The high street needs to innovate or die

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.