Retail Week, The Grocer, The Bookseller and others have all reviewed Kantar Worldpanel‘s latest analysis of the UK entertainment market, which focuses on the 12 weeks through to mid-June.
Despite all this coverage, there is a some vagueness as to what is and isn’t included in their definition of entertainment. As far as I can tell, however, we are looking at:
– CDs (and other recorded music)
– DVDs (and other video content)
– console and PC games
It looks as “downloads” includes ebooks, but the sector definition as a whole doesn’t include pbooks.
It’s unclear how broadly downloads are defined – all apps, or just those that have some kinship to traditional formats? If so, that would be a “yes” to Angry Birds, but a “no” to business apps.
It’s also unclear whether all subsidiaries are properly accounted for – so, for instance, are LoveFilm downloads included in Amazon total?
Still, whatever the definition, it all makes for a good story. The changes in percentage point share are pretty predictable – Amazon up, HMV down, Game Group – with multiple store closures following administration – well down.
But I am interested in the scale of some of the gains. Of course, the overall size of the market fluctuates, but for iTunes to move from 6.0% to 8.8% represents an increase in penetration of nearly 50%. And, LoveFilm or not, Amazon’s growth continues powerfully, with no reason to assume it will slow down in the foreseeable future.
Tesco’s tribulations and Sainsbury’s progress are both graphically illustrated here – indeed, if these numbers are a microcosm of current trading at Tesco, that would be a concern.
Meanwhile, Play.com sees its share slide, as it loses consumer visibility. Amazon isn’t just taking sales from bricks and mortar retailers…
That the “Others” are growing their share suggests diversity in the market. I wonder who they might be?
You’ll have to bear with me; I’m a following a train of thought here. There’s nothing scientific about this, but there’s plenty for retailers and mandarins to think about.
I was reading a piece on The Next Web, about the rise in the US of online-only brands. The article (which you can read here) discusses US enterprises like Dollar Shave Club and Warby Parker whose business model is built around having no bricks and mortar availability for their products. As Everlane CEO Michael Preysman says:
We are going to shut the company down before we go to physical retail… Traditional retail models are bloated with unnecessary costs. Online just makes more sense: we’re national from day one, we have a single store, we don’t have to cover costs of physical inventory in stores and we don’t have to pass on a 2x markup through retailers.
This moves us on from showrooming, and into a world where the showroom has been specifically designed out of the equation. In terms of business planning, this is a big leap forward from “omni-channel” – the message from companies like Everlane is that, while there may be multiple ways for brands to communicate with each their customers, there is only one channel through which they will make their goods available to you.
This marinaded in my mind for a little while, then we started Twittering this morning about the sad closure of a fine record shop. Record shops have been in the advance guard for physical closure and collapse in the retail sector for many years; however few we have left, it seems as they though they keep on failing. As Steve from Rounder Records wrote:
We are closing because we can’t make it add up any more. We are a business that has been decimated by downloads (both legal and illegal), VAT avoidance by the big online retailers, a double dip recession, & the decline of the high street. Our lease has ended and we have nowhere to go.
So, I started to think, how many properly staffed, paying-their-taxes retail businesses (or indeed retail categories), anchored in bricks and mortar and supporting a vibrant high street, have to go to the wall before HM Treasury starts to feel the pinch?
Here are some purely illustrative and not properly audited at all numbers to think about. Let’s assume – as the British Standards Institution believes – that total retail sales in the UK are worth around £300 bn. (That’s 300,000,000,000 in pound coins.) And, to keep it easy, let’s assume that half of those sales – excluding food, children’s clothes etc – attract VAT.
20% VAT on a gross £150 bn equals £30 bn. That’s a lot of schools’n’hospitals. Of course, most online retail transactions attract VAT at the appropriate rate, but some don’t – all those downloads from Luxembourg, for instance.
Right, £150 bn less VAT equals £120 bn. Stick with the train of thought:
Business rates at, say, 4% of ex-VAT sales, will raise £4.8 bn.
Staff costs, at 10% of ex-VAT sales, will raise £2.4 bn in income tax on those wages, assuming tax is paid at a flat 20%. (Netting out personal allowances against higher tax band payers, for the sake of argument.)
Employers’ NI on those same staff raises around another £1 bn.
