Angus & Robertson sent a letter to 40% of their suppliers demanding cash payments and rebates as a condition of continued business. The scandal broke at
A friend describes it as “Bookselling, The MBA way”. This is bound to be one of the case studies I’ll use in my MBA.
Here is the text of the letter for the screen readers and the blind:
Angus & Robertson
30th July 2007
Unit 2 / 17 Rodborough Road
I am writing to inform you of some of the changes to the way we manage our business.
We have recently completed a piece of work to rank our suppliers in terms of the net profit they generate for our business. We have concluded that we have far too many suppliers, and over 40% of our supplier agreements fall below our requirements in terms of profit earned. At a time when the cost of doing business continues to rise, I’m sure you can understand that this is an unpalatable set of circumstances for us, and as such we have no option but to act quickly to remedy the situation.
Accordingly, we will be rationalising our supplier numbers and setting a minimum earnigs ration of income to trade purchases that we expect to achieve from our suppliers.
I am writing to you because TOWER BOOKS falls into this category of unacceptable profitability.
As a consequence we would invite you to pay the attached invoice by Aug 17th 2007. The payment represents the gap fro your your business, and moves it from an unacceptable level of profitability, to above our minimum threshold.
If we fail to receive your payment by this time we will have no option but to remove you from our list of authorised suppliers, and you will be unable to complete any further transactions with us until such time as the payment is made.
I have also attached a proforma for you to complete wand return to me, with your proposed terms of trade for our financial year commencing Sept 1st 2007. We have the following expectations:
All agreements contain a standard rebate, a growth rebate and a minimum co-op commitment to enable participation in our marketing activity.
Growth rebates activate as soon as our purchases with you increase by $1 on the previous year.
All rebates are paid quarterly for the previous quarter’s performance, you must make sure that your remittance, with calculations, is received by us by the 7th of the month following the preceding quarter. Any remittances not received by this date will attract a daily 5% interest charge.
I am also including a copy of our ratecard, and our marketing calendar, to enable you to begin planning your promotional participation now.
If you would like to discuss this with me in more detail, I am delighted to confirm an appointment with you at 1.00pm on Friday 17th August for 10 minutes at my offices at 379 Collins St, Melbourne.
ARW Group Commercial Manager
Enc: A&R Ratecard
A&R Marketing calendar
Trading Terms Proforma