SMOKE AND MIRRORS -- or
The Nail in the Shoe of the Horse of the General…
A Cautionary Tale
and a Personal Plea for Action –
By Wallace
Kuralt
(The writer is a bookseller
of over 40 years and the former owner/operator of The Intimate Bookshop, Inc., a
group of nine large general bookshops centered in Chapel Hill, NC, the last of
which closed in 1998. In the 1980s
and early 1990s the shops sold over $100,000,000.00 of books, some 1/10 of 1% of
the national bookstore market annually, and were increasing in sales at a rate
of $1,000,000 each year until, over a short period of time, some 22 new book
“superstores” – the equivalent of about 180 mall-size stores – opened in the
same market area, most within a mile or so of The Intimate shops and some within
sight. After over four years of investigations with New York attorney Carl
Person, Mr. Kuralt offers the following report).
Note: All of the statements in this Intimate Bookshop communication are allegations, as distinguished from statements of fact. The obvious purpose of having allegations below, instead of statements of asserted fact, is to avoid unnecessary litigation.
Subject to the foregoing notice that everything in this statement is alleged, this communication analyzes the damage done to the economy by many, if not virtually all, of the national chain retailers and their accounting professionals, officers and directors (collectively the "Professional Staff"), and concludes that
§ Wal-Mart, Barnes & Noble, Borders (and others) and their Professional Staffs deserve no support in their efforts.
§ The Professional Staffs have been paid more than they deserved for the professional work undertaken and performed; and
§ The Professional Staff members are not innocent bystanders who should continue in their efforts at siphoning off American savings and the U.S. economy into the pockets of themselves and other financial wrongdoers.
Here’s new data concerning
the federal Robinson-Patman Act antitrust lawsuit of The Intimate Bookshop, Inc
vs. Barnes & Noble, Borders, et al, fresh out of the discovery oven and
you're one of the first to see it.
It's all really quite simple
how Wal-Mart and other national chain stores, including Barnes & Noble and
Borders, could blot out competition and take over retailing, but it’s taken over
four years of subpoenas and discovery, depositions and argument to get at the
facts which have been kept secret for so long
We have alleged that they
have been successful for many years in secretly soliciting and receiving "DNA"
benefits (discriminatory discounts, fees, allowances and other advantages) --
and we have ample proof as to Barnes & Noble, Borders, et al. (who do not,
for the most part, dispute these findings at all) – and that their professional
staffs have been or should have been aware of these practices and have failed to
report them to their outside investors or lenders, and have themselves received
outsized benefits.
We allege as well that these
secret benefits are illegal under the Robinson-Patman Act, (“RPA”) and the court
is studying our claims to see if we have a triable case.
Some would hold that it
doesn't matter that these tactics have destroyed competition and caused havoc in
the market -- so long as the customer benefits by virtue of lower prices.
Now we can show that the customer benefits little, if any, from these
secret and illegal machinations, while many others are seriously
damaged.
Only the favored reseller
gains. Why?
Result to the
seller: As the publisher (or manufacturer) is
pressured to give more benefits to the chain, it must still maintain its own
revenues, which are not large enough to give exhorbitant discounts of up to an
additional 30% of the original retail price of the item. So the
publisher/manufacturer simply creates a new "list price" from which it discounts
its price to all retailers – by raising the original list price often by as much
as 50% -- and then discounts heavily to the chains and rather lightly to the
independents.
Result to the
retailers?
An item originally list priced at $10 by the publisher is raised to $12.50
or $15.00, depending upon the negotiating power of the retailer, then sold at
the same original cost of $6 to the chain and at up to $9 to the others.
The chain can then offer a "discount" to its customers of 33% off the new
$15 price (while its competitors can only discount at about 17%) and the chain
can still make a healthy profit, while the competitor makes nothing.
Result to the
customer?
The original list price was to be $10, giving each retailer a typical
profit of about $1.00 after all its expenses. The chain’s new "discounted"
price is ... you guessed it -- still $10 or so. Smoke and mirrors.
The customer receives a "discount" of a third or more (of the “new” list
price and gains nothing. The chain store thrives, being able either
o
To discount its competitors
out of business or
o
To make huge profits once
there is no competition.
Result to the chains’
competition? The competition has a choice of going
out of business or selling out to another company.
Result to the market – and
the economy?
