Category Archives: UK retailers

Turning the page on publishing

Stitched Panorama

If you are in the book publishing business right now you might be bracing yourself for an HMV-like end, but it seems to me that publishers still have options and if they make the right choices the end, however it arrives, could still be a long way off.

Those of you who followed my campaign a couple of years ago to try to persuade HMV that there was life after i-Tunes will know that I can’t resist a challenge.  That exercise saw me gathering a bunch of marketing folks with fertile minds on a kind of LinkedIn crowd-sourcing basis and trying to persuade the HMV CEO to listen to a few ideas we had on reviving their business.  I’ll leave you to judge for yourself what his rejection of our offer says about the relationship between success and the “open to ideas” philosophy that I have always promoted.

I’m struck by the similarities between the publishing and music industries.  Both are victims of the digital onslaught.  Technology has provided an alternative to their physical products, everyone is an author these days (even me), pretty well anybody can get published, readers don’t have to leave home to buy a book and last week you could buy any of the UK’s top 10 selling books online for 78pence!  This latter fact is a symptom of another phenomenon, the tendency of business in other sectors, in this case Sony, to give away the publishers’ raison d’etre, in their pursuit of sales of their own dedicated hardware eg tablets.

Publishing also has a similar structure to the music business.  There are publishers like Harper Collins who own numerous brands, they each support many authors and their books are distributed through physical stores and on-line.  Three levels of the business, each of which is under attack.

There are two keys to the future of the book business. The first is brand. It seems to me that publishers have been very slow to develop the brands they own. There are few sectors where brands measure up to the description “community” more than those of a publisher. You’ll know if you’ve been on this blog before that I believe all brands to be, by definition, communities and publishers’ brands are far more readily represented as communities than food products or cosmetics, yet, when I look at publishing houses I can’t see much evidence of them either recognising this or exploiting their good fortune.

The second key is the physical retailers. The front line book stores are suffering the same pressure from e-commerce that HMV did. Businesses like Waterstones are probably making a better job of competing than the music retailer did, but they have a long way to go before they maximise their assetts and even further before they could claim to have a model that will sustain them in the future. Like HMV, physical booksellers need to be more radical in their thinking. Instead of adapting their current model they should be experimenting with complete, ground-up rethinks. My worry is that, again like HMV, they are failing to recognise not just the requirement for such radical thinking, but the urgency with which they need to get on with it.

They might take a leaf out of the book of Ralph Halpern. When he headed up Burton Group he was said to have twenty or so retail formats on test in pilot stores at any one time. It worked for him and I firmly believe that, like any product manufacturer, retailers need think at least two store generations ahead in order to ensure continued success. John Selfridge taught us that retail is about entertainment and bookselling, more than most other sectors, is firmly in the entertainment sector. This means that bookstore owners have to ask themselves, “are my customers looking forward to their next visit to my store in the way they would a football match, concert or theatre?” Sadly most retailers I come across set their bar far too low in this respect. Customers should be feeling like a young lover about their next date with you.

Actually record shops used to be like that, In fact record shops used to be real communities too. I remember hanging out in a record store in Birmingham each Friday when albums were traditionally released, sampling the new stuff and discussing it with the store guys and anybody else who felt like chiming in. You could spend hours at a time in there and I often did. Come to think of it, there was a musical instrument store up the road from the record store with a similar vibe. I met Ozzie Osbourne and Tony Iommi from a new band Black Sabbath there once and they invited me to their gig that evening in the back of a pub in town (Now that dates me!) These days I can get the same kick from a visit to a bike shop like 718 Cyclery in Brooklyn. All these stores are interesting and engaging in their different ways. That’s missing in a lot of retailers these days and its where the answer could lie for retail book stores.

Its not surprising that some of the thoughts I had on HMV apply equally well to bookstores, but these in turn were based on a train of thought I evolved with a mobile phone operator a few years previously. A growing number of retail sub-sectors have to understand that they need to approach selling from a new direction, engaging customers in other areas of their lives creating an environment and establishing conversations into which a sales message can be introduced.

In a similar fashion, a few years back I created a magazine for Philips comprising features on successful projects in highly specialised business sectors. The features were compelling to the target market, but more than that, by ensuring that they were each written as a showcase for specific Philips products and concluded with a call to action and a contact device, we turned an entertaining magazine into a powerful sales tool that is still doing the numbers. I’ve also created community projects for manufacturers and service providers. Introducing products and services to consumers in the context of other areas of their personal lives engages them on an entirely different level. This I believe is how bookstores need to start thinking. Its not new of course. Its commonplace in the US for bookstores to be incorporated into coffee shops or restaurants, an idea that has been adopted in parts of Europe and even the Middle East (I have such a venue close to where I currently live in Bahrain).

While the front-line would benefit from radical thinking, publishers need to start making things easier for themselves and instead of engaging head-on in a battle with digital and e-tail that they just won’t win, turn the page and focus on the aspects of their business that their competitors just don’t have. They need to tighten up their brand definitions, get a better grip on their customers and start building relationships with them based on something other than price. Forget readings and signings, they aren’t sufficiently radical to make the difference that this sector needs.

