BORDERS: Separate to the US-owned chain, Borders has five stores in New Zealand.

Whitcoulls customers are being asked to spend at least twice the face value of their gift vouchers if they want to redeem them.

The bookseller, along with Borders, was put under administration in New Zealand and Australia yesterday, after Australian parent firm REDgroup Retail called in voluntary administrators to the business.

According to Whitcoulls' website in order to use a gift card with a face value of $30 a customer would have to spend at least $60.

KIRK HARGREAVES/The Press BOOKSTORE: The Whitcoulls chain has 65 stores, according to the company's website.

"The administrators are under no obligation to honour gift cards and accordingly this arrangement is favourable to gift card holders," the company said.

No gift cards will be sold while the company is in voluntary administration and gift cards will not be able to be redeemed online.

A customer of Whitcoulls' Chartwell Square store in Hamilton tried to use a gift card this morning but walked out of the store when told she would have to spend double its face value.

"They've effectively turned a gift voucher into a discount voucher," she said.

The same scenario is being reported in Australia at Borders stores.

Earlier in the day there was a lot of confusion about vouchers from both stores.

A number of customers have contacted Stuff saying they were unable to redeem vouchers today.

Wellington mother Kate Harris said she went to Whitcoulls on Courtenay Place this morning, thinking she would get in before the store stopped accepting vouchers.

"I got some magazines and a book but when I went up to the counter they said they weren't accepting vouchers while the audit was on."

Harris had both a gift voucher and a rewards voucher. Staff said neither were able to be redeemed.

"They were very apologetic but it's not their fault."

Glen, also from Wellington, said he presented a voucher this morning at the Lambton Quay store which would not scan.

"I was told it was not redeemable, but staff informed me they could manually process it and they (thankfully) did so."

A Borders staff member also said there had been issues today with some card vouchers being rejected when staff went to process the order.

It was not clear why some had been rejected and others still worked, though older vouchers appeared less-likely to scan.

Consumer advisor Maggie Edwards, from Consumer New Zealand, said Whitcoulls and Borders were not obliged to redeem vouchers given their financial status.

"The idea is that they have a think - it's a short term measure that freezes a companies financial position while the administrators and the creditors determine the company's future."

Edwards advised that consumers held on to their vouchers because it was unclear "which way it was going to swing" for the company.

Rewards cards would also be frozen, Edwards said, as that would be part of freezing the company's financial position.

REDgroup's New Zealand managing director Peter Kalan is said to be in meetings today with his Australian counterparts.

Ferrier Hodgson Partners have been appointed voluntary administrators of the group.

Partner Steve Sherman said as far as possible it will be business as usual while the administrators conducts an urgent assessment of the business's financial status, according to a statement.

Online battering

Head of operations at auction site Trade Me, Mike O'Donnell, said Whitcoulls and Borders had faced a "perfect storm" of increasing competition with local and global e-commerce retailers as well as a high US dollar which is making the market "super-competitive".

While the businesses could be still viable O'Donnell said the days of large-format bookstores may be over.

"If I look at Wellington for instance, they've got two big stores on prime real estate that they're paying heaps of rent for and they've got a tonne of staff."

He said book retailers would either have to move online and cut overheads, or switch to a smaller service-based model where customers didn't mind paying extra for expertise.

O'Donnell said books are a commodity and downloaded books are "the perfect commodity."

"If you buy Great Expectations by Charles Dickens in Penguin Paperback does it really matter who you buy from? No. But then a download - boy, you can't get a more perfect commodity than that."

O'Donnell believed REDGroup's device choice and e-book pricing was "out of whack" with the market.

A $20 to $30 e-book from Whitcoulls could be picked up for half that from Amazon, he said.

The use of Kobo electronic reading devices for its entry into the downloadable e-book market was "an interesting horse to back" given it lacks the wireless download and web browsing capability of other readers such as Kindle or iPad, he said.

O'Donnell also said the company's private equity ownership, PEP, was facing "challenges on a number of fronts" which had obviously had an impact on the business.

TradeMe currently has 210,000 used books listed with a sell through rate - the percentage being sold weekly - of 17 per cent.

