What’s the Five Star Experience?
Best Buy and Five Star in China
Last week I caught the tail-end of the CNBC show “Best Buy: The Big Box Strikes Back.”
According to the show, Best Buy “closed its nine American style stores in 2011.” In China, Best Buy had become the Brick portion of the “Brick and Click” method of buying. Consumers went into the stores to see the product, to research it, but then they “go back home to buy the product online or they go next store to the local competition because it was a lot cheaper.”
In 2006, Best Buy bought a “controlling stake in Five Star,” which used to be run by the government. According to the show, Five Star makes money leasing out space in the store to manufacturers . . .who pay rent to Five Star and provide their own sales force, reducing overhead. Five Star receives a cut of every sale. On a really good day, a single Five Star could bring in $2 million.”
One reason the Five Star version works better than the American version? It is better tailored to its customer.
Last Year’s Model
In February, Shawn Coyne wrote the post “Last Year’s Model.” Within it, he mentioned a conversation he had with a friend about ten years ago, when the friend was consulting the head of “one of the big six publishing companies.”
Shawn says to his friend:
“Where does it say that a publisher can’t be a retailer?”
“Okay, so you’re saying that the big six publishers should all kick in like 20 million dollars each and start up their own chain of bookstores? Dude, that’s nuts. Do you have any idea the amount of work that would take? And how many small independent bookstores would freak out about that? Not only would that be lawsuit city from the ABA, it would piss off B&N such that they’d slash orders to the bone. I see balance sheets drowning in rivers of red for at least five years.”
Now back to Shawn:
What if the big six came together and “saved” Borders? They don’t ‘take over’ Borders, they “bail it out” with a major capital investment that gives them preferred voting shares and allows them to bring in their own management? That’s a good story, right…”how the big publishers joined forced, saved jobs and kept books vital!”? And they could brand the stores with sections devoted to each of their offerings…can’t you hear your wife saying to you… I’m going over to the Simon and Schuster boutique, meet me at the Macmillan store after you’re done at Penguin.”
The Hallmark Lady at Wal-Mart
A week before Shawn wrote his “Last Year’s Model” post, I was standing in the seasonal Valentine’s Day aisle in Wal-Mart, looking for cellophane bags like the ones I bought the year before, clear with red hearts – perfect to insert Valentine’s Day gifts for my kids’ teachers.
I inspected every inch of the Valentine’s Day aisle. Not there.
Headed to the greeting card/wrapping paper aisle. Not there.
Went back to the Valentine’s Day aisle and asked the woman stocking one of the shelves about the bags.
“Do you know where the cellophane goodie bags are for Valentine’s Day?”
“I only do the Hallmark section.”
“Are you restocking any in the Hallmark section?”
Frustration pulled at the corners of my mouth and pushed my shoulders down into a slump. I didn’t have time to run to another store to find the bags.
And then one last line from the Hallmark lady:
“You know, sometimes I buy the clear ones over near the arts section. Just get yourself a red Sharpie and your kids can draw their own hearts on them – and you can use the extras for other holidays.”
I smiled and thanked her, and was on my way.
What’s My Point?
Five Star, Shawn’s post and my visit with the Wal-Mart Hallmark lady have specialized experience and specialized space in common.
Right now, publishers have a space in the stores, similar to Hallmark in Wal-Mart and electronic brands at Five Star. In book stores, the presence comes via co-op dollars. Those books on the tables at the front of the store? Bought space. The books facing out on the shelves? Bought space. The books behind the registers and on the end of the aisles? Bought space.
But, unlike Five Star, the space isn’t branded. There isn’t one corner or table rented, with obvious branding, for one publisher. And, the publisher isn’t responsible for the sales staff. The bookstores are responsible for selling the books, and for the staff it takes to stock and sell them.
