Category Archives: Brands

Is this the end of multichannel retail?

Jessops went into administration late last week at the cost of hundreds of jobs. According to administrator PWC on 11th January Jessops will close all 190 stores after discussions with suppliers made it clear that support for ongoing trading wasn’t there. This week there was similar news for HMV although it is hoped that a buyer can be found.Jessops appomts administrators

I have written before about Jessops, using them as an example of multichannel retail to question whether the model has a future. I hoped that it would have but wonder whether the failure of Jessops and HMV is a problem waiting to happen for other, niche retailers and in the longer term even more diverse retailers.

Let’s deal with the financials first. Jessops had its problems but last June reported rising revenues up 1.3% and earnings up nearly 30% on 2010. Online sales had risen nearly 80% and accounted for 32% of the business with 70% of online customers choosing to collect their purchases in store.

The problem is that despite agreeing a debt for equity swap with HSBC in 2009 (who at the time wrote off £34m and were still owed £30m at time of collapse) the company still serviced significant debt, estimated to be £80 million. In the last published accounts to 1st January 2012 the company recorded a loss of £909,000 and paid interest of £411,000. Interestingly, the profit before interest, non-recurring items, reversal of intercompany impairments and taxation for the period was £0.2 compaired with a loss in the previous period.

It also paid its 5 or 6 Directors £1,478,000 with the highest paid earning £408,000. This seems a lot given the profitability of the firm and even its relative size – just 190 stores and £236 million. Perhaps it is indicative of the market and Jessops needed to attract good people and in fact couldn’t hold on to Trevor Moore who resigned as CEO to join HMV in August 2012. (HMV also had huge debts as a result of private equity transactions and they were servicing an estimated £176.1m)

So, I could argue that if Jessops wasn’t saddled with debt, had a management team that it could afford and a little more time they could start to deliver a regular profit. But I’m not going to do that.

The music and film industry is particularly vulnerable and HMV’s own estimates were that by 2015 over 90% of music and film sales will be online. They were late to go online and diversification with acquisitions of online brands didn’t pay off. Much of their strategy was driven around getting out of the music and film business and with good reason.

Music and film are not products in the same way that a camera or washing machine is. The tire kicking part of the buying process doesn’t take place with the physical product and is driven by trailers, adverts and recommendations. As soon as broadband speeds reach the stage when they support streaming high-definition video everywhere, people will no longer need physical media at all – assuming the licensing rules are sorted out. So HMV faced a very different problem to Jessops and simply didn’t react quick enough.

Jessops sell a physical product and one sufficiently technical and complex that quite a lot of people want to look at it, pick it up, try it, touch it, literally get to grips with it. They need somewhere to do this but are not tied to purchase from the same place. In fact with the rise of mobile commerce price checking is taking place online often whilst in store. It places retailers with physical stores and the associated overheads at a huge disadvantage.

This is a challenge facing all retailers and I suspect most won’t know how much it is impacting them. They will know that sales are going online and that footfall or sales in store is reducing but trying to understand the relationship between the two is very difficult. Click and collect is all well and good but at some tipping point in the not too distant future online will outstrip retail by a sufficiently large margin that the store will in reality be a glorified warehouse and showroom.

What can retailers do about it? Here are a few suggestions:

  • Change the way they think about products: Jessops could have looked to the mobile phone industry and created propositions that built-in customer loyalty. Why couldn’t a camera be sold on contract over two years and bundled with tech support, a number of prints each month, storage for photo’s online and other parts of the proposition? Niche market shops should think differently about how they differentiate.
  • Brands to pay: Get brands to pay them for displaying their goods to offset the cost of the retail space. Not all brands are going to want to open showrooms and it will be inefficient for them to do so.
  • Measurement: Implement better multichannel measurement techniques so they can understand how hard the store asset is working for them.
  • Differentiate on experience: Retailers have the opportunity to create an experience because of their stores. This is rarely exploited to its fullest potential.

I think multichannel retail, and by this I mean online and offline as the main distinction, will survive but in the future the supply chain will be completely different. If retailers are going to survive they will need to look further ahead or suffer the same fate as HMV, Jessops and all the others that have closed.

