It’s Calliope!

It’s Calliope? What’s Calliope?

Well, plenty of things, actually. Calliope was the Muse of Epic Poetry, back when the Greek Gods ran the world. Since then, the name has been applied to (amongst other things) a hummingbird, a font, an asteroid, a saint, a river, a housing project, five Royal Navy ships and a host of other things.  And it’s pronounced with the emphasis on the second syllable: Ca-LYE-o-pi.

The name was also given to a steam-driven fairground organ, which you can read about here. I’d rather like to own one of these, though the horses might be high-maintenance.

Calliope, the wonderful operonicon or steam car of the muses EDIT

And in the spring of 2013, Calliope will be a retail business operating from a physical shop and a virtual website, selling gifts, books and all manner of attractive things, and run by my old colleague and friend Andy Adamson, and me.

Of course, there’ll be more to tell when we have a business to launch, but in the meantime, here’s what Benedicte Page had to say about us in The Bookseller:

Downer to open new store:

http://www.thebookseller.com/news/downer-open-new-store.html

06.12.12 | Benedicte Page | The Bookseller

Former Borders UK c.e.o. Philip Downer is to open a new store, selling books, gifts and other merchandise, in the spring.

The shop, named Calliope, will be opened in an undisclosed Surrey location for which the lease is currently under negotiation. Downer will run the shop in partnership with former Borders colleague Andy Adamson, who is handling commercial relationships with vendors. A recruitment process has begun for a store manager, with applications welcome.  Conversations with publishers are already underway.

Downer, who announced the venture at a meeting of The Galley Club last night (5th December), said: “We envisage a store and an online offer with a combination of books, gifts and other merchandise. I’ve been saying for some time that bookshops have to diversity and that being an expert 100% bookshop shows a profound failure to understand how customer expectations have changed. There is an opportunity to sell quality books to a broad consumer audience.”

Downer declined to give details on what percentage of his offer would be books, saying the volume and proportion of books within the retail offer would vary “according to season and customer demand”. They will, however, all be beautifully produced volumes, books “of quality, inside and out”, he promised. “I was a judge in the British Book Design and Production Awards and spent two days looking at these fantastic books and recognising that we have the design and production capability in this country to produce truly beautiful, attractive books. It is interesting the extent to which some of the major publishers is grasping that nettle.”

The bookshop will have an “interesting and extensive” but as yet unspecified online offer and will also act as a community resource, Downer said.

The name “Calliope” refers to the music of epic poetry, but Downer said he was more inspired by the old steam organ of the same name towed around the country by horses, the “explosive fairground noises” of which feature on one of the songs on “Sergeant Pepper’s Lonely Hearts Club Band”.

Calliope is already on Twitter, at @CalliopeGifts, so do follow us and keep in touch with developments, as we move from being a great idea to becoming a great shop.

Mr Kite 1

In the meantime, I’ll be undertaking at least ten somersets on solid ground. Have a good Christmas, and don’t forget, shopping at local stores keeps your economy and community alive – and their taxes pay for the services you use.

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Swann Song: Changes at WH Smith

The Bookseller has published a column I’ve written in response to WH Smith’s prelims announcement last week, which delivered the double whammy of £100m+ profits, and the upcoming departure of Kate Swann as Group CEO.  I’ve reproduced it below.

When the WHS announcement was made last week, two sets of instinctive responses crashed into each other.  The City reporters raised the roof for Queen Kate, during whose reign earnings-per-share have been driven to ever higher peaks, thanks to a combination of margin enhancement, cost-cutting and share buybacks.  And the naysayers pointed out that, yet again, sales were down – even in the go-go Travel division, like-for-likes keep falling.  Oh, and BTW, the store environment is pretty poor.

I try to take a slightly more nuanced (or reflective) view.  Swann has delivered extraordinary numbers through torrid times, but has she left her heir apparent, Steve Clarke (who is promising more of the same), with a sustainable model?

