Retail, shopping & leisure

Back to the bricks

Lego, the famous brickmaker, is made up from the first two letters of two Danish words, ‘leg’ and ‘godt’, meaning ‘play well’. It’s certainly true that Lego itself has been playing well. In 2012, it became the second biggest toymaker after Mattel and in 10 years, almost quadrupled its sales. This was a surprising performance, given the company nearly collapsed in 2003-4. What happened?

A young ex-McKinsey man, Mr Knudstorp, decided Lego should “go back to the brick” rather than overstretching its brand into other areas and making too many pieces. The company also found a better balance between innovation and tradition. Like many firms, it is building a factory in China to try and replicate its western success.

You might think wealthy Chinese parents might reject the idea of their children sitting around playing with Lego unless it is educational and helps them pass exams.

Singapore is the home of the ‘tiger mum’, where children are not left to play. Yet one enterprising woman, Joey Tan, has opened a shop there called ‘bricks4kids’ where she runs classes for children on how to play with Lego. She believes younger parents, or ‘pussycat mums’ are more interested in the creativity, teamwork and problem-solving encouraged by Lego bricks than traditional, more serious activities. She may be on to something.

Lego sales rose 35% in 2013: 70% in China, 35% in South Korea and 20% in Singapore. Lego has teamed up with the Chinese government to open sponsored after-school Lego centres and there are now 20 in China and over 100 in South Korea. Legoland in Malaysia has become Asia’s number one theme park.

In Asia, we see a resurgence of old Western ways of parenting. What’s new, pussycat mum? Lego!

Back to the record shop

Following our story above, Back to the bricks, it seems another old technology is bursting back into modern life. Sales of vinyl records in America, once considered more or less obsolete in the digital world, rose 32% from 2012, a trend that began in the early 1990s and jumped off around 2007. It was the sixth straight year that vinyl long-players recorded their highest sales since Nielsen starting tracking data in 1991.

Meanwhile, sales of digital tracks and albums and CDs fell, supposedly because of streaming services like Spotify and Pandora. In Britain, vinyl sales rose 88% from 2007 to 2012, even as the number of independent music shops was dropping and physical album sales were tumbling.

It seems vinyl has a life of its own. Fans of vinyl love the richer, less perfect sound, the feel of the disc and the cover, with the potential for beautiful artwork and design in a large format. Vinyl satisfies the need for nostalgia, even in the young, and the ones who prefer analogue anything to digital anything.

One iconic UK music shop and independent label, Rough Trade, opened an increasingly sought after East End warehouse in 2007, with cafe, books, records, CDs and a stage for live performance. It was designed for the real music lover – there are no discounts here.

Rough Trade banked on the success of its East End warehouse by also opening a huge, 15,000 square feet shop in Brooklyn, America, where vinyl is even more popular. It is more than a shop, staging live performances of popular bands, in keeping with the continuing trend for retail to become synonymous with entertainment. You don’t know you’re spending because it’s so much fun.

Opera with popcorn

Our story above, Back to the record shop, describes how music retailers can use live performances to make the most of their physical space. The same is true for cinemas, which are looking for new ways to maximise their big screens and comfy seats. Ticket prices have risen considerably in Australia and will rise again, simply because the audiences are not there. Americans and Canadians now go to the cinema only about four times a year.

The rise of ‘event cinema’ is designed to combat the argument that people can just watch movies at home – on fancy entertainment systems with their own cheap wine and food. Now audiences can watch live sporting events, listen to great operas, enjoy fine ballet and even see museum exhibits, by going to the cinema. While event cinema is currently only 1% of takings, it could bring in $US380 million this year worldwide.

Event cinema may be particularly apt in areas where audiences do not have access to opera or museums. In Mexico, for example, most cities do not have opera houses and people flock to see it and circuses, such as Cirque du Soleil 3D. Sophisticated digital technology has increased the immediacy and experience of films to match the live experience in a theatre. Pictures can be sent via satellite or broadband connections, instead of 35mm reels.