This handing over, of using a bookstores space – whether around the corner or online – is the second step in the risk aversion Steve spoke about in “Betting on Yourself, Part II.” Authors write the books and then pass them to publishers. Publishers publish the books and then pass them to bookstores. Each step relies on the others doing its/his/her/their jobs. By the time the book hits the shelf, it is like one of 300 students in a college symposium, each student hoping he or she will stand out to the teacher. But by that point, the teacher – or in the stores’ cases, the bookstore associate – has too many other students and doesn’t have time to get to know each one. Once on the shelves or in the online stores’ warehouses, the books are on their own. They’ve got to go whole hog to grab attention, to let readers know they are there.
I don’t know the deal at Wal-Mart, but I know the Hallmark lady made me like Hallmark and Wal-Mart a little more. Once she stepped back, she recognized what was in front of her, and tailored her response accordingly. And I imagine that tailoring is what attracted Best Buy to Five Star. The Five Star model was better suited for China, and I wonder if it wouldn’t be better in the United States, too.
I rarely head into a bookstore these days, so how would the specialized experience work online? It would work in the form of publishers being more creative with how they are selling. Brick and mortar stores are one way, but not the only way. Ultimately, the publishers know their books more than the stores – outside the authors, the publishers know the books more than anyone else. So why aren’t they doing more to specialize the buying experience for readers? This goes beyond venues and more to the how, and not where, of selling. How can they make themselves the place readers want to go for books?
And, why aren’t authors doing this themselves, too?
It is easier to have someone else handle it.
And easier isn’t always better.
More to come…
I’m not sure I’m following you, exactly, but in Denmark a lot of publishing houses have online stores while still, of course, selling books through bookstores.
Ulla, you are right. I wasn’t clear on that point. Most publishers do have their own sites with an integrated online store, but the stores seem an afterthought. The publishers place a tighter focus on outside sellers. Why not focus on creating a specialized experience on your own, instead of relying on others to do it for you–especially if you already have a store in place.
I think it depends … We have a publishing house that specializes in books for teenage girls. They have a community going, with a newsletter, special offers, and a forum for discussion.
But many other publishers have a wide spectrum of books. A person interested in cooking, photography, fitness or whatever will want to visit either a bookstore or an online seller like Amazon to browse those subjects regardless of publisher.
Amazon is a good place to browse, but there are a ton of options. Publishers could focus in on different specialties to highlight them and put them in front of readers. They could do this on their own site, or if Amazon does with publishers what it has done with clothing brands, the publishers could have their own pages, with mystery, nonfiction, cooking, etc. as options.
I like the examples mentioned above. They are so ”clear” to understand.
The current publishing/distributing model has a lot of potentials to improve, but when and who will do the big step before reality changes the ”data” dramatically and the he/she/them system finds itself running to catch the fast moving train?
I use this ”Brick and click” system from times to times (and not only for books). It’s working! Why isn’t it valued by he/she/them/(us?) correctly?
Thanks for this reply. “Brick and click” is tricky – and a place I imagine many brands lose out. The Best Buy example in China provided one example of how a company moved around it. Will it work for others? I don’t know, but there’s something to it.
Callie, I think it comes down to how much does the publisher and author really know about the reader. The more middlemen involved in the process, the less they probably know. How much information do Amazon and the brick retailers really share with Shawn and Steve about the consumers who bought their books? If you gave both Steve and Shawn a little survey, asking them just who are these people, where do they live, why and how did they come to buy Steve’s books, would their answers be close to each others and the actual facts? Companies like Procter & Gamble and Coke spend
a tremendous amount of money buying access to information at the store level to learn buying habits. I worked at Nielsen in retail data and thought how much it would apply to the publishing business.
Paul – I agree. There’s a lot to knowing whether or not the publisher knows the audience for the books, but also a lot to the books stores knowing their buyers. At one signing Steve did, the book buyer wasn’t familiar with his books and didn’t understand the students’ (this was at a school) interest in Steve’s writing. She bought about two boxes of books, which were sold out before Steve arrived. We asked her to consider buying more, but she didn’t listen. I had a few boxes in my car that I was able to bring into the store… She didn’t understand the market for the store she was running.