Sainsbury’s moves away from HR and customer service

Back in July 2010, Sainsbury’s announced that it was scrapping the HR Director role and creating instead a single role that would encapsulate HR and Customer services. The new Customer Services & Colleague Director, in addition to having one of the longest business cards, would take responsibility for HR, customer services, sponsorship, corporate responsibility, and both corporate and internal communications. A huge role then, and massive undertaking that was described by Gwyn Burr, who was promoted from the role of customer service director, as “an opportunity for HR to become much more focused on strategic delivery”.

So, fast forward 30 months to the announcement that Burr will leave Sainsburys in March 2013 and that Angie Risley, current Lloyds Bank Group HRD will take over as Sainsbury’s Group HRD. It was clear from this announcement that this also signifies a demerger of the customer service and HR roles so should we conclude that the initiative failed?

It was only in 2004 that Sainsbury’s first created the position of Customer Service Director with Justin King, then and still CEO, bringing in ex-Asda colleague Gwyn Burr to the role. At the time he felt the customer service needed to be improved dramatically and although Burr sat on the Board she remained a contractor. She also held, and continues to hold, a number of non-Executive Director roles and whilst this isn’t unusual for board members perhaps in this case it indicates that the move was always temporary.

Certainly Sainsbury’s customer service has improved and they have now moved ahead of their rivals. With various initiatives over the past few years the retailer has tackled the causes of poor customer service with training and technology initiatives as well as better use of the web and the introduction of Click-and-Collect, which has been rolled out to more than 900 stores.

The evidence would suggest that we shouldn’t read into this latest announcement that the HR/Customer Service mash-up initiative has failed. Perhaps the greater focus on strategic delivery has worked and now Sainsbury’s is simply putting in place an organization structure that will keep it moving. We will certainly be watching with interest.

 

Sport and social media – west coast perspective

Brendon Kensell, Managing Partner of Kensell & Co, an M&A and corporate growth consultancy, has just posted a piece on sports and social media.  Some of the stats Kensell quotes are astounding with 460 million fans who ‘like’ sports teams on Facebook and almost 100 million fans ‘follow’ teams on Twitter. But he suggests fans are getting frustrated with the one-way nature of Twitter and that the time is right for new sports social media start-up – JockTalk.

JockTalk provides fans and athletes with far richer engagement opportunities than are currently available through existing social media platforms. Because JockTalk publishes to Twitter and Facebook fans who are not interested in richer engagement can still listen to what the athletes they follow have to say. But, for those fans who want a proper, two-way conversation JockTalk provides the ideal platform.

JockTalk fills a number of the holes that exist in Twitter. It allows for 300 characters instead of 140 available in Twitter and the different is incredible. I wonder who decided 140 characters was enough? It is hard to even ask the question in 140 characters and whilst it does avoid waffle for athletes and fans they seem to need and want more.

Sports social media is changing and whilst existing platforms like Twitter and Facebook are trying to keep up, the time is right for a new player.

 

James Bond: 6 seconds premature

I can’t remember seeing James Bond wearing two timepieces but presumably he has too since being equipped with an Omega Seamaster. Encouraged as a fan of the films and in the market for a ‘watch for life’ type purchase I succumbed and invested most of my savings in a shiny new James Bond Seamaster Omega watch. I am not proud of being so easily swayed by the marketing people but as they say, I am what I am.

However, my suspicions about the Omega Seamaster’s timekeeping ability were first raised when I was popping champagne corks at a New Year’s even party nearly 5 minutes ahead of everyone else. That has its advantages of course, but was slightly concerning considering the size of my recent investment. I reset the watch and checked it regularly through January but it was gaining time at an alarming rate (would be funnier if it had an alarm) so I took it back to the shop.

The watch was sent back to Omega who kept it ‘extra long’ to make sure it worked perfectly, or at least that is how the 9 and not 6 week turnaround time was explained and I picked it back up in April. The watch continued to gain time and so I wrote to Omega and shared my disappointment and my concern that I didn’t know what to do next. Here is the letter they sent back:

first page of letter received from Omega
Omega, at least the arrival of the letter was timely

The letter goes on to page 2:page 2 of letter from Omega

As it happens, I haven’t been contacted in ‘short’ by Mr Mike Webb but no matter. I can’t see how any explanation that an Omega watch is ‘OK’ if it has a tolerance of -1 to +6 seconds is going to help me. However, if he does call I will suggest he gives James a ring. For him it could be the difference between life and death.

