…who are as ignorant of each other’s habits, thoughts, and feelings, as if they were dwellers in different zones, or inhabitants of different planets.”
The quote, of course, is Disraeli’s, and it was brought to mind after I read this piece by Marcus Leroux in Monday’s paywalled Times.
The gist of the article (for those of you without a Times subscription) is that 25% of non-essential retail spending takes place in just 3% of Britain’s shopping areas. Of course, the crushing dominance of London – West End, City, Knightsbridge, Westfield – will help to skew those numbers, as London’s share of tourist retail is exceptionally high. But forecasters CACI have reviewed 4,000 different shopping destinations, grading them from A to E, with anything below a C having questionable long-term viability.
The retail landscape has become more differentiated in recent years, as a combination of demographic polarisation, plus online, supermarket and out-of-town shopping, has caused the geography of the UK to divide more starkly between winners and losers. I pondered this in a blog I published at the start of this year, seeking to identify 80 centres that I believed had future relevance; in Leroux’s piece, he notes that around half of Thorntons and Argos stores are in D and E banded locations. And when stores close, which centres do you think will bear the brunt?
Well, here’s the good news (he said, a little acidly): the clone town will be a thing of the past. No longer will there be identical parades and malls of the same jewellers, fashion stores, chocolatiers and gift shops, from Cornwall to the Highlands; instead, we risk a brutally stratified selection of pound shops, pawn shops and cheap booze in struggling towns and suburbs, while chi-chi boutiques and cafes overwhelm the rest.
I’m not convinced this is a good thing (I am a One Nation kind of guy); and I wonder if all of the government’s attempts to focus on local retailers (Portas towns et al) only takes us a short way down the road. I very much support reducing business rates, slackening planning red tape and freeing up parking in order to revitalise a shopping district – but that revitalisation requires strong and solid national chains as well as entrepreneurs and start-ups. Any smart indie retailer understands the appeal of well-known neighbours, preferably robust and well-managed ones.
There is a significant risk that squeezed, mid-market retailers will be closing in the top locations, pushed out by high occupancy costs and sophisticated online shoppers; and closing also in the poorer towns, where falling sales are precipitated by falling employment, collapsing aspirations and a general hopelessness.
We may need to move away from the purist “you can’t buck the market” view to a more nuanced standpoint that recognises that decent communities need a well-balanced high street (as well as good jobs, schools, healthcare, housing…), and that allowing high streets in densely populated areas to fail is akin to leaving broken windows unattended. Of course, those retailers need to provide goods and services that their customers need – which of course is what mid-market chains have always delivered, tweaking their value offer as appropriate to local demographics. But once “some quarters in the City” (Leroux) have prevailed on Argos et al to close their D and E locations, recovery in those towns will become just that little bit more difficult.
Blindingly obvious “two nations” photo: Cheryl de Carteret on Flickr
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.
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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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My eBook, A Year at Front of Store, is available in these Amazon Kindle territories –
Is Amazon going to open a shop?
The answer is, that no one outside Amazon knows, and no one inside Amazon is telling. The rumours first surfaced in the autumn of last year, supported by this excellent artist’s impression:
– then, over the past week or so, the chatter has gone into overdrive (and so have the photoshoppers)…
So, let’s suppose Amazon opened a shop – or, more appropriately, a showroom, in downtown Seattle. How would that work? The let’s-not-think-about-this-too-carefully model would be the Apple Store, of course, but Apple’s offer is narrow and deep, whereas Amazon is wide and shallow. Apple manufactures five ranges (iMac, MacBook, iPhone, iPad, iPod; iPod is on its last legs, but iTV may take the space). The scope and capability of each of these devices (basic iPod excepted) is broad enough to support hours of happy browsing, and to ensure that Apple’s store staff are kept busy explaining evermore brilliant applications hidden in the depths of their beautifully crafted merchandise.
