Have we stepped into a retail time machine? - Part 1

We are living in strange times, of that there is no doubt. A world in lockdown is unprecedented in my lifetime and I hope will not be something I see again, though if some articles are to be believed this may become more of a common occurrence as we get deeper into the century. The prime minister has been using Churchillian terminology that treats the virus as the ‘enemy that must be overcome’. Except that in this case we are not allowed to fight the enemy on the beaches but stubbornly from our sofas and home offices. Our generations major action is uniquely inaction.

One thing most historians agree on is, other than the scale of devastation that world wars bring, often it is when humanity is at its most innovative. Technology typically advances at a lightning pace during war time, and in this war again it looks like technology will be the big winner. Even the most resistant office worker is now seemingly overnight comrades with Microsoft Teams, Zoom, Skype and the myriad of other face to face communication platforms. With whole families at home bandwith has reached a level of importance like never before. It’s widely accepted that post this period of huge turmoil, more traditional businesses are likely to be more flexible around work from home models, and ‘line of sight management’ while not entirely a thing of the past will have diminished in its importance.

But what does this all mean for the entertainment sector and for the retail sector that is responsible for getting entertainment product into consumers hands? People are going to absolutely need entertainment as part of their essential toolkit for survival over the coming months. Are we stepping into a time machine hurtling five or ten years into the future where the high street has gone and the only game in town is the online and streaming behemoths that are stepping into the current void?

The film industry has been quick to re-act to the closure of theatres to bolster their streaming subscription models, with promises of releasing mainstream films directly through those channels over the notoriously busy summer release months. This isn’t an entirely new concept of course. Sky have synchronised own brand film releases in theatres and on sky’s at home sky movies service. Netflix have released the star studded and award laden The Irishman direct to their captive audience so the seeds of this approach had already taken root. Disney launching their Disney+ subscription channel globally into the heart of the pandemic are undoubtedly going to see an uptick against the original forecast expectation (edit - they have now released figures suggesting they’ve hit 50 million subscribers already, hugely ahead of forecast). Subscriptions streaming services across all media formats film, music and book have already risen by 12% in the last month and Nielsen are predicting an annual rise of 60% by EOY. It doesn’t take a retail genius to assume in film and tv the big losers here are going to be DVD, the format already consolidated into major releases only over the last few years, and once the remaining digitally resistant audience have sampled the simplicity of streaming it feels like it will now be significantly challenged as a scale proposition. It would be hard to argue anything other than this has simply served to accelerate a transitioning audience, hastening what would have been broadly the case 5 years from now. Very few retailers in the entertainment sector however are solely reliant on a physical format to drive sales which brings me onto the books sector.

Bookshops, and specifically browse to buy formats such as Waterstones and the Independent sector, are reliant on a primarily physical format, despite diversification into non books products. Their online service, although no longer insignificant as a share of sales, largely relies on the click and collect model, which is redundant once you can no longer physically ‘collect’. The books sector is digitally resistant in the way that film or music are not. E-book sales after threatening to cause a seismic shift in consumer behaviour had stalled with diminishing numbers over the last few years but you can be sure there are large numbers of people dusting off and frantically searching for the charging cables to their kindles as I write. Kindle Unlimited reads and Audible reads will be spiking significantly. Waterstones have often sited a 10% downturn in sales would turn their now profitable business into an unprofitable business. After a long and arduous road successfully re-establishing their offering away from a supermarket light model to a more considered curator for bibliophiles to make their next great literary discovery this would be a bitter pill to swallow. WHS who are not a dedicated bookshop, but have a large proportion of their in store footprint dedicated to the books were very early with a bullish profit warning of £40M and as a consequence their shares dipped by 15% overnight. Everything is playing into Amazons hands right now surely, we’re pressing the accelerator button and stepping out of our time machine to a place where Amazon are the only game in town?