The primrose path turns steep and thornyPosted: April 10, 2011
Moira Benigson, who heads up the executive search company that bears her name, distributes a daily digest of retail, marketing and media news that is always worth a look – you can read it here.
In Friday’s edition, Moira herself writes about topics familiar to readers of this blog:
I am beginning to think that in the world of retail, apart from independents, who have to be outstanding to survive, we are moving towards one (or, maybe, a very few) of everything: think about chains that sell electricals, music, video games, books and even wine. The majority are struggling for survival, many are in the intensive care ward and some are on their way to the angels.
What prompted me to think about this was that I really like to support my local book store, Primrose Hill Books . Jessica, one of the owners, is extremely knowledgeable and very helpful. Lately though, I find myself increasingly buying more and more books (and other things as well) on Amazon, or else I download books onto my iPad. Interestingly, I have noticed lately that the number of packages arriving at the office has increased dramatically. Who needs to go to stores when you can buy with such ease online?
Anyway, I bought a book from the store this week and, as printed on the sleeve of the book, I paid £20 for it. When I got to my computer, I checked on Amazon and the very same book was… £8. What chance does Jessica have of surviving, I ask myself? And all the conversations I have had this week about HMV go exactly the same way – punitive rents, all those staff to pay and other overheads – why bother, when you can just download the music on iTunes? The big issue is, then: what is the role of a store, and is it possible to survive the storm that is brewing for high-street retailers today?
Primrose Hill is about as bookshop-friendly a street as you’ll find in London – a variety of mostly independent retailers with individual offers, well-presented to a clientele that has both money and time to spend. PHB is a lovely store, and in a better world its prosperity would be assured.
The price differential between the full price printed on the book (a price often pitched artificially high, in order to create a platform for discounting, but sold to independents on terms that preclude any meaningful price-cuts), and the price typically charged online (for the physical book or the eBook) is now insurmountable. When Al Gore invented the internet, the £20 book was offered online for, say, £16, plus £3 p+p and an evens chance that someone would pinch your credit card data along the line. Today, shipping is free, card security at least as bullet-proof as a chip-and-pin terminal instore, and the customer gets a saving of over 50%. The physical store, on the other hand, is now paying higher rents, higher utility costs and higher national insurance (though it will have tightened staff costs, of course).
Retail Week has estimated that a store, or chain of stores, can shed about 15% of sales before it starts to get seriously troubled. That leaves 85% of customers seriously incommoded when the store or chain goes belly-up, but margins are tight, and – as all physical retailers operate in the same world (HMV, British Bookshops, Borders, Zavvi, Woolworth…) – this is no longer a question of “inefficient” retailers being subjected to the usual Darwinian forces. The trade goes online (with a few plums to the supermarkets), and has to reinvent itself totally.
In her piece above, Moira extends beyond books ‘n’ CDs to mention electricals and wine. There are plenty of other sectors that will find that their business will be sufficiently eroded by the cheaper consumer offer online. The coincidence of the shift to online and low levels of consumer confidence/disposable income, will alter the high street beyond recognition.
It’s London Book Fair this week – I’ll be at Earls Court for the next couple of days, and will share thoughts on interesting presentations etc on Twitter (@frontofstore). Normal service will resume in due course, but in the meantime, enjoy the glorious weather, and let’s hope for a strong retail Easter.