Swann Song: Changes at WH Smith
Posted: October 19, 2012 Filed under: General retail | Tags: Clinton's, Funky Pigeon, High streets, Kate Swann, Kobo, Online retail, Paperchase, Steve Clarke, The Bookseller, The Works, Travel, WH Smith, Zoodle Comments Off on Swann Song: Changes at WH SmithThe Bookseller has published a column I’ve written in response to WH Smith’s prelims announcement last week, which delivered the double whammy of £100m+ profits, and the upcoming departure of Kate Swann as Group CEO. I’ve reproduced it below.
When the WHS announcement was made last week, two sets of instinctive responses crashed into each other. The City reporters raised the roof for Queen Kate, during whose reign earnings-per-share have been driven to ever higher peaks, thanks to a combination of margin enhancement, cost-cutting and share buybacks. And the naysayers pointed out that, yet again, sales were down – even in the go-go Travel division, like-for-likes keep falling. Oh, and BTW, the store environment is pretty poor.
I try to take a slightly more nuanced (or reflective) view. Swann has delivered extraordinary numbers through torrid times, but has she left her heir apparent, Steve Clarke (who is promising more of the same), with a sustainable model?
WH Smith has made every decision with its shareholders’ interests paramount – and that’s as it should be, am I right? However, it is hard to escape the conclusion that those decisions have been predicated on short-to-medium term returns, rather than the sort of long-term investment that leading retailers make. WHS is still a bricks-and-mortar company (notwithstanding a long-standing but rarely promoted transactional site, and the slightly more forward-looking Funky Pigeon online offer), trading in categories – printed books, newspapers and magazines – that are in long-term decline. Its overseas Travel expansion plans are broad-based – but winners need to be idenified from a pot-pourri of investments across several continents.
Retail Week has just dropped through the door, complete with a profile of Steve Clarke. In the meantime, here’s The Bookseller piece:
Back to the FutureBook: a retailer’s view
Posted: December 6, 2011 Filed under: Bookshops, Digital life | Tags: Amazon, Apple, Argos, Bookselling, Dominique Raccah, Ebooks, Evan Schnittman, Faber, Facebook, FutureBook, Google, High streets, Independent bookselling, John Lewis, Kate Wilson, Kindle, Kobo, Marks & Spencer, Nosy Crow, Online retail, Osprey, Publishing, Rebecca Smart, Sainsbury's, Stephen Page, The Hive, Waterstones, WH Smith, What Bookshops Do Well 3 CommentsA 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.
Takeaway stats:
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:
- Storage
- Device
- Purchase
- Payment
- Social
The walls around each of their gardens vary in height.
FutureBook Conference: “The new retail landscape”
Posted: November 25, 2011 Filed under: Publishing | Tags: Bookselling, Ebooks, FutureBook, Gardners, High streets, Independent bookselling, Kobo, Leo Burnett, London, Magrudy's, Online retail, Publishing, Retail Knowledge Bank, The economy, The Hive Comments Off on FutureBook Conference: “The new retail landscape”If you’re in the UK and have any interest in books, publishing and digitisation, can I commend the Bookseller’s FutureBook Conference to you.
There’s a packed day of activity on Monday, 5th December, at the QEII Conference Centre in Westminster. There’ll be keynote addresses from Stephen Page, Dominique Raccah and Evan Schnittman, and about 40 of the sharpest minds associated with the trade participating in discussion sessions throughout the day. Sessions will be covering digitisation, start-ups, gamification (no, me neither), and international opportunities.
You can read a full programme here – I understand some tickets are still available, but hurry.
I am chairing a discussion on the theme of “The new retail landscape”, with an excellent panel:
Jeremy Brinton, publishing consultant and former CEO of Dubai-based booksellers Magrudy’s
Robert Clark, Senior Partner at Retail Week’s Retail Knowledge Bank
Cameron Drew, head of Vendor Relations at international eReader developers Kobo
Julie Howkins, Commercial Director at Gardners distributors, responsible for the launch of the Hive
Alan Treadgold, Head of Retail Strategy at global creative agency Leo Burnett
It should be an excellent session. Hope to see you there.
Kobo/WHS redux: two contrasting campaigns
Posted: November 1, 2011 Filed under: Ebooks | Tags: Ebooks, High streets, Kindle, Kobo, Online retail, WH Smith Comments Off on Kobo/WHS redux: two contrasting campaignsI try not to be monomaniacal, and having posted at length on the WHS Kobo offer a few days ago… here we are again.