Everything is sold at top-of-the-market prices, earning top-of-the-market margins to support the fairly hefty occupancy costs that come with Apple’s first-class locations. The model is splendidly profitable (though I’d continue to advise Apple against over-expansion – they have about 35 stores in the UK at present).
But Apple’s is not a model that would work for Amazon. If you don’t own a Kindle, you will have played with one in a store, or had a go at WH Smith’s Kobo, and will have swiftly concluded that – brilliant though an eReader may be at delivering its simple premise – it’s a one-trick pony that doesn’t need retail real estate to support it. The Kindle Fire does more, of course, but not enough to make a standalone store a viable proposition. No doubt Amazon is considering branded phones and other technology, but their price positioning is the opposite of Apple’s, and Amazon would need a compelling argument for loading retail overheads on to their zero margin products. And aside from the Kindle, pretty much everything that Amazon sells is created, manufactured and supplied by other companies.
The other obvious model is the big bookstore – Amazon as Barnes & Noble. This idea falls at the first hurdle – big book and entertainment stores were a 20th century idea that no longer works today outside of a few major cities. Unless some sort of own-brand battle were to develop, with Amazon, B&N, BAM etc all carrying unique books in their stores and competing against each other for readers – “Better authors, better books, better prices”… I only have to write this out to see what a non-starter it is. Bookshops aren’t like fashion stores. Revenues from full-range book/entertainment stores have fallen, are falling and will continue to fall. Amazon knows this, and they won’t be opening any of these:
Of course, taking B&N as a propotype is misguided anyway – it plays to Amazon’s heritage as the world’s vastest bookstore, not to its future objective – to be the world’s largest retailer, period. This suggests an Amazon department store – nope, that doesn’t work either.
How about an update on this concept?
For readers outside the UK, Argos is a chain of catalogue shops – essentially a shopfront with warehouse space behind, selling a broad range of homewares, furniture, electricals, toys, jewellery and much more. They’re a catalogue outfit which is transitioning painfully to an integrated physical/online model; very little merchandise is on display in the stores. As a retail experience, Argos is distinctly downmarket – grim ambience, basic service, mass-market brands (though everybody shops there at some point). Mind you, that Argos logo suggests a certain synchronicity…
But all of this is a sideshow
Amazon brand showrooms would certainly be interesting, and their introduction of lockers in major cities suggests that some customers are making use of a click and collect operation. But one of the primary reasons for Amazon’s success and for their ability to blow Tower Records, Borders and the rest out of the water is their low margin/low prices model. Unless they execute a stunning strategic leap forward (eg a partnership with a major supermarket chain) the idea of physical shops as a major plank of Amazon strategy still feels premature.
It also presupposes a world in which all of Amazon’s competitors – which include not only other retailers, but also many of their suppliers as well – continue to behave as though Amazon dominance is the only plausible outcome in our retail world. The legacy copyright businesses (books, music etc) have certainly crumbled hitherto, but Amazon will only achieve pre-eminence in the rest of the retail trade if other retailers and suppliers simply roll over and let them.
The threat is being taken seriously, as US bookstore chains have decided not to carry Amazon books; now publishers need to show similar mettle, as the American Editor blog argued persuasively earlier this week.
So, I’m increasingly of the view that we aren’t on a path to an inevitable Amazon-dominated outcome, but that future will be messier and more interesting. Amazon wins when its competitors worry most about protecting their legacy, and aren’t prepared to take some short-term earnings pain as they rethink and restructure. Amazon is focused, rigorous and ruthless, but it’s a corporation, which means (paradoxically) that it’s human, which means missteps and stumbles.
Its competitors need to force those missteps and catch Amazon unawares. This means thinking themselves out of any comfortable legacy mindset into a new and bold one. Brands, copyrights and patents are immensely valuable, but their exploitation is a fluid opportunity, not an enslavement to tradition.
The book/entertainment retailers who have gone out of business fought the last war and lost; good generals develop new strategies in changed circumstances, and Amazon’s best competitors will do the same.
