Happy 50th Birthday, National Theatre, and Many Happy Subsidies

I wish the National Theatre a very happy 50th birthday. To me, it is what subsidy is all about. It could have been a staid presenter of the classics of the English stage. Instead it has encouraged new writing and the discovery of non-English work. It has been challenging and experimental.

Given the opportunity not to play safe, the National Theatre has produced many incredible productions that have become huge hits. Who could have predicted the success of a play starring life size puppet horses?  Or the recent stunning production of Frankenstein? It’s hard to believe its director Danny Boyle would ever have learnt the skills to put on that unforgettable opening of the London Olympics without a grounding in subsidised theatre.

It is of course a worry when you rely on a subsidy. I’m about to attend my first Board meeting as a trustee of the Theatre Royal in Winchester and I am already concerned about what would happen if our city council were to follow some other local authorities and cut grants to the arts.

It was the opposite case when I worked at The Mayflower. There, the lack of subsidy meant that the programme was inevitably full of known quantities that could be relied on to fill seats – great shows of course (quite a few subsidised in their original productions) but no thrill of discovery or pushing the boundaries.

To those who object to paying to subsidise something that offends them or they would never go to see, I can only say that for every subsidised play I’ve disliked, there is something else that I’ve loved that might never have seen the lights of the stage but for a grant. Les Miserables is one of them. War Horse is another.

Small scale work is important too and more under threat than the large scale endeavours. I still remember the stunning impact of Peta Lily’s Beg! 20 years later- and I loved her latest show when she performed it for the Winchester Theatre Royal. Blue Apple Theatre’s Hamlet last year changed lives both of the participants and the audience. As a trustee of that company, I know just how much we rely on grants.

It is sometimes suggested that independent shops should be subsidised, perhaps with reduced rates or rents. The idea has merit. The big chains would object to this interference in a free market just as the commercial theatres objected to the creation of the National Theatre fifty years ago. Now they would see that the National has enriched the West End with productions, actors and directors.

Small independents fill gaps. Some become large chains. Others provide a testing ground for new products. Think of the Body Shop for example. They also make a city more attractive to visitors and residents. Winchester is enhanced both by its subsidised Theatre Royal and its large number of independent shops.

This blog was written by Paul Lewis, owner of the marketing consultancy The Lewis Experience and online retailer Your Life Your Style, and former Head of Marketing and Operations at The Mayflower Theatre. You can connect with him on Google+ and LinkedIn.

Amazon: Future Tense

In a previous article, I established that, despite its market domination, Amazon makes little or no profits because the pursuit of low prices has led to very low margins. I asked is there a David out there that can exploit this Goliath‘s weaknesses and what we would lose if we didn‘t have Amazon?

Straightaway we need to remind ourselves that at least one online retailer has already grasped the concept of what is unique about the web better than Amazon. Step forward Apple iTunes, a brilliant idea for selling a product that has no physical substance and therefore no fulfillment costs. Amazon has come late to this game with their Kindle e-books.

National retailers like John Lewis or Sainsburys also have a potential edge with their marriage of shop and online. Customers can use the shop as showroom but buy online (rather than using Waterstones as a showroom then buying from Amazon) or utilise the excellent click and collect. There is still a huge percentage more shoppers visiting shops than buying online which means Amazon are limited by having no showrooms. You might wonder what will happen to Amazon book sales, apart from bestsellers, if Waterstones closes and we can’t check out the books before buying online.

Some retailers make a success of selling own brand products because they have a monopoly. Next, White Stuff and even Marks and Spencer (if only M&S had products people want to buy) are examples of retailers who can set their own prices. Again Amazon lose out because they only sell goods in competition with other retailers.

Independent shops like Your Life Your Style do not have the advantage of either a national chain of outlets or exclusive products, but as I said previously the online competition is not so great for niche products- overheads are the reason for us leaving the high street and taking our chances selling purely online.

