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It's been a sad, but inevitable, week for British retail

This week, two former staples of the UK High Street hit their bottom, calling in administrators: HMV; and Blockbuster.

Added to Comet’s demise at the end of last year, the British consumer has seen a lot of household names fail recently.

Both HMV and Blockbuster failed because of three simple reasons:

  • The companies, and their leadership, failed to recognise the importance of online and how it would affect their business. New technology was not adopted and business plans were not adapted to fight against a changing landscape and new competitive threats. This started happening 15 years ago.
  • The banks and financiers supporting these companies kept ploughing in new investment and debt support because of greed, potentially protecting an existing £500m position by risking £50m seemed sensible, for a long time. This has been happening for at least the last 10 years.
  • Finally, the brands’ consumers stopped doing the one thing they needed to do: consuming. Brand advocacy is all very well, and the public laments for the losses have been loud this week, but advocacy without purchase won’t save anyone. This became critical in the last five years.

I don’t have much recent experience of either brand. I hadn’t shopped in HMV in many years and I actually skipped Blockbuster entirely as an adult. So, instead, I’m going to frame my thoughts around a brand that I have had affinity with, and loyalty to, in recent years: Waterstones.

Part of HMV Group until recently, I think the DEFCON status for the retailer is level one: ‘imminent meltdown’. To explain why I believe this, I’m simply going to share three experiences of the brand and its operation.

The lack of attention to user experience

In Christmas 2011, I was given two gift vouchers for Waterstones, both sent by older and distant relatives, for £25 each.

Even though my nearest Waterstones store is less than 15 minutes’ walk away, I proceeded to shop how I always shop – online. Clicking on to the site, I found two books I wanted and, conveniently, the total came to £50 – being £19.50 and £30.50 each.

I added both to my basket and went to the checkout. I added one gift voucher, which deducted £25 from my balance and then attempted to use the second. But I couldn’t – the system was only capable of processing one at a time, which meant I would have to split my order in to two, which would in turn have three consequences for me:

  • One order, the £19.50 book, would result in £5.50 of my gift card balance not being used..
  • One order, the £30.50 book, would require additional payment of £5.50.
  • I’d then be a further £2.75 out of pocket for each order (another £5.50) because the smaller split orders wouldn’t reach the (at that time) threshold for free shipping.

I called Waterstones’ online support but was offered no resolution. In the end, I had to go in to a store, use both £25 vouchers to buy one £50 voucher that I could then use online, which was the only place I could buy the two books I had chosen in the first place!

The disconnect between online and offline

Another time, I wanted to buy a book that I knew had just been released. I checked Amazon, my (by then) usual first port of call, and couldn’t find it. On this occasion, Waterstones had secured an exclusive launch window with the publisher.

So I headed over to Waterstones.co.uk and found the book. It was £34 and in stock but would require three days’ delivery.

Wanting it for a flight I was taking two days later, I decided to venture in to a physical store, where they had one last copy. The only problem was that another customer had obviously dropped this copy and the once-beautiful hardcover (that I was paying most of the £34 for) was ripped beyond minor damage.

I asked the person manning the customer helpdesk if he could check stock levels for me and he advised that the nearest copy was, sadly, in Liverpool – more than 200 miles away. He could, however, order it for me as an intra-store order – to which I thought “great!” as it would arrive the next day.

He took all of my details and asked for my payment card – before telling me the price would be £39.99 (because the instore price was higher than the company’s own online price) plus £4.95 for delivery (because it had to be couriered and couldn’t be delivered with the store’s bulk stock).

This disconnect was not only extremely frustrating and illogical, it turned buying a £34 book from Waterstones in to buying a £44.94 book from Waterstones. That's the same damn book from the same damn company!

The simple issue of value

Where Waterstones really struggled to keep me as a customer (a customer that buys more than 100 books a year) was around a simple, yet industry and category wide, issue – value.

