Richard Edgley

IKEA is an innovative brand. If they are not looking to extend their product and brand proposition, as they did last year with a move into consumer electronics, they are using clever agencies like Mother London to produce great advertising campaigns.

Recently we have seen children and adults having fun together preparing for a dinner party; and hip young couples finding room to breathe in their apartment.

The Swedish brand has recently launched a new campaign that features individuals telling a story about how the IKEA product range has transformed their lives.

The latest ad is called Harry’s Records and features British hip-hop producer, DJ and dad Harry Love. We see Harry at home with his family. His vast collection of vinyl and keyboards is taking over the family home.

The problem is quickly solved using IKEA’s Expedit product range. Soon Harry has his collection under control so that he can enjoy both his passion for music and have space for family life.

It is a clever and engaging advert because it is based on a real family telling their own story. It demonstrates a different take on IKEA products; recognising different ranges can be complimentary and offer something unique – Expedit might be perfect for storing vinyl, Förhöja cutlery trays for discs and Stolmen shoe racks keyboards.

I rather like the soundtrack, in which Harry mixes the sounds of assembling the furniture. It neatly echoes the sampling of different IKEA products to bring something unique together.

 

One of our themes this year is the future of retail. With former bastions of the high street going into administration and many others facing an uncertain future, Fluxx takes a look at HMV. Over the coming weeks we will consider what went wrong and whether there is a future for the brand. In our first piece, Richard Edgley gives a personal perspective and wonders if we should care.

January can be a boring and depressing month – credit card bills, gym bores, people not drinking alcohol (and constantly going on about it). These days the national gloom is compounded by the Christmas trading figures swiftly followed by news of former titans of the high street going into administration. This year we had Jessops, HMV and then Blockbuster. All three have resulted in reams of comment pieces and analysis, none more so than dear old HMV.

HMV have a cultural heritage that runs deeper than the high street, they are entwined in the fabric of popular culture and our nostalgic association with it. HMV has a heritage that goes back to the early 1900s and the early days of the consumerisation of music. While for some HMV was an infrequent but necessary stop-off for purchasing Christmas or birthday presents, for many it meant more. It was the place where you might meet a friend, where you would idle away time, where you bought your first record.

HMV holds plenty of memories for me. I dread to think how much time and money I spent in my local store over the years. As a music obsessed teenager in the late 1980s, my local HMV was a regular destination for my mates and me. It was hangout; somewhere where we could thumb the racks until we either bought something or got bored. We rarely bought anything. We could not afford to. But when one of us did, it was quickly taped and shared. It was the place where I bought my first CD (Primal Scream – Screamadelica, if anyone is interested).

Later it became my employer. I worked in HMV in the late 1990s early 2000s and loved it. It was a means to help pay for law school and a great fall back when the world of gown and wig no longer appealed. While it may not have had the cool kudos of a ‘High Fidelity’ style indie store, it allowed me to work with some interesting, knowledgeable and passionate people. It was a pleasure to help a customer track down a hard to find album or discover something new. I had a staff discount, access to a massive music database and ordering system. That was dangerous. Most of my earnings went on vinyl and CDs, or down the pub chatting with my colleagues.

But am sad to see them going through the pains of administration and restructure? Should we care about the demise of HMV and should it survive?

Perhaps I should care, but I’m not sure that I do. I feel for the staff that have either lost their jobs or are likely to. But for me HMV embodies the old world music and retail business models. These are models that are long past their sell by dates. While its first Oxford Street shop was opened by Edward Elgar in 1921, its last will probably be shut with unsold X-Factor stock still inside.

A few days before the announcement, I had walked past HMV on Oxford Street, seen the giant blue cross sales signs and considered popping in for a mooch. I had £30 worth of vouchers to spend and there was the unlikely chance there might be something interesting to buy. I didn’t go in. I walked on by and grabbed a coffee instead. I had not been in an HMV for months, possibly over a year. HMV had become a former friend. One that you saw about now and then, thought about saying hello only to realise that you have nothing in common anymore. The trouble is that I was not alone in behaving like this.