The reason being… I wrote about WHS’s blue and purple Kobo “look”, expressing my concerns that it would get lost in the visual hullabaloo. Like this:
Now WH Smith, as you’ll recall, has an exclusive deal with Kobo in the UK – to such an extent that WHS will share Kobo’s revenue from non-WHS generated income. So, you might expect the WHS branding to roll across the market.
Not so. This, in a railway carriage yesterday (displacing the usual Kindle ads):
Here we have a slogan (“read freely”), a warm and attractive palette, and a remixed set of attributes for the Kobo. Frankly, I think this looks a lot classier and more seductive, even if “comes with 1,000,000 free books” and “holds 1,000 books” are a little contradictory. But now we effectively have two different programmes, with Kobo summing up their features ‘n’ benefits succinctly, and better than WHS.
I think they need to talk to each other.
Got my Kobo working: WH Smith on the new frontier
Posted: October 28, 2011 Filed under: Ebooks | Tags: Ebooks, High streets, Kindle, Kobo, Online retail, WH Smith 4 CommentsWH Smith and Fnac both announced tie-up deals with Kobo at the Frankfurt Book Fair, a couple of weeks ago. As far as I can tell, Fnac appears to have withdrawn the Fnacbook from sale on its website, but there’s no sign of the Kobo yet. The French market of course isn’t as eBook orientated as ours, and WH Smith has wasted no time in getting its offer out there.
You can read a little more about the Kobo/WHS deal here and here – the Futurebook report also carries a photo of Victoria Main, wrapped in Kobo advertising.
Meanwhile, let’s get ourselves into a shop and take a look. In fact, I’ve visited three stores – Victoria, a major town centre, and a small local store. The results were very “generic WHS”, and very disappointing. Given that (once the periphals have been bought) the customer will have spent over £100, something a little more special would be welcome.
One of the most challenging elements of any modern WH Smith is the visual noise. Kobo has been given a light blue/pink livery, but that struggles to stand out in the rainbow explosion of cardboard, product and shout-lines:
Once you find the Kindle Kobo offer, the presentation is a little lacking. Every cardboard dump I saw was half empty, and short of “reasons to buy”. You can’t sell an eBook in the same way as you sell calendars (a single-function device that simply needs a nail in the wall).
The larger stores have demo bays like this one:
None of the three Kobos displayed in this store was working – flat batteries or frozen. Victoria Main also offered a couple of freestanding pylons in high traffic aisles, with two working Kobos on each.
This is disappointing, and sits uncomfortably when compared to the tasteful, spacious Kindle shrines in John Lewis stores. At no time, in any of the WHS stores, was I approached by an employee, whereas you can guarantee a JL partner will be all over you if you start prodding a Kindle.
Furthermore, WH Smith’s marketing pitch for the Kobo seems odd:
The 1 million FREE eBooks are promoted above all, yet (as we all know), most of those million will be junk, and the preloaded Gutenberg classics seem a curious promotional emphasis. Why not promote Julian Barnes, or Lee Child, or Danielle Steel? The WHS website does a reasonable job of promoting what really matters – decent little eReaders with a good range of contemporary titles at attractive prices. The instore presentation appears better suited to selling bookazines or multipacks of Christmas cards. Given that a Kobo buyer could go on to spend many hundreds of pounds at Smith’s online ebookstore, and that Waterstone’s isn’t going to be in this sector until – when? – WHS could have shown more care, and given customers a stronger impression of value and worth.
Key points from Frankfurt
Posted: October 16, 2011 Filed under: Bookshops, Ebooks, Publishing | Tags: Amazon, Bookselling, Ebooks, Fnac, Fnacbook, Frankfurt, Independent bookselling, iPad, Kobo, Online retail, Publishing, Tools of Change, WH Smith Comments Off on Key points from FrankfurtI flitted in and out of a busy Frankfurt last week. For anyone who hasn’t been to the Messegelände, the scale is spectacular – vast hall after vast hall, interconnected with numerous escalators, corridors and security checks. A dead whale full of Audis and antiquarians was parked in the centre of the complex, and wifi support (notwithstanding the BlackBerry Crumble) was lousy. Earls Court is being demolished next year, but if it ever saw Frankfurt, it would die of shame.
From the perspective of this blog, the big buzz was eBooks, and the point at which their penetration of English-speaking markets will extend to the rest of the world. Kobo’s new partnership with Fnac (as well as their new relationship with WHS as a UK-exclusive partner) suggests both that Europe will start to feel the eBook hurricane through 2012, and that there may be some alternatives to the Amazon hegemony starting to emerge.
My presentation at Tools of Change has been extensively (and sometimes sensationally) reported, though my determination to rouse my audience with touches of revivalist preaching meant that I got what I deserved – anyway, I thought it would be useful to reprise my key points, then we can move on to the next chapter of this brave new world.