WH Smith has made every decision with its shareholders’ interests paramount – and that’s as it should be, am I right?  However, it is hard to escape the conclusion that those decisions have been predicated on short-to-medium term returns, rather than the sort of long-term investment that leading retailers make.  WHS is still a bricks-and-mortar company (notwithstanding a long-standing but rarely promoted transactional site, and the slightly more forward-looking Funky Pigeon online offer), trading in categories –  printed books, newspapers and magazines – that are in long-term decline.  Its overseas Travel expansion plans are broad-based – but winners need to be idenified from a pot-pourri of investments across several continents.

Retail Week has just dropped through the door, complete with a profile of Steve Clarke.  In the meantime, here’s The Bookseller piece:


How’s the retail shake-out working for you?

Some smiling faces in the retail community this morning, with news that like-for-like sales in September lifted by 1.5%, easily the best result of the year.  Why the bounce?  There will have been some pent-up demand, following the armchair weeks of the Olympics and Paralympics, and – extraordinarily – there was actual alignment between fashions instore and the weather outside, so customers stocked up on winter clothing.

This didn’t necessarily mean a kiss of life for the high street, however – online sales rose by 9.9% year-on-year, compared to 4.8% in August, so the big shift from physical stores to the online environment accelerated, once customers started shopping again.  And JJB Sports called in the administrators at the end of the month – one of the biggest failures in a terrible year for business failures.

There’s an interesting piece in the FT this morning (you’ll need a subscription), which lists some of 2012′s most notable casualties - Blacks, Game, Clintons etc – and notes the overall fall in the number of trading retail units across the country.  Most pertinently, it highlights the quiet retrenchment taking place within successful non-food chains across the country, whereby multiple smaller stores are being closed in favour of a fewer, larger stores in the big centres.  (nb my blog on the top eighty retail locations, from the start of this year).  It may not feel like it, but independent retailers are increasing their share of the number of trading retail units, with 67% of all stores controlled by indies, up 1% against 2011.

And this is where the retail shake-out in the headline comes in; progressively, over the past four years, the out-of-date leviathans, the single product chains, the superseded-by-technology businesses and the unable-to-respond-to-slicker-competition-or-just-ground-down-by-Amazon retailers have been bought out, merged or closed down.  There’s now a big “middle of the market” gap between the FTSE 100 corporations and the street-fighting new players, but this recessionary climate has been rolling for long enough to allow the biggest players careful application of their cash piles to reshape their store portfolios and integrate first-class online offers, while the new companies have grown up, and been designed from the ground up, for an omnichannel (apologies to John Ryan) world.

A guaranteed better retail tomorrow requires consumer confidence, and we haven’t yet turned that corner.  (With Europe unresolved, the end of austerity is still some way off.)  Nevertheless, we are seeing the birth of a new, fitter retail sector in the UK, with plenty of entrepreneurial spirit among the start-ups, and in larger, imaginatively run, modern businesses like Hotel Chocolat or The Hut.  This is a volatile and fast-changing sector (asked Bill Grimsey), and there will be more business failures, more empty shops, more job losses.  But good retail practice thrives on its ability to adapt, to anticipate changing consumer behaviour and surprise, delight and good value.  The new generation, and the wisest of the old, understand this, and are seizing the opportunity.


Booksellers and publishers working together: The BA Conference

I spent Monday with the Booksellers Association Conference at the University of Warwick, and wrote up my immediate reactions in this piece, published by The Bookseller.

I do believe that there is a robust future for the best independent bookshops.  But they’ll have to evolve, and to stay ahead of their customers’ expectations rather than trailing behind them.  I hope that bookshop owners, publishers and their trade associations can work together to ensure that there is still a role for these businesses.

Do add your comments.


The pbook tail: an ursine stump. The ebook tail: very long, very thin. And very different…

Some Twittering this morning, inspired by a couple of articles spotted by Jellybooks‘ Andrew Rhomberg.  One is a market report from Publishing News, the other a blog entry distributed by ebookporn.

@arhomberg

Low prices are transforming ebook buying behaviour from “buying to read” to “buying to collect” http://ebookporn.tumblr.com/post/28845301698/why-publishers-are-having-difficulty-settling-on-a …

 ‏@frontofstore

Collect, or just accumulate?