Customer feedback

The flagship Whitcoulls store on Auckland's bustling Queen Street, business was relatively quiet. Ominously, a 2m-high sign at the entrance yelled in large red print: "Priced to clear".

A request to see the manager was declined, as was one to speak to a communications staff member.

One customer with a bag bulging with new books hadn't heard the news of the chain's voluntary administration. "It's a bad thing - a shame. It's the only place where I can get the range (of things I need). I can't think of another stationery store in town (like it)."

Pauline Atkins, a housewife from Glenfield, was aware of the news. "It's very sad. I come here often." On the possibility some stores might have to close and so jeopardise jobs, she said: "Staff are brilliant. It would be sad indeed (if jobs went)."

The reception at Whitcoulls head office in Auckland was frosty with one staff member asking BusinessDay to leave immediately.

Another staff member, asked how colleagues were feeling at the news said she could not offer comment.

Outside Borders, also in Queen Street, Tamara George, a bar manager at Auckland University, said she would hate to see Borders or Whitcoulls stores close.

"It would be devastating. Life is hard enough already," she said.

"I love the joys of losing yourself for half an hour in a bookshop."

Richard, from Parnell, said Borders staff had told him it was voluntary administration and not receivership but he acknowledged that the use of online media had changed the marketplace.

"I myself am looking at getting one of those electronic reading books even though I enjoy my books. I love going shopping for books," Richard said.

"What you can buy online is different. Buying them (books) online is easier. The big problem (for book retailers) is they're cheaper (online) and there's wider choice."

He said he had bought motorcycle parts overseas from various websites. "Service is quicker. It arrives next day by courier."

"It's a shame - it does destroy business in New Zealand."

Staff worried

Most of the Whitcoulls staff in New Zealand are non-unionised.

Robert Reid, general secretary of the National Distribution Union, said it had about 20 members at the distribution centre in Auckland and about another half a dozen Whitcoulls staff who were union members including two in Christchurch.

The Whitcoulls staff negotiated their own individual employment contracts so the union did not know if they had redundancy though the distribution centre workers did.

It was contacting all its members today and said it was times like this that the benefit of union membership was apparent.

Reid said New Zealand staff were now asking what the administration would mean for them as they had not been told anything by their employers.

He said Whitcoulls had been a very difficult company to deal with.

"It takes a while to understand, as these things flow down, what impact they will have on each level. We are not happy with how this has been handled by the company.

"The company has been very obstructive in pay negotiations and instead of being open with us and their problems, they have been playing hard ball and acting like an anti-union company."

The separate US-owned Borders chain also collapsed this week but is not linked to the Australasian chain.

New Zealand's Whitcoulls chain comprises of 65 stores, 40 of which are located in Auckland, Wellington and Christchurch, according to its website.

It was first established as Whitcombe and Tombs in 1888 and merged with Dunedin office supplies company Coulls Somerville Wilkie in 1971.

'Grave concerns'

Booksellers New Zealand chief executive Lincoln Gould said there would be grave consequences as Borders and Whitcoulls are an important part of the industry.

"We just hope they don't start closing doors, it would be an impact for publishers, consumers and it would be very sad. There are obviously hundreds of other bookshops, it would not be a terminal problem for the book industry, but it would be of grave consequence," Gould told Radio New Zealand.

Booksellers NZ is a trade organisation for around 350 bookshops, including the 76 stores operated by REDgroup Retail

Gould said the administration doesn't mean there are fundamental problems with the book industry in New Zealand, but reflects the particular business model of the companies involved.

He said REDgroup has led the way with online book-selling across both New Zealand and Australia, and in introducing e-readers into the local market.

He said there is a lot of discussion in the industry about the price of books and the competition and supply chain determinants of price.

"Those issues are something that the industry is looking at along with all the other issues around digitisation.

"[Digitisation] is a change which is upon us, but it's a challenge which is being very positively picked up.

"Historically bookshops have faced a lot of change quite successfully and I don't see that they're not going to be able to succeed with these new challenges."

by Marta Steeman, Nick Krause, William Mace, Kirsty Johnston, Stuff and NZPA