It seems like entertainment retailers are under siege from all directions.

If the Great Recession wasn’t bad enough, everyone from booksellers to movie rental shops are struggling as consumers shift their spending away from bricks-and-mortar stores.

The trend is no clearer than in the US, where several recent bankruptcies including Blockbuster and Borders have shown the dramatic transformation occurring in entertainment retail. Blockbuster, a household name in movie rentals, was crushed by direct mail DVD rentals and instant online streaming.

That same trend is hitting traditional book retailers. Amazon recently said that sales of its digital books surpassed printed book sales for the first time. As consumer habits continue to evolve towards digital delivery, it’s only going to get tougher. Traditional entertainment retailers can survive, but they need to innovate.

Barnes & Noble, as the largest traditional bookseller in the US, has been in the hot seat. But the company has successfully navigated the choppy waters by coming up with a rival to Amazon’s Kindle e-reader. While Barnes & Noble’s device, known as the Nook, lags behind the Kindle, it has carved out a solid second place position in the e-reader market and will draw a larger crowd with its colour edition.

This month, Barnes & Noble’s innovative digital strategy was given a big vote of confidence when Liberty Media made a surprise $1bn (£617.9m) offer to buy the company. It’s unclear how chairman Leonard Riggio will respond, but the bid shows there’s value in a traditional entertainment retailer.

Last week Liberty chairman John Malone said leveraging Barnes & Noble’s bricks-and-mortar stores to sell the company’s e-book and digital devices would be part of its strategy should the deal proceed. He specifically mentioned Apple as a good example of a company that has executed a successful retail store strategy.

“Apple has created a unique customer experience coupled with a valuable service offering that drives tons of traffic into its stores”

Indeed, Apple, with its 300 retail stores globally, has created a unique customer experience coupled with a valuable service offering that drives tons of traffic into its stores. That kind of innovation is something traditional entertainment retailers need to pay attention to.

Having a successful digital strategy isn’t the only answer to survival. Take Waterstone’s, which recently struck a deal to be purchased by Russian billionaire Alexander Mamut for £53m. Shareholders of Waterstone’s parent, HMV, still need to approve the deal. But Mamut is poised to revamp the chain by focusing locally. Instead of stacks of bestsellers, he wants to focus on book collections tailored for the local community.

Other entertainment retailers will drive traffic to their stores by offering new products that complement their digital strategy. Others will innovate by offering exclusive entertainment content only available in their stores.

The bottom line is this - entertainment retailers need to come up with innovative ways to draw people into their stores. Developing the next e-reader is a big step, but successful retailers will also find a way to leverage their bricks-and-mortar stores to provide customers with a unique experience. It’s a daunting task, but necessary to ensure survival.

  • Gilbert W Harrison chairman, Financo Inc