And if all those retailers make 5% net profit (happy thought) ,on which they pay 20% corporation tax, that’s another £1.5 bn.
Of course, online retailers have the same cost-heads, but with fewer staff, cheaper premises etc, the tax-take from their business activity is going to be significantly smaller than from a traditional bricks and mortar retail model.
Now, I probably ought to be having this debate over a third pint on a Friday night, but somewhere in this maelstrom of lower prices for consumers and lower operating costs for online retailers (yes, I know, they have to spend much more on marketing), there’s a lower tax take.
If online becomes progressively more dominant, as this graph from The Daily Telegraph suggests:
– and as I discussed in this blog at the end of last year, at what point will the current tax regime start to feel the strain?
It rather looks as though the Exchequer will need to raise more money – either from online merchants, through some form of additional levy (which in due course would lead to price inflation); or from consumers, either through raising VAT (though this is vulnerable to corporate strategic avoidance) or by raising income tax.
The channel change is gradual, of course, but inexorable. We won’t end up buying everything online and nothing from physical shops, but there’s a lower-tax trend. Looking to the future, our Chancellor and his shadow could just carry on flicking each other with wet towels, but – in the absence of real economic growth (driven by eg significant job creation in other parts of the economy) – I hope there’s someone in the Treasury giving this longer-term structural change some serious thought.
I’ve written a column for The Bookseller on Sainsbury’s acquisition of the majority of the Anobii business from HMV – you can read it here:
To read more on the background to the deal, click here.
Philip Jones, deputy editor of The Bookseller, presents The Naked Book, a fortnightly radio show “dedicated to ripping the covers off print books and finding out what lies beneath”.
I was invited to participate in the most recent edition, Face the Bafflement and Do It Anyway, where I was joined by Dublin publisher/commentator Eoin Purcell, and Laura Owen of New York City’s Paid Content. We covered the waterfront at an indecent speed, and with a high degree of candour, and low levels of obeisance. It’s the longest day today, and it’s pouring with rain – what better way to pass an hour than to log in and enjoy.
You can listen to the broadcast here.
Clinton’s new Chief Executive Dominique Schurman has spoken to Retail Week about her plans for the brand, following her appointment by new owners Lakeshore Lending, a subsidiary of Clinton’s largest creditor and supplier American Greetings.
Schurman has enjoyed a thirty year career in card and gift retail in the US, where she will continue to serve as CEO of Schurman Retail Group, which is part-owned by American Greetings, and comprises the Papyrus, Carlton and American Greetings shopfronts and online sites.
Adding 397 well-worn UK stores to this mix is a tall order, and Retail Week concentrates on three elements of her short-term strategy thus:
1. Renegotiate lease terms out of administration. With retail chains falling like flies, landlords will be interested in reducing rents to secure tenancies, particularly in the sort of secondary mall locations that Clintons has historically filled – locations that are less attractive to fashion users.
2. Refurbish the stores. The extent to which Clintons had allowed its estate to go to seed looks like a long-term death wish – either that, or simple disdain for customers and competitors. The design of the typical Clintons store – inside and outside – has moved on very little since the 1980s, as the business became captive to its own heritage. And maintenance has been poor: carpets are tatty, and fixtures and lighting well-worn and out-of-date, creating an ambience of “downmarket without the value-add”. It is hard to see how you just freshen up these stores – they will need to be gutted and started again.
Schurman has indicated that she will drop the chain’s signature orange. I’d think hard about the name, too; “Clinton Cards” has had out-dated connotations for a long time, and though it never quite shot itself in the foot (cf Gerald Ratner), it’s become a brand for which there is little consumer loyalty. The store and online offer is going to have to be completely reinvented – why keep the old name, when you could do a Next-out-of-Hepworths, or River-Island-out-of-Chelsea-Girl, and properly reposition your business.
3. Improve the product mix. Clintons is another middle-market retailer that has fallen between the two stools of value (personified by Card Factory) and designer/quality (think Paperchase or Scribbler).
This is likely to mean a broader spread of gifts. What does Schurman sell in her US businesses?
In addition to cards and stationery, upmarket brand Papyrus offers photo frames and albums, bags and purses, soaps, books and bookmarks, candles and diffusers, mugs, glasses and tableware, entertainment products, jewellery, scarves, journals, toys, games, plush and much more; Schurmann’s other brands provide mid-market ranges of similar products.
