Despite its US parent’s move into Chapter 11 bankruptcy protection, UK Blockbuster has traded profitably of late, following heavy losses in the mid-2000s - but what are its future prospects?
Retail Week Knowledge Bank’s updated profile tracks progress as the UK network is fine-tuned, with underperforming stores closed - down from 740 to 600 over the last couple of years - hopefully enhancing profitability, while sales have fallen.
Meanwhile, management has widened the product range adding ‘complementary’ products like iPods, mobile phones and TVs. While this could help drive footfall, these are among the most competitive and crowded product markets. Could such extensions detract from Blockbuster’s main focus?
The retailer faces ongoing issues with technological developments. They are encapsulated in the short term in ‘downloading on demand’. It is a complex scenario in which a dominant specialist like Blockbuster, built on earlier technologies, would appear vulnerable over time. Improving operational efficiencies identified by Retail Week Knowledge Bank - raising sales densities and lowering the staff costs to sales ratio - are only part of the equation. The biggest challenge is evolving a retail brand’s key points of differentiation; re-orienting the balance between entertainment products and new ‘digital’ services.
The solution is difficult to envisage with continually moving targets, but could involve further reductions in a 600-strong shop network, as sustained profitability becomes the key to survival. A highly focused network of flagships showcasing an omni-channel, screen-based approach with carefully segmented specialist services, demonstrating USPs that will keep evolving, seems the broad solution but is perhaps easier saidthan done in practice.
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