CBA Industry Blog

Class-action suit targets e-book "Agency Model"

The “agency model” – a business strategy to protect the value of publishers’ content – has been challenged in a class action complaint filed Aug. 9 in the U.S. District Court, Northern District of California, by Seattle law firm Hagens Berman.

The suit alleges that Apple, its CEO Steve Jobs, and five publishers conspired to control e-book prices, some of which now are higher than hardcover book prices. The conspiracy was designed to thwart Amazon.com’s e-book market dominance, driven by its policies to sell e-books at or below cost to gain market share.

The suit contends that publisher agreements with Apple allowed the company to force publishers to discount e-book prices on bestsellers below certain minimum ranges “to compete with brick-and-mortar bookstores and competing online sites.”

The publishers – called the Agency 5 in the suit – are Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster. No Christian-publishing divisions or imprints are named in the suit as others are.

Random House was forced in March to “join the cartel [Apple] had helped to create to raise prices” because Apple banned the publisher’s titles from its online e-book store, according to the lawsuit.

Publishers are positioned in the litigation as forcing Amazon.com to adopt the agency model with help from Apple, even though Amazon had controlled 90% of the e-book market at the time and was taking market share by undervaluing content.

Apple and the named publishers colluded to increase prices to boost profits and force e-book rival Amazon “to abandon its pro-consumer discount pricing.”

The suit contends the agency model is unfriendly to consumers, and points out European, Texas, and Connecticut antitrust regulators are investigating the publishers and the agency model.

The suit seeks a jury trial and various claims for damages and attorney fees. 

Read the lawsuit.

 

 

Internet tax-fairness bill to be introduced

Senate Majority Whip Richard Durbin, D-Ill., is expected to introduce the Main Street Fairness Act today. The bill would enable states to require out-of-state sellers to collect sales tax whether they have a physical presence in the state or not.

The act supports a system set up in the 1990s to enable remote sellers to collect and forward tax revenues to states. The legislation would simplify a process that was so complicated the U.S. Supreme Court ruled in 1992 in Quill vs. North Dakota that retailers are required to collect sales tax from out-of-state customers only if retailers have a physical presence such as a store, warehouse, or office in the customer’s state.

The Main Street Fairness Act allows states that have adopted the Streamlined Sales and Use Tax Agreement – which was developed to simplify sales tax laws in response to the Supreme Court ruling – to require out-of-state sellers to collect sales tax whether they have a physical presence or not. The bill would cover all “remote sellers,” which include online retailers, catalog merchants and “1-800” offers on radio and television.

CBA Executive Director Curtis Riskey said, “The fairness act will level the playing field for brick-and-mortar retailers who suffer as much as a 10% price disadvantage in some states because of unfair sales-tax laws.” He said local businesses contribute to local economies with jobs and tax revenues that pay for police, fire, parks, and other local services that Internet-only retailers avoid.

The National Retail Federation’s Senior Vice President for Government Relations David French said the act is a congressional fix to a constitutional problem.

Click for more on the Main Street Fairness Act.

Comments?

 

It’s time to to worship God and preach the gospel …

I can no longer in good conscience continue to write about the stuff of this world and how it will make our businesses better without first writing about the things of Heaven and how desperately we need to return to being about these things and not that stuff.

My friends, our predicament reminds me of a passage in the Bible: “Then some Jews arrived from Antioch and Iconium and won the crowds to their side. They stoned Paul and dragged him out of town, thinking he was dead. But as the believers gathered around him, he got up and went back into the town. The next day he left with Barnabas for Derbe.” (Acts 14:19-20, NLT)

They came after him because why?

We got into this industry because of the transforming power of Jesus Christ and the impact it had on each and every one of our hearts. We certainly didn’t come into this industry to become wealthy by the world’s standards.

We came into it with zeal to change lives. In this, this type of posture doesn’t sit well with the opposing forces of the Kingdom of God.