My most recent trips to a physical store – something I used to do regularly as a semi-social activity – had evolved in to a consistent pattern:

Find book > check price > check Amazon > find book cheaper > buy on Amazon

The final death knell for instore book shopping, for me, happened on three occasions close together:

  • I wanted to buy a new book from one of my favourite publishers, Phaidon, on Asian Architecture. Waterstones - £29.99, Amazon - £17.15. I chose Amazon and saved 43%.
  • Taschen, another of my favourite publishers, had just released a limited edition Mario Testino collection. Waterstones - £150, Amazon - £110. I chose Amazon and saved 27%.
  • Finally, I wanted to buy several of Wallpaper’s travel guides (also a Phaidon listing).  Waterstones had the ones I wanted and was running a ‘4 for 3’ deal, leading me assume that it would finally serve me the best deal. Alas, Waterstones - £5.95 (£17.85 for four), Amazon - £3.76 (£15.04 for four). I, again, chose Amazon and saved 16%, despite the deal.

Surviving the apocalypse

I’m incredibly sad to see how the British High Street is slowly fragmenting and major brands are disappearing. But I’m neither surprised at what has happened nor enthused about future prospects for companies like Waterstones.

Retailers such as HMV, Blockbuster and Comet failed to innovate. They failed to adapt to the world around them. They failed to serve customers in ways that delivered value.

Unless the new wave of retailers that now try to steal the market share once enjoyed by these giants (let’s face it, there’s a mountain of DVDs out there now!) do all three of these – innovate, adapt and deliver value – the future of retail in the UK will require nothing more than the device you’ve just read this on.

Craig Le Grice

Published 18 January, 2013 by Craig Le Grice

Craig Le Grice is Global Technology Performance Director at Aegis Media and a contributor to Econsultancy.

4 more posts from this author

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Sarah Delaney

Insightful piece guys. I cant argue with any of this but I do hope Waterstone's can turn it around. We need books to survive and not just as digital.

over 3 years ago

Craig Le Grice

Craig Le Grice, Global Technology Performance Director at Aegis Media

Thanks Sarah. I'm a huge book lover too (despite being so digital) so I definitely share your hope that real sales of real books continues on our High Street. But it will need innovation to make book buying an experience that people will pay for.

over 3 years ago

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Depesh Mandalia, Head of Digital Marketing at Lost My Name

Craig, a really interesting write up based on your experience as a (rightly) disillusioned customer.

Getting online and offline right is hugely important, but in the case of Waterstones/any other bookstore, you just can't compete with the dynamics of the Amazon model for books (amongst other categories). Neither can you just simply lay down and die of course...

The advantage some retailers have over pure plays is their physical stores, however this is where the connect and join up of online has let them down and they've not evolved... sadly potentially more retailers to suffer the same fate in 2013...

over 3 years ago

Craig Le Grice

Craig Le Grice, Global Technology Performance Director at Aegis Media

Thanks Depesh. I completely agree - the challenge for retailers like Waterstones is to now use their estate to provide experiences. Their stores must become a place for book lovers. Passion can compete with price when not much else can!

over 3 years ago

Nathan Levi

Nathan Levi, Head of Performance Marketing at TotallyMoney.comSmall Business Multi-user

I think the idea that brands need to create 'experiences' on the high street is a bit whimsical. This is all very well for the likes of Apple and Nike who have lead in this space. However, they can afford to take a massive hit on their margins to create these store experiences. Lower margin businesses will struggle to do this and will be forced off the high street, as we are seeing with HMV. The main factor in creating an experiential store will be one of economics, with I'm afraid the vast majority of brands won't be able to justify. Waterstones could go the extra mile by creating great reading spaces, hosting book launches and speakers, and a whole host of other experiential elements. This won't prevent the vast majority of people enjoying the experience but buying on Amazon. I think it's curtains for Waterstone too.