@arhomberg

bit of both? Some is accumulate “wanted to read” (and then forgot), but also collect “don’t want to miss out” (deal!)

@arhomberg

the post certain rang a bell with me in that ebook buying and physical book buying are evolving somewhat differently

@arhomberg

you now have genuine impulse buying from the comfort of your home and at genuine “impulse prices”

@arhomberg

Front list/back list ratio is 40/60 for print, books, but 20/80 for ebooks! http://www.publishersweekly.com/pw/by-topic/industry-news/bookselling/article/53430-what-happened-to-the-long-tail-.html …

@frontofstore

Concepts like frontlist/backlist, based on print runs/reviews/marketing, increasingly redundant in ebook world.

PN notes that Nielsen Bookscan has reported a fall of 30%, almost one-third, in US sales of fiction backlist titles in printed book form, for the period ending 22nd July 2012, compared to one year earlier.

The shift in market shape is accelerating, not slowing down, with the article noting a significant fall in physical book space at retail outlets (over and above Borders’ US closure).  One major American publishing group is reporting that 80% of backlist sales are now in ebook format – the pbook long tail is getting shorter and shorter.  Assuming Amazon still accounts for a large part of those backlist sales, backlist bread-and-butter in bookshops must be looking very stumpy indeed.  And without backlist sales to prop up the discounted frontlist, the book-specific store model looks very troubled.  Booksellers need to diversify, and to recognise that the “general bookstore” is probably unsustainable.

But hell, you know that already.  What’s piqued my interest today is the effect that all of this will have on publishers – and not so much on the grand strategies of media groups (many of which are quite forward-looking), but more on the basics of seasonality, range management and changing consumption patterns.

Amazon made one of their opaque announcements this week, proclaiming that for every 100 physical paperbacks and hardbacks they had sold in 2012, UK customers had downloaded 114 titles to its Kindle e-reader.  Such is Amazon’s dominance in the UK book market that this was headlined “Readers are now buying more e-books than printed books“, ignoring the enfeebled minority of book-lovers who are doltish enough not to use Amazon.

Ebook customers aren’t behaving like pbook customers.  Are you a traditional “heavy book buyer”?  If so, how many books might you buy for yourself at a time – four, five?  Any more, and the weight/bulk will be too much to carry, and once you get home, there’s the imputation that all those pages piled up at your bedside must be read.

Whereas ebooks – pah, easy.  Click, download.  Click, download.  Moby-Dick – always meant to read that.  Click, download.  À la recherche du temps perdutwelve volumes for £3.25 – no problem.  Click, download.  Having it on your Kindle is almost tantamount to reading the thing anyway.

Back to that ebookporn piece.  As the writer notes, people are downloading “huge chunks of content that will never be read”.  The piece concludes:

If your download 70 books at $0.99 each you are spending $70 and acquiring years of books to read. Very soon this reader stops purchasing and that sales bubble bursts.

If instead they were to spend not $70 for 70 books but $7 a month for access to 7 million books this reader spends $84 a year, year in and year out.  Knowledge is light and it stands to reason that access to all books can be sold like a utility such as electricity, water, and internet access.

This is what might be described, broadly speaking, as the Spotify principle, and it’s one that slashes through publishing, bookshops and libraries as we know them.  Which has more value to a reader who has no desire to surround him/herself with dead tree content – 70 ebooks, most of them unread and never-to-be-read, or an almost infinite quantity of content, from classics to trash, all available from the cloud at a moment’s notice?

This brings us back to frontlist and backlist.  I can understand how new ebook content can break through and succeed, whether a title starts with word-of-mouth build, typical of self-published hits, or is driven by a professional marketing campaign.  However, that approach divides ebooks into Monster Hits and Everything Else.  When publishers were putting out a few dozen pbook titles each season, they were reasonably certain that most bookstores would carry/display/promote most of those titles.  The books would get their place in the sun, and then (if they’d sold a few copies) earn a position in the backlist, where sales could tick over unto eternity.  They would move from frontlist to backlist; most of them heading ultimately to oblivion, and few lasting for lifetimes.