So, the battle was on and now, here we sit. Or in some cases, here we lay upon the ground appearing dead. But, do you see what happened next to Paul? He preached the Good News and made many disciples.

My friends, do you feel like you’ve been stoned and dragged out of the city? Do you feel like you’re dead?

You may have remained steadfast all along, yet still you find yourself apparently dead. You may have lost your way at some point and perhaps were the ones who unknowingly cast the first stone, only sadly missing the fact that your very self was the target, and so you, too, find yourself lying there apparently dead.

Whichever the case, it’s not important how you found yourself apparently dead upon the ground. But do you notice what Verse 20 says? It says, “But as the believers gathered around him, he got up and went back into the town that he was dragged out of and left for dead.”

I believe it’s time that we gather and get back up to then return to our cities with that same zeal to worship God and preach the gospel. But no longer on our own…now together as one.

Gunnar Simonsen

(To see Gunnar's full column in Retailers + Resources magazine, register for a free subscription to the digital magazine.)

Gift sales: all the world's a stage

Three basic types of gift and specialty products bring customers into the store. Retailers should review these products like a movie director, as every product category has actors with “cha-ching” potential.

 Like a blockbuster director, retailers should envision the role each product will play and decide how it will perform to meet their needs. In a product audition, “To be or not to be” is the question that’s answered by the role it will carry out in the store. Retailers should select store merchandise in terms of the quality of their performance and the emotional/psychological impact they can have on their intended audience.

 Sherry Morris of Carpentree sees the process as a three-act play.  Simply put, every product sold in Christian retail has a speaking part. In every blink of the eye, the customer receives a message from product “speak.” At some level, customers feel the psychological and emotional impact of what the products say about the store.

 Knowing how each gift fits into the play -- a product strategy -- helps retailers both make good buying decisions on core inventory as well as plan for seasonal and other gift needs. To maximize each item’s potential for increasing profits, set the stage with a good strategy.

Read her column in the latest Retailers + Resources magazine, sign up for a free subscription.

 

Message to honored guests after successful ICRS

“It’s hard to believe that ICRS was wrapping up a week ago! All of us at CBA enjoyed hosting you as our honored guests at the Show, and we hope you were able to meet all your business needs—and have time for fellowship, worship, and some fun in the process!

“Because we’re always looking for ways to improve the ICRS experience, we’d love to get your input on what you liked and what you disliked about ICRS 2011—and what you’d like to see next year for ICRS 2012 in Orlando, FL.

“Although we’ve already sent out more formal survey forms that we hope you’ll fill out and return to us via the Web (Attendee Survey, Did Not Attend Survey, Exhibitor Survey, Attended Training Survey, and Attended as Media Survey), I’d still like to hear from you personally about your experience at this year’s Show. You can send your comments directly to me at [email protected]. I look forward to hearing from you and learning what we can do to continue to improve ICRS for you and for the industry as a whole.

“And, I want to offer my sincere thanks to you for joining us this year at ICRS. You inspire me. Thank you for doing what you do! And if you couldn’t join us this past year in Atlanta, I hope you’ll be able to join us in Orlando. Please let me know what we can do to ensure you’ll be there with us July 15-18, 2012!”

By grace alone,

Curtis Riskey

Executive Director, CBA

 

“License Plate” receiving here for Christian stores

Spring Arbor lets you receive shipments with a bar-code scan, if your POS system lets you. Imagine receiving scanning boxes and then just shelving product with no manual check-off lists, no re-entry into the POS, no jerry-rigging electronic purchase orders to be receiving documents, and no manual re-checking when the invoice comes?

Spring Arbor Distributors and parent company Ingram Book Content Group has been successful in working with numerous POS systems to make it happen for Christian stores, including Booklog, IBIDie, Revelation Retail, PRAIZ, and ExtremePOS.