Tools of Change, NYC, February 2012
Enough blogging for the time being, as I am off to New York to speak and debate at the Tools of Change conference. I’m looking forward to meeting many smart people who are focussing on the future – if you’re there, I’d love to meet you, and do drop into our session on the Changing Face of Retail Bookselling, at 10:45 on Tuesday 14th. There is much to discuss!
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25th January 2012
WH Smith traditionally brings the Christmas results season to a close, and here they are, down 6% in the high streets and 3% at their Travel division. Although this was accompanied by the usual statements about the entertainment categories (CD, DVD, now an infinitesimal part of Smith’s mix), and “resilience”, “challenge” and “cost controls” all made their usual appearances, there was little indicating retail progress. Strong categories? Kobo and online? Former British Bookshops stores? You can manage a business for cash for so long (and it’s been so long that it’s remarkable), but at some point you have to sell more product, to more customers, more often. That’s what we want to hear from WHS, and it’s what’s missing again.
19th January 2012
I’ve been on the road for the past couple of days, and quite a few gaps in the table have been filled during that time. Strong sales from Primark and Matalan indicate that there’s still a desire for value when it’s done well. Of course, you might say the same about Peacocks, which by all accounts remained operationally profitable, but has been crippled by debt and forced into administration, threatening the biggest one-off loss of retail jobs since Woolworths in 2008.
The Centre for Retail Research in Nottingham has published a sobering schedule, detailing retail failures from 2010-2012. They state that, over the five years 2007-2011, 173 retail businesses folded, comprising a breathtaking 18,342 stores, and over 150,000 jobs. Questions please to the CRR –here’s the link.
Back to Christmas 2011, and at the other end of the fashion scale, Burberry and Mulberry have announced excellent growth, but it’s been unclear whether the numbers have referred specifically to UK retail, so I’ve omitted them.
No such qualms with not-retailers-at-all Greene King and JD Wetherspoon. Looks as though we still have money to spend on a night at the pub! And animals had a good Christmas, even if their owners cut back, with Pets at Home up 4.9%.
I posted a like-for-like book sales for Oxfam last week, and this has been followed by a flurry of other figures, reported in the Guardian.
Biggest news from the mid-week period has been from the electricals retailers, with Dixons (Currys/PCWorld) hailing -7.0% as a relative success, and Comet’s -14.5% a reflection of the grim condition of a business struggling through a sale process, and pretty much disowned by Kesa.
However, I think there are good things to be said about Dixons, but they need a separate blog – watch this space…
16th January 2012
Just three additions today – Boots and The Perfume Shop, both looking good; and the McArthurGlen outlet centres, which appear to have had an exceptional season. It’s worth bearing in mind that Christmas historically has peaked early at outlet “villages” like Swindon and Cheshire Oaks – outlet customers search out the best bargains early, and then complete their shopping in traditional malls and high streets – from memory, the final weekend in November was typically the best in the run-up to Christmas.
Who are we still waiting for? Of those who made Christmas trading announcements last year: Electricals – Currys/PCWorld and Comet; books/media – WH Smith and Waterstones (though the latter is now privately owned, so is under no shareholder pressure to announce); fashion: Primark, Matalan; DIY: B&Q (though Christmas is hardly a prime season for them, it’d be good to benchmark their performance against Homebase and GCG).
Who would we like to hear from? Big, successful private businesses like Arcadia and River Island; PE-owned growers like Pets at Home and Hobbycraft; discount grocers like Aldi and Lidl, and bargain retailers like Poundland; niche successes like Jack Wills and Cath Kidston; mega-brands like Selfridges… It’s a long list, and any analysis of published numbers is inevitably just a snapshot of a sector which is far less plc-dominated than in the past.