The US has a greater appetite for printed invitations and formal partyware than the more casual Brits, and this is reflected in the offer. It also memorialises public holidays to a greater extent. We do birthdays, Christmas, the spring seasons (Valentines, Mothers, Easter, Fathers), and a few personal milestones. We don’t send a lot of cards celebrating Halloween or New Year, we’re disdainful of industry-created opportunities like Bosses’ Day, and – for instance – we express our patriotism rather differently to the US (did you receive any Diamond Jubilee cards?). There’s no market for UK versions of the 4th July selection at American Greetings’ website, however keenly we support Help for Heroes.
Of course, it’s too easy to point up how we’re divided by a common language etc etc, but Schurman’s team will need to quickly recognise how different our attitude towards each other can be, and how this affects our preferences in cards and gifts.
All of the above will cost a lot of money, and a reinvention of this sort cannot be delivered overnight – American Greetings will have to run fast to deliver store prototypes and revised ranges for next Christmas. And Schurman will of course have to address Clinton’s unexciting online offer, out-manoeuvred by Moonpig and prey to WH Smith’s new Funky Pigeon brand.
As a manufacturer and supplier, as well as retailer, AG will have to manager its supplier relationships with the supermarket chains, who are muttering about boycotting AG’s cards. It would be counter-productive to save Clintons (at significant short-term cost) in order to lose long-term supermarket business.
Similarly, Clintons has important retailer relationships with AG’s direct competitors, like Hallmark. Much triangulation will be required…
So, what’s the endgame? – a long-term presence as a retail owner in the UK, or a turnaround and exit in the course of the next five years? While it’s good news that nearly 400 stores (and the jobs that go with them) have been saved, can profitability be grown at all of those locations? And if you were setting out to build a 400 store chain, how many of these locations are the ones you’d choose? This is not a quick-fix business.
I was pleasantly surprised this morning to click on my WordPress stats and learn that the total number of hits enjoyed by the Front of Store website since inception has now exceeded 50,000. Given this site’s relatively narrow remit – retail and books account for the great majority of the content – and the absence of large-scale external referrals or any SEO, this is very gratifying. Front of Store now receives sufficient traffic to attract advertising, and has led to writing commissions with The Bookseller, Publishing Perspectives, Retail Week and others, as well as several interesting consultancy projects. It’s also provided a reasonable slug of content for an ebook.
And that’s about as self-referential as we need to get – but I thought you might be interested to know a little about who you all are. WordPress’s excellent “My Stats” service includes an analysis of visitors’ country of origin.
Over the past three months, about 61% of site visits have been from the United Kingdom; 12.5% from the United States, and 2.9% from Australia. France, Canada, India, Italy and Singapore each account for around 1%, followed by Brazil, Ireland, Spain, the Netherlands, Germany, the Russian Federation, Thailand, New Zealand, the Philippines and Malaysia, all with over half of one per cent.
A further 84 countries are represented, comprising (deep breath):
Albania, Algeria, Andorra, Argentina, Armenia, Austria, Azerbaijan, Bahamas, Bahrain, Belarus, Bosnia and Herzegovina, Brunei, Bulgaria, Chile, China, Colombia, Costa Rica, Croatia, Cyprus, Czech Republic, Denmark, Dominican Republic, Ecuador, Egypt, El Salvador, Estonia, Finland, Georgia, Ghana, Gibraltar, Greece, Guam, Guatemala, Hungary, Iceland, Indonesia, Iraq, Israel, Jamaica, Japan, Jordan, Kenya, Kuwait, Laos, Latvia, Lebanon, Libya, Liechtenstein, Lithuania, Luxembourg, Macao, Macedonia, Malawi, Malta, Mauritius, Mexico, Moldova, Monaco, Mongolia, Montenegro, Morocco, Mozambique, Namibia, Nepal, Nigeria, Norway, Pakistan, Peru, Poland, Portugal, Puerto Rico, Qatar, Romania, Saudi Arabia, Serbia, Slovakia, Slovenia, South Africa, South Korea, Sri Lanka, Sweden, Switzerland, Syria, Taiwan, Tanzania, Trinidad and Tobago, Tunisia, Uganda, Ukraine, United Arab Emirates, Uruguay, Venezuela, and Vietnam.
