World E-Reading Congress: Legacy, bookshops and the future

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:

Q1 2012

Revenue:      $13,180,000,000

Profit:          $      130,000,000

Margin:         1.0%

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:

Q1 2012

Revenue:      $39,200,000,000

Profit:           $11,600,000,000

Margin:         29.6%

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.

To comment on this blog post, just click on “leave a comment” in the Tags block above.

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My eBook, A Year at Front of Store, is available in these Amazon Kindle territories –

United States, United Kingdom, Germany, France, Italy and Spain

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Thinking about legacies

I’ve been thinking about positive and negative legacies over the past few weeks, and my talk at the World E-Reading Congress tomorrow uses legacy challenges as one of its springboards.  I’ll share a few more of those thoughts with you once the speech is unembargoed, but in the meantime, here’s my monthly column in The Bookseller, pondering the dead weight of real estate legacies that can damage or even destroy traditional retailers.  (Plenty of recent examples available.)

It is stupidly neophiliac to treat any past achievement as a legacy to be denied and downgraded, of course.  Last night I had a splendid time at The Bookseller’s Industry Awards night in London’s glittering West End.  Several of the major awards went to long-standing organisations that are still closely associated with their founders – businesses that understand the value of what they’ve created, and can build imaginatively upon it.  Congratulations to (in this instance) Usborne Books and Foyles; and indeed to all of last night’s prizewinners.


Shapps/Portas – and now…?

Housing Minister Grant Shapps has announced the government’s official response to the 2011 Portas Review.  You can read the Communities & Local Government Office’s full text here.

It’s been quite a week for retailers, with the government promoting local shopping by manufacturing a petrol shortage which will ensure we’ll only be spending at shops we can walk to this weekend.  Much more seriously, the impact of channel change on established and historically successful retailers is being felt across the world – Game Group’s administration, the collapse of leading Dutch bookseller Selexyz, famous for creating the “world’s most beautiful bookshop“, and today the announcement from Best Buy that (a) it’s closing 50 US stores and (b), short of slashing costs and talking hopefully about online opportunities, it’s a bit short on strategy.

So, back in Britain, there are plenty of feelgood elements to Grant Shapps’ announcement: market days and Town Teams were particularly eye-catching back in December, so they get full support, but there’s relatively little money forthcoming – around £12.8m, which will fund a few more Portas Pilots, but is a tiny sum of cash – it’s rather less than, say, Foyles in Charing Cross Road turns over in a year, or under a third of the estimated cost of the Leveson Enquiry.

Paradoxically, though, I’m not calling for loads more cash; I’d prefer to see more real local power and accountability, with councils mandated to create a successful business environment for the communities they serve.  This will be the acid test of the programme, as there is much promised on revoking archaic bylaws and reforning planning  – will local councils have the guts to go the whole way, and will the government be prepared to devolve real decision-making and – at council level – revenue raising powers?  Step forward the first council that wants to tell Grant Shapps that, actually, we think a 5.4% increase in business rates is a little steep in the current environment, so here in Tomorrowtown, we’d like to do things a little differently.

Well, I can dream.  But beware of short-term revitalisation and too great a focus on heritage and bringing back “the old high street”.  There is, understandably, much hand-wringing about the number of vacant shops across the country – 14.6% of total stock across the country, it says here.

But hang on just a second – is that the number of empty premises, or the volume of empty space?  Or, to turn the numbers around (without knowing the answer) what is the total volume of trading square footage in retail today, compared to ten or twenty years ago?  I’m going to bet that the number has gone up, but that old stock has been allowed to rot on the vine.

As retail commentator HatmanPro has observed on Twitter, much of our empty retail space exists because newer space has superseded it.  In too many town centres, successive new developments – blocks of stores, little shopping centres – have been dumped into vacant spaces, increasing the total volume of footage and laying waste to older shopping streets and districts, on the assumption that, as the population grows and we all become wealthier, more and more shops can prosper.  Even without the internet, this is patent nonsense – I’d like to see new shopping centre openings accompanied by a structured reduction in dead space; a recognition that, with 10.7% of all retail spend now online (and that number will grow and grow), even the most Pollyannaish assumptions of future economic recovery will not merit the number of old shops cluttering up our old towns.

Will Town Teams and local councils have the ambition, the power and the cojones to repurpose spaces?  Will they be able to do so, and maintain the variety of chains and independents, generalists and specialists, commodity sellers and boutiques, that a thriving town centre needs?  I really hope so.  But the “beating heart of the community” needs to be strong and vigorous, and must look beyond the reduction of street furniture and controls on levels of parking fines – if 15%, 20% of all retail spend is going online (because that’s what the consumer wants), then those high streets need to reflect tomorrow’s needs, rather than yesterday’s longings.