13th January 2012
A quick final update before the weekend is upon us. Has Tesco had enough press coverage? As Twitter noted last night during News at Ten, you’d think they’d called in the administrators… Still, Philip Clarke has been very candid about the challenges Tesco faces, and has been reminded (as The Times editorial today emphasises) that no company stays at the top forever. I’m thinking hard about Tesco Extras, and a separate blog might follow…
Nils Pratley on The Trouble at Tesco
Harry Wallop on Is This the End of Tesco Dominance? (QTWTAIN)
Meanwhile… Good numbers from Original Factory Shop, The Entertainer and Superdrug, but another tough season for Theo Fennell. Nul points to Asda and Ted Baker for announcing total growth for Christmas, but not like-for-likes. Of course, I appreciate they don’t have to announce anything at all, but if I had shares in Wal-Mart, I’d want to know what was what.
12th January 2012
After a positive start to the week, things have turned ugly with poor results from Tesco spooking the markets, and throwing fresh doubt over the sector.
As you can see from the table above, Tesco has performed significantly worse than other supermarkets (and M&S food, which has been broken out separately in reporting, and which saw a like-for-like increase of 3%).
House of Fraser has posted some remarkably good numbers, but it isn’t clear whether they’re inc or ex-VAT. For the record, I’m a committed ex-VAT person – including a variable rate of tax in your sales is no way to accurately reflect like-for-like shopper behaviour.
(At Borders, 75%-80% of our sales were VAT-free – books, newspapers and magazines – and the remainder was VATted – stationery, CDs, DVDs, toys etc. We also paid a “special rate” of VAT, where eg a CD-ROM was attached to a book on computing or language learning, which reflected the fact that part of the whole product was zero-rated. I’d like to think that the HMRC officers required to create and police these rules, and audit the proceeds, cost rather more than the total tax take.)
Anyway, back to Christmas 2011, and as expected, times were tough at the likes of Halfords, Thorntons and Mothercare. Argos had a particularly grim set of results – for how long will 750 stores be sustainable?
Some more variances to reporting periods, highlighted in green. These were the reporting periods twelve months ago:
- Tesco LY: 6 weeks to 8th January
- JD Sports: 5 weeks to 1st January
- New Look: 15 weeks to 8th January
- House of Fraser: 5 weeks to 8th January
FTSE 100 retailers are now shown in bold.
10th January 2012
Plenty of results added to today’s table, including a couple of outriders that you may not have seen reported elsewhere!
Game takes over at the unhappy end of the chart; their LY numbers are highlighted because of a change in reporting period – for 2010, they reported five weeks to 8th January, this time around, an additional three weeks pre-Christmas were included. The Co-op also made a change – the prior year numbers relate to a 13 week period, October – December.
There’s some inc-VAT (Debenhams) and ex-VAT (Majestic) differentiation, which given the rate jump from 17.5% to 20% has a bearing on different companies’ numbers. And of course, these are just sales – not profits. The rumbling undercurrent – “of course, their margins will have taken a hit” – accompanies many of these announcements.
Nevertheless, it’s great to see many more pluses than minuses on the schedule – long may it continue…
9th January 2012
And they’re off.
It looks as though this year, every media source and his dog is going to be publishing regular updates on Christmas trading, so I’ll keep this brief, and update it as required.
I’ve included last year’s numbers, where I have them – and as this is a busy office, I haven’t dug out LYs where I previously didn’t have them – I’ll try and infill if Edwin Drood becomes unwatchable.
Worth noting that, where comparisons exist, the order of companies is exactly the same as last year. (The reporting periods are all similar, so these are good comparisons.)
It’s worth remembering that bad results always take longer to calculate than good ones…
And for the many hundreds of you who enjoyed my “8o towns” blog from last week, I’ve shown store numbers. Counting stores is always an inexact art, but most of the chains are on multiples of eighty. Some will stay that way – supermarkets, Next. But there’s restructuring in the air.
Just to keep us all honest, this article from the Telegraph highlights some of the more imaginative ways that Christmas performance can be characterised.