Terry Greer, manager of Ingram Data Services, said the company developed the required electronic data interchange (EDI) documents using the publishing industry’s transaction standards for the purchase order, purchase order acknowledgment, advance ship notice, and the electronic invoice. While the advance ship notice (ASN) has been in use for several years, it has been difficult to make it available to Christian stores because industry POS providers couldn’t make the integration happen.

Greer said accuracy rate in tests is above 99%, meaning it typically would cost more to find an error than receive the credit or pay for extra product. Each box in a shipment has a license plate, so if a box gets lost, the receiving data can’t upload and the ASN and Invoice won’t reconcile. If boxes arrive at different times, the scan still associates the box with the original purchase order. The purchase order is the controlling document in the pick-and-pack process adding a final accuracy check.

“The time savings in doing license-plate receiving is well worth any risk of loss from an incorrect shipment,” Greer said. 

“This really encourages a better environment for booksellers,” Greer said. “With shrunken staffs and thin resources, booksellers need all the help they can get to run as efficiently as possible.” 

The technology means less time in the back room and more time on the sales floor with customers, she said.

Greer said Ingram has worked hard to simplify the technology integration process, working with established standards and processes that can be adapted easily into POS technologies.

She said she hopes the ASN technology is just the beginning of the conversation with retailers. “We want retailers to be well informed about what’s available and we want to hear what else they need,” she sad. “Where can we help?”

See the full story in CBA's Retailers + Resources magazine.

Transformation and Relationship

After visiting with a number of Christian stores recently, a common theme runs through the
conversations: We’re doing everything right, but nothing’s happening.

Operating a business in today’s economy and technology-driven world is one of the most demanding challenges any person might take on. The traditional systems and processes may be honed to a razor’s edge, but they don’t seem to cut anymore. Something’s missing.

You’ve mastered your ordering cycle, but it seems that it doesn’t always align with our customers’ timing. You’re blogging, Facebooking and Tweeting, but birdseed isn’t paying the bills. What’s going on?

Retail has always been about trust. But today it seems to take more to gain that trust, and trust extends beyond just fair weights and measures. It’s about connecting on a heart level.

One of the saddest things I’ve heard when a retailer is in trouble is that there are no strong relationships with local church leadership. The store is thought of more like an adversary than a partner and not even considered.

Some of the barrier seems to be built on old-school marketing. It’s one-way messaging, not dialog and relationship. If the conversation only becomes price and item, we’ll lose in that context. However, if the conversation can move to ministry needs and common connection, this is where we can find alignment.

If you host a pastors’ breakfast as a marketing strategy, you might as well serve powdered eggs and cold toast. It’s like those boring time-share meals where you eat free in exchange for 90 minutes of commercial and a hard-sell pitch for dessert. If you host a pastors’ breakfast as a way to build relationship through your testimony of like mission and to hear from pastors about their needs, then even powdered eggs might become eggs Benedict. I might be stretching the analogy a bit, but the point is that one-way marketing and advertising aren’t going to build the trust you need at retail today.

Retailers generally are looking for ways to connect better with customers. However, while the metrics of impressions and exposures still may have value, it’s the ability to engage people on common ground and be a partner to help transform them into something they want or need to be that drives retail success.

In the church relationship, it must be about understanding a pastor’s needs and coming alongside in mission for the people you both serve. A good question to dialogue with a group of pastors is, “How can we win this city for Jesus? How can we collectively leverage what we have been entrusted with to change this community?” Just being a product supplier doesn’t work any more. Churches increasingly are decentralized with many decision-makers at larger churches, and both large and small churches face relentless cost pressures and time constraints. But they all have a need to build individual faith walks, to reach the lost, and help with the harvest without a lot of workers in the field.

The Christian store is an extension of the church in many ways. The obvious extension is the availability of many powerful resources that change lives. However, the value a store brings is matching those resources to specific needs, whether with and for the church or for Christians in general and then beyond to those who don’t currently profess a relationship. Your knowledge and expertise builds trust because you understand your customers’ needs and can select just the right resources to help them.