over 3 years ago

Craig Le Grice

Craig Le Grice, Global Technology Performance Director at Aegis Media

Thanks Nathan. I agree... Not all brands can compete and provide true 'experiences' like Apple and Nike. Unfortunately, that leads me to wonder if the High Street will soon exist solely for big players with the ability to sacrifice margin level in order to host such experiential destinations. I believe innovation and technology can prevent that for 'some' of our most loved brands that are at risk of disappearing. (But it's too late for Waterstones).

over 3 years ago

Ashley Friedlein

Ashley Friedlein, Founder, Econsultancy & President, Centaur Marketing at Econsultancy, Centaur MarketingStaff

Three years ago I published this piece (http://econsultancy.com/blog/5411-the-unbundling-of-the-shopping-experience-across-channels-implications-for-retailers) which in hindsight seems quite accurate.

If the High Street is to be reinvigorated and become a place that more people actually want to visit again then it needs to become a better experience generally. This includes parking and so on. But it also means that the shops that are most likely to thrive are those who are actually selling an experience e.g. food, drink, beauty, exercise etc.

I think this may be no bad thing for the UK High Street in the long run as they were becoming very homogeneous and dull, full of uninspiring chains. If these disappear to be replaced by artisan/craft/niche/experiential stores + 'show rooms' for brands who can support the cost that wouldn't be so bad? There's no point, in my view, trying to compete directly with Amazon, Tesco etc. You have to think how you can add value that they can't.

over 3 years ago

Craig Le Grice

Craig Le Grice, Global Technology Performance Director at Aegis Media

Thanks Ashley. Absolutely agreed. The issues you raise - secondary to core retail - are interesting also. Parking, safety, vandalism, choice, accessibility etc are all huge deterrents. For years people thought this would lead to out of town retail parks flourishing. In reality, it's skipping that altogether and showing people how easy it is to buy from their mobile on their sofa instead.

over 3 years ago

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Sue WT

I switched my book buying back to Waterstones last year in protest at Amazon's tax practices. I decided to down weight price in my value equation - but funnily enough, with their loyalty card, stamp card and buy one get one free, it has worked out quite a lot cheaper than Amazon. I also get a warm glow from the staff there who have fallen over themselves to give me great service. I really hope they seize this opportunity and keep books, employment and life on our high streets. I think wi-fing the stores is a good move too.

over 3 years ago

Craig Le Grice

Craig Le Grice, Global Technology Performance Director at Aegis Media

Thanks Sue. Some really good points raised there... Instore loyalty is one area that traditional retailers can currently make some headway on, absolutely. The 'warmth' you talk about is also something that most retailers know the value of. Unfortunately, in an environment with such high staff turnover and a great distance between leadership and the shop floor, not everyone can guarantee such great service. Which becomes a major issue if you're asking people to pay more for the privilege of an instore experience. Lastly, Wi-Fi, yes please!

over 3 years ago

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Colm McCrory, Head of eCommerce & Digital at Waterstones

Hi Craig, sorry to hear that you had a bad experience.

You’re absolutely correct in saying that two of our biggest challenges are better connecting online to offline, and defining ‘value’ in an industry that is changing so fast.

These issues are not however unique to Waterstones and unlike some other brands we’re very fortunate to be in the midst of a substantial turn-around plan.

Many of the most important changes are as yet unseen but some may have noticed, for example, our shop refits, the Wi-Fi roll out and the new Reserve & Collect service.