Thank you to everybody who keeps an eye on this blog; I shall do my best to inform and prompt in the future.
I’ve written a piece for Retail Week about Waterstones and Amazon, published today. You don’t need a subscription to access it, though you will need to log on:
The Bookseller has rounded up some of the press commentary that followed Monday’s announcement of Waterstones’ new relationship with Amazon. Speaking to The Guardian, James Daunt stated that Waterstones’ owner Alexander Mamut is putting “tens of millions of pounds” into the store refurbishment programme, which will see roughly 100 of its stores refitted this year.
Some of those refits are already completed, and they merit your attention. I popped into the Twickenham branch yesterday afternoon. This was opened as an Ottakars in about 2005, and has run with that brand’s cherrywood fixtures and green carpet ever since. (Photo below shows a typical Ottakars interior: ageofuncertainty.blogspot.com)
The new Waterstones look has been delivered on a carefully managed budget, but the feel of the shop has changed totally. Gone is the clutter of over-bearing fixtures and narrow aisles, and in its place is a cool, classic/modern shop.
The most immediately noticeable changes are as follows:
The front two-thirds of the store are uncarpeted, and now have exposed floorboards.
As this photo of the front of store demonstrates, the overall appearance is clean and classy. That “gateleg” table can only carry so much stock, and is clearly not designed to have understock rammed beneath it.
Cards and other impulse items are right at the front (the entrance is immediately to the left of the photo). New books merchandising is subtle – too subtle?
But it’s the wooden floor that makes the real, immediate difference, reminiscent of Waterstone’s in Hampstead back in the 1980s. It exudes authority and class.
Twickenham isn’t the most flexible of retail spaces – it’s a long, narrow “bowling alley”, with a two-foot jump in height in the rear third of the store. As you can see, there’s a plain carpet in here; lighting is a combination of directional spots and “domestic” lampshades, and fixtures are a mix of new (all black) and refurbed Ottakars (cherry with affixed black surrounds).
Tight ceilings here, so the tops of the bookcases abut the tiles. Unless you’ve got nine-foot ceiling heights, this always induces a slight claustrophobia. The front two-thirds of the store are much airier.
So, this is an attractive, sensibly sized store with the right level of sophistication for its suburban/professional customer base. I enjoyed browsing through the store, though I’d like to be surprised a little more often by the title/range choices, which mostly feel safe and generic.
1. When the Kindle tie-up goes live in the autumn, how much space will it require, whereabouts in the store, and with what effect on the overall experience? I’d hazard that the new shopfit has fewer shelves than the old, but I may have been deceived by the general decluttering – practically all spinners, dumpbins and other detritus have been consigned to the skip. With the exception of a few book tables, everything (cards, toys etc) sells from bookcase carcases now.
2. It’s often a feature of newly remodelled shops, but the feel at present is pretty sterile. The store needs more imagery, and more opportunities for the Twickenham team to share their enthusiasm with their customers.
3. Waterstones has always struggled with merchandising children’s books properly. This bay is adjacent to the central aisle; a concession has been made to tumbling tots in the form of a mat on the timber floor, but the overall effect is still one of children’s books displayed for adults to select and buy without undue lingering. The PoS is old here, so there may be a makeover in the works, but children need a safe space that is clearly merchandised for them, and becomes a place where children want their parents to take them. This was an area that (Tintin obsession notwithstanding) Ottakars tended to get right, but Waterstones still gets wrong.
Of course, children’s publishing is being supplanted/enhanced (you choose) by iPad apps and other digital media, but I’d contend that the children’s printed book category is a whole lot more robust than paperback genre fiction. Particularly after Amazon has taken up residence in the shop.
And Amazon-to-come is now the spectre in the corner of every branch of Waterstones. Monday’s hysteria is slowly giving way to a more measured response to Waterstones’ new partnership. More measured, but no more comprehending or enthusiastic.
I’m a lover of bookshops large and small, and of course, like everyone, I understand that it’s no longer possible – no longer rational – to have pbook stores without a complementary and first-class ebook and online offer. I was very interested in this story in this morning’s Publishing Perspectives, which describes the creation in South America of an alliance between Grupo Planeta, Telefónica and Bertelsmann to create an “Airbus” to challenge Amazon’s “Boeing”. Quite what shape this project might take is unclear, but – as I argued last week at the World E-Reading Congress – publishing and bookselling can only enjoy a future that doesn’t result in total Amazon subsumption by working together – and, in the process, ensuring that a few decent bookshops survive.
