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?
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.
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!
To comment on this blog post, just click on “leave a comment” in the Tags block above.
The Bookseller has published my monthly column, and this time around, Waterstones’ Piccadilly flagship has sparked off my train of thought.
In retailing, flagships tend to come in two forms – the retailer, and the brand. Examples of retail flagships would be Marks & Spencer at Marble Arch, Top Shop at Oxford Circus, Harvey Nichols in Knightsbridge and HMV in Oxford Street. These are the stores that define the chains, and that set the standards for the rest of the business to follow.
Plenty of retail brands get by without flagships. Supermarkets don’t have flagships (they may have a current “future store”, but these things shift), nor do electricals or many retail park brands.
Brand flagships are different, and create a halo for fashion, jewellery, perfume and lifestyle brands that are sold through many different retail channels. In London, Bond Street is the home of these flagships, and of course similar stores can be found in major cities worldwide.
It’s questionable whether either type of flagship always stacks up as an economic proposition, and many retailers and brands have had their fingers burnt by flagships. Nevertheless, the “best of the best” is always seductive, and the new businesses continue to seek their flagship opportunity.
There is, sadly, little sense of surprise in the news that Game Group has finally called in the administrators, as the chain’s poor Christmas was followed by the reluctance of the banks to prop up a struggling enterprise, and then the progressive withdrawal of support from its suppliers. However, what does shock is the speed at which a plc can go from success to failure, once the storm starts to rage. In 2009, Game Group posted pre-tax profits of £119m, up 75% in two years – here was a company that was beating the consumer recession – although this proved to be the last of the good news, as the absence of new platforms, lower pricing from online competitors, and the growth in downloaded content progressively reduced profitability and investor confidence.
Game themselves – slick and capable operators who’d innovated in many ways (eg by mainstreaming the second-hand market) – now had a brand that was too anodyne for the hardcore gamer. They should have repositioned their primary brand to better serve that market, rather than chasing the more family-friendly (and fickle) Wii market. Instead they sought to serve the hardcore through the rougher and readier Gamestation brand, having committed the Retail Deadly Sin of acquiring a parallel business in 2007 and then having to post-rationalise it (see Clintons/Birthdays, Mothercare/ELC, WH Smith/Waterstone’s and many more down the ages).
Their second Deadly Sin was to focus on international expansion at the expense of the home business, when they should have been replicating their physical dominance (a one-third market share at peak) in the online sphere. That’s a tough, going-on-impossible trick to pull off when the competition includes retailers like Amazon and developers like Zynga and Rovio, but it was where the market was going and it’s where Game should have gone, in a fair and equal world.
However, this world ain’t fair nor equal, and a retailer – any retailer – committed to decades-long leases in prime pitch locations at the most expensive malls is naturally going to be focused on how maximise those stores’ sustainable profitability, how to turn them around – in short, how to protect the legacy/millstone that they’ve inherited.
It’s this lack of flexibility than can kill even market leaders in the current consumer climate; their lease commitments are so onerous that they have to focus on hauling those locations back towards profitability, even though there are precious few examples of gone-bad retail locations miraculouly coming good again.
Game Group’s collapse is the worst, in terms of potential job losses, since Woolworth at the end of 2008, and it is to be fervently hoped that some jobs, stores and the brand can be saved. However, it once again throws the plight of the middle market into sharp relief, as a profitable core of Game stores won’t prosper unless the online/download/value challenges I instanced above can be resolved. (And any good news that all of this represents for HMV will be short-lived too.)
Meanwhile, the less attractive or affluent high streets and shopping centres are being hollowed-out by store closures. The Portas Review rightly promotes the conversion of retail premises to other uses, but what strategies, one wonders, are the shopping centre landlords contemplating? The biggest and best – the Westfields, the Meadowhalls – can thrive, but all those poky, low-ceilinged 80s developments with their shallow shop units, the natural home of Game and many other 2011-12 retail casualties – how will they be repurposed? Which major landlord is going to break ranks and announce a new strategic approach to asset management that isn’t built on the old assumption that everything will remain largely the same as it was before?
In February 2012, 10.7% of all UK retail sales – including food – were executed online. In February 2011, the figure stood at 8.3%. That’s a lift of £140m in a dull month, when overall retail sales were flattish at the very best. Factor in Christmas, and you’re looking at the thick end of £2 billion transferring from bricks and mortar to online over the course of 2012.