There has been much analysis already about where HMV went wrong. HMV’s cultural heyday lasted from the 1950s into the 1980s. It created a retail experience that worked for the music business and the consumer. HMV had a huge catalogue. It was regarded as the place to go to get a record that the local indie could not afford to stock. Staff who knew what they were talking about provided a naturally valuable service. This was the retail experience that worked for the music fan.

If those were the halcyon days for the music fan, its fat cat days were the 1990s to the mid-2000s. There were new and complimentary formats to exploit in DVD and gaming. During this time the business, buoyed by high share prices implemented a strategy for growth that saw diversification into book retail with Dillions and Waterstones. Such growth and profit saw the CEO hauled before a House of Commons Select Committee and questioned about anti-competitive practices.

For me it was around this time that HMV started to lose its way. Inevitably store layouts changed to accommodate the new formats and the move into consumer electronics. Music seemed to move further away from the heart of the business. As someone who loved music, I found it increasingly hard to find what I wanted or discover new things. Something changed.

When I worked at HMV, while the majority of product was centrally ordered, individual stores could buy product that worked in their area. I remember the team leader for dance and electronic music regularly buying in the records he knew would work well. He knew because out of hours he DJ’d at clubs. Many of my former colleagues were either in bands; DJ’d, or were film buffs and music geeks. As the 2000s progressed this wealth of cultural awareness and passion was being eroded by the move to being a media and entertainment group.

The high prices didn’t help. I spent more time in Rough Trade and Fopp. They appealed to the music fan. Where Fopp offered lower prices, Rough Trade had knowledgeable and passionate staff. Both were more enjoyable retail experiences, places where you felt you wanted to linger and discover.

Much as already been written about why HMV failed. I think HMV’s former ad-man; Philip Beeching’s comment piece is one of the best. In the late 1990s and early 2000s, senior management failed to make a coherent long-term strategy. The failure to develop a compelling online offering was fatal. It made it more difficult to respond to the likes of Amazon and Play.com; supermarket discounting and online downloads.

HMV strategy since then has been scattergun, either a mix of poor ideas or poorly executed ideas. The move into the mail order business with HMV Direct proved expensive. Their loyalty and reward programme – purehmv – was a sensible idea but seemed badly delivered and provided a disjoined experience with both the online and physical stores. Their attempt at social networking – GetCloser.com – appeared sound, connect fans with each other and engaging content in the hope they would buy more music. Again the idea suffered through poor execution and communication. It was disconnected from HMV.com and purehmv.

GetCloser also suffered from the fact that the target market was not interested in connecting in HMV’s space. Music fans would rather connect and discover through Spotify and Lastfm. Even Apple Ping failed to crack social networking and music.

The old world music and retail business has been a victim of technology and a myopic approach to understanding the implications and responding. As a traditional entertainment retailer who was slow to digital, how do you respond to the threat of online piracy and file sharing, to Amazon, to iTunes and the Apple App Store, streaming through Spotify?

Games retail is no longer about purchasing a box in a store; the preferred channel is digital distribution through app stores or the likes of XBox Live. Box set culture and home viewing is moving to Lovefilm and Netflix. Smartphones and 3G networks added another challenge to music retail. A customer could stand in HMV looking at a product only to check the price on Amazon and purchase through them.

Yesterday trade body BPI published its Digital Music Nation 2013 report. It indicates that there has been a tipping point in the behaviour of British consumers in favour of digital music services. Almost three in ten people in the UK have purchased downloads or streamed music in the last year, while 80.6% of consumers recognise one of the leading streaming services such as Spotify. For HMV with a relatively poor digital presence this is terminal.

But what about physical retail and entertainment experiences? The eventual failure of both Fopp and Zavvi gave a clear indication that there were serious challenges to traditional entertainment retail. HMV took over Fopp and some Zavvi stores. Fopp continued to trade in its own name. It seems odd that HMV should keep Fopp at arms length, when their appeal to the music fan was perhaps what the HMV store network required. Instead they turned to selling iPods, headphones and random tatty merchandise. The iPods and headphones may have seemed self-destructive, but they offered a potential lifeline I generating enough revenue to pay of its debt or refinance. The tatty nonsense served only to distance them further from their core customer base.