Amazon tried to tear up the retailing rule book that said competing on price can only end in tears because you end up with no profit. The key to success in the pre-internet days was to compete on quality, service and marketing. The trouble was, back in the nineties, people were reluctant to change their buying habits to this new fangled internet. Offering low prices was probably the best way to get people to switch to buying online. In fact, tearing up the rule book may be proving as difficult as tearing up a telephone directory.

The Amazon website is a wonderful warehouse but the emphasis is always on the cheapest price. Service is excellent but the clinical photos and bullet point descriptions do little to put across the value of the products. This works when it comes to selling a light bulb or something the customer already knows he or she wants but is no help when you need an uncertain purchaser to make an emotional connection with a product. John Lewis or even our own website do a much better job at persuading someone to buy a product. Its the difference between a description of a teddy bear’s size, colour and materials and a story of a child getting a bear, cuddling it and it becoming her friend. Or a picture of a wine glass and a photo of a dinner party with people chatting and drinking from the glasses.

From the early days of e-commerce, Amazon’s tactics have been the same. The company announced from the start that they would lose money for years while they built up their online business. As a result, they led the way, first as a cut-price bookseller who caught all other booksellers unawares. Then it widened its range of products, before moving into e-books which offer a better profit margin. Its best idea has been to invite other merchants to sell on its site. The virtually cost-free commission it earns from these traders may prove Amazon’s salvation.

If Amazon were to go, I would most miss the company’s tremendous commitment to innovations that make online shopping easier and more attractive to the customer from One-click shopping to rating the products to e-books.

Not that I would bet against Amazon winning the battle for the wallets of online shoppers. Nor it seems would investors who sent Amazon shares up when the results were announced.

How Do We Solve A Problem Like Amazon?

Amazon have announced their latest financial results and we‘ve decided to close our Winchester store and concentrate on our online shop. The two are not connected but it’s easy to see from the figures why some people point the finger at Amazon for the success of online retailing and the closure of shops.

In 2012 your Amazon book purchases, Kindle downloads and the rest contributed to a worldwide revenue of $61,090,000,000. That’s just over $61 billion, if you have trouble with all those noughts. Turnover has increased by something like 45% on the previous year’s $48.08 billion.

So is Amazon set to take over the world of retailing as Britain’s high street shuts up shop? Will someone or something yet defeat it? Or does Amazon, like the Roman and British Empires in the past, contain the seeds of its own destruction?

More than any other online retailer, Amazon established the internet as a trustworthy convenient way to shop. Even though the rise in online retailing has played a part in destroying the high street, it’s too easy to put all the blame on Amazon or even the internet. Online sales are still small (around 13% in the UK), albeit big enough in some sectors to kill profits. Speaking for my shop, I don’t think too many people were checking out our handmade designer products and then buying them online.

There are many other factors that have affected the high street and my own shop. Number one is the economic downturn- people just aren‘t spending like they used to. Out-of-town shopping and department store-like supermarkets were bogiemen long before Amazon. Expensive parking in towns has driven customers into their  arms. I believe that one of the reasons why Winchester High Street is doing relatively well is the lack of competition from a Meadowhall style centre.

Then there’s the abysmal failure of those responsible to respond to shops’ difficulties by offering better rates, rents and bank loans.

Let’s also remember it was iTunes and film streaming rather than Amazon that busted Blockbuster. Even bookshops, most often quoted as victims of Amazon, were already damaged by the abandonment of price fixing which allowed supermarkets to sell all the profitable popular books at knock down discounts.

Nevertheless the ease of purchasing online and the low prices have taken a significant chunk of business from certain kinds of retailing. And Amazon has been the champion in the use of both of these weapons.

Some high street shops may be suffering from Amazon’s power but trading in the shiny new online environment isn’t a lot better. It’s true overheads are a lot lower but so are margins, thanks to low prices. Your Life Your Style will be trading solely on the internet in future, apart from a pop-up shop at Christmas. Like all the other little fish selling online, we can’t ignore Amazon swimming around like a massive pike in a small pond.