Despite all of this, I personally remain convinced that physical retail has a strong future but – as my headline suggests – bricks and mortar is trapped in a losing war at the moment. That war will end – a truce will be called, and a new equilibrium established – and it will be consumers en masse who end hostilities, once a new balance of online purchasing (for value and convenience) and physical retail (for the experience of the product, the face-to-face benefits, the “localness”) has been established.
Of course, online and physical will blur, as they already have for successful, robust businesses like John Lewis or Apple (this hoarding is just two doors down from Game in Kingston’s Bentall Centre). It’s proved to be very much easier for customers to evolve into multi-channel operators than it is for the retailers that serve them.
But the biggest and the best will survive and thrive, as will the smaller operators, who know their market, understand their customers and can move swiftly without too much legacy encumbrance. The mass, the middle market? That’s proving to be much more difficult.
Author’s note: My alma mater, Borders Group, of course committed more than a few Deadly Sins in its time; but the concession agreement we had with Game in the UK was highly successful for both brands during its all-too-brief existence.
* * * * * * *
My eBook, A Year at Front of Store, is available in these Amazon Kindle territories –
I started writing the Front of Store blog a year ago, as a response to British retailers’ 2010 Christmas trading numbers. A year later, a new set of results has been published, another Christmas has been put to bed, and it feels like a sensible time to take stock.
When I created the first entry, I couldn’t be certain what directions my blog would take – I knew I had plenty to say, both about my “home” trade of bookselling, and about the broader world of retail. And the news stories kept on coming throughout the year – Borders, HMV, Waterstone’s, and more recently Westfield, Tesco and Mary Portas. Underpinning the bricks and mortar triumphs and travails is the real unavoidable success story of modern retailing – online commerce, digitisation and Amazon.
Ah yes, Amazon. An inescapable part of everyone’s life now, bringing good things (service and value) to the consumer, while driving a coach-and-horses through established practices in every sector it touches. Like Apple, Amazon anticipates the future, leaving its competitors to react to its initiatives. Too often, Amazon’s competitors try to protect their heritage, where instead they should be repurposing their companies for the future.
There came a point last autumn when I looked at the total word count and thought, blimey, I’ve got a book here. Hence a Front of Store e-book – and, of course, I’m selling it through Kindle Direct Publishing. Industry estimates suggest that around 1.3m e-readers were bought in the UK over the Christmas period, and of that number, 1.2m were Kindles.
It would therefore be profoundly foolish to début anywhere other than on Kindle. Naturally, if I have a smash hit on my hands, I’ll make use of other formats – but the effort required to make a Kindle book has been fairly demanding – many evenings of editing and formatting in, and swearing at, Microsoft Word.
The initially published result was below par, so today’s buyers are being offered the second edition; after KDP struggled to translate tables and jpegs into ebook format in the first version, I went back and substituted lists and descriptions. This probably says more about my book-creating abilities than it does Amazon’s – but it underlines the complexity of creating “real” books, and the relative ease of ebook publishing.
I was talking to a friend last week who spends much of her life on planes and trains, and who loves her Kindle – convenience, accessibility and readability all score high marks with her. However, she confessed that she struggled to remember what she’d read on the Kindle; by contrast, physical books have a tactile presence that imprints itself on your memory (and thereafter, they sit on your shelves, whispering “remember me?”).
“A Year at Front of Store” is journalism, news and comment as it happens. I’ve carried out some pretty vigorous editing – excising time-expired pieces, eliminating anything that required colour illustration (or indeed any pictures at all), improving syntax (a bit), and adding in summaries and afterwords in the appropriate places. I’ve also included pieces that were published elsewhere, and added the full text of my Frankfurt address from October.
What I haven’t done is to apply any Winston Smith editing, so I don’t foresee that Mamut will buy Waterstone’s in June, or that London will riot in August.
There are a number of themes that I’d like to explore for a book “proper”, which will require a shift from journalism to more considered writing. The retail industry continues to be the most fascinating business arena – fast-moving, unpredictable, unsafe, and undergoing its most fundamental changes since the birth of the supermarkets.
I’d like to give a big hurrah for WordPress, which allows the Front of Store blog to happen, and whose text is relatively easy to shunt into Word, and thence to KDP. The blog has created opportunities for the Front of Store consultancy, as well as opening up some fascinating opportunities to speak at conferences and to advise behind closed doors.
Finally, thanks for reading. Readership of Front of Store has been growing exponentially – January’s hit-rate is 30% higher than December, which was 48% higher than November – and so on. Here’s to an exciting, challenging, ever-changing 2012.
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.