And, as of next month (and notwithstanding WH Smith), Waterstones will be Twickenham’s only bookshop, as independent Langton’s closes after over 60 years of bookselling. It’s good to see Waterstones investing in its physical future, but that investment combined with an independence from Amazon would, I guess, have been even more welcome.
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No argument about what today’s big story is – though details of the proposed relationship between Waterstones and Amazon are scant at present. The Guardian is all over the story:
both merit your attention, and The Bookseller has of course been updating all day long.
The Bookseller asked me to write an instant blogpost, and you can read it here. I don’t just draw lessons from history, but I’ve been through one consummated relationship with Amazon in my life, so some reflection is allowed!
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The Bookseller has run a piece on the speech I gave to the World E-Reading Congress earlier this week, so I’m reproducing the text in this blog entry.
Whilst I’ve edited out some of the more obvious “lecture” elements (eg “Good afternoon, my name’s Philip Downer”), this is still a talk, so in places you may find it (even) more rhetorical than some of my usual writing; similarly, the grammar and syntax will be a little sketchy or forced in places!
My audience consisted of publishers, and those who provide publishing services – distribution, analysis, technical support, media coverage, plus a smattering of creatives (writers, illustrators, designers) and some online sellers of books and/or content. There were no bricks and mortar retailers present.
* * * * *
My theme for this afternoon is Bookselling: The past is another country, but the future is another planet.
This is a bit clunky, but on an agenda full of brave new worlders, keenly identifying opportunities and breakthroughs for the future of eReading, I am the lucky person who has elected to talk about shops.
I’ve given a few talks over recent months, and as I approach each one, the news for specialist booksellers appears to have got a little bit more challenging. At Frankfurt last year, I observed that “We are entering a world where a handful of corporations own proprietary formats through which all the books, and a great proportion of all other creative content, are channelled. New technology can do great things, but it can also damage supplier diversity and consumer choice.”
I stand by these words. The bigger and more powerful the mega-corporations become, the more entrenched they’ll be. They operate out of highly protected walled gardens, and their goal is to tie you, very tightly, into their specific eco-system. It isn’t in their interests to allow this situation to change – even though I would argue, it is clearly not in the best interests of every author, publisher and reader, for a handful of tech-driven organisations to own books and reading.
I’m talking to you today about retailing, rather than the broader outlook for publishing. However, the old author/agent/publisher/bookseller/reader model is significantly fractured and everyone in this industry needs to decide whether monopolies or diverse markets are more appropriate for its future.
As this is an eReading Congress, I think a show of hands would be appropriate.
Who uses an electronic device in their leisure reading – an eReader, a tablet, a smartphone? [Practically everybody in the room.]
Put your hand down if your principle device is a Kindle. [Around half of those present.]
OK. Now, lower your hand if your principle device is an iPad or iPhone. [The other half of the room.]
Sony? Kobo? Nook? AN Other? Samsung phone? PC? [No, no, no. Everybody used Amazon or Apple devices.]
Although they play very different roles, there are of course two, big dominant players in our new world, a retailer and a consumer electronics company. But Amazon and Apple are an odd couple
Amazon: is setting a course to becoming the world’s biggest retailer, and en route laying waste to the established author/publisher/bookseller ecosystem.
Take a look at its performance for the first quarter of this year:
Profit: $ 130,000,000
Amazon sells ebooks and pbooks at low margin, break-even or a loss. This (we are assured) benefits the customer.
Amazon has very patient investors, who support a high P/E ratio, currently running at over 90x. I assume they work on the principle that, once world domination is assured, the profits tap will be turned on. Otherwise, where’s the value?
How many sectors and countries does Amazon have to dominate before this happens?
Apple: is producing the products that everybody wants, selling phones, tablets and other hardware and content at a spectacular profit.
Notwithstanding Samsung, it pretty much leaves all its competitors in the dust. It also, by-the-bye, runs a highly successful and much-respected retail chain.
Looking at its quarter one performance:
This extraordinary margin, we understand, also benefits the customer; so Amazon’s 1% is a good thing, and Apple’s 29.6% is also a good thing.
