Waterstones is a British book retailer founded in London with 275 stores and 3,500 employees in United Kingdom and Europe. Russian billionaire Alexander Mamut brought in the current CEO James Daunt after he purchased the organization for £53 million (Eyre, H. (2014).
Despite huge losses in the past Daunt has managed to reduce operating loss by £13.2 million, substantially decreasing the rate of financial decline within the company (Eyre, H. (2014). The company sells books, kindles, stationary, and board games and has its own Waterstones café within most of the bookstores. The company see’s a lot of its revenue from non-book items. Waterstones has struggled greatly with discount wars especially with consumers increasing use of 24-hour online bookstores.
So after 4 years at the brink of financial turbulence the questions remains what went wrong?
1.) The recession did one of many things to retailers; planted doubt within consumers minds, reduce disposable income, shifted consumer preferences. Not only did consumers loose the relationship they once shared with retailers they were forced to re-evaluate there spending habits.
Coyle, C. (2010) describes perfectly the transformation of consumer behaviour after the recession in a simple but precise acronym, MRSALDI.
Masstige
Recession’s Secret Shopper
See-Saw Consumer
Austerity Chic
Lipstick Effect
Domestic God(ess)
Individually
Masstige: despite being in financial hardship the consumer craves elegance and luxury
Recession’s Secret Shopper: the shift to digital put 1.6 billions consumers online making them more savvy about reviewing brands, products and services. The new channel of communication enhanced one-to-one interaction between retailers and consumers
See-Saw Consumer: consumers are not only aware but seeking value more than ever (bargains and investments)
Austerity Chic: Cheap is the new expensive, consumers actively seek bargains, shop in charity shops and aren’t afraid to boast about what their saving
Lipstick Effect: Consumers are seeking immediate rewards for what they buy, buying luxury products scarcely
Domestic God(ess): Instead of relocating consumers are redecorating and their doing it themselves (DIY)
Individually: although consumers are on a budget they are willing to pay premium prices for a personalised experience
– Coyle, C. (2010)
2.) Emerging technology, our global economy went from 0 to 6 in a matter of a year and for those retail companies who didn’t predict or stress the importance of digital within their company strategy got left behind. Waterstones was slow to adapt to the technological progression and in turn was overtaken by digital behemoths like amazon.
Once consumers were confined to their catchment areas and had no other way than entering the physical store if they wanted to purchase a book, clothing, toiletries etc.
Information and technology forcibly changed the way retailers once operated hindering their value proposition to consumers and creating “catchment areas that knows no bounds”. Consumers have more access to an array of products and services at a variation of prices than ever before.
Grewal, D. et al. (2012) provides a basic 3 step recommendation to how retailers can stay on top of the ever-changing environment they operate within:
- Remain more in touch with consumer preferences
- Take advantage of opportunities created by new consumer preference
- Enhance the value they offer to consumers
For more tips on retailers operating after the recession read this discussion with John Quelch
and for more tips here is an article from the Harvard Business Review.
References
Burnett, J. & Hutton, R.B. 2007, “New consumers need new brands”, Journal of Product & Brand Management, vol. 16, no. 5, pp. 342-347.
Coyle, C. (2010), ‘Reacting to Consumer Trends, Reaching New Markets, and Mitigating Risks in a Tough Economic Environment’, Licensing Journal, 30, 1, pp. 1-7, Business Source Premier, EBSCOhost, viewed 17 March 2016.
Eyre, H. (2014). James Daunt: the man who saved Waterstones. Available: http://www.standard.co.uk/lifestyle/esmagazine/james-daunt-the-man-who-saved-waterstones-9913047.html. Last accessed 20th November 2015.
Grewal, D., Roggeveen, A. L., Compeau, L. D., & Levy, M. (2012). Retail value-based pricing strategies: New times, new technologies, new consumers. Journal of Retailing, 88(1), 1-6. doi:http://dx.doi.org.ezproxy.brighton.ac.uk/10.1016/j.jretai.2011.12.001