Your store also creates a sense of place, a location, and a destination that serves as a community hub where like-minded people can connect with each other. That might be a frontliner with expertise in a subject or product area, or other Christians who gather at your store to talk about local concerns in the church or in the community. Community builds trust in the sense of shared needs and passion, and enabling a customer to find a comfortable spot to fit or to engage in bigger-picture concerns, such as life transformations.

It’s very difficult to shift from the old one-way marketing delivery to a dialog and relationship. But when sales are down, a new brochure or a new ad won’t always be enough to generate the long-term relationship that sustains your community hub. In the new retail, especially for independent specialty stores like Christian stores, it’s about transformation and relationship, not about the purchase. The purchase comes as a result of the knowledge, trust, and engagement the store creates as added value, something that can’t be duplicated online or in a discount store. It’s not just about the cheapest transaction.

Knowing how to help your churches grow or fulfill their ministries will help you fulfill yours. Our help comes from the Lord, His joy is our strength, and our work is the fulfillment of His work. We’re in this together. 

Curtis Riskey
CBA, Association for Christian Retail
Executive Director 

Amazon challenged on unfair taxation

Two recent actions are showing governments and people are starting to realize Amazon is a big bully and growing at the expense of unfair business practices. The most recent is a Monday ruling by a Seattle federal judge who ruled that Amazon must provide enough customer data so North Carolina can collect long-overdue sales taxes from Amazon customers. The ruling follows a recent Texas case where the state charged Amazon.com owes it about $269 million in uncollected sales tax, including interest and penalties for sales from December 2005 to December 2009.

Amazon is collecting sales taxes in five states where it has nexus. However, in some, such as Colorado, the online predator fired local affiliates to avoid paying sales tax after a state law requiring such was passed.

Lost sales taxes caused by Amazon’s practices are the same funds that are requiring states to reduce services, lay-off workers, and raise state taxes to keep operating. Local businesses must pay sales taxes to support their local communities, but doing so puts them at a competitive disadvantage to Amazon and other online retailers who skirt sales taxes.

It’s about time states worked for business fairness and equity and stopped predatory tax-avoidance practices.

 

E-books & stores? Dragons have armor chinks

Digital music, e-books…it’s all the same, right? Technology drives content. The medium is the message. There’s no hope for brick-and-mortar stores in a digital world.

 

Not so fast. That likely isn't the case.

 

What Macmillan did recently in challenging Amazon’s e-book monopoly by changing the business model is the chink in the techno-dragon’s armor. It’s not a mortal wound to the flame-throwing Amazon, but it’s a spot to throw more spears and tear the killer to pieces. More importantly, it’s part of a larger trend to destroy the monopoly of single-delivery options ─ the oppression of the reading device ─ and democratize how content is delivered.

If you’ve been cowering in a cave and avoiding the heat, what happened in the Macmillan-Amazon skirmish was the publisher changed terms for e-book purchases, moving Amazon to the agency model. Different from the current publishing model that wholesales titles based on discount from the publisher’s suggested retail price, the agency model sets the price and pays a commission to the retailer who sells it (thank you Michael DiMarco for the clarification). That sets the minimum retail price. That’s assuming retailers won’t discount or sell below cost ─ an assumption that doesn’t always play out, of course. We saw that last fall when Amazon and its rival dragons Wal-Mart and Target tried to dominate the territory with price-war flame-throwers. Turning reason to ash for the sake of market dominance and potential monopoly, the predators priced book sales at about half of their alleged wholesale cost. But that’s another story.

With publishers more involved establishing retail price, the business model for covering costs and making profits is more workable -- something that the digital-music business model didn’t do. When you kindle the fires of more e-reading devices, it makes content delivery itself a commodity and the content more valuable with more price elasticity.

This should mean savvy publishers will have more options to better manage their sales channels and not cannibalize one to placate the hysteria of the other. And brick-and-mortar booksellers don’t have to be fire-breathing dragons to sell e-books. They can just take care of their customers.

