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By Stuart Woods
April 9, 2012
6:28 PM

Filed under News

Publishers “blindsided” by 25 per cent increase in Indigo co-op fees

Indigo Books & Music has begun informing suppliers about new changes to its co-op program.

According to sources contacted by Indigo, the retail chain has raised co-op fees from 4 to 5 per cent for books sold online or in its brick-and-mortar stores – an increase of 25 per cent. The new model took effect April 1, though many in the publishing community are only learning of the changes now.

Indigo did not respond to a request for comment on Monday. In a recent email addressed to publishers and distributors (and obtained by Q&Q), Indigo vice-president for adult trade Bahram Olfati explains that the increase in co-op fees “is brought about after extensive market tests in several key stores.”

Olfati continues: “The test involved indigo [sic] selectively monitoring the sales success of a range if [sic] titles based on placement. When the titles did not continue to perform, they were replaced by other titles that did (priority given to same publisher). The net effect was better sales in those stores that were part of the test.”

The increase in co-op fees has caught many of Indigo’s suppliers off guard. “It’s not an understatement to say we were completely blindsided by the note that came Thursday,” says Erin Creasey, chair of the Association of Canadian Publishers’ trade committee. “There’s nothing from Indigo that gives a good explanation why these [co-op] efforts now cost an extra per cent more than they did last month.”

Creasey adds that Indigo has refused to discuss its co-op program with the ACP, and declined an invitation to attend the association’s mid-winter meeting last February.

Indigo overhauled its co-op program in January 2011. Under the old system, publishers and distributors paid set fees to promote certain titles in stores. Indigo replaced that fee-for-service model with an across-the-board surcharge for all books sold by the chain, in theory allowing it to respond more nimbly to spikes in demand. The changes corresponded with a drastic reduction of in-store shelf space devoted to books.

The new co-op structure has proven unpopular among publishers and distributors, some of whom feel they are receiving less value for their promotional dollars. A representative from one publishing house, who asked not to be named in this piece, describes the new Indigo reality this way: “The orders are way down, the returns are up, and we have to pay more for the privilege of having very few copies in the tiny book space they have left.”

The increase in co-op fees seems certain to have a negative impact on publishers’ bottom lines.

“This is a blow in two ways, and it’s hard to say which one has the greater impact: it is a further reduction of publishers’ margins, and it is a further demonstration of Indigo’s absolute lack of interest in working with Canadian publishers,” says ACP executive director Carolyn Wood. “There is no sense of partnership.”

“The only option [publishers] have is to not sell to Indigo, and that is not a viable option in most circumstances, not at present,” Wood continues. “But that may change over time.”

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