Spontaneous Purchasing

DECEMBER 1, 2009 
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Many in the home entertainment business were hoping that last year's turbulent times would not be repeated this Christmas. Having survived for a year without Woolworths and Zavvi on the high street and without wholesalers Entertainment UK, a period of stability in the key months of November and December would have been welcome. Retail remains in choppy waters, however, as Borders UK entered administration just 12 months after Woolworths walked the same plank. With WH Smith reported to have looked at Borders and turned away, the outlook is grim both for the suppliers who are owed money and the 1,000 or so employees. Financial commentators have been quick to blame the growth of online shopping habit for the demise of a business that never really found its feet in the UK. Bricks and mortar retailing has been at the heart of the Borders concept since the company arrived from the US in 1998 and, despite two changes in ownership, the company does not appear to have reacted adequately to the threat posed by the internet, losing ground while others have benefited. According to e-commerce service provider The Hut Group, which runs online retail platforms for Asda, WH Smith, Argos and Lovefilm among others, Nov. 30 was set to become the busiest online shopping day of the year. UK e-tailers expected more than 1,750 transactions a minute, the company predicted, adding that 71% of consumers surveyed believe that online shopping is the best way to buy Christmas presents. The same Cheshire-based Hut Group acquired the rights to the Zavvi website in March, added the Woolworths entertainment site to its portfolio in June and is today the owner and operator of the Borders Entertainment web site. Although the Borders UK site displays a terse message from administrators MCR, Borders Entertainment appears to be open for business. The Hut Group was ranked No. 1 in this year's Sunday Times Tech Track 100 with sales that have grown 189% a year from £997,000 in 2005 to £24 million in 2008. In September this year, it clinched a multi-million pound private funding deal to support its target of operating 30 sites by 2010. In the same week as the Borders announcement, research agency TNS Omnibus reported, "One in 20 UK shoppers expect to do all their Christmas shopping online this year, which for many could be an opportunity to avoid spontaneous purchases." Impulse sales of Blu-ray and DVD titles can be counted on to generate revenue throughout the year, whether for blockbusters or catalogue titles. As they walk the aisles of supermarkets or specialist retailers, shoppers might add "Ice Age 3" to their basket of groceries or pick up "Fawlty Towers" to keep the party spirit going through Boxing Day. The possibility that consumers are actively avoiding "spontaneous purchases" should be a concern to all involved. Online shopping is enhanced by recommendation engines - the "items to consider" prompt on Amazon's home page is a good example - but the chance discoveries made by browsing thousands of titles in-store would never be found this way. Similarly, the static on-screen pack shots that populate online sites fall far short of the appeal of eye-catching in-store displays, which from last week can include animated graphics, thanks to the Belgian start-up Lumoza. The downfall of Borders, which had a 5% share of the book market, will benefit competitors, whether traditional or online. Play.com, for example, the third most visited online retailer in the UK, has reported book sales up by 55% so far this year and supermarket sales are nudging a 10% share, according to TNS. Without physical product on display in retail stores, however, it is hard to be optimistic about the outlook for "the long tail" of home entertainment titles. Unless shoppers can browse through physical product and make those spontaneous purchases, Christmas stockings this year are likely to be filled with "Transformers 2", "Star Trek" and very little else.