And having said all of that – if this comes off, when those first Town Teams cajole their councils into really making a change and doing  things differently, this is going to be damned exciting.  Retailing is one of the things we do best in the UK, and everyone who’s committed to a retail career wants to make it better.

Pictures: The Sun; bhbeat.com


WH Smith – how does it keep on squeezing those margins?

I mentioned WH Smith’s continued walk-on-water results in my last post, with sales down and operating margins up, and I’ve started to worry that I might be obsessing about a single brand.  However, on reflection, this is understandable – Smiths is the only retailer in the book sector whose current performance is visible to the public.  Waterstone’s is now privately held, so it’ll join Foyle’s with Companies House filings only published many months after they cease to be relevant.  And Amazon of course never breaks out UK performance, and reveals no more than it chooses to through its Luxembourg base.

We all know that WHS is no longer the serene multi-layered-management arm of the Imperial Civil Service that it once felt like.  We can only speculate as to its market share in the critical Toblerone sub-sector.  And as a well-known retail guru and government advisor observes on Twitter this morning:

Mary Portas

@maryportas I truly hate WHSmith. Used to be a loved British biz & now a dump. Rush hour, 7.45am at Euston. One person on till. Queues. And shitty promos

But, spitting feathers aside, and noting obvious savings in staff costs, shop-fit etc, where is WHS’s continual margin gain coming from?  With twenty minutes to kill in their new store at Westfield Stratford yesterday, I went strategy spotting.

One of the best ways to drive margin is through own-brand, and WHS continues to extend own-brand and unique stock throughout all its categories.  WHS has always carried a sizeable slug of own-brand stationery and the like, but many of its categories are now dominated by own-brand to an unprecedented degree.  Take calendars.  There are multiple suppliers of wall calendars in the market.  Some of them own valuable IP – eg Top Gear, The Simpsons – but a large proportion of the market is generic – kittens, landscapes etc.  And WHS (at least in Westfield) no longer stocks generic calendars that aren’t own-brand.  The opportunities to increase margin are significant.

Value publishing – creating attractive books to be sold at a lower-than-expected price – has been a staple of store chains like The Works for many years.  It served us well at Borders, and WHS has always had a toe in the water, but its commitment to value publishing is now more substantial, and takes many forms.  Value titles are no longer separated out, highlighted as “second-class” goods – they’re integrated into the main offer.

WHS is proving particularly adept at providing alternatives to current trends/titles – eg baking books to accompany the Great British Bake Off.  This can be yours for a fiver:

Placed strategically close to the Guinness World Records dumpbin is a selection of similar facts’n’entertainment titles like “You Won’t Believe It But…”, “Gruesome Facts”, “Planet Earth” and so on.  These are retailing for £5, half the price of Guinness (which in turn is nominally 50% off its £20 RRP, though I defy you to find any chain merchant selling it for over a tenner).  WHS offers a cheap alternative to Guinness which isn’t as time-sensitive, and will earn a higher cash margin per unit sold than Guinness.  Win-win.

Now, here’s an interesting offer – any two for £10 on over forty best-selling hardbacks.

That’s a great deal in today’s market, but it’s also a clever deal, recognising that WHS’s average customer isn’t a Bookseller subscriber or regular attendee at the London Book Fair.  These are, for the most part, last year’s books (long available in paperback), or they’re illustrated publishing of the sort that The Book People specialise in – big print-runs on reliable topics, sold into specific outlets at low-low prices.  Describing these books as “best-selling” is accurate – they certainly have been best-selling in their time, and with offers like these, perhaps Ant & Dec will sell better second time around…

Here’s another way to get mileage out of old books.  On the new books table at the front of store, two hot biographies of major cultural figures, both best-sellers, but Keith Richards was published 12 months before Dickens/Tomalin:

The River Cottage Veg book is new, and appears to be selling at full price – though keeping up with stickering is hard work in this environment.  (The Cheryl Cole at bottom right was published in September 2010, and is on a not-wholly-attractive “2 for £10 or £4.74 each” offer, if I’m reading that sticker right.)

The Keith Richards was a huge success last year, and representing it for Christmas 2011 works for everyone.  At 70% off, it’s retailing for £6 – somewhat higher than a traditional remainder seller would price it, but excellent value nevertheless.

