quality books to every corner of Australia, the Everyman’s bookseller.  They’re classic Old Media, and they sold just one product category, and – until the last several years – did it fairly well.

Borders, the hip young USA brand that Gen-X & younger oozed over in the 90s and early 00s for its multimedia retailing tour de force – not just a massive range of books, but music (pressing a few buttons to sample any CD on headphones was a revelation!), DVDs, glossy magazines & more, in large, plush, comfortable stores with its very own cafe, seemed to take the book retailing world by storm.  Clearly Borders was commoditised American economic imperialism propagating across the world like a virus, but unless you were wedded to your local indie bookstore and studying a double arts degree, visiting Borders was like a guilty pleasure, but without the guilt.

The only way these two could be less different would be to compare them to Woolworths or KMart, or an indie one-store bookshop up the proverbial street, whose rickety floor-to-ceiling shelves feel like they’re about to collapse in a plume of dusty old-school dignity.  But despite their obvious differences, two pillars – the oldest and the newest – of the Australian book retail world have suffered the same fate at the same time.  What on Earth went wrong?

When Borders entered Australia in the late-90s, the two were genuine competitors with unrelated owners, and quite different business models.  But for individual reasons, both came under the ownership of Pacific Equity Partners (PEP), who formed REDgroup Retail to hold them, alongside Whitcoulls in New Zealand (and other sundry non-book entities).  By this stage, the wheels were already wobbling.

My guess is these two very different businesses were originally seen as complementary; A&R serves the Everyman, and Borders served lattes to the hipsters.  Unfortunately the devil is in the detail.  Borders AU/NZ/Sing were already in serious debt when snapped up by PEP, and A&R were headed down the same path.  Not surprisingly, two negative cash flows do not make for a positive cash flow, and under this growing mountain of debt (now totalling some $130M !!!) some truly horrible things have been done to both brands in a desperate futile attempt to stem the flow of borrowed money.

There’s been a bookshelf of words written this past week about REDgroup entering voluntary administration & who’s to blame.  Some of them hold water, some of them are utter nonsense, and some I’m really not remotely qualified to comment on.  Fell free to tell me which ones I got wrong!

  • Much hoohar has erupted over the claim by REDgroup’s CEO that the parallel import restrictions were a significant contributor in REDgroup’s demise.  However, given that (a) many of their books were marked ABOVE the Australian RRP (ie. they can’t have been too concerned about discounted books from offshore retailers), and (b) REDgroup’s own submission to the Productivity Commission in 2009 recommended KEEPING the PIRS, this is all clearly bumkum smokescreening.  According to Henry Rosenbloom from Scribe Publishing, the US and UK don’t allow parallel imports either, and if Australia were to do so it would have severe implications for local publishers, authors and printers, to the benefit of their overseas counterparts.
  • That GST should be applied to offshore imports, or be exempted from certain domestic retail categories, to “level the playing field”. This one’s gotta be the ultimate scapegoat, and Gerry Harvey had his hat handed to him in the court of public opinion in January this year trying on this furphy.  Suggesting that some select few endangered species of the Australian retailer genus should be GST-exempt is mind-boggling.  AS IF the Australian Government is about to do away with a major component of its GST income – the GST targets the retail level!  Online retail – from both national and offshore retailers – has steadily grown in the last decade from obscurity to significance.  In 5-10 years when I can try on a digital pair of jeans on my digital avatar and check for proper fit & see what they’ll look like from a virtual mirror on my high-resolution monitor, or point my smartphone at the corner of the room to project an image of a new sofa to see if it’ll fit in my room, and click a button to have it delivered, clearly the scope of what can practically be bought online is only going to grow, so why on earth would the Government set a precedent for slitting its wrists & slowly bleeding to death?
  • That too much of Borders stock was inappropriate for Australian readers’ tastes.  Maybe.  As Patrick Carr says on Newmatilda.com, Borders “sacrificed profitability for market share. They poured huge money into extensive stockholdings. Their hope was that if they stocked everything, shoppers wouldn’t look elsewhere.”  Unfortunately that didn’t work out so well, and I’m guessing that’s behind a lot of the $130M about to be written off by banks, publishers, and other creditors (everyone except their owners, PEP).  Whilst it was a correctable problem, paying off the debt from that catastrophic error when it’s already a tough market obviously wasn’t possible.  But it doesn’t explain Angus & Robertson’s equal lock-step demise…
  • That the honourable centenarian Angus & Robertson have been disrespectfully relegated to bargain-bin & best-seller-pulp status, undermining the value of their time-honoured brand.  If you narrow your range to pulp, don’t be surprised when customers buy pulp for a fraction of the price from Woolworths or Amazon/et.al.  But how did that happen?  Perhaps extorting smaller local publishers for an additional $2.5k to $20k to stock their books might’ve had something to do with them deserting the once respected chain, leaving A&R without unique compelling product?
  • There’s just so much more entertainment available now, and so much more competition for our disposable dollar & attention.  Even a mere two decades ago we consumed media distributed by news papers and magazines, TV, movies, music (vinyl/CD), and that was about it.  Computer/video games were niche, and there was no (recognisable) Internet/WWW.  Nowadays we have a smorgasbord of tech to keep us entertained & distracted on a whim anywhere, and all of them are seriously challenging the old-school old-media business models of physically-distributed media with territorial copyright licensed to 3rd-party distributors, or highly regulated & gate-keepered traditional electronic media.  Whilst the pie has grown much larger along with our prosperity, the number of ways that entertainment pie is now sliced has exploded.  We are reading less books.
  • No one’s talking about this one, but it can’t have helped matters that REDgroup made the tragic mistake several years ago of being convinced that SAP would be a good thing for their business IT infrastructure.  Surely a swish new world-class enterprise management system would make things better, right?  Did no one at REDgroup do their homework and read about the litany of over-budget & over-time SAP implementations scattered across the world in the previous decade??  Books have been written and websites dedicated to documenting their spectacular failures.  As other smaller entities in REDgroup came to make major IT infrastructure decisions in recent years, SAP was given a wide berth, for fear of crippling their own business with a grossly expensive and agonisingly slow development cycle.  Aside from that, any IT department that has a two week waiting list to delegate an internet domain name for their own online ecommerce store (something that can be actioned in 5 minutes) has way bigger problems than being duped by blowhard SAP salesmen.
  • eBooks & eReaders are taking a share. Yes, but I suspect this one’s a trivial component dwarfed by the other factors, but no doubt it’ll grow into a major additional bite in the coming years.
  • Let me drop two dirty words in the book industry: self-publishing and eBooks.  Thy time approaches.