In recent years HMV diversified further. The launch of HMV Tickets and ownership of the Curzon cinema, Hammersmith Apollo and MAMA Group venues such as G-A-Y were all sensible moves. The shame is that it was too little too late. In 2011 HMV were forced to sell Hammersmith Apollo in order to payoff debt. Weeks ago G-A-Y founder Jeremy Joseph started the process of buying back MAMA. The strategy that could have offered hope was significantly weakened.

My music is consumed through iTunes, Spotify, Soundcloud, Lastfm, This Is My Jam and The Hype Machine. This week I purchased and downloaded the new My Bloody Valentine album direct from the artist through a link on an online music magazine. I enjoy the odd trip to Rough Trade East. But that is less about music retail and more indulging in a geeky experience. I’m not alone. If music and film fans like me find no need for HMV, then how do they attract new and younger consumers?

Many teenagers expect music and related content to be free, consuming it on YouTube and Tumblr rather than any physical or digital store. They have no cultural association with the old world music industry or HMV. Why should they?

For the Baby Boomers and Gen Xers who still love physical product, there is Amazon and the remaining independent shops.

So should we care if HMV goes? I don’t think so. We can be nostalgic about the past, but those times are gone. And we certainly should not mourn the HMV of recent times.

Is there a future for HMV the brand? There might be. If there is, then it needs to play on the strengths of its heritage while adopting the innovative mindset of those digital start-ups that ten years ago began changing the music business forever.

 

 

This is the second in mine and my colleague Sheel Patel's series of pieces for Fluxx on trends in the luxury market.

As we discussed in our previous blog, the luxury market is at an interesting stage. There are new emerging markets to explore, which bring fresh challenges to many companies. In addition there are challenges closer to home which are forcing brands to reconsider their current business models and how they engage with their customers.

In this, our second perspective we are introducing how we think brands can blend the right ingredients to ensure long-term success. We will be exploring our thinking in more detail at our Fluxx Luxx event on the 22^nd November.

After years of wowing the public, now its fashion houses who are striving to get the looks – falling over themselves to stream their spot at London Fashion Week to as many people as possible.

A couple of years ago there would have been only 200 people watching the runway – today’s audience is global. The British Fashion Council reported that at this season’s London Fashion Week 2013, 70% of the shows were streamed live. There is always rivalry between the fashion houses, from who is sitting on your front row to the theatre of the show. With live streaming, the race to better each other in innovation will only intensify. What will innovations in Autumn/Winter season 2013 have in store?

There have been some unique and interesting moves forward in digital for Spring/Summer 2013, pushing the boundaries of customer experience and commercialisation. Burberry’s show fitted perfectly with their strategy to merge the physical and digital experience, as evidenced by the seamlessness of their flagship World Store and runway show. This builds upon last year’s ‘Retail Theatre’ approach that saw the brand introduce click and buy direct from the runway, enabling  customers to receive items in 6 to 8 weeks rather than waiting 3 months for stock to come into stores. This not only enhances the experience for customers it makes sound business sense enabling effective supply chain management and forecasting.

When watching a live-streamed show, many can ‘like’ a Burberry outfit, few can click the buy button. Topshop have successfully married the immersive show experience with making a purchase. As a result of this innovation the ability to share your favourite looks by ‘customising the catwalk’ has resulted in a printed panel dress being sold out within one hour of the show and Topshop lipsticks being purchased every minute.

Brands are now better placed to use digital effectively to tell their story, and are no longer afraid to leverage social shopping. These bold approaches for the luxury sector are crucial to ensure brands remain financially viable in these challenging times.

What does Fluxx think?

Despite some disappointing results and cautious outlooks, the value of British heritage brands remains solid. All have identified international growth as being core to their strategy. However, we believe to achieve these ambitious plans, require an understanding of three core related themes, which are significant in seeking to engage with consumers in the digital and physical space.

