David C. Cook Canada Purchased by Senior Management Team

David C. Cook Distribution Canada of Paris, Ontario has been sold. The announcement came Tuesday (1st) afternoon in a press release from its former U.S. parent in Colorado Springs. Many of us had trouble opening the release so I’ve copied it here in full:

DAVID C COOK SELLS CANADIAN DISTRIBUTION OPERATIONS

Colorado Springs, CO (March 1, 2016) – David C Cook’s Chief Executive Officer, Cris Doornbos, announced the Canadian management buyout of its Canadian distribution division, located in Paris, Ontario, by Executive Director Greg Tombs and Financial Director Hardy Willms. The sale is effective February 29, 2016.

The Canadian distribution division has been resourcing Christian and general market resellers and the church for over 30 years and will continue to provide a national full service sales, marketing and fulfillment operation. David C Cook’s resources will continue to be represented along with the other partners in Christian publishing, music, media, cards and gifts the organization already serves.

“Greg and Hardy have been competent leaders over the years. They have a real passion for the dissemination and distribution of Christian resources for the long haul. We are confident that this purchase by Greg and Hardy will result in a long term continuation of their effective service to the Canadian market,” Doornbos stated.

“During this transition, we remain committed to each and every customer and client and will ensure the high level of customer service everyone has come to expect from David C Cook Canada. Every effort has been made to make this transition as seamless and successful as possible. A strategic plan looking forward to 2020 is already being executed Greg and Hardy.”

Tombs said, “Hardy and I are delighted to have the opportunity to continue to serve the CBA trade, general market and churches in Canada with the books, curriculum, music, cards, gifts and church supplies that Canada needs for ministry and discipleship. We are pleased that we will continue to have a great working relationship with David C Cook as we continue to distribute their curriculum, books, and Integrity music in Canada.”

This is independent of another story we reported on earlier the same day of the selling of Augsburg Fortress Canada to the same owners.

Augsburg Fortress Canada Sold to David C. Cook Canada

Christian bookstores in Canada now have one less organization in the supply chain. Augsburg Fortress Canada has been purchased by David C. Cook Canada, effective March 1st. The sale includes all of the existing inventory and distribution rights for everything AFC carried including:

• Augsburg
• Fortress Press
• Westminster John Knox
• Abingdon
• Abbey Press Gifts
• Anglican Book Centre
• United Church of Canada Publishing
• Penguin/Random House religious titles (CBA rights only)
• Waterbrook/Multnomah (CBA rights only)

Norm Robertson will continue to call on mainline Protestant and liturgical accounts representing the former AFC product line and any existing Cook products those stores may find of interest. One other former AFC staff member is transferring to Cook.

This also adds a curriculum line and VBS brand to Cook Canada’s already huge stable of Christian Education resources. (The company recently picked up the former Standard Publishing’s Sunday School curriculum.) With Abingdon, it also gives Cook a virtual monopoly on church bulletins and ancillary products.

Not to be overlooked in the deal is the strong success many stores are enjoying with Abbey Press giftware, which will also now be stocked and shipped from Paris, ON to Canadian accounts and will only make the brand more accessible to stores here. 

Anglican and United Church denominational products include a mixture of trade titles and items sold to stores on a short-discount basis.

The sale came about after Augsburg Fortress in Minneapolis had been seeking to shut down the Canadian operation if it could not find a buyer. The AFC retail store in Kitchener, ON has closed and is not part of the transaction. 

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This story is independent of another announcement the same day of the sale of David C. Cook Canada to two members of its Canadian management team.

 

Burlington Christian Bookstore Adds 2nd Location Devoted to General Market Remainders

Just when it seems that all we hear are stories of people either giving up on bookselling or feeling forced to throw in the towel, today we have a story of a store that’s actually expanding its bookselling presence in its home city.

Last month Jack Huisman and the team at Family Christian Bookstore — one of the largest Christian bookstores in Ontario — located in Burlington (a city of 176,000 in the Greater Toronto Area) opened the doors on a new project called Froogal Books and More just one building, six retail stores, and a few short steps south of its present location on one of the city’s busiest streets.

I need to pause here and say: That’s a great logo. I see franchise possibilities written all over this!

The website itself is powered by Book Manager and offers full online shopping possibilities which on the weekend boasted 4,022 titles of which 3,728 are described as “Bargain Books” and — this I found very interesting — 116 are listed as “Regular Stock,” which includes everything from Goodnight Moon to Stephen King to the To Kill a Mockingbird sequel. (Not all items in this category were book items.) Surprisingly, only 71 books were listed as “Religion” and these were mostly titles with great general market crossover potential. The new store is clearly meant to have a very distinct identity.