And, lest we forget, the following chains probably won’t be providing Christmas trading updates:
Barratts Priceless, Blacks, D2 Jeans, Hawkins Bazaar/Tobar, La Senza, and Past Times. Ask not for whom the bell tolls, but let’s hope stores can be rescued, and jobs maintained.
A scintillating day yesterday at the FutureBook Conference at the QEII Conference Centre in the heart of Westminster.
2011 has been the Year of Change, with digital content and eReading becoming established across the sector, thanks to the explosive success of the Kindle and (to a lesser extent) the iPad. The potential of smarter and more versatile devices, allied to social networking in the very broadest sense, has got people like Stephen Page rethinking the whole publishing paradigm – and it was great to see experienced but independent leading publishers like Page, Rebecca Smart and Kate Wilson being recognised for picking up the old business models and giving them a damned good shake. It was also refreshing to see more young and/or independent delegates, who will reshape the face of publishing over the next 5-10 years.
Dominique Raccah, CEO of Chicago-based Sourcebooks, kicked off:
Ereader users believe they are purchasing more titles. The evidence suggests, yes; but the industry still lacks a reliable eBook “chart” in the UK and the US, and Amazon/Apple are notoriously tight-fisted when it comes to sharing their data.
Ereader users believe their overall spend on books has risen. As overall spend (eBooks + pBooks) has fallen, this is hard to prove.
Ereader users believe they’re reading more. Again, ths is unproven, though there may be a link to “dual screen” use, whereby the user browses a device (most typically, an iPAd) at the same time as they’re watching TV.
A snapshot of the Top 85 Kindle charts in the US: 66% of titles were published by “traditional” publishers; 18% were self-published; and 16% came from “non-traditional” (ie digital) publishers. nb for the traditionalists, this compares to about 95% (my guess!) trad publishers in the average print bookshop.
Evan Schnittman of Bloomsbury divided the audience with his “hardcover + eBook” proposal (he’d charge a 25% premium for the bundle, which presumably would include a VAT element). Personally, I’m gung-ho for this idea, particularly as Evan reminded us of the difference between “books” (objects that deliver permanence and permit display), and “reading” (which is all about content).
I sometimes chuckle at the “convenience” argument around eBooks. Is it really a whole lot more convenient to carry an eReader than a single book? (Do you remember, in the dim, dark days before Kindle, when you used to say “I’d love to read more, but carrying a book is so inconvenient“?) It’s the enhanced convenience of carrying lots of books, and being able to purchase when you wish. These are great qualities, though perhaps they encourage the grasshopper mentality of the dual-screener? (Research suggests that 26% of Kindle users do this.)
Meanwhile, while the take-off trajectory of eReaders has been, and will continue to be, spectacular; though bear in mind that 76% of book-buyers have yet to buy any kind of eBook and – according to BML research – over 50% of those aged 35 or over don’t at present intend to do so.
Finally – I think this was an AT Kearney stat – European eBook sales currently break down as follows: 52% of all eBook purchases take place in the UK. Germany – where Thalia’s Oyo is making the running – delivers 28%. After that, France is at 7%, Italy 3%, and the rest of the continent 10%.
This brief run-down of stats doesn’t give the reader any real flavour of the optimism, enthusiasm and boundary-breaking that characterised great ideas and discussion from William Higham, Valla Vakili, Charlie Redmayne, John Mitchinson and many, many more. But we need to press on…
OK, let’s talk about bookshops
It fell to me to wave my accustomed bucket of cold water around the Fleming Room, and to remind the Conference that this once-in-300-years reshaping of the industry is taking place during the worst consumer downturn, and the worst set of economic forecasts, for many, many years. New devices, formats and ideas are being launched into the teeth of last Wednesday’s Autumn Statement, which promised austerity beyond the next election, and a return to 2001 living standards in – 2017? 2020? Providing the Euro doesn’t implode, of course – then things will be much worse.