We have identified these themes as:

Storytelling

A consumer’s thirst for knowledge now goes beyond product and price. There is an expectation from that the brand will engage them with its heritage, provenance and experience. This holds true whether it be experiencing the theatre of a live runway show, seeing the craftsmanship of a product, or engaging new consumers to a brand they may never have heard of.

This activity is often thought to be in the PR or brand management domain. Whilst this is true, we believe it’s more about engaging people in a deeper relationship with the brand. Storytelling can achieve this simply and memorably.

Omni-channel experience

Omni-channel seems like en vogue buzzword for multichannel retail. But it is more than that. Omni-channel is the bringing together of all brand and customer touch points, to work as one simultaneous experience. Whether that means watching a live runway show on your iPad and clicking to purchase, down to the merging of physical and digital spaces as recently demonstrated by Burberry and Topshop.

Commercialisation

In today’s tough economic climate, luxury brands can no longer rely on a core customer set. Over the past ten years, many brands have sought to expand their customer base through product diversification with mixed results. It is a fine line to balance brand exclusiveness whilst ensuring commercial survival. Many forward thinking brands are embracing this dichotomy, by giving customers the same experience across different levels of range and price. This means recognising that sales are not just about a store and a website. It is about embracing a suite of digital tools and then applying them appropriately. More significantly it is about not being afraid of the ‘buy now’ button.

So come and join us. Book your front row seat for Fluxx Luxx on the 22nd November.

This is a piece myself and my colleague Sheel Patel have written about developments in the luxury market. It is the first in a suite of pieces that will look at different aspects of the industry in advance of an event we are hosting at Fluxx - Flux[x] Lux[x].

Over the past few months, we at Fluxx have been observing developments in the luxury sector. There has been much discussion recently about the luxury sector bucking the recessionary trend and being one of the few industries to be growing in this age of Western austerity. While the high street suffers, luxury brands are being championed as a possible savior of the UK economy, not just bricks and mortar sales, but online too.

The BBC recently reported that Britain’s reputation for producing crafted luxury goods and services should be leveraged. Many experts perceive the rise of the aspirational emerging affluent in China and India as a growth opportunity for British luxury brands. It is hoped that with this new demand for luxury goods, the UK economy might be able to export its way out of recession.

There has been evidence of this in the luxury car manufacturing industry. Land Rover has recently partnered with Victoria Beckham to launch a special edition Range Rover, the Evoque. In response to the growing global demand for the model, Land Rover’s Halewood manufacturing plant is operating round the clock for the first time in its history, creating 1,000 jobs for the local economy in the process.

The global market for luxury spirits also promises to benefit the UK economy. Diageo recently announced plans to invest £1billion over the next five years in Scottish whisky production to meet anticipated global demand. This investment will involve infrastructure improvements such as a new distillery and storage facility, through to benefiting small craft workers making barrels.

The potential for global growth in the luxury market is not just limited to the established brands. Many British niche companies are either benefiting now, or have plans to do so. Sipsmith, the London-based micro distiller, is seeking to develop and capitalise on the niche market for super-premium gin in China. They see the potential for gin to follow whisky, and are engaging affluent Chinese consumers.

At London Fashion Week, the talk was not just been about next season’s fashion trends, or the new hi-tech Burberry flagship store. The Financial Times reported that the next big British brand is the luxury leather goods retailer Smythson. They have ambitious international growth plans, including expanding their retail presence from a dozen to between 40 and 50 shops in the next four or five years, eventually reaching 100.

This will not be an easy journey. British poster child Burberry have had mixed fortunes recently. The opening of their flagship London store, designed to blend the physical and digital retail experience, was accompanied by a profit warning which wiped a fifth off the value of its shares. Mulberry had a disappointing 2011, resulting in a drop of 22% on their share price with a cautious outlook for 2012. Likewise, Aquascutum has seen tough times. Earlier this year they were bought out of administration for £15m, which some might argue is a bargain for an upscale heritage brand. But it is the value of their historic roots that is their saving grace. UK chief executive Tim Dally told Retail Week that he wanted to exploit the brand’s “quintessentially British heritage” by opening a flagship store in the West End. He sees their target audience not only coming from China, but also Russia, Middle East and North America.