There are plenty of
statistical measures for charting the progress of a company which is growing
through the use of the DNA measures, and almost none to report the results of
their activities upon their competitor companies, the owners and officers, staff
members, investors and financial service centers, suppliers of goods and
services, professional assistants, landlords, shopping centers, their taxing
authorities or the governmental agencies who must step in and provide assistance
to those who are put out of work and lose their benefits; there’s little with
which to analyze the deteriorating retailing area and the crime that comes with
failing urban centers and lack of jobs, and little information on the results of
company failures on manufacturing and the jobs that end up on some foreign shore
because of the extraordinary number of these failures.
Still, over 3,000 bookshops
have closed just in recent years, and values far greater than their bottom-line
profitability have been lost. We’re
working on this disaster and hope you’ll study what we have to offer and keep in
touch and help.
Please tell me what you
think of this. I’ll be happy to talk with you at any time. WHK
Wallace Kuralt, 110 Watters
Road, Carrboro, NC 27510 919 967-1716 whkuralt@aol.com
Carl Person can be reached
at 325 West 45th St, Suite 201, NYC
10036 (212)
307-4444.
The website for these
charges and Court papers is at http://www.lawmall.com/bookcase.
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SMOKE AND MIRRORS: |
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HOW
WAL-MART AND NATIONAL CHAIN RETAILERS, THROUGH THE USE OF "DNA"
(DISCRIMINATORY BENEFITS |
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GIVEN
BY SUPPLIERS) CAUSES PRICES TO RISE ARTIFICIALLY, ALLOWING IT TO APPEAR TO
BE DISCOUNTING |
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HEAVILY WHILE, IN FACT, THE
CUSTOMER IS PAYING ALMOST EXACTLY THE SAME PRICE WITH NO BENEFIT
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EXCEPT
WHEN COMPARED TO THE RETAIL PRICES OF THE WAL-MART COMPETITOR (EVEN IF
DISCOUNTED). |
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Seller
calculations |
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0.40 |
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Seller
calculations |
0.50 |
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Seller
calculations |
0.60 |
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$ |
% of
list |
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$ |
% of
list |
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$ |
% of
list |
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Cost
of manufacturing |
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2.00 |
20% |
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Cost
of manufacturing |
2.00 |
16% |
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Cost
of manufacturing |
2.00 |
13% | ||
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Administration |
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1.50 |
15% |
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Administration |
1.50 |
12% |
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Administration |
1.50 |
10% | ||
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Selling |
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1.00 |
10% |
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Selling |
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1.00 |
8% |
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Selling |
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1.00 |
7% |
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Overhead and
profit |
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1.50 |
15% |
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Overhead and
profit |
1.50 |
12% |
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Overhead and
profit |
1.50 |
10% | ||
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Trade
discount @40% |
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4.00 |
40% |
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Trade
discount @50% |
6.25 |
50% |
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Trade
discount @60% |
9.00 |
60% | ||
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Original list
price |
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10.00
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100% |
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New
list price |
12.50
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100% |
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New
list price |
15.00
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100% | ||
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Trade
discount @40% |
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4.00 |
40% |
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Trade
discount @50% |
6.25 |
50% |
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Trade
discount @60% |
9.00 |
60% | ||
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Selling
price |
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6.00 |
60% |
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Selling
price |
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6.25 |
50% |
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Selling
price |
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6.00 |
40% |
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volume
discount |
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0.40 |
4% |
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volume
discount |
0.50 |
4% |
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volume
discount |
0.60 |
4% | ||
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Volume
selling price |
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5.60 |
56% |
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Volume
selling price |
5.75 |
46% |
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Volume
selling price |
5.40 |
36% | ||
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prof
(loss) |
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-0.40 |
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prof
(loss) |
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-0.50 |
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prof
(loss) |
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-0.60 |
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Chain or
independ. |
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0.40 |
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Chain or
independ. |
0.50 |
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Chain or
independ. |
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0.60 |
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no
discounting |
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$ |
% of
list |
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no
discounting |
$ |
% of
list |
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no
discounting |
$ |
% of
list | ||
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Original list
price |
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10.00 |
100% |
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New
list price |
12.50 |
100% |
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New
list price |
15.00 |
100% | ||
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Trade
discount @40% |
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4.00 |
40% |
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Trade
discount @50% |
6.25 |
50% |
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Trade
discount @60% |
9.00 |
60% | ||
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trade
cost price |
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6.00 |
60% |
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trade
cost price |
6.25 |
50% |
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trade
cost price |
6.00 |
40% | ||
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retail
price |
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10.00
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100% |
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retail
price |
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12.50
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100% |
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retail
price |
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15.00
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100% |
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Gross
profit |
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4.00 |
40% |
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Gross
profit |
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6.25 |
50% |
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Gross
profit |
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9.00 |
60% |
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Administration
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1.00 |
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