When publishers put sales of books into the hands of bookstores, they are assuming that the stores know the markets. And the same is said of the author putting his/her book into the hands’ of a publisher. This process often waters down the outreach potential for certain books.
It is easy to blame publishers, but if bookstores are marketing themselves as sales venues to the publishers, then the bookstores need to take responsibility, too. They need to do more to specialize their offerings.
A great call to arms for authors to start doing this for themselves. I think the publishers have a lot of catching up to do–I’m an avid reader, but I have no idea who publishes my favorite authors, i.e. which team they’re on. I don’t watch pro basketball, but I know LeBron James plays for the Heat.
I used Google to search “Steven Pressfield publisher,” and the first four links were for this site–good on ya!
Thanks, Jeremy. I’d like to see more authors doing this – and publishers, too. The book stores serve a purpose, but the publishers and authors shouldn’t have to play second fiddle to them. In the end, the book stores exist because authors exist. The same, of course, holds true for publishers. Quite a few times, I’ve heard different publishers mention the need for authors to include sell buttons for all major retailers on their site – the publishers don’t want to anger the books sellers, which might not want to place an order for books. For the author, money earned from a book store sale is much less than what he/she would earn through his/her own author store – and most likely less than what would be earned through the publisher’s store, which often doesn’t feature the discounted sales offered to booksellers. So why should the author promote all of the booksellers on his/her site? Why shouldn’t the author and/or publisher be the major source of sales? As an author, I want to know what a certain bookstore is doing for me. And aside from the bookstore buy, most other promotions from stores cost co-op dollars. The authors and publishers have to pay for the promotion. If the authors and publishers were doing it themselves, they could put those dollars into their own systems and bypass the stores that treat them like another widget, and do business with the ones that act like partners, so there’s a feeling of both sides working together.
Callie, I don’t think I follow. What would be the benefit of having ‘branded space’? As a book buyer, I don’t decide on which books to get based on the publisher that releases it. Have you been seeing something different?
Thank you for this comment. The branded space caught my eye via the Best Buy example – and Shawn’s post in Feb. The branding isn’t necessarily about making sure the buyer knows the publisher, as much as it is about the publishers and authors providing a certain experience. For example, much of my experience has been working with authors and publishers of military/policy-related books. If I was a publisher with a branded space in a store, I’d make sure that space had certain books that I know are going to be popular within that market. Years ago, the Pentagon had a bookstore. If I had a space there, I’d make sure I included professional development books related to the military/policy/international relations. I’d keep on top of the headlines, and make sure that I had books on my shelves that tied into what is going on in the world. It wouldn’t be a once a month rotation. I’d stay on top of it to make sure the right books were there, bringing the most relevant ones to my buyers. And, I would reach out into different genres, such as leadership and economics, where tie-ins often exist, and which are also of interest to my military audience.
The branded space, in the end, allows control/specialization.
Thank you for the post Callie. Great examples and insightful thoughts. So the thought here is to go complete the race. Don’t run 25.2 miles of the marathon, only to pass off the baton to someone with their hands full. The last mile is just as important as the first 25.2 and publishers should treat it is such.
Thanks, Mitchell. The authors and publishers should finish it. I have received one too many calls from unhappy authors who are upset with their publisher. For a long time, I was on the authors’ sides, upset at the publishers, too. But in the end, the author has to take responsibility for making the choice to go with a certain publisher. If he/she isn’t happy, then switch publishers for the next book. There are great publishers. Find one. And if you do end up with one with which you aren’t happy, do what it takes to get yourself/your book to the finish line. Just keep in mind that the authors and publishers should take responsibility – and, of course, the booksellers, too.
As the digital revolution moves on, the prime “space to rent” will be online space, and it’s already mighty expensive to “rent” this prime space by placing an ad on high-volume web pages. So, it seems to me that authors will either have to find rich collaborators, who will probably want to control the project and the profit as much as the traditional publishers do now, or we’ll need to find the best inexpensive “spaces to rent” and then figure out how to direct our adoring readers to those spaces. No small task, but with a little education I bet we can do as good a job as the traditional model’s middle folks who are concerned with a lot of things other than our book.