Elsewhere, WHS has bought heavily into what is essentially “Jamie Oliver’s Greatest Hits”, a collection featuring previously published recipes from all over Europe, priced to sell at £9.99.  This is more heavily featured, and more cheaply priced than this season’s new Jamie – and as a recipe selection, it may well be more attractive to many customers.  Given WHS’s stock commitment, a better cash margin also looks likely.

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These are just a few examples, culled from a brief stroll around one store, but they underline WH Smith’s absolute commitment to creating a consumer offer that will drive the strongest possible margin.  Lest this sounds merely blindingly obvious to any general retailer, this isn’t how a traditional bookshop works – stock selection is driven by frontlist publishing, and by the creation and maintenance of a diverse and credible backlist range.  The bookseller will haggle with the publisher for margin and payment terms, marketing support etc, but their commitment to the “right” titles will limit their ability to grow margin.

What WH Smith has done is to free itself from the old dependence that retailers of copyright products (books, news/mags, music, movies, games etc) have on producers, by analysing what its customers want to buy, turning the screws on suppliers in exchange for exclusive deals and big buys, and generating large volumes of unique and own-brand stock across all categories, from bookazines to giftwrap.

I still share the general bogglement at Smiths’ ability to keep pulling off this trick, again and again – last month, Kate Swann announced that a further £11m-worth of savings had been identified across the business.  And I wholly understand the dismay that Mary Portas and many others have in the current WH Smith store environment – these are no longer pleasant stores.  (Younger readers, when I were a boy, WHS and John Lewis felt very similar to each other…)  But WHS now has a much greater level of control over what they stock and sell.  How all of this will fare if digital content takes over 50% of the book market (and the magazine market?) is hard to say, but as a survival strategy this looks more robust (if less attractive) than that of the old “stockholding bookshop”.


The foolishness of not buying from Amazon

Thanks to the magic of Twitter, I stumbled on this recording from BBC Radio 4’s Today programme this afternoon:

http://news.bbc.co.uk/today/hi/today/newsid_9525000/9525598.stm

Arts Correspondent Will Gompertz talks to Penguin’s John Makinson, The Bookseller’s Neill Denny and blogger Adrian Hon about the impact of digitisation on books and publishing.  It’s an interesting listen, but the element that has stuck with me is the vox pop half way through, wherein we hear from a Foyle’s customer, interviewed on the Charing Cross Road pavement.

To paraphrase, she says that she was passing Foyle’s, and loves it, but normally of course she’d buy her books on Amazon, because of the price saving.  This is very matter of fact; Amazon and the bookshop are no longer occupying the same mental space for this consumer.  Amazon is the obvious, default place to buy a book – indeed, it’s almost perverse to go into a bookshop, but an occasional mad fling is OK.  Thus the bookshop moves from an inclusive place for everyone who enjoys browsing and buying books, to the equivalent of an expensive boutique, or fancy cake shop- maybe you’ll go in there for a guilty indulgence, but it doesn’t make financial or any other kind of sense to visit too often.  (And of course, she isn’t shopping at “an online bookshop”, she’s shopping at what might as well be  “the only online bookshop”.)

I may be extrapolating a little too much from a snatched moment on-mike, but those who consume books, rather than fetishising bookshops, are likely to be thinking more and more in this way.


Which in turn supports the appearance of the Assouline shop inside Liberty on Great Marlborough Street.  Like all department stores, Liberty used to have an eclectic book department which reflected its clientèle and their interests.  There are still some gift books on tables here and there elsewhere in the store, but Assouline provides the mad fling or naughty treat – with prices from around £20 to hundreds of pounds.  I like the Assouline offer, and I thought their second-hand section (branded “Vintage”, like a classic Yves St Laurent frock, and priced accordingly) was very cleverly done.  But Liberty customers, like the woman outside Foyle’s, will get their bread-and-butter books (physical or digital) from Amazon.  The book as a collectible or an extravagance, rather than a staple, moves another step closer.

Assouline photo: http://www.assouline.com


Foyles heads east to Westfield

Foyles announced yesterday that they will be opening a 5,000 sq ft bookshop in the new Westfield mall at Stratford City in east London.  This is a bold move, perhaps even a brave one.

“Stratford City” is an interesting new conceit, the result of many years’ planning and the Olympic fillip.  Not everybody is happy that this massive development has landed in a previously unconsidered old corner of Hackney – marshes, roads and railways, light industry and playing fields have been subjected to comprehensive redevelopment.  Iain Sinclair was waxing lyrical about the subject on yesterday’s Start The Week (about 15 minutes in).  Once the Olympics have come and gone, we will be left with a cluster of over-specced sports facilities, offices, housing, and the largest urban shopping centre in Europe, with 1,900,000 sq ft of letable space.