There is no straightforward translation of this old world into the land of ebooks, where hits will be bigger and faster, but will probably also be forgotten more swiftly.  The solution, of course, is not to try and force a frontlist/backlist pbook mindset on the ebook world, but to adapt methods that works best for readers – who now have the freedom to behave in a totally different, less considered way.

Note, methods.  Sales will fluctuate; surge, recede and return again.  Content will no longer be defined by its copyright date, but by its relevance to a particular reader’s needs.  Publishers will require a whole range of different sales tactics which are reliant on understanding the end customer.  This is best achieved through partnership with sellers, sharing sales data and market understanding, though it runs counter to Amazon’s established strategy – Seattle is determined to hold on to its data and control the customer relationship.

The “Spotify” approach is a rational response to the hangover that will follow downloading excess; alternatively, publishers may have to assume that a high proportion of ebooks will be sampled, but never read, and price them accordingly.  Neither solution represents a straightforward “format shift” (in the way that hardcovers were succeeded by paperbacks in the mid 20th century).  Consumers aren’t thinking in those terms, so publishers are going to have to change their model fundamentally.  And because the book has been such a successful object for so many centuries, that’s a difficult shift for people and corporations alike.  Ask any old bookseller – we know…

And to close, a gratuitous photo of about seventy pbooks, all of them pretty well-read…


The changing entertainment market

Retail Week, The Grocer, The Bookseller and others have all reviewed Kantar Worldpanel‘s latest analysis of the UK entertainment market, which focuses on the 12 weeks through to mid-June.

Despite all this coverage, there is a some vagueness as to what is and isn’t included in their definition of entertainment.  As far as I can tell, however, we are looking at:

- CDs (and other recorded music)

- DVDs (and other video content)

- console and PC games

- downloads

It looks as “downloads” includes ebooks, but the sector definition as a whole doesn’t include pbooks.

It’s unclear how broadly downloads are defined – all apps, or just those that have some kinship to traditional formats?  If so, that would be a “yes” to Angry Birds, but a “no” to business apps.

It’s also unclear whether all subsidiaries are properly accounted for – so, for instance, are LoveFilm downloads included in Amazon total?

Still, whatever the definition, it all makes for a good story.  The changes in percentage point share are pretty predictable – Amazon up, HMV down, Game Group – with multiple store closures following administration – well down.

But I am interested in the scale of some of the gains.  Of course, the overall size of the market fluctuates, but for iTunes to move from 6.0% to 8.8% represents an increase in penetration of nearly 50%.  And, LoveFilm or not, Amazon’s growth continues powerfully, with no reason to assume it will slow down in the foreseeable future.

Tesco’s tribulations and Sainsbury’s progress are both graphically illustrated here – indeed, if these numbers are a microcosm of current trading at Tesco, that would be a concern.

Meanwhile, Play.com sees its share slide, as it loses consumer visibility.  Amazon isn’t just taking sales from bricks and mortar retailers…

That the “Others” are growing their share suggests diversity in the market.  I wonder who they might be?


Online retailing: when will new taxes be needed?

You’ll have to bear with me; I’m a following a train of thought here.  There’s nothing scientific about this, but there’s plenty for retailers and mandarins to think about.

I was reading a piece on The Next Web, about the rise in the US of online-only brands.  The article (which you can read here) discusses US enterprises like Dollar Shave Club and Warby Parker whose business model is built around having no bricks and mortar availability for their products.  As Everlane CEO Michael Preysman says:

We are going to shut the company down before we go to physical retail…  Traditional retail models are bloated with unnecessary costs.  Online just makes more sense: we’re national from day one, we have a single store, we don’t have to cover costs of physical inventory in stores and we don’t have to pass on a 2x markup through retailers.

This moves us on from showrooming, and into a world where the showroom has been specifically designed out of the equation.  In terms of business planning, this is a big leap forward from “omni-channel” – the message from companies like Everlane is that, while there may be multiple ways for brands to communicate with each their customers, there is only one channel through which they will make their goods available to you.