Mashable offers favourable view on JockTalk

With JockTalk appearing at Demo12 at the same time as Beta launch there is an opportunity for the great and the good of the digerati to get their hands on the concept and offer some feedback.
First out of the blocks is Mashable with an insightful and very positive review of the platform. Their analysis is spot on and it is comforting to know that the simplicity and power of JockTalk can be communicated so effectively in a world that is becoming increasingly complex as a result of digital explosion. I am now really looking forward to the reviews that will follow the presentation later today.

The evolution of Sports Social Media

I was recently invited to get involved with a social media start-up called JockTalk (www.jocktalk.com). I am a bit of a cynic when it comes to new social media ventures because I am the type of person who likes the ones I use and use the ones I like and that keeps the paying field small – mainly LinkedIn, Twitter and Facebook (a bit and mainly for the kids). However, the more I heard about JockTalk the more convinced I became that this is the future of sports social media.

Photo of stage at DEMO12

There are a number of social media plays trying to fix the “monetisation of Twitter” problem and JockTalk certainly addresses this opportunity. A revenue share with athletes means that the content created can be monetised through ad revenue. However, what is really great about JockTalk is the level of fan engagement built-in. It is obvious when you get under the hood, that athletes have been involved in scoping it because each feature fulfils a flaw in the way Twitter supports fan:athlete engagement. There is a Q&A section, athletes can rank top fans and the platform publishes to Twitter and Facebook so it doesn’t require a massive behavioural change for athletes and fans to get involved.

What I most like about JockTalk is that it is designed to deal with all sports. As a fan this is crucial because like many fans, I enjoy multiple sports. I don’t want to go to a different social media platform for each set of athletes (soccer, Rugby, Baseball, Cricket etc.) I want to be able to put all my sport in one place. As a Twitter user with two profiles – one work and one social I already have compartmentalised my business Tweeting from my sports Tweeting and so JockTalk allows me to enhance this even further. The site is in Beta but you can take a peek here: https://beta.jocktalk.com

The team is presenting at DEMO12 this week and I can’t wait to see the feedback. It is often said that the simplest things are the most effective and JockTalk’s simplicity and power are sure to be a hit.

In defence of Morrisons

Yesterday, Mycustomer.com reported that retailers were losing millions because of poorly integrated touchpoints. It goes on to say many are playing catch-up and can’t understand why “retailers are allowing sub-standard websites to damage online sales opportunities”. Of course in an ideal world all major retailers would be investing in the digital channel but I think Morrisons has a defendable argument as to why they are late. I should say from the outset this is my analysis and I don’t have an inside track on what Morrisons is doing.

If you drive down the M5 between Bristol and Exeter you will see one reason why, in Morrisons case the website is not currently the centre of attention. They are investing £95million in a new regional distribution centre and the project is slightly behind. However, it is a very important project in support of allowing Morrisons to distribute nationally.

The group is also only half-way through an IT infrastructure roll out at an estimated cost of £310m. The project, called “Evolve” will be completed in 2013 and is a five year upgrade of virtually every system and process the business has. The upgrade will support the groups planned expansion to 600 stores whilst saving support costs and providing operational benefits and efficiencies. Back in 2004 Morrisons also paid £3.35bn to acquire Safeway and has some problems integrating the 327 stores and IT systems into its own.

Also, Morrisons only announced that it would have a go at online sales in 2010 and even then was cautious because of keeping costs under control. Recent news compared Morrisons to the sales Tesco and Sainsburys are achieving online but that hardly seems fair given Tesco’s was the worlds first online grocer and Sainsbury started online in 1998. Having said that, the recent acquisition of a 10% stake in FreshDirect is designed to accelerate the groups knowledge of how to run an online business. They will actually get a seat on the board and the ability to learn about the systems and processes FreshDirect has. They also announced the acquisition of Kiddicare back in February who is an online retailer of cots, nappies and push-chairs.