Developments like Westfield Stratford should, amongst other objectives, regenerate a previuously run-down area.  Old Stratford was certainly a mess, and New Stratford will have plenty of new housing and employment opportunities that should benefit the immediate area.  “Should” – but will they?  I was struck, working through the Westfield website, by the extent to which ease-of-access is promoted – in other words, if you live somewhere else – somewhere “nicer” – then you’ll eventually be able to get into Westfield via one of eight different rail lines.  The mall sits conventiently on top of the rail interchange, so the visitor should be able to remain pretty much hermetically sealed off from the East End.  Westfield Stratford could be anywhere – unless you choose to use your car; the local road network has always been choked (you’ll have heard the words “Blackwall Tunnel Northern Approach” a few times on the traffic news), so driving in will be quite an expedition for the target market.

I need to take care that I’m not biting the hand that’s fed me; I support new shopping schemes, and I’ll defend the customer’s right to buy what they choose, wherever and whenever they like.  If, for instance, consumers want retail parks, then rethink the high street, rather than denying them the convenience and value that out-of-town provides.  What’s interesting with Westfield is that it sits in the heart of the old East End.  If it’s mid-market (as the list of tenants here seems to suggest), then will it primarily cater to local shoppers, taking shoppers from Ilford and the multitude of small local centres like East Ham and Leyton?  Or, to stack up financially, is it reliant on a target customer who will travel a much greater distance than is typical in London, passing through neighbourhoods largely untouched by the new mall’s benefits?

Back in the boom years, Borders opened a series of retail park stores in “untraditional” bookstore locations – Ellesmere Port (chemical works and car factory), Kinnaird (closed mines), Silverlink (old light industrial/residential) – which were among our most profitable and sustainable shops.  (Two of those three went to HMV/Waterstone’s and continued to trade.)  The principle worked in shopping parks like Teesside, Stockport and Inverness as well.  However,  inside the M25 we had a mighty struggle – Lakeside and Gallions in East London, and Brent Cross on the North Circular under-performed, despite the inspirational hard work of shop managers and booksellers.  Londoners found travelling across town was too difficult and demanding; they had the West End (and all its satellites), had strong shopping at their workplace (eg Canary Wharf, Covent Garden), had a high street at home, and didn’t need to make the effort to travel further.

At the risk of passing myself off as a faux-Iain Sinclair, London is different.  It’s a city state with its own rules and habits.  Without trampling on regional sensibilities too heavily, what works in Dundee can work in Cardiff or Bristol, but every borough in London is unique.  Which brings us to Foyles.  Mall developers have always liked to woo bookshops – we’re quite good at using otherwise trickily configured space, and we add variety and interest to a mall, particularly if we can enhance the children’s offer (and provide a Dads’ sanctuary amongst the Haynes guides).  However, malls are not high streets – they rarely boast dry-cleaners, pubs or betting shops, and they use the magnet of Big Stores (JLP and M&S so far at Stratford) and Big Fashion to draw in a predominately young, female, clothes-conscious crowd.  A bookshop in a new mall feels a little out-of-place (think Waterstone’s at Reading Oracle), and has to work hard to achieve strong sales densities, particularly in the higher-margin backlist.

5,000 out of 1.9m square feet is almost incalculably small (though it’s the right size for a modern bookshop).  Foyles has form – all its most recent openings have been in malls (Westfield White City, One New Change, Bristol Cabot), so there is clearly a strategy at work here.  All of their small stores are interesting, and the RFH shop is one of the most rewarding in London.  There are plenty of urban locations, similar to those where Booksetc. once thrived, less suited to Daunt Books’ upmarket specificity or Waterstone’s inevitable “chain-ness”, which would suit Foyles well.  It’ll be interesting to watch the strategy develop, and I wish them every success.


Foyle’s in Bristol

Foyle’s has announced a new store opening in the centre of Bristol.

This is bold – anyone opening a new bookshop deserves our encouragement in a time of fast change and uncertain economics.  Foyle’s is ramping up its openings, with One New Change only a couple of months old at the time of writing.

Bristol is a sound choice – one of Borders’ most profitable stores was in Clifton, where a succession of good managers ensured strong sales from an educated, informed and prosperous customer-base.

The trick for Foyle’s is to translate all that we value in its Charing Cross Road store, into the smaller stores, so that it develops brand values that are as applicable in 5000 sq ft as they are in 50,000.

Central Bristol has improved immeasurably with the opening of Cabot Circus; Foyle’s clearly has confidence in their smaller stores, so I shall be watching their first move from central London with great interest.