So it seems that the UK luxury market is not as resilient as first thought. On the one hand there is LVMH, who reported revenue of £13billion in the first half of 2012 (an increase of 26%), and on the other you have a number of luxury heritage brands reporting flat results.

 There is no doubt that China still offers much to UK luxury brands. However, countries such as France and Italy have also a strong tradition for crafted luxury goods that appeal to global consumers be they from emerging/existing markets. For UK luxury brands to meet their ambitious plans they need to focus as much on evolving their commercial model as much as their product lines.

 The luxury market is at interesting stage. There are new emerging markets to explore, which bring fresh challenges to many luxury brands. In addition there are challenges closer to home which are forcing brands to reconsider their current business models and how they engage with their customers.

Fluxx will be exploring these themes through a series of blogs leading to our Flux[x] Lux[x] event on 22^nd November 2012. Watch this space for further details.

 

A piece I wrote in character for an event we are having at Fluxx on innovations in the payments industry.

There’s a new kid on the block – and he’s looking to wipe the floor with the opposition at Fight Night on 4th October.

Fluxx is hosting an evening of Contactless Boxing – debating the future of payments and what it means to all four corners of society. And fresh face ‘The Innovator’ came out swinging when he vowed to win over the crowd at the Carter Lane event in three weeks’ time.

“I understand the consumer, the retailer and how to make it work better than anyone,” he insisted. “For most people mobile payments are not core to their needs. Cash and plastic works for them. Right now they are confused by the different options available to them – contactless, SMS, proximity, QR etc. But we know that in five years’ time our products will be integral to their lives, the natural way to pay.”

If you read the press you would be forgiven for thinking that we are in the middle of a mobile payments revolution. In the near future we will be binning our wallets stuffed with plastic cards and paper notes in favour of a contactless nirvana, where with a swipe or a tap or even by our mere presence we will be able to pay for a coffee and, given time, a television or a new kitchen.

With Barclays Pingit we can now pass money between each other with nothing more than a mobile number and a bank account. In case you hadn’t noticed, the London Olympics were billed as the first contactless Games. So will paying for things be quicker, less hassle and safer? Are we heading towards a cashless utopia or payment chaos? Do people really care – or is it a case of inventing a solution for a problem that does not exist. After all coins, bank notes and plastic cards are all mobile, easy to use and accepted everywhere.

If a solution is required, The Innovator is convinced the ensuing fight will be straightforward for his camp. He explained: “I’m no banker, nor do I come from a deep financial services heritage – and that’s an advantage. I’m a lean start-up venture like Jack Dorsey’s Square and Europe’s iZettle. I’m free from legacy systems, a cumbersome corporate culture or a tarnished public perception. My strength is through insight, clear thinking, and an ability to be lean in delivery, making the right partnership deals.”

“The problem with the banks and payment providers is that they seem to have missed the point. They are caught-up in an arms race with each other – releasing multiple products from mobile wallets, to apps and stickers. These only serve to confuse customers and frustrate retailers. They have missed that it is not about payments and more about customer experience. It is about simple ease of use and a value add – be that loyalty and reward, or a deeper understanding of what they want mixed with the magic of discovering something new. Innovators like Jack Dorsey get this.”

“I liken it to the Betamax and VHS video format wars in the 1980s. Betamax was perceived as being the superior product to VHS in having better picture quality. But for most consumers that difference was negligible. VHS won out because it was a better customer experience – it was affordable, available and offered 30 minutes more tape capacity for recording. It will be same with contactless payments, the winning format will be the one that gets the customer experience right – and that will be me.”

It is fair to say we are in the midst of a gold rush, with all the associated fevered confusion. Banks and payment providers, mobile manufacturers and network providers, Silicon Valley tech giants and innovative start-ups are all seeking to claim their stake on our financial lives and its associated consumer data. It is hard to tell who the winners and losers will be. One thing is certain: The Innovator will be the first in the ring.