The website currently contains a photo archive which chronicles the journey from taking possession of the store at the end of June to completion and grand opening at the end of August. We haven’t yet seen the store in person, but hope to visit late October.

The store’s Facebook page maintains an unusually clean and uniform layout presenting the latest titles on offer.

Would your store consider something like this?

Those of us who deal with remainder product already have some expertise in this part of the larger book market. (Besides trade books and remainder books, other branches of our industry include the premium or specialty market, the textbook market, used books, antiquarian books, the self-publishing or vanity press market, and books like the Harlequin titles which are part of the periodical or magazine paradigm. Then there are trade market specialties like sci-fi stores, cookbook stores, children’s bookstores, etc.) Some of us already have a breadth of supplier relationships that would make this possible. We already know our local market well and the possibilities for partnerships and media with the best advertising reach.

On the other hand, for our family it would mean investing in products we’ve never committed dollars to before, which might include things that would raise the eyebrows of clientele in the other store. I’m sure that the team at Froogal bring their family values to the new store, but you would still want to keep the business units and customers separate.

The other challenge is running an off-price, general-market, liquidation type of store but staying closed on Sundays, as Froogal currently is. (Salvation Army and Bibles for Missions stores are closed Sundays, but they’re in the Thrift Store category selling used goods.)

On the other hand, diversifying within the same industry creates a number of synergies, not to mention in this case having a second store that’s less than a minute walk from the first. The “and More” in their name also leaves open the possibilities of adding any other liquidation commodity that makes a good fit, though trial and error may define what that fit looks like.

We’ll be watching this with great interest.

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Family Christian Books in Burlington is in no way related to the Family Christian chain in the United States. Depending on who you are dealing with, the remainder book market may includes discontinued titles, publisher overstock and (sometimes) hurt (slightly damaged) books.

 

Canadian Customers Not Prepared To Pay More

It’s not going to work this time.

The market has changed. Competition is fierce. Customers are much more price-conscious. Most important, Canadian customers have become accustomed to seeing US/Canadian pricing which is approximately the same.

The frightening thing about the picture above is that the wholesaler has made no effort to cover up the U.S. price, which is what I think I might have done in the same circumstances. They don’t see the problem; they don’t see an issue; they don’t have to deal face-to-face with customers.

Canadian distributors are caught in a situation devised by U.S. literary agents — i.e. lawyers in disguise — who decided a long time ago consider Canada part of the U.S. market insofar as it applies to royalties. We’re just another territory like Puerto Rico or American Samoa. So every book sold here that’s of U.S. origin has a price that rises and falls with the value of the Canadian dollar. (Or more accurately, the  difference in value; many of the so-called ‘drops’ in the CDN buck are actually bolstered investor confidence in the U.S. economy.)

Customers are caught in the middle of a war they don’t know exists.

So why don’t distributors here speak up on behalf of retailers and consumers? If there is an impact to the present price increases here — and I believe there will be a measurable one this time around — they may be forced to.

Yes, Canada has a more robust economy. Yes, there is a sense in which retailers here need higher MSRPs in order to cover higher rents and higher labour costs. But all the customer sees, when they look at the example pictured above is, “Why do I have to pay $3.50 more?” That’s 22% (21.8) and as of noon today, buying a US dollar costs $1.135 (posted rate of 1.11 plus 2.5% bank charge).

The consumer thinks, “Dollar is 11% higher; book is 22% higher.”

The Canadian dollar has actually been rising on five of the last six trading days. (It’s down today, though.) Did suppliers overreact by switching to a 20% conversion? How did they all (initially) pick that same number? (David C. Cook backed off its original conversion, $14.99 books that had jumped to $17.99 are now at $17.50.)

We just don’t need this. Not now. The timing is not good.

We need a Canadian market price.

We need Canadian distributors to speak up for us and demand a fixed Canadian market price.

Amazon Becomes First Foreign Owned Book Distributor in Canada

Back on March 9th, we reported here that Amazon was wanting to hire its first ever Canadian employee and ship its first book from a distribution base located on Canadian soil.    Last week, that desire became reality.

The Globe and Mail reports who capably handled the earlier story — Omar El Akkad and Marina Strauss — continued with it on April 12th; choosing a quotation or two wasn’t easy; these are highlighted paragraphs only, you should click here to read the entire article:

Ottawa said it will allow U.S. on-line bookseller Amazon.com Inc. to set up its own distribution centre in Canada, a second major move in recent months by the federal government to effectively override foreign-ownership rules.

The ruling allows the Seattle-based firm to cut its costs significantly, prompting heavy criticism by local booksellers who say it will allow Amazon to price Canadian businesses out of the market…

…“This signals a government of Canada policy change confirming that a company no longer needs to be Canadian-owned to sell books in Canada,” said Heather Reisman, chief executive officer of Indigo Books & Music Inc.