The real price of discount retailing

With markets as tough as they are it’s not surprising that more businesses than ever are weighing up whether to adopt a short-term tactical approach or hang tough with the longer-term strategic thing.  Retailers are right at the centre of this dilemma and you only have to glance at your local high street or shopping mall to see the choice that many have made.  Stores with perpetual sales or cut-price offers have become a feature of the retail landscape in pretty well every country around the world.

Even though they know that the path to instant gratification has an inevitable pay-off, cake today is becoming an irresistable proposition for idea and cash-strapped marketers, who can only be aiming to be somewhere else when the bill arrives.  So, what is the price of this kind of short-termism?

In this context there are two types of retailer – those who sell branded goods and those whose offer comprises mainly own brand.  The first group can be further divided into premium and mass-market.  The premium retailers, by and large, are chasing margin with high prices.  They are usually the last to have to make the short-term/long-term choice because their clientele are well-heeled and unfamiliar with the financial reality most of us live with.  On the other, far more popular side of the street, mass-market sellers of branded product are “champions of the consumer”.  We rely on them to negotiate with manufacturers on our behalf to deliver the branded products we all hanker after at advantageous prices.

The own brand retailers come from a different direction.  The value of their proposition is entirely their own making.  Customers recognise own-branders as an authority in the things they sell and trust them to use their knowledge and experience  to produce great value product of their own.  Retailers like this that come to mind would be Ikea and Marks and Spencer.

Now consider for a moment discount promotions as a concept.  Again, you could say they come in two kinds.  The first is the seasonal event that we have come to expect.  This is legitimate.  We understand that these promotions are the retailer’s way of clearing slow-moving stock or ends of lines and as long as it remains occasional it and the retailer will retain credibility.

The other kind of discount promotions are those run by struggling retailers to generate sort-term business.  These usually achieve their immediate objective.  The problems arise with repetition.  You must have heard people dismissing retailers as “the place with the sale on all the time”.  The perpetual sale isn’t credible, so let’s not kid ourselves that consumers are buying this line.  If a product appears to always be reduced to 99p then that’s all its worth to the consumer and no amount of double pricing is going to convince them otherwise.  We’ve all witnessed the Pierre Cardin brand get pulped in markets around the world.  Once a respectable, desirable brand, constant deep discounting has reduced it to a bargain basement brand.  Nobody pays full-price for a Pierre Cardin suit because we all know that it will be 70% off next week!

So, when do you start heading into the mire of perpetual discounts?  The answer is the minute you abandon the accepted seasonal event norm.  Then its just a matter of how far you venture in this direction and how quickly you get back to firm ground that determines whether your business is irreversibly damaged.  Discounting is like a drug habit.  Initially the hit is rewarding – you make a load of cash quickly, but as you stick with it your dependency increases and the reward diminishes.  You lie awake at night racking your brains for new superlatives to up the anti in your advertising, margin disappears and eventually your turnover will too.

Your hard-won brand community will dwindle.  We wear the products we buy and carry branded shopping bags with pride as badges of belonging.  Where’s the cudos in belonging to to the cheap shop community?  Customers will feel betrayed.  The brand that you have devalued to junk had defined their status.  Now you’ve pulled the plug.  Your authority disappears over night and whatever you say to try to re-establish value in your offer is futile.  You are just a cheapskate discounter and there’s no way back!

If your regular customers don’t abandon you they’ll do something even worse –   they’ll only turn up for the deals that you make no money on and the only new customers you can expect are all broke like you.  When The Full Effect Company went into one well-know organisation a few years back, we discovered that a third of their customers were actually costing them money because they only bought the bargains with little or no margin.  There was no spoon-full of sugar to help the medicine go down in this case, we just had to loose 30% of their customer base.  However, there are few shareholders who would stomach this kind of treatment unless, as we did, you manage to get back on track very quickly.  We replaced those customers with new, profitable ones within twelve months and met the company’s growth targets.

So, before you launch your umpteenth BoGoF this year give some thought to where this road is leading.  You may not be planning to be around when this chicken comes home to roost, but there aren’t that many juicy retail marketing jobs around, so you might want to think again.

Matalan – Sometimes, all it takes is the basics.

I’m subscribed to more on-line retailers and loyalty programmes that I can remember these days, but I never cease to be amazed at how badly these companies manage their data.  Its been years (I mean more than twenty) since I started getting my clients to build relationships with their customers by acknowledging dates like birthdays that are important to them, but I can’t remember ever receiving a birthday reward from anybody other than MoonPig and then, of course, it was someone else’s birthday they were reminding me of.

I was reassured therefore by my mother’s delight at having received a £5 shopping voucher for her birthday this week from, of all people, Matalan.  I’ve always wondered why the retailer didn’t appear to do anything much with the data they collect when they register their customers.  Especially as you are strong-armed into subscribing to their loyalty programme at your first visit to one of their stores.  It seems that having hit rock bottom in recent years the retailer has addressed issues well beyond their dowdy stores and stock.  Well done Matalan for showing UK retailers how its done!