Check out my column in CBA’s March Retailers + Resources magazine for more of my take on the Amazon-Macmillan flare-up.

Surprise Non-Compliance Fee from Your Credit-Card Service?

If you received a non-compliance fee on your credit-card processing statement and are wondering why, you should take the Payment Card Industry Security Standards Council (PCI SSC) self-assessment questionnaire.

 

Credit-card companies and credit-card processors are assessing fees and penalties on retailers who don’t demonstrate compliance with credit-card data-security standards. Eventually these retailers could be denied credit-card system access. Much worse, if a retailer suffers a data breech the fines and loss pay-backs could devastate the business. Sometimes it takes weeks to realize you’ve been compromised.

 

I spoke with Bob Russo, PCI council executive director, recently who warned that any retailer who processes, stores, or transmits credit-card data must be compliant with current data security standards (PCI DSS). These standards were developed by credit-card brands and companies along with participating merchants and technology companies to ensure personal credit data isn’t commandeered by criminals for stealing, fraud, and identity theft. Russo says the whole point of the council and the standards is not about compliance, but data security and loss prevention.

 

I’ve received a couple of calls about new PCI deadlines recently. The reality is: the initial compliance deadline was last summer for all merchants. The PCI council will be introducing a new standard for operation of PIN-pad and other payment terminals in April, but we’ll get back to that.

 

To demonstrate compliance, generally you just answer a self-assessment questionnaire. Answering the questions also helps you understand what must be done.

 

For most merchants, if you don’t do more than 500,000 annual credit-card transactions, the questionnaire is all you must do. The actual criterion for who takes a questionnaire is determined by your credit-card processor or credit-card company. Your service provider determines who needs only to answer questions and who must have on-site audits by a qualified security assessor (QSA) and quarterly web-site and network scans by legal hackers to determine compliance.

 

MasterCard, for example, requires all merchants to have a quarterly computer-network security scan by an approved vendor, either by the merchant or the processing provider.

 

Other than that, cost of compliance should be minimal fees service providers charge. If you’ve updated your card-swipe equipment within the last year, you shouldn’t have to buy anything. However, if you haven’t updated your equipment or don’t have equipment that encrypts transmitted data, you need to upgrade immediately. (Crooks know their window of opportunity is shrinking.)

Most other compliance requirements are about how you handle credit card data, both paper records and electronic data.

First National Merchant Services, CBA’s endorsed credit-card processing service, says Christian-store retailers probably need worry only about the questionnaire and equipment. The company has set up a website for its customers to ensure compliance: www.Getcompliantwithfnms.com.

 

Just think of how your customers will feel when they see your posted certification indicating your compliance with security standards. Nothing like a little safety and security to warm a shopper’s heart.

New PIN Terminal Security Standard

What is new is the final draft of the PIN Terminal Security standard. This will cover PIN pads, processing terminals, etc., and is due to be published April 30. It has a three-year review (a year longer than normal, which should extend your equipment budget).

This standard targets what’s called skimming. This is when a thief modifies PIN pads and payment terminals by re-wiring or replacing the card-swipe device to re-direct or skim credit-card data for criminal purposes. While technical standards are directed to equipment manufacturers, the council’s common-sense best practices also could prevent skimming on your devices. Be observant for wiring that suddenly appears on your device, for example, and check out the swiping device once in awhile.

 

For a one-page skimming overview:

https://www.pcisecuritystandards.org/pdfs/skimming_prevention_overview_one_sheet.pdf

For approved terminal providers: https://www.pcisecuritystandards.org/security_standards/ped/pedapprovallist.html

For in-depth merchant best practices: https://www.pcisecuritystandards.org/pdfs/skimming_prevention_form.pdf

The PCI council will issue standards changes on payment applications and off-the-shelf software for credit-card processing from May to August. All the proposals will be formally presented to merchants at the council’s September annual community meeting in Orlando.