The government’s approval of Amazon’s plans follows a surprise December decision that opened the door for Globalive Wireless Management Corp. to begin operating a wireless network in Canada, overturning a ruling by the Canadian Radio-television and Telecommunications Commission that deemed Globalive to be a foreign company because of its Egyptian financial backing…

…Amazon.ca is a website that has no physical presence in Canada. Had Ottawa rejected Amazon’s shipping centre application, the government would have found itself in the untenable position of saying the company’s business runs afoul of Canadian rules, while at the same time allowing Amazon.ca to operate outside those rules.

Instead, the Conservative government secured a number of “commitments” from Amazon in exchange for approving the distribution centre.

According to Heritage Minister James Moore, those “commitments” include a $20-million investment in Canada…

…However it’s unclear how much of the $20-million investment is new money. In addition, many of Amazon’s commitments are vaguely stated, such as “increased visibility for Canadian books on the Amazon.ca Web page,” “increased availability of French-language Canadian cultural products” and “making more Canadian content available on the Kindle e-reader.” Neither the government nor Amazon supplemented these promises with hard numbers, or indicated when they would begin to take effect…

…Again, you’re encouraged to check out the entire story.

Meanwhile on Saturday, also at The Globe and Mail, columnist James Adams suggests much more is afoot:

…Still, the decision, announced Monday, is important, momentous even. It may be the case that the Conservatives were bowing to the reality that Amazon was already in Canada as an e-tailer (albeit working through a subsidiary of Canada Post, a Crown agency, rather than a retailer with hundreds of physical locations). But some are arguing the decision is nothing less than a reversal of the cultural protection policy that’s been in place since the Trudeau era. For Heather Reisman, CEO of Indigo Books & Music, the situation is pretty clear. This week’s decision “signals . . . a policy change,” she said in an e-mail. “[It confirms] that a company no longer need to be Canadian-owned to sell books in Canada.”

A change in culture policy?

…Heritage Minister James Moore would allow, during Question Period in the House of Commons… “We will create new Canadian jobs in Mississauga.” The same went for Paul Misener, Amazon’s vice-president for global public policy: “We believe that a local fulfilment center will enable us to even better serve our customers in Canada as well as our customers in other countries who seek Canadian books and other cultural products,” he told The Globe and Mail in a statement.

Could there even be more than one facility? In the United States, books are only a small part of Amazon’s retail offerings (a low-margin one at that) – and you don’t earn gross annual revenues of $25.3-billion, as Amazon did last year, by selling Dan Brown’s The Lost Symbol at a 42 per cent discount.

Over the years, Amazon has steadily increased its choice of wares to American consumers to the point that there’s pretty much nothing they can’t order – baby food, toilets, musical instruments, faucets, beauty aids, power drills and, of course, the Kindle e-reader. Asked about future plans to expand their offerings in Canada, an Amazon spokesperson would only say: “We don’t have anything to add at the moment – I’ll let you know should that change.”

Changes might not be too long in coming. Last December, when The New York Times asked Amazon.com chief executive Jeffrey Bezos, “What is your goal, exactly?”, he replied: “We want to have Earth’s biggest selection.”

Continue reading that piece here.

For our industry, Heather Reisman’s concerns are representative.   This is a selling out of Canadian sovereignty over a “cultural industry” and opens the floodgates for Borders, Books-a-Million and Barnes & Noble to look north for expansion; stores which carry a much, much larger percentage of Christian book bestsellers than our own Chapters; not to mention chains like Family Christian Bookstores.

Don’t assume that won’t happen.

Amazon Seeks Canadian Distribution Base

In what could prove to be the most significant story of the year for authors, publishers, distributors and retailers of all kinds of books, Amazon, which established a Canadian website in 2002, is now seeking to distribute its books from a Canadian warehouse.

This would appear to infringe on a longstanding Canadian position of “Cultural Sovereignty” designed to protect the book and music industry here.

Furthermore, if the government approves this, it would be somewhat powerless to stop Barnes & Noble, Borders and Books-a-Million from establishing an overt retail presence in this country.

Years ago, when I worked for the company that later became known as The Master’s Collection, Pilgrim Records U.K. had a financial stake in Pilgrim Records Canada, which, when the government became aware of it, forced the company to jettison their British owner or shut down.   International companies trading here have had to establish Canadian identities, such as Random House of Canada or HarperCollins Canada.

Big box stores like Indigo and Chapters exist here because Barnes & Noble can’t travel north of the border; Chapter’s shopping-mall incarnation, Coles Bookstore, means that the company has a virtual monopoly when it comes to book retail chains.   Some have argued that breaking that monopoly would increase competition, but Coles has exclusive lease agreements with every major shopping mall in the nation, and one expects that Indigo or Chapters has negotiated similar security with the developers of big-box- and power-centres.