Naturally, Apple’s investors are as happy as can be, and they’re even being promised dividend payments in the future. Oh, and Apple’s P/E ratio is a rather more rational 10.5.
Jeff and Steve have made this world for us in which consumers are happy to pay top dollar for the best hardware, and the lowest conceivable prices for content.
In the past month, of course, a new alliance has been formed – something of a 1990s supergroup. Is the Microsoft/Barnes & Noble alliance strategically brilliant, or a last throw of the dice? Microsoft has a track record of alliances with previous cycle winners, like Yahoo! and Nokia.
However, publishers and many readers are looking for alternatives to Amazon’s hegemony. The deal enables B&N’s Nook and College divisions to separate themselves from the old superstore business, and provides the firepower for the Nook to be launched worldwide, with a solid retailer base in the US.
Are Barnes & Noble the future, or is this just a coming together of legacy businesses? And what is a legacy business, anyway?
Ten years ago, if I’d said “legacy” to you, you’d have understood it in the old sense – “Something handed down from an ancestor or a predecessor or from the past”. A legacy was a good thing – real value created by previous generations, and a solid foundation for the present and the future.
Today, the word “legacy” is used as an unthinking term of abuse – essentially, any business that has a history longer than a few years is a “legacy” business, and thus unfit for purpose, and ripe to be taken down. Established publishing houses are described as “legacy businesses” by teenage entrepreneurs seeking to discredit them. Perhaps they fail to distinguish between a business that has a valuable inheritance, and has the capacity and the drive to embrace the new world, with one that isn’t in control of events. Or perhaps they confuse all established businesses with the fireworks of the tech sector, the Netscapes and MySpaces that crashed and burned; the Yahoos and Research In Motions whose innovation has been eclipsed by other, newer stars.
It’s inevitable that what appears to be change-making today will become – necessarily – protective and fixed tomorrow. Perhaps, in this sense, “legacy” simply means “grown-up and responsible”. Well, there are worse things to be, and, companies that once behaved radically will start to behave protectively instead, in order to maintain their primary income streams.
But let’s talk about retailing, because this is where a physical legacy can become really toxic. In the 1930s, Woolworths opened nearly 400 brand new stores across the UK. When I say “opened”, I don’t mean “rented a tin shed and screwed their name to the front”. I mean, they acquired freeholds, and built big, brand-new stores. This was a massive investment of cash and confidence in the market. The crowning glory was the Blackpool store, which opened in Spring 1938. Five storeys over 75,000 square feet, including two vast restaurants. Woolworths was one of the biggest and most powerful consumer brands in the world.
Building all those stores guaranteed Woolworth a strong presence in every town in the country. This was the legacy of its period of supergrowth, but as time passed, the retail offer lost its focus; the freeholds were sold, and the legacy of great stores was no longer a valuable inheritance, it was a millstone of failing retail premises.
Historically, this is what retailers have done – opened stores, and carried on opening them until sometime after the market cries “enough”! Clintons Cards and Game are two of the most recent examples in the UK – and then, of course, there are the challenges facing the remaining booksellers.
Right, here’s a scary prospect for you.
Imagine you’re running a chain of bookshops. We may be talking about hundreds or a handful; we may be talking about any country in the developed world. Two or three years ago, the era of the superstore came to an end. Now, I would argue, the era of the chain bookshop is going to follow, unless the model is radically reinvented.
So, if you’re running a chain of bookshops today, you have to do two impossible things.
The first is to deal with your straggling real estate, because, as I’ve discussed, the single biggest challenge for any bricks and mortar retailer is their legacy of old stores. However carefully that estate has been built, however appropriate it was five years ago, it is now shot through with toxicity. All of those shops are tied to long leases, with upward-only rent reviews. Landlords are operating in a shrinking market, so are in no position to give concessions to any business that wants to close a shop while the lease still has years to run. This leads to pre-packs and CVAs (company voluntary arrangement), but these acts of desperation are usually the prelude to administration.
All retail businesses have an unproductive tail, and any location that’s bad at the moment has the scope to get worse.
Archie Norman, Asda’s former CEO, has observed that retailers should close 5% of their estate every year, and he’s absolutely right – but I can think of no retail business that has heeded that advice until it’s much too late.
As a bookseller, your bricks and mortar shops have to be super-viable. You must close today’s loss-makers, and tomorrow’s loss-makers too.