You’ll be pleased to know that creating a compelling high street experience supported by a much-improved digital experience is absolutely part of that plan!

over 3 years ago

Craig Le Grice

Craig Le Grice, Global Technology Performance Director at Aegis Media

Thanks Rebekka. I'm really glad you commented. Please, firstly, let me make it clear that I used Waterstones as one of many possible examples. I was such an advocate of the brand for so long, I feel I know the brand enough to be qualified to talk about it. I accept that the challenges aren't unique to your company - but I do still believe you'll struggle in the longer term. I hope you don't. I hope you prove me wrong and your initiatives work as planned. I just worry that the combination of culture, technology, geography and logistics may come together to make your task too hard.

over 3 years ago

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Colm McCrory, Head of eCommerce & Digital at Waterstones

No worries Craig, the next few years will certainly be interesting. Thanks for starting the debate :)

over 3 years ago

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Tina

Interesting article, though i would disagree that HMV lost it because of their lack of presence online. I remember buy HMV DVDs online 10 years ago and being very impressed with the fact, that:
1)it's was good website from user point of view
2) I had to pay no postage on orders as little as 3.99

It's a shame to see HMV go, but I think their main problem was change in consumer shopping patterns, not many of us buy physical copy of a CD or DVD nowadays, I have two subscriptions with Love Film and Netflix, both of which allow me to watch a great variety of films without having to store copies of those films or albums.
As for Waterstone, they are next in line to vanish from high streets. Who buys physical copy of a book and why? With ipads, kindle and other ereaders, I can carry a small book library in my pocket.

over 3 years ago

Craig Le Grice

Craig Le Grice, Global Technology Performance Director at Aegis Media

Thanks Tina. I agree with you - HMV would have lasted much longer if it was online only. The problem was that with nearly 250 stores, the company's fixed overheads were unsustainable. The "much longer" phrase I use there is important though - because I don't think it could have survived indefinitely without a dedicated streaming offer. HMV had a "right to win" in that space. It could have launched a LOVEFiLM or Netflix of its own. The fact it didn't possibly means that it deserved its fate.

over 3 years ago

Gray Sycamore

Gray Sycamore, Chief Strategy Officer at Mobileize

Some great points. Many high street retailers have focussed on developing a channel strategy rather than a customer strategy. The result in some cases means these channels operate as almost parallel universes. The arrival of mobile, which arguably is neither exclusively an on or offline channel blows this approach out of the water.

over 3 years ago

Craig Le Grice

Craig Le Grice, Global Technology Performance Director at Aegis Media

Thanks Gray. Agree, agree, agree. If people think "online" changed everything, they'd better brace themselves!

over 3 years ago

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Hugh Anderson, Co-Founder & Director at Forth Metrics Limited

Excellent post Craig and a stimulating debate. I don't disagree with your conclusions. I'd make a couple of observations:
I think HMV and Blockbuster were doomed anyway as the entire business model was transformed by technology advancement for music and video - downloads and streaming replacing traditional dvds and videos.
Waterstone's is an interesting case as their market is also being transformed as e-readers take over, but I too sincerely hope Rebekka and her colleagues can work some magic as at the end of a long day in front of a computer screen I love to have a proper book to read. They are doing the right things with the introduction of coffee-shops, wi-fi, etc in-store.
Finally, I agree that the model is bust for the high street unless retailers can offer an 'experience' or they can consolidate lots of great stuff into one store - the John Lewis model.

over 3 years ago

Craig Le Grice

Craig Le Grice, Global Technology Performance Director at Aegis Media

Thanks Hugh. Great feedback - I'm glad we align! I agree re: Waterstones and believe your call-out for John Lewis is deserved. It's one of the few offline retailers (especially with Waitrose) that has my absolute loyalty. The others are all 'experience destinations' like Selfridges&Co., Kuoni, Richard James, Burberry, Alfred Dunill etc.

over 3 years ago

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Matt Isaacs, Senior Ecommerce Manager at Perricone MD

Is the WiFi thing not a bit worrying? Most Kindles are bought on Amazon and directly linked to an Amazon account.

So I can go into Waterstone's with my WiFi only Kindle, have a good browse (which is why I prefer going into a book store), find the book I like and download it onto my Kindle through Amazon while in the store.

I don't think its comparable to JLP because they have so much add value, especially on the after sales side.

This is just a book (or worse an e-book).

I have a loyalty card with Waterstone's but its never really had the benefits sold to me. Nothing made me want to click through to the website.

