Australian retailers need strategies for changing times. They need to innovate or reinvent themselves to adapt to the digital wave.
This article reflects on two book industry innovation stories 100 years apart, the establishment of Cole's Book Arcade and the Lonely Planet publishing house.
It is inspired by our recent work advising retailers re-inventing themselves, comparison shopping websites and product marketing and distribution e-commerce websites. It's about the opportunity to capture a higher business sale valuation by establishing an effective presence online.
Compared to 10 years ago, the Sydney central business district has fewer specialty new and used book and music retailers who can provide informed customer service. For new titles there's now either the big chains or sole survivors such as the world class bookshop, Abbeys, or record store, Birdland.
Retailing requires innovation. This includes putting old wine in new bottles. Consider the Australian book retailing legend, Edward William Cole (1832 - 1918).
Cole was a self-made man. He was born in England. Launching his career in retailing, in 1874 he leased a building fronting on Melbourne's Bourke Street to open his first "book arcade". Today we might say it had a vibrant off-line presence.
Cole relocated creating Cole's Book Arcade, for many years it was one of the best-stocked bookshops anywhere in the world. He set up branches in Sydney and Adelaide. He sold books with pizzazz. There were brightly costumed staff and piano players on Saturdays. Cole made money by making Cole's Book Arcade the Amazon.com of its day.
Cole also published a series of funny picture books (eg book cover above), which are delightful for children and adults alike. Hunt down Cole's Funny Picture Book, it's a scream. Whether as a book retailer or publisher, Cole served book hunger with quality and certainly quantity.
A century later, another book venture brewed in Melbourne, that of Tony and Maureen Wheeler.
They too migrated from England. In 1973 they published Across Asia on the Cheap. This was to spark their establishment of an Australian contemporary book publishing industry success story - Lonely Planet, a travel guidebook publisher. [Jan 2012 edit - Tony Wheeler's entertaining rendition of his Lonely Planet story is told by him here on IP Australia's YouTube channel.]
Statistics tell the story. A Wikipedia entry states that by 2004 Lonely Planet's list included 650 titles, distribution in 118 countries, and sales of six million guidebooks annually. The Lonely Planet site tells us that by August 2006 it had printed 80 million books. Ten of them have sold over one million copies each including Australia, New Zealand, Thailand and India. Lonely Planet has offices in Melbourne, London and Oakland, with over 500 staff members and 300 authors.
What was its innovation? There were many elements. Lonely Planet redefined travel guidebooks, especially for economical backpackers or young-minded readers and travellers. It side-stepped the deep pockets, dull and conservative positioning of competitors such as Berlitz Publishing, Fodors and Frommers. It was followed by similar ventures such as Rough Guides which first published in 1982. While some like Let's Go guides pre-date Lonely Planet, at least in Australia they had less presence in shops before or after the launch of Lonely Planet.
Lonely Planet also ventured into television production and the internet. However, here it seemed to fumble in its strategy. It never seemed to garner a television or online audience sufficient to snowball. Maybe it was not interested enough.
This month the Wheelers announced that BBC Worldwide has secured a 75% share of the Lonely Planet business. Tony Wheeler's explanation to The Bulletin, is that to conquer digital media markets Lonely Planet needs a suitable and bigger partner like the BBC. Fodor is part of Random House and the Bertelsmann group. Frommers is part of Wiley Publishing, Inc.
One blogger dedicated to the travel and digital media industry has estimated that the 75% of Lonely Planet sold was for a reasonable sum, but not a princely sum.
If this is so, then a comparison with financial data from Wotif adds to the analysis. While the comparison is not perfect, an unlisted book publishing company versus a listed online travel booking company, it draws out some of our themes
The Lonely Planet sale comes at the same time as happy news continues from Wotif, the Australian listed online travel booking retailer established in 2000. The Wheelers would acknowledge Wotif is in a growth business. The Australian Financial Review reported last month: "Wotif listed in June 2006 at A$2, and hit a 52-week high of A$6.25 in the middle of July this year . The company has a market capitalisation of A$1.1 billion.
The report continues: "Wotif recorded revenue of A$67.3 million for fiscal 2007, up from A$45.5 million the previous year. ... The company reported a pre-tax profit of A$37.9 million, and an after tax profit of A$26.4 million, up from the A$19 million forecast in the prospectus." (Source: Joshua Gliddon, "Online businesses prove their worth", 26 September 2007, p. 30).
In seven years, in purely financial terms Wotif is reaching heights higher than Lonely Planet managed in 34 years. Nonetheless the achievement of the Wheelers and Lonely Planet remains extraordinary. The market is putting higher valuations on Wotif for a variety of reasons, including the fact that it is a public company, online and fully digital.
The intention behind the above comparison is to provide an example of the impact of the digital tsunami on business valuations and business futures. It underlines the need for businesses to engage digital strategists to more effectively capitalise on opportunities.