It’s been a bit brutal on the retail front in the UK of late.
HMV, Blockbusters and Jessops all entered administration in January 2013. The list of big name retailers to run into problems grows at an alarming rate.
In every report I’ve seen or heard about all of these retailers one of the main reasons that is always rolled out is,
“Struggling against online competitors”
Too many of the traditional big name retailers have pretty much stood still while the world changes around them.
A really easy way to picture the problem is to explain how each of the businesses work to a child. Modern children grow up with computers everywhere (for lots of kids an actual computer seems old fashioned!) with masses of bandwidth where everything is instant, convenient and always on.
While their business models may have been great 15-20 years ago, when framed in the context of how the world works today they don’t make much sense.
Let’s try and explain it in the same way as I would to my six year old and see what’s wrong?
HMV sell shiny discs that have music and films on. They keep big piles of them in big shops. if you hear a song on the radio that you like you need to travel into town so that you can search through the piles of discs to find the one you want which can take quite a long time. If you don’t know the name of the song or what it’s called you can try humming it to someone who works in the big shop. This doesn’t usually work. If they don’t have the disc you want they can sometimes get it from another shop but you’ll need to come back next week. Sometimes you might only like one song but you’ll need to buy 10 others that go with it. You won’t know if you like the other songs until you get home though.
Where to start?
Here’s an example of a scenario that happens in my household on a regular basis.
If my daughter heard a song on the radio she liked she’d expect me to use the music recognition software on my phone (built-into Windows Phone or via an app such as Shazam). Once we’d found the song I’d be able to pay for just that one track or if I was subscribed to a service such as Xbox Music or Spotify I wouldn’t worry about that. Either way I’d download the track straight away. At the same time I’d be able to see other tracks from that same artist and I’d be able to listen to some of these other songs to see if I like them. It would also suggest other songs and artists I might like. The whole thing would take a couple of minutes. No trip into town. No search through stacks of plastic cases. No buying songs I’m not interested in.
It’s easy to look back with nostalgia on trips to the music store to check out the latest songs but back then it was the only way to purchase music. If you’re coming at it completely new (in the way children do) the whole concept seems like a massive inconvenience.
Looking at it from the perspective of the business owner doesn’t the digital method seem much better too? It doesn’t matter whether you want to sell 10 or 10,000 of the latest popular track. Storing a digital file doesn’t have the same physical storage requirements. Customers also largely serve themselves. Both of these things can help keep costs down.
Sales of music CDs have been on a downward trend for some time. The modern alternatives are much better for the consumer.
The keyword here is choice.
If you’d like to watch a film you can go into town to a shop where they have lots and lots of empty boxes for you to look at. If you like the look of the pictures on the boxes you can pay some money and they’ll give you a disc to take home. You then get a day or two to watch it before you have to then go back into town to the shop to return the disc. If you don’t get the film back in time you have to hand over some more money. You can also pay to keep the film forever but it’s not much cheaper than buying it from the supermarket. If you do pay to keep it you can watch it whenever you like. This normally means once or two a year for the ones you really like. They sit on the shelf near the TV until you decide to watch it again.
So as with the previous example how does it work in my house? If the kids want to watch a film or TV series they have two options.
The first is to use a streaming service like NetFlix. We turn on a device in the house (Xbox, Smart TV, Laptop, Tablet, phone!), browse the the list of available content and the film will start playing straight away. No trips out of the house, no late fees, if we don’t like it then we can just stop and pick something else and we don’t have lots of discs hanging around the house. The keyword here is instant.
Alternatively, you can use a disc by post service such as LoveFilm. We pick a list of things we’d like to see. LoveFilm send it through the post .We keep it as long we like, watch it, send it back and we’ll get another one a few days later. Again no late fees, no trips out (we post the discs as part of our normal routines). The downside is it’s not quite as instant as NetFlix but LoveFilm do have a streaming service as part of their offerings. The keyword here is convenient.
In reality we actually use both services in our household as they offer different types of content (which is rather annoying..but the costs aren’t huge)
If you want to buy a camera you travel into town, speak to the nice person in the shop who knows all about cameras and will show you lots of different types and tell you which is the best one for you based on how much you want to spend and what you want to use the camera for.
Sounds simple enough right?
I know quite a few photographers and if you ask them about buying a camera the advice is usually,
“Do your research online. Go into Jessops and see if you’re happy with how it looks and feels in your hand, check the menu system is easy enough to use……and then buy it online as you’ll get it cheaper.”
The problem is the description above isn’t the real picture of the world. Shops like Jessops don’t have the experts they used to in the past. It’s a sad fact that the shopping experience isn’t all that great. Too many shop assistants don’t really care and are frequently rude or uninterested in their customers. I appreciate this is a bit harsh on lots of shop staff. There are lots of good people out there. It’s just not the norm anymore in my experience. I also don’t appear to be alone in that opinion. This piece on PC Pro was an interesting read highlighting a specific example. This isn’t just picking on Jessops though. This piece discusses some research by customer intelligence company Market Force Information that suggests poor service drives people out of the high street and Halfords were voted worst for customer service last year. People do want cheaper but they are willing to pay more for a good experience. Haven’t Apple proven this over years? If people are getting a poor experience then they’ll be much more picky over price so will look for the cheapest price online.
Many stores such as Jessops do have an online presence but they are just one of many voices looking to compete on price and the brand name means very little. When they are competing against websites that have no physical presence (Amazon?) then all those bricks and mortar stores drive the price up making it very hard to compete.
Retail is changing
Media consumption is changing
The old ways of doing business just seem really inconvenient and cost more in time and effort.
These same businesses are clinging onto the old way of working and the ones that aren’t even trying to stay relevant are going the way of the DoDo
I think pretty soon they’ll be a large shift and businesses will need to change if want to continue to exist. Customer service will need to get better. High street stores will need to become attractive in such a way that people will gain experiences that aren’t possible online.
The small independent stores that have struggled in recent years as big businesses have hammered them on price will have the opportunity to grab a piece of the action again. Their size makes them in a good position to make changes quickly in the face of customer demand.
As always this is all just thoughts that have randomly plopped out of my head onto the Internet via my keyboard.
How do you see the future of retail?