Today’s Globe and Mail spells out the issues involved in Amazon story: (These are selected paragraphs only in a very thorough and recommended story…)

Canada’s booksellers are urging Ottawa to block Amazon.com from building a distribution network in Canada, raising the stakes in a showdown over government restrictions on foreign control of the cultural industry.

The Canadian Booksellers Association says it wants Heritage Minister James Moore to reject Amazon’s plan to open a new business in Canada, which industry insiders say is aimed at boosting the company’s competitiveness and giving it more control of its book distribution here.

The booksellers association warned the Heritage Minister that allowing Amazon to operate here would contravene the Investment Canada Act, which requires that foreign investments in the book sector be compatible with national cultural policies and “of net benefit to Canada and the Canadian-controlled sector.”

The rising tension between Canadian booksellers and Amazon underlines the paradox in federal policy that allows Amazon to run a virtual business – Amazon.ca – as long as it does not have a physical presence in the country.

For consumers, Amazon’s proposed new business could be a benefit if the e-tailer were to pass on operational savings to customers. The “fulfillment centre” it wants to launch is believed to be part of Amazon’s move to cut costs by moving shipping in-house. Currently, Amazon has a distribution deal with a Canada Post subsidiary.

In regulatory terms, the business is significant. If Canadian Heritage allows Amazon to proceed, critics claim Ottawa will set a dangerous precedent, opening the door to foreign ownership in a Canadian cultural industry.

If Amazon’s proposal is denied, the government will find itself in the difficult position of simultaneously saying Amazon’s business runs counter to Canadian cultural regulations, while allowing Amazon.ca to continue functioning with few restrictions.

Either way, Ottawa’s final decision – coupled with its recent plan to possibly open the Canadian telecommunications sector to more foreign ownership – may herald a fundamental reshaping of Canadian foreign ownership and cultural protection regulation.

Though Canadian rules prevent book retailers from being foreign owned, some foreign companies are key in book retailing. U.S. chains such as Costco Wholesale play a big role in Canadian book merchandising, sidestepping the ownership rules since they aren’t squarely focused on book retailing.

Continue reading here…

Reuters Canada news service also reports on the story:

Efforts to pry open the culturally sensitive Canadian media industry to more foreign ownership took a new turn Monday when Amazon.com sought federal approval to start a new business in Canada.

The application to Heritage Canada, if approved by the Ottawa, would see the U.S. online retailer establish its own fulfillment business here after using Canada Post for product delivery since 2002 to serve a Canadian version of its U.S. website…

…Beyond book-selling, Canada also regulates foreign investment in the phone and broadcasting sectors, both of which face changing foreign ownership rules and landscapes as well. The conservative government last week signaled it would look to open the floodgates to more foreign investment in these areas.

In an earlier story in The Globe and Mail, the same reporters, Omar El Ekkad and Marina Strauss, provided this additional background:

“It’s full of contradictions,” said Carolyn Wood, executive director of the Association of Canadian Publishers. “It does highlight how the meaning of national borders is changing in a digital world.”

Ms. Wood said Amazon.ca is subject to no restrictions. “It is essentially only a domain name,” she said. “There are no offices or warehouses. … They aren’t subject to any restrictions in terms of carrying Canadian content or anything else.”

When Amazon launched the Canadian version of its website in 2002, Canadian Heritage conducted a review of Amazon.ca. Ultimately, however, the department concluded that the Investment Canada Act didn’t apply to the website – thus allowing Amazon to enter the highly regulated Canadian bookselling industry. Canadian retail chain Indigo and the Canadian Booksellers Association (CBA) took the case to court, but to no avail.

The key argument that the Canadian Heritage review rested on was the fact that Amazon had no employees or offices in Canada. It currently has a Canada Post subsidiary handle its shipping in Canada, but that relationship was deemed a contractual relationship.

But the proposed establishment of Amazon Fulfillment Services Canada Inc. changes all that. Even though the new company likely has almost no impact on Amazon.ca’s relationship with Canadian customers or the way the website’s front end operates, it does represent a physical business in Canada – that technicality prompted Canadian Heritage to revisit the 2002 issue.

Additional coverage in The Bookseller here and here.

Meanwhile, Amazon in the U.S. has other problems on its hands today, dealing with the issue of the vast number of websites and blogs that are part of its affiliate program.   These bloggers and online sellers provide additional presence and visibility for the company and sometimes the alternative sites create the illusion of competition, when in fact all Google searches lead back to Amazon.

The issue concerns affiliates in the state of Colorado and the collection of state sales tax on products Amazon ships in from out of state.   Rhode Island and North Carolina also have strict online sales tax laws, and affiliates there had to be cut of as well.   Read more about that issue in this Yahoo News report.