Wise Investment: Kieron Smith or Blinkbox ?

So would you invest in a service that still has to prove itself or someone who has done it more than once and brings ability to the table?

The troubled UK supermarket Tesco was forced recently to refocused on its core business and as a result dropped its potential universal media service offer Blinkbox. The film/video service was acquired by TalkTalk for a reported £5million and Australian company Guvera entered talks to buy the music service. This left the ebook business Mobcast, which it bought for £4.5m from author Andy McNab and business partner Tony Lynch in September 2012. The Blinkbox ebook service only went live last March.

So would you buy Blinkbox ebooks or look at alternative ways to invest less for more?

Waterstones went for the acquisition to buy the ebook business from Tesco, but they failed to agree and parted. We now have reports that Kobo are after their customer list which is a good option provided they are active, the sales generated are worth the investment, the data itself is in good order and of course the price is right. However, customer lists are not exactly million dollar purchases and list brokers could probably offer a cheaper and equally attractive demographic.  

So the clock continues to tick and the question must be whether Tesco will let it go in a fire sale and write off the debt or will continue to strive to find a home for either the debt or the service?

It hard to see how BlinkBox ebooks making the return Tesco sought and decoupling the three media streams dilutes further any value it had. Some would question how they had grown to 60 core staff, what on earth they were all doing, the price they paid in 2012 and the level of effort and cost they threw at it to rebranded it, repackaged it and re-staffed it. Some would suggest a classic case of buying a pup and certainly something that they could have achieved quicker and for less money.

The markets often don’t follow logic and when someone wants to participate they often lunge for a quick fix and buy what they perceive is a good buy. Due diligence is often hard when its about perception, interpretation and gut feel and none of the major UK supermarkets have been able to bring to market an effective digital media service and with their current refocusing its hard to see them trying too hard moving forward. Waterstones is likewise refocusing and continue to show little appetite, or ability, to take on digital. Some would suggest that buying Blinkbox was never going to fit Waterstones whatever the deal.

So today we hear Kieron Smith is joining Blackwells. Now that’s a smart move by Blackwells and considerably cheaper and wiser than buying a service that you would only spend a fortune on, to take apart, to fight a battle you aren’t going to win.

Blackwells has always had a good history of digital investment and although they have had their own challenges and very difficult markets they continue to press forward. By acquiring the man and not the service, they bring in someone with very strong digital credentials who has done it before in the trade and someone who has proven his ability to adapt and could well add another dimension to their existing market segments.

As pointed out on Dragon’s Den it is often the person that investors should focus on and the service or product may be a bonus.

Bookshop Beacons Across The UK?

Forrester Research claim consumers are using tablets in their living rooms (67%), bedrooms (60%) and even their kitchens (42%), but smartphones are used more on the go, including in the car (68%) and of course, in retail stores (68%). This presents smartphones with a real opportunities to use new beacon technology to give consumers access to a mass of information, such as prices and locations whilst they are in the street, store and on the move.

Imagine walking down your High Street and you receive a message telling you the butcher you are about to pass has a special 3 for 2 joint offer today. Next you pass a clothes shop that immediately informs you that you could get a personal offer today on a similar shirt to that you bought last month. Then you pass a bookstore that informs you that your favourite author’s latest title is just in and is on special offer to you!  Then you’re in a department store and approach a display which recognises you and tells you about what is on offer and send you a special voucher. Maybe you are at a bus stops, or looking at street adverts, or in a tube station and are directed towards a specific shop before you even go anywhere near it.

Already some supermarkets and department stores are trailing this new beacon technology. UK Department store House of Fraser is trailing beacon-equipped mannequins in its Aberdeen store. Aloft Hotels are testing beacon technology, which will allow customers to unlock hotel doors after they check in and potentially remove the whole check-in process. The Crown Estate, which owns Regent Street, which includes retailers such as Hamleys, Longchamp, Burberry, Banana Republic, Hugo Boss and Anthropologie, will introduce the new smartphone application that takes advantage of the technology to deliver discounts, new-product promotions and other alerts to the smartphones of shoppers as they walk past stores and restaurants. Over 100 stores in Regent Street have already been fitted with the technology. UK retailer Waitrose is trailing the technology in their Swindon store. Finally, under pressure supermarket Tesco is aiming to use the technology improve customer service and personalization offering alerts on click-and-collect orders and enabling consumers to pinpoint the location of products on their shopping lists.

Beacons are a low-cost, micro location based technology, which utilises Bluetooth technology to communicate between smartphone apps and beacons. The technology can also provide retailers with invaluable data about their customers’ shopping habits as well as the activity of their staff. This information can improve store layouts, flow as well as promote products and offers. The Beacon technology appears now poised to surpass and deliver what many thought would be achieved via near field communication (NFC) technology.

However, before we all run out to install beacons, retailers need customers who want to use them and trust that their personal information is secure. The customers have to first download and install a smartphone app and there is the issue of how many apps a consumer needs. While customers may be happy to download an app for a couple of retailers, they might not want to download an app for every shop they visit. This may be overcome by retailers integrating their technology with common popular third-party shopping apps such as PayPal or PriceChecker.

So will we see a UK Bookseller Association app and beacons switched on for business in independent and BA member shops across the UK? This would be a novel way to promote the local book store and its titles and offers. Not as independents but as part of a national book group and even offer opportunities to further integrate other customer services. They could even sell ad space to publishers and authors to contribute towards it. However it is more likely that we shall see large stores such as WHS, Waterstones, The Works adopt the technology whilst the independents sit on their hands or look around for a technology partner to do it for them. 

Are Tablets Becoming Cheap Ticket Commodity Items?

