Hughes & Hughes: It’s Anything But Simple

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Over at MediaConact there’s a blog post that puts the blame squarely on high prices for Hughes & Hughes’ failure:

In the analysis of the failure of the business in the media today there is mention of high rents, and the move by consumers online as the main reasons for the closure of the chain. The truth behind the collapse is a little more simple. Their books were just far too expensive, with many titles being more than twice the price they are on Amazon. It maybe the prices were a direct result of the high running costs, but there is no way they could have survived by continuing to over charge customers.

Just before Christmas we wanted to buy 60 copies to the wonderful “Tribes” by US marketing Guru Seth Godin to send to customers as a thank you present. I phoned around and the price in Hughes & Hughes was €16 per copy. We ended up getting the books on Amazon.co.uk for just €7.50 per copy. The price was the same on Amazon whether we were was getting one copy or 70.

Do you see now why Hughes & Hughes is gone out of business?

I responded because I really felt that the post was far too simplistic in its analysis:

I agree and disagree with you on this. On the one hand H&H had a real challenge on Price in that Amazon and other internet retailers have a very impressive price advantage. But that can be easily explained.

* Amazon get a much higher % discount from publishers than even a chain like H&H did. That is one reason for the price differential.

* Secondly H&H sell much fewer books and unlike Amazon couldn’t make up for cheaper prices by relying on volume sales, especially in a small market like Ireland (Amazon buys and sells internationally).

* Thirdly and perhaps most importantly, H&H had bricks and mortar stores which Amazon does not. When you add in the distribution network that a Bricks and Mortar chain imposes and the redundant stock it very quickly becomes obvious that the kind of expenses imposed by real world bookselling is what made up for most of the price differential. It was unavoidable.

BUT, and this is important, many independents simply refuse to compete on prices and are doing pretty well. They tap customer need in their locality and provide services that a chain or Amazon simply can’t. So Price alone is not the reason why H&H closed. It didn’t help, of that I am sure, but given the thriving stores that sell at the same price or higher, I think it’s the wrong focus.

Not a good weekend for the Irish Publishing and Book Trades
Eoin

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8 comments

  1. Totally agree Eoin, you simply can’t expect B&M bookstores to be able to compete on price with online stores. Most people don’y mind paying a bit extra either, as you get the opportunity to browse around and find stuff by accident – one of the great perks of book buying! I do agree though that their pricing was maybe a little too high – they usually charged about 1.25 x the Sterling rate for their new stock over the past year or so, and could have cut a little more to around the 1.10 rate which has been the average. I think their biggest problem may have been opening so many large, high rent stores in relatively quiet locations which were simply the wrong locations – Santry, spening money re-doing the Swords & Green branches, the location in Dundrum which is too far from the main centre and would never get the footfall required.

    If rents were substantially lower it might have helped, but maybe the Irish market is simply too small to sustain so many different chains over the longer term, especially with so much of a threat from online stores? Maybe they were too similar to Eason in terms of what they offered, and only one kind of store in that line could ever really survive in a challenging climate? I feel Dubray offer much more of an ‘independent’ type experience – somewhere in the middle of the chains and independents and therefore may fare better as they probably have quite a degree of customer loyalty. I love the way you can pick up some quite unusual stuff there, compared with the bigger chains. Hodges obviously offer a point of difference in terms of range and the fact that they do academic books which are always going to be less sensitive to changes in the economy. I do hope the likes of the newer independent shops like the Gutter and Raven can keep going – and maybe this is a more viable model, with smaller shops, lower rents and staff costs, building repeat custom by creating loyalty through great customer service.

    Just a few thoughts, but even though I knew the book sector was in trouble, and I could have imagined H&H closing a few branches, the news of total closure was a real shock.

  2. Great comments and I don’t disagree with all of your points. In the end all of the points you raise mean that Hughes & Hughes had to charge higher prices which had a major part to play in their downfall.

    Amazon have great advantages, but charging more than twice the online price on any title is a recipe for disaster.

  3. I’m still a bit raw from the events of yesterday and concede that this could easily affect my judgment, but having worked for Hughes & Hughes for a number of years and having been ‘close the action’ I can only say the following:

    Nobody appears to have picked up on the DAA component within all of this.

    [... EDITED BY PUBLISHER ...] The sudden decline in passenger numbers is extraordinarly dramatic. H&H could not continue to operate in this environment without sensible rent reviews.

    Add to that the fact that H&H sell more water and newspapers in the their airport stores than books (a fact reflected in an ATV of under €2) and what you have effectively is a product mix that defines H&H as an FMCG retailer in their airport regions. So – almost nothing to do with the price of their books.

    Make no mistake – the airport element of the business IS the business. Why do you think that the receiver has summarily closed the highstreet stores [... EDITED BY PUBLISHER ...] yet left the airport stores trading, having secured – yes you guessed it – an instant deal on rent!

    Would love to add more to the discussion but I now need to spend the rest of the day browsing jobs.ie

    Take Care

    1. I agree with the final comment. I too am reeling from the revelations of yesterday’s events and am nervous at the prospect of spending months in a social welfare queue. There were many problems within Hughes & Hughes but the main one at the end was lack of support the banks. I find it so insulting at the first article blames price. They obviously know nothing about retailing or the book industry. Books come with a printed RRP on the back of them leaving it impossible for retailers to sell books at an inflated price. Amazon if they could would wipe out the retail industry one by one. The media themselves should watch out as the kindle will reduce sales of newspapers – then they will finally feel our pain. Hughes & Hughes had a very competitive pricing structure matching sterling prices where possible and creating add value to the consumer.

      Hughes & Hughes at the end of the day was a massive part of the Irish culture. It was more than just a bookshop – it employeed over 225 people whose families also became part of the business. Hughes & Hughes is a massive loss to Ireland & the saddest part is most people don’t know this yet.

      As for DAA – As was mentioned before why has nobody picked up on this?

      I too must return to jobs.ie.

      Good night & god bless.

    2. There is no rental agreement with the DAA H&H tendered and in the tender they would have offered a minimum payment and a % of turnover whichever was the highest.

      There is no rent reviews in the tendering process, you tender your amounts for the period full stop.

      H&H’s I believe tendered very strong to ensure they got the contract, that is where they fell into difficulties, if your read any of the tender documents the passenger numbers are only given as a guideline and forecasts of passenger numbers should be treated as such. H&H’s tendered and won the contract to operate its not DAA’s fault they tendered too strong. H&H were well aware of the tender process and DAA would have been wide open to legal cases from unsuccessful tenders if they rearranged the contract with H&H.

      What ever about the high street rental reviews its not the DAA’s fault, they would have received monthly turnover details from H&H.

      By the way am not an employee or affiliated with the DAA in any way.

  4. Totally agree with the points re rent being too high – and unless something is done about the upward-only rent review system (seems like a totally unfair system and I’m not sure how it ever got passed into being – surely it is an abuse of power?) shops are going to close left right and centre and premises will be left empty. Surely commercial property owners must realise 50% of a rental income is better than 100% of nothing?

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