 





Seeing REDgroup – Part 2 – The Face Of Things To Come

8 03 2011

The Face Of Things To Come

I started ‘blazing’ the online consumer trail in 1997 – 14 years ago – when I bought books from Amazon.com, and a nice but obscure brand of chocolates for my chocaholic sister for Christmas that same year – which I thought was pretty nifty, but she thought was a little odd, gingerly tasting the first chocolate as though it might be poison.

Despite all the posturing to the contrary (by retailers & luddite consumers alike), there’s a heap of stuff you can confidently buy from reputable online retailers, Australian & overseas, many of whom DO offer genuinely good service, without needing to actually see, touch, try on, or spend any time whatsoever in mind-numbingly sterile malls offering the same narrow set of brands everywhere.

Until the early 2000s, Australian Customs *did* levy import duties on some stuff I bought overseas.  I don’t know what the dollar amount threshold was, but when combined with the cost of shipping from overseas, and the exchange rate below $0.60 to the US1$, it usually made it a more expensive proposition than shopping locally, and thus relegated offshore retail to stuff you just couldn’t get locally.

But that world is gone.  For unrelated reasons the US & AU dollar are virtually parity, international shipping can often be quite reasonable, and there’s now no import duty or GST applied to imported goods totalling less than au$1000.  Now I can go on a clothes or sneaker shopping spree – online – and have several hundred dollars worth of stuff (which would cost anything up to double from Australian bricks-n-mortar retailers) and have it all shipped to me for $20-50, still making it a clear financial win.

Is it wrong that overseas retailers don’t have GST applied to their sales?  Absolutely.  I mean c’mon!  In this globalised age where anyone can buy stuff from anywhere else on the planet so easily, why shouldn’t the Government apply GST?  A better question is why don’t they.  My theory is in the ideology of the GST itself.  The GST forced nearly every Australian business to become a tax collector for the Government.  It spread the administrative burden far wider (though about the same thickness for all), whereas the previous Wholesale Sales Tax regime involved at least an order of magnitude fewer Australian businesses and virtually no individuals.  Clearly corralling retailers across the planet into becoming GST collectors for the Australian government would be Mission Impossible (even if legal), so having it levied by Australian Customs at the import waypoint is the only practical option, basically slapping an invoice on every box before local delivery.  With such a cavalier attitude to turning every Tom, Dick and Harriet businessperson into a GST collector for the Government, it’s no surprise that the (Howard) Government wanted to divest itself of the administrative burden of applying and chasing import duties from a strongly growing citizen import tendency.  A decade ago Amazon was just a distant blip on the radar.  Now, with zero import duty/GST and a steadily strengthening AU$, it’s a serious bite out of not just local retailers’ income, but Government’s too.

But lets not make the mistake of thinking the lack of GST applied to consumer importation accounts for the attraction of buying from offshore eretailers.  It doesn’t.  As I said above, the price of much of the stuff I buy offshore can be nearly half that of local retailers.  Even the addition of 10% GST, or more, wouldn’t level that ‘playing field’.

In any nationally competitive industry, prices stabilise at a value that lets all the links in the retail chain make at least a workable profit.  Australia is a small population, spread out over a massive continent.  Out retail prices reflect primarily the ‘economy of scale’ of our comparatively tiny population, and often the cost of shipping product over our vast distances to tiny towns.  So when Europeans and Americans come here and bitch about the price of everything, well, that’s in large part because they come from a country/region with a much higher population, and population density, among other factors.  Get over it.

Maybe you’re more a Readings type of bookworm, one of the few who likes to go to a bookshop who actually reads through several pages of a book, shake hands with the author, AND then buys it from the shop at whatever price they decide to charge.I’m not.  I buy books based on recommendations from my social network, reviews, and occasionally author reputation, in which case I don’t need a physical shop to visit.  Seems I’m in good – or at least voluminous – company.

The reality is that so much of what we buy has become so commoditised, we don’t care where we buy it, “value adding” is often irrelevant, we just want it for a fair price, and we’d especially prefer not to pay the inflated price of faux-discount retailers who use expensive TV advertising.  How can all the existing bricks-n-mortar retailers with expensive mall rents, extensive multi-site IT & POS infrastructures, and a vast staff with structured management spanning a state or country ever compete with a website operated from an ‘invisible’ office-with-warehouse out in a cheap suburb with no public shareholders to please?  Ruslan Kogan is laughing all the way to the bank on this business model!