Another idea is to use theatres off peak for videogame players to display contests on the big screen. This is already done in South Korea, where audiences crowd in to watch players compete. Some cinemas have created VIP seats, which recline so far back they take up room that could have been used for other seats, but attendees seem willing to pay higher prices for them. Other cinemas sell alcohol, which offers the high margins previously earned on popcorn (80%) and chocolate. Moviegoers are more likely to order a second drink than another box of popcorn.

In some ways, event cinema offers a travel experience without leaving the seat, much as TV once did. With ticket prices for sport, opera and concerts going through the roof, combined with the cost of petrol or a plane ticket, event cinema may turn out to be cheaper than it looks.

The golden hour

The hour that you spend in an airport, after going through immigration and security, may seem like a waste of time. But for travel retailers, it is the ‘golden hour’. In 2013, travel retailers sold $US60 billion of goods and, according to Verdict Retail, retail sales in airports will grow 73% from 2013 to 2019. The lucky retailers are luxury brands. Luxottica, Italian sunglasses maker, calls airport sales “the Formula1 of retail”. Airports are not just places where you catch planes; you go there to shop.

Dubai is now the busiest airport in the world, with Heathrow second, a sign of the Gulf’s attraction to tourists and shoppers. Retailers in Asia’s airports already sell more goods than Europe’s airports and will sell twice what Europe sells by 2016.

The advantage of the golden hour is travellers are at a loose end and they have money in their pockets for a trip. Retailers are familiar with flight schedules and know who will be coming past at any time, whether it is brandy-loving Nigerians or Chinese women looking for moisturizer. Assistants need to be culturally sensitive and will reconfigure displays to suit national preferences.

Retailers are keen to encourage wealthy individuals out of business lounges, where they are more likely to work than spend. The biggest selling categories are cosmetics and perfume, not alcohol and tobacco as you might expect.

Airports are natural media spaces, with large walls, hoardings over the roads in and out of them, and plenty of room for multimedia advertising. Some brands use a country’s airports to experiment, before spending heavily to move into a new international market. Airports provide an early indicator of where the global shopper shops.

Of course, airport owners want their share of the profits too. For example, Heathrow, with 420,000 sq ft of retail space and 345 shops, takes a percentage of net sales or a guaranteed minimum sum, whichever is greater. No wonder airports like the golden hour. Space is money; time is money.

The death of the Post Office

Perhaps one of the biggest changes in High Street retail is the slow decline of the humble post office. Most mail is for commercial purposes, so businesses get the benefits of a service that is now too cheap. People simply don’t send letters anymore. Australia Post, for example, will deliver 1 billion fewer pieces of mail in 2014 than in 2009. The British Government just privatised Royal Mail to recognise that the old business model for post offices no longer works and to access capital for new technologies. But tellingly, it did not sell off the branches.

There is a kind of nostalgia for the post office, particularly in rural or country areas, where it often provides a kind of hub for the community. In Australia, 60% of its 4,429 retail outlets are in regional, rural and remote Australia. People who live in these areas are also used to picking up their mail from a post office, rather than having it delivered. For city people who are used to deliveries five days a week, this seems inconvenient. But Australians are now facing the prospect of deliveries about three times a week. In Canada, people already have to go to central collection points for their mail, just as rural dwellers already do.

The question is what to do with this valuable network of branches. The banks set about closing many of their unprofitable branches because of online banking, but now look at their branches as an opportunity to sell more services. This is likely to be the approach of post offices.

Australia Post makes a healthy profit sending parcels, which is a direct result of online shopping. But the future of the post office depends on increasingly digital services while providing a counter where people can go and get the services they need, such as passports, banking, or local advice. The post office has always been the hub of a village and it could continue to be by building on what it is good at – customer service and logistics. It can be a valued source of local knowledge about available services, business advice, or virtual medical or employment assistance.

It’s a long way from the world of Postman Pat and his black and white cat.