1. Bookshops cannot survive as economic entities
UK bookshop chains, a few years back:
Progressively, most of the businesses on the first slide disappeared over the past ten years – they were acquired and subsumed, or they failed and closed down. In a more benign economic environment (less price competition, less online competition, less severe banking crisis) more of them might have survived; of course, some were more robustly structured or better managed than others.
These bookshops (and the hundreds of indies that have also folded) didn’t disappear because no one wanted to buy from them any more; however, in a world of upward-only rent reviews, rising utilities costs, and very tight net margins, bookshops can only survive losing, say, 20% of sales before they become uneconomic, and plugs get pulled.
This leaves the remaining 80% of their customers unhappy and disenfranchised; it speeds the drift to Amazon and supermarkets (and in due course Kindle), or it causes those customers to stop buying books altogether.
The “eBook Revolution” (one for the cliché file) will accelerate this process. I’ve never prophesied the death of the physical book (or pBook, as the eBook-people prefer), but publishers need strategies for a bookshop-free world, and I’m not yet convinced they’ve found them. One strategy might be to support bookshops with more equable terms, of course, but retailers and publishers would have to be very honest with each other about outcomes, so that publishers’ profits weren’t ploughed into supporting failing enterprises, or bookshops given a false sense of their own robustness. Interesting to read Hachette Livre Chief Executive Arnaud Nourry’s views on these matters.
2. Retailer diversity matters
Regular blog readers will have seen my “Amazon takes over everything” sketches before. Click here for the Fantastic Dystopia. I used these old sketches to illustrate the peculiarly British phenomenon, whereby Amazon has emerged as the sole credible online bookshop, and the sole credible eBook seller, in the UK. I’m concerned that the publishing community hasn’t done enough – collectively? – to ensure that there are alternatives to this level of domination.
There is a limit to the amount of business you can do with a “frenemy”. John Ingram, whose family owns the dominant American book wholesaler (and much more) defined his company’s relationship with Amazon – on a Tools of Change panel discussion – something like this:
Amazon will make use of our services and expertise for as long as it makes sense for them. But as soon as they can do it themselves, they’ll shoot us in the head.
I had something of a Damascene conversion over the summer, shopping for books in the regulated French market, where book discounting is limited by law to 5%. I saw a greater choice of books in mass market stores, and a greater choice of interesting bookshops. It started to look as though price protection might be assisting plurality, and helping to keep good bookshops in business. Consumers may pay more for their books – but (beyond academia) no one has to buy books. More realistic pricing would be a benefit to everybody.
Here’s a table of pricing that Rüdiger Wischenbart presented at the TOC wrap-up. Rüdiger calculated the average RRP and discounted price of six major nations’ top ten fiction books, and benchmarked them against their eBook equivalents. The results confirm that we get cheap books in the UK – though we have got ourselves into a “high RRP, big discount” mentality that favours the most powerful merchants, and disadvantages the small specialist.
3. Keep books special:
I’m worried about books being subsumed into “the seduction of colour, movement and noise” represented by tablet devices. My slide showing all the things you can stuff into an iPad looked like this:
Of course, the tablet environment is ideal for many non-narrative formats, but I fear for the distinctiveness of long-form narrative if it is left to fight all of this miscellaneous (and often more seductive) content. I believe that standalone eReaders are important – indeed, I’d like to see the focus move away from what is a fairly basic and straightforward piece of technology, to a point at which the eReaders are free of charge, and the content – the stuff that really matters – is ascribed the value it merits.
4. A couple of contentious observations:
a) Publishers need to promote more, younger firebrands to positions of real responsibility. My generation grew up with paper (and telephones, vinyl, 35mm film and all the rest), and we are inevitably “translating back” – subconsciously – much of the time. The bigger the publishing house, the more disruptive new media will be to their established business model, and thus the more disruptive the people they should be hiring to ensure they prosper. We’re saying goodbye to our bookshops; professional publishing is economically and culturally essential.
b) It’s great coming to Frankfurt, and talking books, books, books, to all and sundry. But most book buyers (the actual customers that publishers need to get much closer to) don’t eat, sleep and breath books. They have other things to worry about. Publishers will have to fight for their attention, so they need to ensure the public still value what books give us, and their fundamental role in a strong society – the ideas, the knowledge and the power that they ultimately confer on us all.
If you want to talk to me directly about any of these matters, you can contact me at philip@frontofstore.co.uk.
Afterword: Apologies to the long-established and very fine booksellers John Smith & Sons, whose name should have appeared on both of the “bookstore” slides above.