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REDgroup insolvency a further challenge for Kobo

It’s been a dismal 24 hours for global bricks-and-mortar booksellers. A day after U.S. chain Borders entered bankruptcy protection, Australia’s largest bookstore chain, Angus & Roberts, entered administration, putting in question the future of its 180 stores. The Australian Borders (which is entirely separate from the U.S. Borders) and New Zealand’s Whitcoulls chain are also in jeopardy.

All three booksellers are owned by REDgroup Retail, which was placed into voluntary administration by the private equity fund Pacific Equity Partners, which has owned the retail conglomerate since 2004.

While the news is a further sign of instability for print books, it could also cause some disruption for Canadian e-book retailer Kobo. Both Borders U.S. and REDgroup are part owners of Kobo and sell the Kobo eReader in their stores; in the short term, it seems inevitable that the device will be sold in fewer physical retail outlets. Kobo, meanwhile, has assured customers in the affected countries that the insolvency of REDgroup and Borders will have no impact on the availability of Kobo e-books.

The Australian cites “a massive downturn in consumer discretionary spending” as the cause of REDgroup’s insolvency, but that isn’t the whole story. Tax-free e-retail and the search for cheaper online products “ described by The Sydney Morning Herald as “the Australian consumer’s love affair with online shopping” “ was also a major factor, with Australian Publishers Association CEO Maree McCaskill pointing to the impact of the strong Australian dollar. “While the Australian dollar is high, a lot of Australian consumers determine that they will buy whatever they need online and from overseas suppliers,” she commented in the Guardian.

REDgroup chairman Steven Cain also pointed to restrictions on parallel importation “ the practice of retailers buying around local suppliers with exclusive territorial rights “ as a cause. The Australian parliament recently shot down a proposal to lift restrictions on parallel importation, a move the Canadian Booksellers Association has also called for.

The insolvency of REDgroup does not come as a surprise to Australian publishers after the retail conglomerate reported a $43 million loss last year and laid off several senior staffers.