What do you do when a giant international competitor starts business across the road from you? Get competitive fast.
| Entrepreneur |
Mark Rubbo, Managing Director |
| Company |
Readings Books and Music |
| Business type |
Retail seller of books, music and film |
| Employees |
140 part-time (95 full-time equivalent) |
| Head office |
Hawthorn, Melbourne |
| Contact details |
+61 3 9815 0300 |
Key Learning Points
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Competition
Don’t panic! Treat new competitors as a chance to reinvigorate your brand and your business.
Niche position
Know your market and sell to your strengths.
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The Readings Story
The Managing Director of Readings Books and Music in Melbourne looks the part of a book business owner. Mark Rubbo is quietly spoken, gets about in jeans and a T-shirt and shares a cramped, book-stacked office above his Carlton shop. But don’t be fooled by the laid-back style. He is in a fiercely competitive business with big international competitors fighting for market share.
Rubbo and his business partners - Steve Smith and Greg Young - have run and expanded the Readings business since 1976, with shops in Carlton, Hawthorn, Port Melbourne, Malvern and St Kilda. Readings outlets have become an institution for many Melburnians who relish the warm, unintrusive atmosphere that invites people to browse the books and music for as long as they like. Staff are numerous, as bookish as their customers, and friendly. The shops often host talks by writers.
But in 1998 a competitive elephant landed opposite Readings’ flagship Carlton store in the form of the US book retailer Borders. It has since opened five more stores in Melbourne. The entry of Borders, which can afford to offer big discounts, and a fall in the number of people buying music, has forced change on Readings’ managers. They have had to become more efficient and to differentiate their service-based approach from Borders mega-mart style.
The Challenge
To deal with the increased competitiveness of the retail book market, particularly since Borders opened stores in Australia. To find new revenue streams to replace the fall in music sales.
The Solution
Readings has always been a strong business with good community support and interaction. A key to its survival and expansion has been to highlight and improve what it was already doing well.
Readings management had to look at where they could compete with Borders. Rubbo says: “Borders’ success is based on keeping costs down, so their service is different. We focus on providing service. Our staff are better paid, so we are able to get more committed and professional workers. I believe our service levels have improved; we are paying a lot of attention to having the right number of staff at the right times.” Borders’ have few staff on the floor and a mega-mart-style of queuing to pay a cashier. At Readings, the counter has numerous enthusiastic staff who seem pleased to help.
Since Borders moved into Melbourne, Rubbo says that Readings has had to become more professional and to put more resources into finance and administration. It has outsourced its IT and employed a management and financial advisor, Gerald Smith from Phase III Consulting, who is on a retainer. Rubbo says: “We speak to him three or four times a week. That has been invaluable. Gerald did the due diligence for our St Kilda purchase; I consult with him on a broad range of issues from HR, to structure, to finance.”
Readings has also employed a full-time marketing manager, Emily Harms. She has been working on the Readings brand and the business now has new logos, consistent design and a much more professional approach to its partnerships. The monthly newsletter, which is mailed out to 10,000 readers, has been revamped and effort has gone into deepening community relationships, such as the literacy program that Readings runs with The Brotherhood of St Laurence.
Marketing and increasing sales development are her next task. A priority will be to increase sales through further promotion of the Readings brand name. Rubbo has always been interested in marketing. He says: “My interest is not in the sense of getting people to buy books they don’t want; I see all these wonderful books go through my hands and I want to be able to tell people what’s good.”
The Result
Readings has returned to pre-Borders profit levels, having suffered dramatic falls during the first two years after Borders opened in Carlton. Revenues are up on two years ago and DVD sales have replaced the lost music sales, although the margin on DVDs is very low. This has been compensated to some extent through better margins from book and music suppliers. Although Readings cannot compete with Borders and big chain stores on discounting, it can attract a niche customer who seeks friendly and informed service, familiar faces and an ambience fuelled by passion for books and music. Rubbo says: “We seem to be able to co-exist.”