S.J. – Why rent a space when you could own one? This comes down to relationship building. In the past, ads, interviews, etc. were the way to buyers.Now, you can go right to the buyers. When authors place an expensive ad on a certain site, they are relying on the sites’ readers – hoping they’ll click on the link. Makes more sense to spend time creating content that people read, which brings them in and makes them want to read a book – interest will bring people in over ads, thus creating sales. I’ve often thought about a co-op example, such as military authors pulling together to create a portal for selling military books. They’d have the background to provide amazing content to drive an audience to the site, and thus to the store. They’d stand out more than other sites, because they’d become the place/s to go for X,Y,Z. They provide a specialized experience for readers.
Wow. Thanks for all the personal responses. (Somebody needed to say so.) Agree with you. Nowadays, the more we authors can take control of the marketing of our work, the better. The trick for upstart authors like myself, assuming people find our websites’ content engaging (no small assumption), is to attract folks to our sites in the first place. And yes, since not many of us can afford those expensive ads anyway, that involves relationship building, a bit of which I’m shamelessly trying to do here. 🙂
S.J. – Thanks for the kind words. Getting yourself out there, connecting with others, building relationships are good things! Callie
All of this discussion and hoopla about the online revolution requires that we re-invent the physical retail space to make it more inviting, alive, and interactive. If stores seek to make the physical space less static and more dynamic, it will create its own sense of magic. Currently this cannot be replicated online, just as holding a physical book in one’s hands cannot currently be replaced by a Nookie.
I believe the two can co-exist and enhance each other; my hope is that brick-and-mortar stores do not die.
Ronald, I’m with you. I’d much rather hold a paper book in my hand and I’d rather visit a bookstore to do so. However, the brick-and-mortar stores have a significant problem that doesn’t as directly affect the online sellers. That’s the rising cost of gasoline, which will make folks think twice before leaving the comfort of their digital den and heading to the bookstore. However, bookstores CAN offer face-to-face human interaction which online chat rooms, even video-enabled ones, can’t quite match. Perhaps that’s what they should emphasize.
S.J. – I agree. I don’t have the answer, but my gut says there’s more to be done. The bookstores aren’t dead. As with everything else faced with extinction, they need to evolve. Just evolve.
Ronald – I don’t want to see them die either. They need to change.
It’s almost the same thing we’ve seen with newspapers, with more of them focusing on local news. There are so many options for national news, so more papers have turned back to being the source for their location’s news. For stores, that translates to creating specialized experiences. For the stores, local might be defined as a strong focus in horror books or poetry or military…
Not to throw cayenne in your punch bowl, Callie, but Bet Buy is on Standard and Poors’ credit watch. If they’re so smart,…? Maybe the strategy you’re describing will right their ship, or maybe not.
A structural transformation like the one you’re discussing may not succeed. Even if it does–I wish your ideas well–, it involves a lot of trial and error.
Best Buy caught my eye because it wasn’t working in China. Stores were closed. Failure was staring the chain in the face. And then it found something that seems to be working – at least in that one region.
That’s the takeaway for me.
Rather than Best Buy trying to copy what worked in other areas, it changed its course. That’s what I’d like to see others try. The same cookie cutter approach doesn’t work across the board. Best Buy found that out in China and paid attention. As far as its other business practices… I don’t know about them. I just know the one example. Perhaps Best Buy will take a look at its other stores and break away from the original mold more often.
And, of course, there’s no way of guaranteeing what worked in China will work elsewhere. There will be trial and error. But in the face of straight-out failure, my hope is that all others facing what Best Buy has will pay attention and make changes. Doesn’t make sense to stay a course that isn’t working because making changes will be hard.
We write from different perspectives. Your perspective is an entrepreneur’s. Mine is an investor’s.
Roving helpers at Home Depot have, several times, told me that an item not carried there could be found such-and-such competitor. “I believe Ace Hardware carries those….” I suspect this is Home Depot employee training, and is a reason I always go back there.