So, book people need to be thinking not just about how to reshape their industry in such a way as to preserve copyright, encourage new talent and stop Our Friends in Seattle (or, more broadly, the “GAFA” group*) from dominating commerce and innovation; they need to embed that change at the same time as Joe Public is devoting his dwindling income to candles and tinned food.
I was chairing a discussion panel that brought together Kobo vendor relations manager Cameron Drew, Hive development manager Julie Howkins, Middle East bookseller/publisher Jeremy Brinton, Retail Week Knowledge Bank director Robert Clark, and Leo Burnett marketing strategist Dr Alan Treadgold. Here are some of our key points:
The UK pBook market has consoidated to one specialist (Waterstone’s), one generalist (WH Smith) and one website, which between them meet most of the needs of committed book-buyers. (Of course, there are also three participating supermarket chains, though they aren’t specialist by any definition.) This represents a real narrowing of the market – but perhaps that market will now start to broaden again, driven by feisty and more self-confident indies, the arrival of eReader alternatives to the Kindle (specifically Kobo), and an expanding reach (devices, channels, formats) from the Stephen Page-defined world of broad publishing.
However, no one has yet resolved the “showroom” conundrum: once its sales have fallen by around 20%, a physical bookshop becomes untenable, and has to close. Bookshops can move to cheaper premises, can sell a broader range of products (toys, coffee etc), but unless they are actively participating in eBook sales, their market share will be eroded beyond recovery. This will leave those 50% aged 35+ who don’t intend to buy an eReader for Amazon to scoop up into their search-excellent, browse-lousy world.
The panel recommended some solutions to this problem:
Ereader manufacturers that partner with retailers can encourage consumers into a bookshop relationship without committing them to a non-transferable, Amazon-type scenario. Hive-affiliated bookshops (currently about one-third of serious indies?) can sell eBooks in multiple formats, and share in the revenue they generate, as well as creating local incentives for their customers. And Kobo’s retailer partnership model (WHS, Fnac, Indigo etc) clearly has legs.
Physical bookshops must use their websites to drive store footfall. One of the UK’s most consistently successful retailers, Richer Sounds, has a strong eCommerce site, which nevertheless acts primarily as a driver to get customers into personality-saturated stores, where they can test the product and take advice from trained staff. There’s a bookshop model here.
Click-and-Collect is growing swiftly as a preferred distribution channel for many customers. 26% of Argos’s business is Click & Collect, and M&S, John Lewis and Sainsbury’s are among the retailers investing heavily in this service. Click & Collect allows the customer to pick up their goods at a time convenient to them – and of course exposes them to personal service, and many more buying opportunities.
Social networking through eReaders (Kobo Vox) can bring reading communities together, and could be curated by bookshops who currently support reading groups. Events and literary festivals not only bring together readers with shared interests, but underline a bookshop’s specialisms. (And deliver healthy book sales to boot.) In short, community runs through good bookselling like the words in a stick of rock, and good staff matter more in bookselling than perhaps any other retail sector.
Everyone in the world of books – publishers, authors, retailers, analysts – needs to be focusing more on their end customer: the person who buys the book. Historically (ie until a few months ago) publishers tended to view retailers as their customers, with (as John Makinson has noted) a B2B mindset at odds with the creation, marketing and selling of consumer products. Book trade people need to be aware of retailing best practice, and to understand how consumers and retailers are behaving in sectors far away from their own. We cannot integrate ourselves into 21st century lives while still behaving at one remove from our readers.
Finally, there is a common retail trend running through all sectors – fashion, homewares, electrical etc – and that’s a trend for fewer, better shops. We certainly have fewer bookshops than we had five years ago, and it seems likely that the number will continue to fall. Those that are left must be digitally integrated, and committed to a programme of continual improvement.
*GAFA: Google/Apple/Facebook/Amazon. Each is developing a vertically integrated suite of services and functions, as follows:
The walls around each of their gardens vary in height.