04 May UK betting: is there a future for LBOs? – Part II
We have discussed the gathering momentum of channel shift and its impact on LBOs in Part I. While some within the GB LBO sector might be breathing a sigh of relief at the timing of the General Election, believing to have some respite however temporary (or even mitigation), from imminent changes brought on by the Gambling Review, the relentless shift in player habits should be a clear target to focus the mind, which few can afford to ignore.
The gambling sector is not unique, in that consumer habits have been changing across most if not all forms of retailing for some time. How retailers have dealt with these changes has varied greatly, with varying results; with some ending in spectacular failure (Comet, BHS, Woolworths). Retailers that have been unable to adapt quickly enough have fallen by the wayside, whilst others have built new businesses entirely online without the ‘encumbrance’ of a ‘traditional’ bricks and mortar business (eg, ASOS, Ocado). Nevertheless, it is both telling and encouraging that one of the most successful online disruptors – Amazon – is now entering the landbased retail environment (although inevitably also seeking to reinvent it).
A third way, has been the omnichannel offer – which aims to blend the best of online and retail together. John Lewis is seen as a leading light in this third way and even ‘traditional’ brands such as Argos have adapted well (with 65% of ‘Black Friday’ sales initiated online and 250 ‘digital’ stores being added to Sainsbury’s footprints), but even these businesses are now citing that overwhelming consumer changes and the shift to online threaten the size as well as the format of existing retail estates. Many general retailers, (eg, John Lewis, Argos, H&M and Debenhams) are now publicly predicting that the shift to online is starting to accelerate and therefore they are planning to streamline and refocus their landbased retail operations.
The signs are there – consumers are increasingly moving online (specifically mobile). Internet businesses are more agile than landbased ones and have the added benefit of knowing their customers better (despite the lack of physical contact), delivering more targeted services with lower overheads; the (generally) innovative ‘white collar’ mix within the workforce is also much higher, impacting culture. With modern platforms (not always prevalent), changes to product line-ups can be made rapidly and tested in the market, without the expense or time constraints of physically rolling out to multiple locations. These tests are more likely to hit the spot, on data /evidence-based decision making rather than experience (only valuable if mindful of change, then invaluable) or semi-informed guessing. This shift is happening therefore in terms of both demand and supply.
The same has been seen in betting in the UK: some businesses have grown very successful on the back of online focus (bet365), others have played the omnichannel card very advantageously, if somewhat belatedly (eg, Coral) – maintaining retail revenue (overall) and growing online significantly. Indeed, betting is one of the most channel shifted consumer services in the UK and the trend emerged early, Yet, despite these tactical successes and obvious direction of travel, the UK landbased ‘normal’ is of aging retail estates without a clear plan of what to do next and how to tackle accelerating channel shift accompanied with flat or declining revenues (regardless of regulatory impact).
Of course, all of the major LBO operators know all this and have (largely) been heavily investing in online businesses for years, but what to do about an aging retail estate whose appeal seems to be declining with younger consumers who prefer mobile enabled access on the move? This question has been practically ignored (other than by an Austrian subsidiary of an Israeli gaming company: not an obvious growth pedigree for the UK betting market – the ‘home of betting’, some say…)
Looking again at general retailing, the smart operators are providing experiential services which cannot be replicated online (as well as physical fulfilment, an issue that betting does not have). Retail needs to be the most entertaining engaging brand experience, leaving consumers in no doubt where they would want to spend their money when they return to their internet connected worlds. Retail needs to become the most effective way for consumers to connect with a brand, building loyalty and long term value. Looking at consumers overall spend rather than by channel is one step to true enlightenment along the path of this business transformation. Easy to say, but difficult to implement in many companies built on divisional and channel structures.
Remember the loss of entertainment from high street gaming? This is surely contributing to the shift, for retail to survive this trend needs to be arrested. Of course, the number of betting shops required to provide such services could be materially fewer than today, but then the remaining betting shops can be focussed more on being sports betting and brand beacons rather than a half-way house between small arcade and high street casino, with betting an increasingly anachronistic or outsourced minority product. That said, arcades, casinos and bingo halls need to improve their customer offer to ensure that they become recognised and valued as providers of out of home entertainment experiences not just a convenient place to gamble as to many consumers the mobile is now the ultimate ubiquitous experience (sports betting could play a part in this, see our blog “Are Britain’s Casinos Missing a Sporting Chance, ”).
So what lessons can be learned from the wider retail response to channel shift? We would identify three which are of immediate relevance to gambling in general and LBOs in-particular:
- Focus on the experience rather than the transaction (ironically, LBOs were far more experience-driven places before the advent of EPOS deskilled the workforce)
- Create a digitised environment so that the consumer can both ‘take the experience home’ and ‘find extra in-store’ (in many shops this stops at posters)
- Ensure that marketing and loyalty are joined up and based upon longevity / dwell-time rather than driving one channel at the expense of another (an irony of the highly aggressive online marketing war is that ‘marginal’ customers are almost certainly being taken from retail where they are profitable to be negative contributing customers online after acquisition costs)