Hope it works out for Waterstones as I still enjoy shopping there.

over 3 years ago

Craig Le Grice

Craig Le Grice, Global Technology Performance Director at Aegis Media

Thanks Jonny. The Wi-Fi piece is potentially dangerous - as I mentioned above, I've used the Amazon app to check instore prices many times - but for a certain group of consumers, it will probably provide a pull. Especially when combined with a cafe environment. I don't believe it's strong enough to act as a customer acquisition point of difference though, no.

over 3 years ago

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Karen Galasso, GM at Tenth House

Happening everywhere in the world - Just look at the sad case of Oxford Street in Paddington, Sydney.

over 3 years ago

Craig Le Grice

Craig Le Grice, Global Technology Performance Director at Aegis Media

Thanks Karen. Every High street / Main Street in every country is facing these issues, agreed... Especially in economies such as the UK's where online retail is so prominent and penetrative.

over 3 years ago

Pete Williams

Pete Williams, Managing Director at Gibe Digital

Great discussion! My first instinct is that the customer service team need to be given the authority to use common sense and understand your issue and manually amend and then send it as an issue to the developers. If they get that right then you will more likely come back. After all it was a human in the shop that helped you if indirectly. I had a similar experience with a sports retailer Wiggle where I required a part and in the end they sent a complete new unit which I took the part I needed and sent the whole thing back. Must have cost them money but I got what I needed and will go back to them.
Humans will always have the ace card to play in ecommerce until we all become robots!

over 3 years ago

Craig Le Grice

Craig Le Grice, Global Technology Performance Director at Aegis Media

Thanks Steve. Staff empowerment is really important - absolutely. Until robotic domination, people matter!

over 3 years ago

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Karen

Great piece. Although something to think about on price. Amazon can afford to have their prices cheaper and keep the same margins when they are not paying so much tax as established high street stores. It makes it much harder to compete when it's not a level playing field.

over 3 years ago

Craig Le Grice

Craig Le Grice, Global Technology Performance Director at Aegis Media

Thanks Karen. I'm not going to start a conversation about corporation tax here - it's a whole separate post! But the wider picture of cost base differentiation is key, you're correct. One of the biggest contributing factors in this space is real estate costs (Waterstones high, Amazon low) and instore salaries (again, something that obviously hits Waterstones hard).

over 3 years ago

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Luke

I love track my user experience, this help me finding out what pages are not congruous enough and impetus user exit from website. I do make them improve then and this works well.

over 3 years ago

Craig Le Grice

Craig Le Grice, Global Technology Performance Director at Aegis Media

Thanks Luke. Great to hear you're using analytics to drive growth!

over 3 years ago

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Ifigenia Arampelou

The highstreet is failing on price and customer service. Online channels by nature are eliminating these points of failure. Price: they can afford to compete in price (if they do their maths correctly). Customer service: well if the journey doesn't go into "negative" scenarios (I.e I need to get up from my sofa and have to make a call to a 0845 number) there is no rude and disinterest teenager who doesn't want to serve me, there is no queue I need to be in and I know exactly what is in stock at any given time.
Retailers who are still standing in the high street have combined offline with online in a way that customer feels secure to get in a shopping mode in either configuration. I order online on the Sunday I go to the shop and collect on Monday ( no postage fee). I don't like what I bought? I can go to the shop, I can post it back I can get it collected from my home. The days were the customer had no choices are over. The customer has too many choices and restricted budget so the arena of retail is a tough one. As far as it concerns books... With amazon and its kindle our children will grow up without knowing what a book looks like smells and feels and they will never spend a Sunday morning getting lost in the fantastic world of books in a bookstore... And this in itself is sad.

over 3 years ago

Craig Le Grice

Craig Le Grice, Global Technology Performance Director at Aegis Media

Thanks Ifigenia. A great response... My children will know books, don't worry, despite being such a digitally focused person!

over 3 years ago

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