Strategy may be an art more than a science, but there are nevertheless basic rules that should be followed. The most obvious way to point this out is to consider the case of companies that failed to follow them – in this case the photographic retailer Jessop’s of Leicester.
As a child my father was a keen amateur photographer, so I grew up spending happy hours in a room under the stairs watching black and white images emerge under the glow of an orange photographic safety lamp. When not in the darkroom, I would thumb through the pages of Amateur Photographer magazine looking longingly at the latest cameras and equipment.
Once a desirable item of equipment had been identified I would turn to the back of the magazine to the Jessop’s of Leicester advert, where the best prices could be found, in the hope that the item would be affordable. In those days, the Jessop’s advert was not so much an advertisement as a catalogue of literally thousands of items, all at the keenest of prices. They were a retail innovator and the market leader in keenly priced photographic equipment.
I mention this as in recent times their fall from grace has been meteoric. From a flotation in 2004 when the business was valued at £160m, the hapless shareholders today have assets worth just £100,000, with the remainder being owned by the pension fund, an employee benefit trust and their bank – HSBC who recently wrote off £34m of debt in exchange for 47% of the equity.
So what went wrong? How could such a successful business and market leader crash so badly? To understand this, we need to go back to the beginning.
Jessop’s was founded in 1935 as a small corner shop in Leicester. Their timing was good as from that time onwards photography enjoyed a boom as technological advances moved it from being a professional occupation to an accessible amateur pastime. By the time I owned my first camera in the 1960’s, Jessop’s had discovered a new strategy. Instead of using the shop as a showroom to explain photography to potential customers, they used the shop more like a warehouse and adopted the same “no-frills” approach to customer service that is now the trademark of the budget airlines. Most of their business was taken over the phone and if you did ask have a look at something when they were busy, you were politely told that they only sold equipment, they didn’t demonstrate it.
This strategy proved to be massively successful and, although I don’t have the figures, I am sure that the turnover of that tiny store in Leicester would have easily made them the largest photographic retailer in the UK.
It therefore came as something of a surprise to me when, in the mid 1990’s I spotted a Jessop’s store in a prime location on New Oxford Street in central London. Inside the store was spacious with plenty of staff on hand to help customers. In the basement there were darkrooms and studios for customers to hire and they were even running photographic courses. I was amazed as it seemed such a far cry from the “stack em high, sell em cheap” strategy of the past.
During the following years Jessop continued to expand their retail network, floating the business in 2004 and ploughing even more money into their expansion.
The problem was that during this time the market for photographic equipment was changing dramatically. Whereas in the past it had been quite technical with photographers needing to know about film speeds, the ‘hardness’ of photographic paper, the ‘temperature’ of light etc., the future was digital where the camera took care of all of the complicated things for you. Purchasers of photographic equipment therefore no longer needed the advice of experts. Ironically, the market was moving towards the very market that Jessop’s had once dominated – the “stack em high, sell em cheap” market!
The morals of this particular story would appear to be:
- Know your market. Jessop’s success was founded on keeping costs to a minimum and driving volume through a mail-order business. They appear to have abandoned this strategy at precisely the same time as others such as Amazon were adopting it. They therefore handed their market to their competitors on a plate!
- Know your customer. In the company profile on the Jessop’s web site they wax lyrically about their commitment to customer service, but do not mention low cost or competitive pricing at all. However, if you look back at their glory years, customers did not flock to them for their excellent customer service but for their low prices. With the ease of use and quality of today’s point-and-shoot photographic equipment, customer service is far less relevant than price. It would therefore appear that Jessop’s have lost touch with their customers.
- Look before you leap. When Jessop’s decided to move away from the predominantly mail-order business and into the ‘High Street’, it appears that they threw caution to the wind. While you can admire their commitment, you have to question the judgement of the financiers, managers and directors who supported this 'all-or-nothing' approach.