Plenty of retailers are facing this problem right now – Argos, French Connection, Mothercare and Thorntons have all been in the news in recent weeks. However, although they’re vulnerable to online sellers, it’s still difficult to digitise a romper suit or a box of chocolates.
So, close your under-performing stores. Then define your customers and their interests, and close any further stores that don’t match that profile.
Your second impossible challenge, and one that is at the heart of this conference’s purpose, is that you have to compete in an omni-channel marketplace, and you have to do so against some of the richest corporations the world has ever seen. Logically, this is impossible, because it requires huge resources, and your chain of bookshops can’t do this alone.
This is where the book trade needs to pull together. This industry is at a crossroads where it either allows the global corporations to progress from being walled gardens to becoming super-fortresses; or it fights to ensure plurality. I salute unreservedly the stand that Macmillan and Pearson are taking, alongside Apple, in the Department of Justice case regarding agency pricing. A couple of weeks ago, Amazon decided to give away the Hunger Games eBook free of charge. Now, maybe I’m just losing it as I get older, but can anyone explain to me how giving away the best-selling book in the world helps to secure current income, or to create a future value proposition, for anyone other than Amazon? It may be that the publisher and thus the author still got paid, but at the long-term cost of proclaiming their work to be without value.
Booksellers today need the freedom to participate in the omnichannel world, and it is in everyone’s interests to lower those barriers. That means removing DRM, so that content becomes device-agnostic; customers can buy the hardware that suits them, and the content, at an appropriate price, from the retailer who can do the best job for them.
I would love to see thinking of this sort emerging from Microsoft and Barnes & Noble’s NewCo. If B&N thinks it now has the firepower to challenge Amazon without also changing the ground rules, then they will find that Amazon can always out-gun them. Anybody else with a stake in ebookselling needs to do likewise. You won’t beat Amazon by being a pale imitation of Amazon, pleading with consumers to do what’s best for the long-term health of the book trade. Consumers have enough to worry about. They will respond, though, to a different, better offer.
Your retail goal – because you’re running a chain of bookshops, remember? – has to be an integrated ebook and pbook offer, with full online visibility of stock by branch for your customers. You’ll need a financial model that supports “showrooming”, because it’s a fact of life. You’ll offer Click and Collect, targeted social marketing and all the rest of it – everything a sophisticated pure-play online retailer does, with a shop attached. You’ll need to understand more about your individual customers than ever before.
Your online and ebook offer can of course cover all categories. Your pbook offer must be reshaped to reflect the new reality. That means fewer fiction paperbacks, and fewer reference books, because the day of the “general bookshop” is over. You need to be known for doing a few things extremely well, not everything tolerably competently.
All of this sounds scary, and you will all be aware that the number of specialist bookshops in the UK has declined by over 20% since the credit crunch kicked off.
Booksellers – and, by extension, our suppliers and our customers – invested far too much energy in worrying about supermarkets, and not enough in recognising that Amazon wasn’t just another specialist competitor in a healthy eco-system, with a novel twist. Today, if we take all the UK’s true specialists, the Waterstones, the Foyles, the academic chains, all the independents, and add them together, I don’t suppose their unit sales are as great as Amazon’s are now.
There’s a school of thought that says, well, you pesky booksellers, you should have done more. Should have done it sooner. More fool you. I think this is a little like acknowledging that a fine historical building has caught fire, and saying “they should have installed a better sprinkler system. I’m not calling the fire brigade” – when there is still plenty of merit worth saving, and plenty that you’d miss if that magnificent building was gone.
Specialist booksellers – including independents – are now barely competing with each other at all any more. They’re competing with Amazon and Apple; they’re competing for time as well as spending.
However, here’s the interesting thing. At the risk of sounding like Clement Freud on Just A Minute, I’m going to run through a diverse list of retailers. Here goes:
Anthropologie • Argos • Asda • B&Q • Bentalls • Blacks • Comet • Conran Shop • Cotswold Outdoor • Dobbies • Eden Project • English Heritage • The Entertainer • Fortnum & Mason • Habitat • Halfords • Hamleys • Harrods • Harvey Nicholls • HMV • Historic Royal Palaces • Hobbycraft • Homebase • John Lewis • Lakeland • Morrisons • Mothercare • National Gallery • National Trust • 99p Stores • Oliver Bonas • PC World • Pets At Home • Poundland • Royal Horticultural Society Wisley • Ryman • Sainsbury’s • Selfridges • Tate • Tesco • Toys ‘R’ Us • Urban Outfitters • Wyevale Garden Centres
Most of these businesses are thriving, successful enterprises. Some are struggling – but all of these chains are also booksellers.
