Saving Waterstones Case Study Analysis

Competition and market entry

The launch of Amazon. com immediately started to have an impact on the way consumers purchased books. Since Waterstones was a Highstreet book shop they had to incur overheads such as ‘rents and rates to labour costs’ this made competing with Amazon and other e retailers difficult as they were able to deduct the price of overheads from their total costs of books which in turn allowed them to sell books cheaper then Waterstones.

‘Online-only retailers, were able to keep their costs, lower, because they didn’t have overheads associated with retail outlets’. Although Waterstones prided themselves on selling a large range of books to their consumers another issue that they encountered since the launch of Amazon. com was to compete with the unlimited ‘virtual self-space’ Amazon. com had for books. ‘Online retailers were also able to stock many more books then the average bookshop due to their unlimited virtual shelf space’.

With the withdrawal of the Net Book Agreement (NBA) in 1997 Waterstones found themselves with another competitor. Supermarkets such as Tesco and Sainsburys found an opportunity to retail books to consumers. From the case study we are told that they focused on selling a ‘small range of books that were likely to sell in high volumes. This allowed them to negotiate lower trade discounts which enabled them to sell books at a discounted rate. This undermined Waterstones as before this they had ‘been one of the main booksellers to discount book prices.

E retailers also caused an issue for Waterstones discounted marketing strategy of books as they too were able to negotiate better trade discounts since they were able to stock an unlimited number of books which sold in high volumes. From the exhibit 3 in the case study we can see that supermarkets tended to get a 50% discount on books whiles e retailers got 55%. This was a 5-10% cheaper discount rate then Independent shops and major chains.

In addition to these issues there was an economic downturn. Revenue available to governments fell’ which resulted in university fees increasing. Waterstones would have previously stocked books for education purposes but since education fees had increased the sale of printed text books would have declined as students ‘were likely to have less disposable income’. It wasn’t just students who had less disposable income cuts to the public and private sector would have resulted in ‘less consumer spending’ and printed books at the time may have been a luxury to buy and would have affected Waterstones books sales.

One market that may in the past been a reliable consumer for printed books was older generations. However, ‘in 2011, some 27 per cent of over-65’s in the UK’ were using the internet for purchasing goods. Waterstones would have found this to be another issue as a reliable target market for purchasing hard copy books in the past was adapting to new forms on shopping. Daunt’s Strategy was positive for the most part from re decorating Waterstones store to re-introducing the old Logo. However, Daunt’s strategy also included dismissing a vast number of regional managers who had been part of the company for several years. Although these changes ‘would save money’ Waterstones staff were less ‘enthusiastic about this strategy.

Instead of applying for new roles several managers decided to resign. Due to these staffing changes and resignations staff morale among Waterstones employees was at an all-time low. This would have been another issue for Waterstones as your staff is an integral part of your business and business’s need everyone to be working together to meet the company’s overall objectives. However, the situations continue to worsen and 4 of their key buyers and marketing director decided to leave the company.

From our analysis of the issues facing Waterstones in the case study it is evident that at the time this was written Waterstones was facing several problems from E retailers and E books launching, Supermarkets entering the book market, an economic downturn and reliable markets moving away from traditional purchasing method and lastly staff morale at an all-time low due to the new business strategy.

What makes SWOT very beneficial is with a lot of thought, it can help a business uncover opportunities that you are well placed to exploit. And by understanding the weaknesses of your business, you can manage and eliminate any threats that would catch you unaware in a business. By looking at your competitors using the SWOT framework, you can devise a strategy that helps you distinguish yourself from your competitors, so that you can succeed in your business.

External Analysis: PESTLE Analysis

Political Factors

The UK is a good political environment for the bookselling industry. There are no political restrictions within the country that would affect the growth of Waterstones’s. The bookselling market is growing with a record-breaking year in 2017 total book sales income (physical and digital books) was up 4% to £3. 7 billion.

Economic Factors

Economic factors that are a concern to Waterstones is the high unemployment levels, which in return decreases the demand for books which also affects the demand to produce such books. These factors are outside the control of Waterstones but due to them been dependent on people buying books it has a big impact on them. Social FactorsThere is no single target market as almost all age groups read. There is a difference in books for children, education, and just for pleasure. Different consumers have different demands and their purchase attitudes and behaviours are varied. Also, the growth of E-books in the market has generated more popularity than physical copies.

Technological Factors

Technology is vital for competitive advantage. The development of E-books and the opportunity to development even further in a market that Waterstones appears to be a big factor in means in the future they can increase future sales. Also, Waterstones uses their social media platforms to their technological advantage by promoting its product on this network services such as Twitter and Facebook. Legal factorsThe e-books and traditional books retailing are in a way determined by the copy right laws that differ from country to country. There is no law that says there is a set price for E-books in the UK. Other laws are consumer laws which are there to protect the consumer from buying misleading products and the competition law which prevents the bigger companies from bullying the smaller ones.

Environmental Factors

The desire from everyone to try protecting the earth and to be more environmentally friendly has an impact on every company including Waterstones. Waterstones also works with the British Safety Council to try get a wider measure of the environmental impact. This was done to not only be more environmentally friendly but as a strategic effort for high productivity.

Recommendations

From our analysis of ‘Saving Waterstones’ which included determining the issue that Waterstones faced at the time the case study was written and conducting both a SWAT and PESTLE analysis we have been able to propose some recommendations which would benefit the company. Our first proposition would be for Waterstones to launch their own branded e-reader to improve their competitiveness as mentioned in our PESTEL analysis (Technological factors).

Even though Waterstones does have a website introducing their own e-reader would allow them to negotiate even better trade deals with suppliers to stock digital format books. As mentioned in our SWOT analysis (Threats) there is a ‘growing market for eBooks there may no longer a need for traditional hard copy books, products maybe out of stock for long amounts of time. A new generation may buy online rather than going into the bookstore. ’

As mentioned in our PESTEL analysis Waterstones has been active on social media. Our recommendation would be for them to be considerably more active on social media. Social media can be a very powerful marketing tool that can enable companies to market to a large audience. Inviting celebrities/bloggers for book signings would give Waterstones exciting new content to market to younger generations about these events and when the event is in progress the celebrity/blogger will be able to document themselves at Waterstones which can be a great advertising mechanism for the company.

Lastly, we would recommend that Waterstones conduct team building exercises to boost staff morale. As mentioned in our identifies issues Waterstones staff ‘was at an all-time low’ due to the new business strategy conducted by Daunt. Team building exercises or day outs can really improve staff moral throughout the whole company. Waterstones employees are key to business success as they are the ones driving the Highstreet store from delivering excellent customer service to arranging floor displays. If staff feel they are disposable or not a part of the team their enthusiasm will decline, and this could result in a loss of sales.

Strategy Statement: Based on the external and internal analysis we know the major thread for Waterstones is on economic and financial side, which indicates Waterstones is not able to win the mass market in fierce price competition. According to our analysis, we recommend new technology development in bookselling is an opportunity for Waterstones, and they can gain more customers and drive offline sales through digital marketing.

What’s more, we also found the employee is a critical factor to Waterstones’ development, which is Waterstones’ competitive advantage through good management. So finally, we make our strategy statement of Waterstones as below: The objective is to increase sales by 20% annually through reducing sales costs and promoting sales activities online and offline. Waterstones should conduct an efficient literate sales team to cater the tastes of target customers either local or segmented by elevating customer purchase experience.