8th September, Morrisons announced its interim results for the half year to 31st July 2011. Although Morrisons financial performance is good, they can only do so much. Revenue is up as was PBT (to £449m for the period) and cashflow was £667m, £97m up on the previous period but with higher outflows due to capital expenditure. They have also initiated the first phase of the planned £1bn equity retirement. As a result debt grew £238m to £1,055m but they do have a £1.26bn revolving credit facility available until 2016 and with £494m not drawn down.

Can they also invest in a major multi-channel, integrated customer experience programme? I would argue they already are by getting solid building blocks in place both in terms of systems and knowledge. This will put them in a very good position to accelerate development of mobile channels and possibly even overtake some of the competition.

The Numbers and Connections

“The success of human beings depends crucially, but precariously, on numbers and connections.” This quotation comes from chapter one titled “The collective brain” in Matt Ridley’s excellent book called “The Rational Optimist“. In this chapter Ridley describes a world that thrived due to the increasing connections between humans and the trade effect that resulted. He also talks about innovation networks and division of labour all enhanced by the increasing connections we have and diminished or even reversed when connections are lost.

With the rise of the Internet human beings have never been more connected and each day, as technology advances, social behaviour adapts and connections increase. This increases our ability to trade goods and ideas and innovation is enhanced. This got me thinking about “Crowd Sourcing” and how genuinely innovated this is.

I noticed that over the summer, First Direct launched the “First Direct Lab” – described as “crowdsourcing platform that will give customers a stake in the online and telephone bank’s digital marketing efforts”. I have a bit of a problem with this definition as I think it gives customers a voice, not a stake. There are no consequences for them offering poor advice. However, I can see it makes sense to engage more with customers and isn’t that just the point?

Crowdsourcing is simply another way to engage with customers in the same way that surveys and customer panels can. They facilitate a conversation rather than listen to the results of marketing efforts. There is significant evidence that they work and Gary Hamel, business guru, provided various evidence in his book “The future of management”.

So to my question about how genuinely innovative crowdsourcing is. My conclusion is that the technique is innovative based on the new technology available now and its ability to facilitate wider conversations. But ultimately, the idea is as innovative as the first person who said – “gather round you guys, what do you think about this?”.

Apple iPad – the latest business tool

I suppose like most people who work in the related industries, I have been having lots of conversations and thoughts about the iPad recently. Nearly all of them have ended with two conclusions: That the iPad is game changing (something I have not always agreed with); and no-one is really sure how. Well now I am convinced and I think I do know how.

The “not sure” conversations have all looked for applications around the home. I have seen people sat on the train with tip toes trying to type on the iPad and that is definitely not the way forward. So if the input nature of it is weak then the home applications relate to it becoming  a coffee-table device for looking at photos, social media, maps, websites etc. All these I suspect will be true but the biggest application for the iPad I believe will now be as a business tool.

Two weeks ago, the Economist reported that a company, whose head office was located in Bermuda, had rolled out iPad’s to 500 senior managers globally with the primary purpose of enabling them to view the monthly management information pack. Previously, this monthly pack of four inches of freshly printed paper was couriered around the world to each of the managers. It was reported that the company saved the cost of the iPad’s in the first month alone, although it is hard to see that precisely, but savings in a short cycle are certainly achievable.

A large media company in the UK has gone down a similar route issuing iPad’s to its key managers although the purpose at this stage is not clear. They have many online properties and spend a substantial amount of time reviewing them so this alone might provide the purpose. And these two examples are enough to convince me that the iPad will become an important business tool.

Add to these the ability of the iPad to do, what many, myself included have been sceptical about, replace books and magazines because of it’s own “feel” and I think it will be prolific. When I look in my own bag and I see that I am carrying the Economist, New Media Age, Revolution and Management Today plus a book and company papers. Replacing these for a single, lighter device is certainly desirable and if their iPad versions (if and when they arrive) are anything as good as The Times (well done Applied Works) I will have no hesitation but to put my luddite ways behind me and go digital for my reading.