This marinaded in my mind for a little while, then we started Twittering this morning about the sad closure of a fine record shop.  Record shops have been in the advance guard for physical closure and collapse in the retail sector for many years; however few we have left, it seems as they though they keep on failing.  As Steve from Rounder Records wrote:

We are closing because we can’t make it add up any more. We are a business that has been decimated by downloads (both legal and illegal), VAT avoidance by the big online retailers, a double dip recession, & the decline of the high street. Our lease has ended and we have nowhere to go.

So, I started to think, how many properly staffed, paying-their-taxes retail businesses (or indeed retail categories), anchored in bricks and mortar and supporting a vibrant high street, have to go to the wall before HM Treasury starts to feel the pinch?

Here are some purely illustrative and not properly audited at all numbers to think about.  Let’s assume – as the British Standards Institution believes - that total retail sales in the UK are worth around £300 bn.  (That’s 300,000,000,000 in pound coins.) And, to keep it easy, let’s assume that half of those sales – excluding food, children’s clothes etc – attract VAT.

20% VAT on a gross £150 bn equals £30 bn.  That’s a lot of schools’n’hospitals.  Of course, most online retail transactions attract VAT at the appropriate rate, but some don’t – all those downloads from Luxembourg, for instance.

Right, £150 bn less VAT equals £120 bn.  Stick with the train of thought:

Business rates at, say, 4% of ex-VAT sales, will raise £4.8 bn.

Staff costs, at 10% of ex-VAT sales, will raise £2.4 bn in income tax on those wages, assuming tax is paid at a flat 20%.  (Netting out personal allowances against higher tax band payers, for the sake of argument.)

Employers’ NI on those same staff raises around another £1 bn.

And if all those retailers make 5% net profit (happy thought) ,on which they pay 20% corporation tax, that’s another £1.5 bn.

Of course, online retailers have the same cost-heads, but with fewer staff, cheaper premises etc, the tax-take from their business activity is going to be significantly smaller than from a traditional bricks and mortar retail model.

Now, I probably ought to be having this debate over a third pint on a Friday night, but somewhere in this maelstrom of lower prices for consumers and lower operating costs for online retailers (yes, I know, they have to spend much more on marketing), there’s a lower tax take.

If online becomes progressively more dominant, as this graph from The Daily Telegraph suggests:

- and as I discussed in this blog at the end of last year, at what point will the current tax regime start to feel the strain?

It rather looks as though the Exchequer will need to raise more money – either from online merchants, through some form of additional levy (which in due course would lead to price inflation); or from consumers, either through raising VAT (though this is vulnerable to corporate strategic avoidance) or by raising income tax.

The channel change is gradual, of course, but inexorable.  We won’t end up buying everything online and nothing from physical shops, but there’s a lower-tax trend.  Looking to the future, our Chancellor and his shadow could just carry on flicking each other with wet towels, but – in the absence of real economic growth (driven by eg significant job creation in other parts of the economy) – I hope there’s someone in the Treasury giving this longer-term structural change some serious thought.


Sainsbury’s and Anobii

I’ve written a column for The Bookseller on Sainsbury’s acquisition of the majority of the Anobii business from HMV – you can read it here:

http://www.thebookseller.com/blogs/what-anobii-link-means.html

To read more on the background to the deal, click here.


There are a Million Stories in the Naked Book…

Philip Jones, deputy editor of The Bookseller, presents The Naked Book, a fortnightly radio show “dedicated to ripping the covers off print books and finding out what lies beneath”.

I was invited to participate in the most recent edition, Face the Bafflement and Do It Anyway, where I was joined by Dublin publisher/commentator Eoin Purcell, and Laura Owen of New York City’s Paid Content.  We covered the waterfront at an indecent speed, and with a high degree of candour, and low levels of obeisance.  It’s the longest day today, and it’s pouring with rain – what better way to pass an hour than to log in and enjoy.

You can listen to the broadcast here.


Waterstones and Amazon: A good partnership?

I’ve written a piece for Retail Week about Waterstones and Amazon, published today.  You don’t need a subscription to access it, though you will need to log on:

http://www.retail-week.com/comment/waterstones-and-amazon-a-good-partnership/5037121.article?blocktitle=Retail-Comment-&-Opinion&contentID=5972#.T8iIObBfGZg


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