I don’t blame Amazon for its encouragement of low- at times lossmaking- prices. It simply recognised that customers searching for the lowest price would drive the rise of online shopping. However low prices are a problem for online retailers, including Amazon itself, and you could argue it’s a problem of its own making.

It may be that Amazon will fail because of that very business model that has made it the giant it is today. Low prices meant that last year its operating profit (what was left after costs) on the $61 billion dollar sales was $676 million. After deductions of interest payments and tax (don‘t act so surprised, they do pay tax somewhere), the net loss- that’s right, loss- was $39 million. Even the operating profit they made in the Christmas quarter was only two cents for every dollar taken. Compare that with the profits Apple or John Lewis make and you can see why it’s not all plain sailing on the Amazon tanker.

So, is there a David out there that might exploit this Goliath‘s weaknesses and what we would lose if we didn‘t have Amazon?

Straightaway we need to remind ourselves that at least one online retailer has already grasped the concept of what is unique about the web better than Amazon. Step forward Apple iTunes, a brilliant idea for selling a product that has no physical substance and therefore no fulfilment costs. Amazon has come late to this game with their Kindle e-books.

National retailers like John Lewis or Sainsburys also have a potential edge with their marriage of shop and online. Customers can use the shop as showroom but buy online (rather than using Waterstones as a showroom then buying from Amazon) or utilise the excellent click and collect. There is still a huge percentage more shoppers visiting shops than buying online which means Amazon are limited by having no showrooms. You might wonder what will happen to Amazon book sales, apart from bestsellers, if Waterstones closes and we can’t check out the books before buying online.

Some retailers make a success of selling own brand products because they have a monopoly. Next, White Stuff and even Marks and Spencer (if only M&S had products people want to buy) are examples of retailers who can set their own prices. Again Amazon lose out because they only sell goods in competition with other retailers.

Independent shops like Your Life Your Style do not have the advantage of either a national chain of outlets or exclusive products, but as I said previously the online competition is not so great for niche products- overheads are the reason for us leaving the high street and taking our chances selling purely online.

Related links

Amazon tore up the retailing rule book that said competing on price can only end in tears because you end up with no profit. The key to success in the pre-internet days was to compete on quality, service and marketing. The trouble was, back in the nineties, people were reluctant to change their buying habits to this new fangled internet. Offering low prices was probably the best way to get people to switch to buying online.

The Amazon website is a wonderful warehouse but the emphasis is always on the cheapest price. Service is excellent but the clinical photos and bullet point descriptions do little to put across the value of the products. This works when it comes to selling a light bulb or something the customer already knows he or she wants but is no help when you need an uncertain purchaser to make an emotional connection with a product. John Lewis or even our own website do a much better job at persuading someone to buy a product. Its the difference between a description of a teddy bear’s size, colour and materials and a story of a child getting a bear, cuddling it and it becoming her friend. Or a picture of a wine glass and a photo of a dinner party with people chatting and drinking from the glasses.

From the early days of e-commerce, Amazon’s tactics have been the same. The company announced from the start that they would lose money for years while they built up their online business. As a result, they led the way, first as a cut-price bookseller who caught all other booksellers unawares. Then it widened its range of products, before moving into e-books which offer a better profit margin. Its best idea has been to invite other merchants to sell on its site. The virtually cost-free commission it earns from these traders may prove Amazon’s salvation.

If Amazon were to go, I would most miss the company’s tremendous commitment to innovations that make online shopping easier and more attractive to the customer from One-click shopping to rating the products to e-books.

Not that I would bet against Amazon winning the battle for the wallets of online shoppers. Nor it seems would investors who sent Amazon shares up when the results were announced.

A Christmas Carol

A minor disaster hit the shop this week. I’m not talking about the weather decimating sales or our selling out of faux fur hats and Steiff mini bears. No, much worse, our CD player, after many years’ hammering, finally threw in the towel. It probably couldn’t face playing Bert Kaempfert’s Tijuana Christmas for the zillioneth time.