We are starting to see a real convergence in the mobile device market. Tablets are shrinking with 7 inch now becoming a norm and smartphones are growing with 5.5 inch being just the starting point. We are also seeing tablets starting to become real throwaway commodities with prices now falling to under £100 and the big retailers starting to own brand and go after the market.

The challenge for many tablets is how they can now maintain a high price ticket yet offer little extra value over their cheap and cheerful counterparts? They have the same operating system, same apps and let’s face it aren’t that different. There will always be the ‘tag hags’ who buy the label to be seen with, but today more and more people want value, or a price that is a throw-away. The major UK retailers are developing their strategies to compete not with each other as much as with Amazon. Expect to see more compelling tablet ‘own label’ devices as we approach Christmas.

Interestingly, smartphones still retain a relatively high ticket. This may be down to many people being on fixed tariff contracts, or that the real choices are covered by but a few and that this scarcity of real offer maintains the high price.

So is it about ‘tin’, apps, context (search and discovery), or content? Some will say that it is now about brand and market share and that these other elements are merely sub-brands that support the major brand.

The technology cycle goes something like; idea, prototype, adapt, adopt, commodity, review, reinvent or move on. Perhaps some tablet technology is fast approaching commodity whilst eink is clearly at the ‘move on’ stage

The moves in the UK by Tesco and Argos have certainly made a clear statement re the price of tablets and it will be interesting to watch how those who live on greater margins but far narrower range react. Certain market segments, such as education, can now face a welcomed challenge, or an opportunity, where they can buy bulk and cheap and move forward, as opposed to buying expensive labels and fighting budget cuts. The entrance of cheap tablets may deliver that one laptop/tablet per child to UK schools, which in itself may change the digital journey for all of us.

Asda / HMV Is It Wise.Com?

Today we read that Asda, the UK arm of Walmart, is ‘considering’ a bid for UK entertainment retail casualty HMV. Administrators Deloitte have already almost halved the number of HMV stores leaving it with some 116 outlets and the deal may be attractive given Walmart’s own position in the same market in the US.

It is an interesting rumour given that their two biggest UK supermarket rivals have clearly pinned their money on going after the growing online media marketplace. It also comes on the back of the news that Argos is reintroducing CDs and DVDs into selective stores. The CD and DVD is clearly becoming transient technology and not one to invest in today unless you see a quick buck in ‘stacking them high and selling them cheap.’

Last year Sainsbury acquired the flagging Anobii ebook service, rebranded it and now are pushing it hard to their customer-base .  It may not give them a comprehensive online media offer but it starts to plug the gap.

Tesco,  now the third largest retailer in the world, have made their online intent clear by hiring Gavin Sathianathan, Facebook’s EMEA head of retail for Europe and Mark Bennett, a former EMI and Warner Music executive who headed up Sainsbury’s digital entertainment unit. In 2011, Tesco bought an 80% stake in the Blinkbox which gave them a competitive position against LoveFilm and Netflix and it also acquired music streamer, We7 and ebook retailer, Mobcast. It now has added Blinkboxbooks and Blinkboxmusic sites and is planning to target market its millions of customers about the services. Tesco are also about to launch a Clubcard TV channel, which will be available to Tesco’s ClubCard loyalty scheme members, free of charge, and will offer a mix of archive films and television shows. An interesting move after Argos had announced it was to close its own TV station. However, with some £64bn turnover and £3.9bn operating profit, Tesco has the money to compete in the media marketplace and is not about to simply roll over.

Both supermarkets have avoided the device wars and have stuck to being online and device agnostic. A wise move.

So what about Asda? Do they need the HMV store footprint in an online marketplace? They could flip the stores into smaller media outlets, but does that really make a difference?

When virtually every laptop, ultrabook, notebook and tablet today does not have a CD drive and even the car manufacturers are starting to fully embrace online,  is buying a store range that never understood this, is it wise.com?

Every Little Helps

Love them or hate them Tesco like WalMart are pushing back the walls of their stores.

Firstly, Tesco Mobile has announced it will be launching the UK's first ever 'Unlimited' monthly tariff. It will be allowing their plan subscribers to unlimited talk, text and data for just £30 per month. There is a fair use policy but with a ceiling at the equivalent of £500 worth of calls, texts and browsing per month it should be one that only a very few will ever reach – that’s unless you know better.

Tesco CEO Lance Batchelor is widely quoted saying, "You don't have to choose if you're a chatterbox or a texter, you can use your mobile as much as you want without having to worry about the cost. We believe that this will change the way people use their mobile phones. The new tariff aims to give people a simple, guaranteed way to have unlimited calls, texts and browsing. It takes away the concern and uncertainty about your monthly bill as it's fixed at £30, meaning you can talk, text and browse freely."

Tesco has a virtual network running off the back of a licensing agreement with O2 so everyone will be watching what they and the other carriers now do. After the recent performance problems on the O2 service it will be worth watching its performance as it takes on Palm Pre, the iPhone and now Tesco unlimited.

Tesco has also made the API (application program interface) to its online shopping service available to developers who will now be able to make their own apps to let you load up your trolley from just about anywhere. It may not be the same as Ocado’s iPhone app, which lets you shop even when out of mobile or Wi-Fi signal, but opens up the total catalogue of the UK’s biggest retailer. The Guardian reported earlier this month on some of the earlier adopter constraints ‘Tesco offers an API for its shopping. Now start thinking what to use it for’, but there are potentially more positives than negatives in this move.

This would enable access from any phone and for developers to place Tesco product buy buttons in to websites and potentially for consumers to scan barcodes in store to get product information directly on their mobile. This approach offers significant opportunities to anyone with a catalogue and a Tesco relationship – maybe books?

UPDATE: within 24 hours Virgin Media have matched Tesco's unlimited offer. Nay more takers?