Given the inevitable drift of business to new delivery systems like downloading, in categories such as DVD sale and rental, along with retailing of CDs, books and even games, it is important to distinguish denial from planned demise in a product or category lifecycle. Anyone in doubt need only think of the declining fortunes of Blockbuster, HMV, Borders and GameStop for some high-profile examples of the trend.
Essentially, it is important to accept that all brands go through a natural lifecycle from innovation to growth, maturity and decline in response to market demand. Whilst the latter stages can be delayed, the process of prolonging active life usually becomes increasingly expensive and produces diminishing returns. However, in some circumstances, the life of a brand can be prolonged profitably by constant innovation and ‘reinvention’ in the absence of serious threat from substitution.
Thus Brylcreem is still the world’s leading male hairdressing brand, having successfully passed through a series of ‘rebirths’ in response to changing consumer tastes in the past sixty years. In the same way, the provision of movie-entertainment has lasted over 100 years by constant evolution from silent to talkie, black and white to colour, to high definition to 3D, while replacing mono-sound with stereo and eventually delivering surround sound…whilst offering the consumer increasing flexibility in terms of satisfaction of need via multiplex theatre, home entertainment and even solus on-the-move experience.
Likewise, if we accept that a home entertainment retail format offering video-rental and sale, like a brand, has a life cycle, we need to acknowledge that the format passes through stages such as innovation, growth, maturity and decline, as night follows day… Here the download alternative provides convenience, choice and ‘instant’ gratification in a way that is impossible for traditional outlets. As the download providers take increasing shares of these categories, in time their low cost-base will allow them to complete the process via price-cutting the traditional outlets out of existence. In these circumstances it is important for traditional home entertainment retailers not to deny the inevitable, but rather to proactively manage the maturity and decline of their format.
Apart from the obvious step of adding a download facility, traditional home entertainment retailers need to explore why some consumers still prefer to visit a store instead of buying via download. This could range from face-to-face contact with the seller, obtaining expert advice and guidance from fellow enthusiasts, or merely the companionship of a shopping experience shared with others of the same shopper-appetite. If there are sufficient numbers of potential shoppers to make a high service level viable, in ways that cannot be easily replicated in a download channel, then this may provide a way of prolonging the life cycle of a traditional home entertainment outlet.
Obviously not all traditional home entertainment retailers will take this proactive approach, so there are potential gains to be made by proactive retailers at the expense of their competitors. Systematic assessment of their offering vs. those of competing retailers will help to identify strengths that can be optimised to retain and even grow share in a diminishing market.
Overall the strategic focus in maturity and decline phases of the retail home entertainment format should be to retain share and increase productivity, manage declining trade spend carefully, aim for selective satisfaction of core-shopper needs, offer minimal prices/charges, and gradually reduce differentiation to conserve profitability as the life cycle progresses.
For suppliers dealing with channels or formats threatened by new formats, there is a need to use KAM consultancy skills to help store owners move from denial to proactive management of the maturity and decline phases of their formats. This can be done by helping them take an objective view of their appeal relative to other stores of the same format. This is about optimising difference via tailor-making the supplier’s offering to emphasise the retail-partner’s competitive advantage.
For store-owners, the ultimate question of how long the mature and decline phases will last has to be replaced by one reflecting the owner’s lifestyle expectation in terms of return on investment, coupled with their risk-profile (risk-averse, risk-neutral or risk-seeking). This will help the owner to determine a satisfactory risk-reward relationship that will help them to decide whether to persevere for five or ten years, or seek a radical reinvention of the home entertainment format. As entrepreneurs at heart, store-owners will be accustomed to making business decisions that offer a realistic balance of risk and reward in a market undergoing constant change.
Obsolescence is but another variable in the game….