Consequently we had to resort to putting on the radio to entertain our customers. As it turns out, I found our local independent station offered a very nice mix of music, until that is I heard it advertising a rival Winchester gift shop. It was at that moment I really found myself missing our Christmas CDs. But then I love Christmas songs- both carols and secular. I even find myself singing them in the middle of summer until I’m told to shut up (although that happens whatever I’m singing).

For me, the best Christmas crooner is Frank Sinatra. He makes the worst Christmas song ever sound good. The song in question being the one that begins ‘Oh by gosh by golly, it’s time for mistletoe and holly’ and proceeds to throw in every Christmas cliche you can think of. To me, it’s even worse that Cliff Richard’s Mistletoe And Wine. And no, I don’t have a thing about mistletoe, some of my best experiences have taken place under it.

Until I heard Frank’s Christmas album, I was never that keen on what seemed to me to be a weak, slightly off-key singing voice. So it was listening to Jingle Bells rather than My Way that suddenly I got what it was that people love about him. His art is in making what he does seem so relaxed, easy, almost louche but at the same time not entirely effortless, so the slight strain makes you feel he could be you attempting to sing- if only you had his phrasing and his sense of rhythm. So, thanks for a Merry Christmas, Frank- and Merry Christmas to you too.

Free Isn’t Cheap

I wasn’t surprised to read that Which? has concluded ‘free’ banking costs a fortune. The fact is, nothing in the commercial world is really free. If you buy one and get one ‘free’, it may be true that you pay the same if you only purchase one but the price allows for you buying two. The same applies to ‘free gifts’.
Businesses use ‘Free’ offers because it’s the most emotive attention-grabbing known to marketing but the reality is, as Mrs Thatcher once said, ‘there’s no such thing as a free lunch’. Your Life Your Style recently followed the example of others including the great Amazon and started offering free shipping on most online purchases. Our courier hasn’t become a charity so we are still having to pay for shipping. In most cases, our customers are not paying more. The additional cost has been paid for by the increase in turnover this offer has generated. Nevertheless, if we were in Germany, we would probably have to say, ‘Shipping included in the price’ but that doesn’t sound anything like as exciting.
At least Your Life Your Style’s free shipping genuinely applies to everything over £20, unlike a packaging supplier I came across recently who offered ‘free shipping on all orders’ but made a ‘small order surcharge’ of £9.99 on all purchases under £100!
The use of the word ‘free’ can sometimes be disingenuous becasue everything has a cost to a business and has to be valued against the revenue it generates. It’s the same with a free gift offered if you subscribe to a magazine, or a donation to a good cause in order to enhance their brand. This is not sinister or underhand, but equally it is not altruistic.
Take Your Life Your Style. We offer things for free to attract people to my business websites in the hope that they will stay and buy something. So we provide free cocktail recipes and a free tourist guide to the Winchester on our shop website, and there are pages of free basic marketing advice on my consultancy website.
Of course, free gifts from businesses can become unsavoury. David Cameron is probably too young to remember Margaret Thatcher’s cautionary words, which may be why he didn’t realise the potential fallout from accepting an invitation to a ‘country supper’ from News International’s Rebekah Brooks. Neither should he have been surprised that businesses donating to the Conservative Party coffers might expect to be invited to Downing Street where they could lobby ministers over the canapés.
My mother was always rightly suspicious about anything free. She would be confused by today’s world in which the low delivery costs of the internet have led to lots of services being ‘free’. We get free searches from Google, free social networking from Facebook and free mailboxes from Yahoo. However, she might not be as surprised or outraged as some people have been to discover the companies in question are using the information they gain about us to target advertising in our direction. When I use Google’s free search, I’m like a fish caught by bait: Google’s customers are the people who buy the fish, in other words advertisers. As my mum wqould have said, ‘You get what you pay for.’