Ed Note: This article is adapted from an Australian Small-Cap Investigator weekly update from April 2011.
The natural world and the business world are both competitive places. But it’s not just the strong that survive. It’s the most adaptive.
You have to be able to respond to changes in your operating environment – whether it’s a jungle or the software industry – faster and better than your competition.
Those businesses that are most efficient and offer the products and services demanded by consumers, survive, grow, and replicate (think franchises). Businesses that ignore changing consumer demands or simply fail to meet them as well as their competitors will perish.
On another subject, I picked up a copy of MIS magazine this week. MIS stands for Managing Information Strategies. It’s an IT magazine.
I’d flicked through it at the newsstand and noticed an article on cloud computing, so I bought it.
Turns out, the article wasn’t worth the few dollars we’d shelled out for the mag. But another article was.
It’s titled “Disruptive Influence”, and as the subhead states, the writer “looks at new business models and how old business is adapting.”
A better title would have been, “Disruptive Ignorance”. Because judging by the first few paragraphs, some businesses aren’t adapting very well at all:
“Dymocks was among the first bookshops in Australia to begin offering e-book downloads four years ago. He predicted then that by 2015, e-book sales would be about 5 per cent of all books they sell. So far they have only made it to 1 per cent.”
Now compare that to a recent announcement from online book seller, Amazon.com:
“Amazon.com is now selling more Kindle books than paperback books. Since the beginning of the year, for every 100 paperback books Amazon has sold, the Company has sold 115 Kindle books.”
In other words, 53.5% of the books sold by Amazon are e-books… yet Australia’s Dymocks is at 1 per cent.
Dymocks is clearly stuck in the past. Refusing to believe the online revolution is anything to get excited about.
MIS writes:
“[CEO, Don] Grover from Dymocks does not believe buying books online is going to replace physical stores any time soon because people still value the experience of shopping as well as the actual feel of books.”
The article then directly quotes Mr. Grover:
“Stores are a social network. They were the first social network. We all of a sudden say Facebook is social networking – it is not the first.”
I’m sorry, but someone is clutching at straws. Bookshops as a social network? We don’t think so. Although it’s not the first time we’ve heard a bookseller try to claim that. It may be the case for small independent, owner-operated bookshops (even then we’re not convinced), but it’s definitely not the case for chain stores.
Besides, let’s remind ourselves of Amazon’s numbers again… 53.5% of the books it sells are e-books. And Dymocks? That’s right… 1%.
And perhaps Mr. Grover should check out some stories from the US. Such as this report from Daily Campus:
“USA Today reported that Barnes & Noble has already closed all of its 798 B. Dalton mall outlet stores…”
B. Dalton was a US bookstore first opened in 1966 and reached 798 stores at its peak. Today it has none. It doesn’t exist.
Obviously US book retailer Barnes & Noble isn’t convinced about the “social network” of book stores. Or even if they believe it, they clearly didn’t make any money from it.
And has Mr. Grover forgotten about Borders and Angus & Robertson? There’s only so much that can be blamed on bad management for the death of those two retail chains.
The fact is, traditional booksellers are reluctant to change. They’ve invested so much in their way of business – stores, staff, service, etc., they just can’t imagine anyone wanting to buy a book online, least of all an e-book.
It’s got the same ring as the saying attributed to Warner Brothers founder, Harry M. Warner in 1927, just as talking films were hitting the screens:
“Who the hell wants to hear actors talk?”
Millions did. And thankfully for Warner Brothers, Harry M. Warner and his chums figured it out quickly.
But that’s the way disruptive technologies work. The title of the MIS article tips a hat to disruptive technologies – something I mentioned in the March issue of Australian Small-Cap Investigator.
Even in the face of facts and a clear trend, many established businesses refuse to accept change. They just can’t picture it in their mind. I mean, books, everyone likes books. They look great on a bookshelf, and it’s satisfying closing a book shut when you’ve finished it.
“Who the hell wants to read a book on a small computer screen?”
Millions do!
But… let’s be serious. You heard the same story not so long ago when compact discs replaced vinyl records. How’s the vinyl industry doing these days?
Fortunately, record stores didn’t fight the change. They adapted and moved on. If booksellers don’t adapt their business models they won’t be so lucky.
The way I see it, if Dymocks’ goal is to increase e-book sales to just 5% in the next four years, odds are it won’t make it… simply because the receivers and liquidators will have been called in long before then.
Kris Sayce
Editor, Australian Small-Cap Investigator
From the Archives…
Fortescue’s Fight Against the State
2012-06-22 – Kris Sayce
Don’t Let the Fed Fool You, This Isn’t the Time to Abandon the Market
2012-06-21 – Kris Sayce
An Addicted Stock Market About to Suffer Withdrawals
2012-06-20 – Murray Dawes
Why Liquefied Natural Gas Makes Australia The Next Energy Hotbed
2012-06-19 – Don Miller
Why Greece is Just a Side-Show to the Economies of Spain and Italy
2012-06-18 – Dr. Alex Cowie
Disruptive Technologies: Accepting Change to Avoid ‘Disruptive Ignorance’