Some, like the supermarkets, are big, important players. Others offer books as a value proposition, or as part of the lifestyle offer they’re promoting, or as a souvenir of a day out.
But they all believe that there’s a place in their shops for physical books. Most of these retailers have a much clearer understanding of their brand, and of their customer, than general bookshops have.
The physical bookshop struggles, but the physical book can thrive.
We tend to look at the problem from a “growing online, declining physical” standpoint. But if the solution is to ensure that all physical stores have multichannel capability, surely the same applies to pureplay online retailers?
As Sarah Wilson of the Egremont Group has argued persuasively, without a high street presence, without the ability to see and touch the goods you want to buy, online sales will plateau. After all, if we all really wanted to, we could stop using bricks and mortar shops tomorrow, and just buy everything online – it’s all there, after all. But we don’t. Consumers of the future will be looking for an “integrated experience… as they choose to shop across channels and increasingly look on pure plays as employing yesterday’s model”.
OK, this is where it gets interesting. You’re running a chain of bookshops, remember? But chains are inevitably bland. Chains are corporate. Chains are bound by process; necessarily managed to lowest common denominator standards.
I’d posit that more good managers leave book chains and open their own bookshops than happens in most other sectors. They do it because they love what they do.
So, at this stage in the development of the bookshop, I think it’s time to acknowledge this. You could create a partnership model, like John Lewis’s.
Or you could be bolder, and create a franchise model. The centre would provide the technology, the systems back-up, the buying power. The managers acquire ownership of the stores, buying an interest in them or purchasing them outright, customising their shops as appropriate for their markets.
You cease to have a chain of stores. Instead, you have a network of individual specialists. They may go down the children’s route, open cafes, build non-book sales. Or they may, like the Harvard Bookstore, invest in Espresso Book machines; providing a real specialist service, with same-day delivery to local addresses, and next-day around the world.
That network of stores doesn’t have to be restricted to your core business. You can sell your chain’s expertise to other independent bookstores, and reinvent yourself as a bookshop service organisation.
We have a number of good businesses supporting UK booksellers. Gardners’ networked Hive website, offering pBooks and eBooks online; the Bookseller and Nielsen, providing news and reliable data; and of course the support of the Booksellers Association. I’d like to see all of these organisations – and others – committed to supporting everyone who is a bookselling specialist, whether they’re primarily selling eBooks or pBooks, online or instore. If anyone could pull this together it would be the BA, but the organisation would have to repurpose itself appropriately.
There’s a way forward for individually managed and owned shops that have full access to ebooks, and yet can localise their offer to suit each physical location, each local residential, business and academic population, in a way that chains inevitably struggle to deliver.
And funnily enough, your carefully tailored local offer could be exactly what individual customers around the world are looking for. And today, you can reach out to any potential customers. You can identify where there are similar populations, elsewhere in the country, elsewhere in the world, and serve them too.
Of course, this means that you and your shop need to have to have an opinion. A point of view. A personality. All of these things rolled up into a specific and saleable competence. Please some of the people most of the time, because you can’t be all things to all people.
Supermarkets have done their damage, and will reduce their book ranges as the mass-market transitions away from paper books. This is an opportunity for our industry’s specialists, who need to improve in quality and consistency. Some of our best bookshops are among the smallest and most independent, in every sense of the word.
Customers will still seek out good, well-run shops, and I suggest that the distinction between “independent” and “specialist chain” is a whole lot less important to everyone’s future, than the distinction between “specialist” and “non-specialist”.
A healthy bookselling sector is in the best interests of everyone in the trade – authors, agents, publishers, readers. Bookselling needs to remodel itself for the future, and do so in partnership with all the other key players in the publishing business.
But books and bookshops still matter, and there are still people who want to sell books. If those specialist bookshops focus on competing with each other for ever diminishing returns, they might disappear altogether. The more effectively they can work together, the more robust our retail offer in the future.
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