HMV vs Disney: Which business model holds the key to success?
With the two retail giants taking very different approaches, Business Leader received this article from Neil Debenham, renowned business troubleshooter, consultant and private equity specialist, where he discusses which model businesses should be looking to adopt if they want to succeed in a highly saturated market.
The pandemic has decimated the retail industry. According to a recent report by PWC, more than 17,500 stores closed in Great Britain last year with the severity of the impact of the pandemic being displayed by John Lewis – historically one of the most successful department store businesses in the UK, confirming plans to permanently close eight more outlets after its first-ever full year loss, resulting in these abrupt shifts leaving many retailers scrambling to reach customers through other channels.
It won’t come as a surprise that e-commerce operators have adapted with greater success than businesses prioritising brick and mortar at the expense of online strategies.
In June, Disney announced plans to close all but two of its UK stores with a shift in focus towards e-commerce. Just weeks later, HMV announced a contrasting business model with plans to open ten new stores, including a London flagship site.
But the question is: Who has got it right? Is HMV’s faith in a brick & mortar model misplaced?
Many businesses will now be asking themselves which model they should look to invest in if they are to succeed in a highly saturated market.
All successful business leaders will need to consider the state of the current market to keep pace with changing demands and in this current environment, the success of a business depends entirely on how willing they are to diversify and adapt to certain requirements listed below.
Changing consumer demands
There has been a clear shift in consumer habits in the last few years, fueling the growth of the e-commerce market. “Retail therapy” was once seen as a luxury and a pleasant day out, with shoppers experiencing the feel-good factor of treating themselves. Now, most consumers are focused on instant accessibility. They want a tailored shopping experience at the touch of a button. It’s a classic case of Blockbuster failing to identify Netflix as a threat.
For a business to succeed, they now need to allow their customers to decide on when, where and how they shop. A company’s offering must be personalized and seamless, or they risk losing out to savvy market competitors.
This shift into the digital sphere doesn’t just make sense from a business standpoint, but also financially. The 100-year-old high street model is associated with high staff and rental costs and unaffordable business rates, whilst overheads in the digital world are much lower. In a financially challenging year for all sectors, this optimizing of spending is vital for success.
Brick & mortar vs. e-commerce expansion plans
Whilst brick-and-mortar brands have had trouble keeping up with the rapid shift online, we are unlikely to see the end of physical stores. And nor is the high street going to disappear overnight.
Instead, we are going to see a fundamental shift in what physical stores offer. For a long time, I have been on record stating that the high street would be replaced with a super hub that would handle the sales/returns for a range of brands. Initially, I expected the likes of Tesco to be first out of the blocks but now it seems that Amazon are charging ahead, following their announcement of their plans to open a chain of large department stores in the UK and the US.
Unlike HMV, Amazon is not viewing the high street through a traditional lens. Instead, they intend to harbor digital technology and their endless in-depth consumer knowledge and bring the best of online shopping to the high street. This hybrid business model is what businesses should be aiming to replicate if they really want to thrive in today’s landscape. By doing so, businesses can provide their customers with the best, most harmonious experience, matching their demands and needs.