Christian Davies, creative director at brand consultancy Fitch, famously says “Retail will change more in the next 5 years than the past 50.” Patrick von Sychowski investigates industries adopting change and lessons they offer.
1. Airlines – Frequent Flier Miles and Variable Pricing
The only attempt at budget airline-style cinemas began and ended with the closure of easyCinema in Milton Keynes in 2006. Instead, cinemas are today more inclined to go Business or First Class with VIP seating and Gold Class auditoriums. Yet a bigger lesson comes from the airlines’ use of dynamic pricing ticketing and loyalty programmes.
Kevin Sterthues, Business Development Manager at SP-Smart Pricer GmbH, notes that 90% of hotels, car rentals and airline tickets are already sold online with dynamic pricing. “Big industries are typically first,” he notes, but “in cinema disruption is happening now and is an opportunity to increase revenues” Even 50% of sporting events are sold this way today, but cinemas languish at 20%.
Different forms of variable pricing includes new ticket types (‘Super Saver’), dynamic pricing (linked to time and number of bookings) and dynamic price categories (for example, depending on seat). Other industries starting to embrace this include stage shows, zoos and ski resorts, with Germany’s UCI and Russia’s Cinema Park the first cinemas to test the water with Smart Pricer.
Airlines also offer lessons in terms of bundling services and products (meals, priority boarding, car rentals, hotels and more, when you book your flight), often going beyond their core product. Airlines also have the world’s largest currency, with frequent flier miles worth more than dollars, euros or yuans. According to Bloomberg, US “airlines make more money selling miles than seats,” where “each mile fetches an airline anywhere from 1.5 cents to 2.5 cents,” through the credit card transactions.
Time for Cineworld, Odeon and Vue to launch a Platinum AmEx card?
2. Banks – Go Cashless (like the Swedes)
Handling money is both expensive and risky. The hidden costs include labour, inaccuracies, counterfeit risk, and shrinkage (i.e theft). According to Harvard Business Review (‘The Hidden Costs of Cash’, 2014), “U.S. retail businesses lose about $40 billion annually because of the theft of cash alone.” That’s just internally. External risks include robbery.
Outside of China the Swedes have gone the furthest in eliminating cash. ABBA sang about ‘Money, money, money’, but in the Stockholm museum dedicated to them a sign states that cash is not accepted. Credit, debit cards and the payment app Swish are the norm. Only 25% of Swedes use cash once a week. Sweden’s second-largest cinema chain Svenska Bio went cashless at the end of 2016, inspired by the smaller chain Björnbiografer, which led the way a year earlier. Cinemas that use online booking and card payments can collect more data on customers and know them better.
Perhaps it’s no surprise Swedish community-focused bank Handelsbanken is also the UK’s fastest growing bank, scoring highly in customer surveys. Just don’t expect an ATM.
3. Retail – Customer Centric Online & Offline
The retail landscape is littered with companies that failed to adapt and were often over-leveraged with debt — Toys R Us, BHS, Maplin — but there are also stories of remarkable recoveries, such as bookstore Waterstone’s. Alberto Brea, EVP, Head of Digital Strategy at Edelman NY, famously made the point that “Amazon did not kill the retail industry. They did it to themselves with bad customer service.”
This point was driven home in the keynote by MBC’s Laura Chabi at the UKCA conference in March, talking about ‘New Retail’. Speaking to Cinema Technology recently she elaborated that “New retail is the blending of all the best practices of offline retail that look at Customer experience design (Cx) and marries it with all the best practices of digital user experience design (UX).” China has taken this concept the furthest, where “this is engineered via the mobile device, as customers walk into stores and check-in, the store gains access to them and aims to offer a most customised in-store experience.”
Regulatory and data governance, such as GDPR, mean Europe can’t just copy China, but there are lessons to learn. “First and foremost — who own the customer data set?” asks Laura Chabi. “A business must have its own first-party customer view and manage the relationship with its audience.” In a country such as China, where over 85% of cinema tickets are sold on smartphones, there is much to be learned from New Retail’s O-2-O (online-to-offline) customer focus strategies.
4. Commercial Property – The shopping centre is changing
As well as affecting individual retailers, online shopping and changing consumer habits force property developers to re-think malls, shopping centres and retail destinations both in city centres and out-of-town locations. The so-called “Mall-pocalypse” has hit the US particularly hard, with Credit Suisse predicting in 2017 that “approximately 20-25% of all American malls will be shuttered inside of five years.” UK and European market are less over-built, and malls continue to boom in China, the Gulf and other emerging markets, but developers are nonetheless re-evaluating fundamentals.
“By thinking more about “place”, the overall experience and the connection with that place, landowners, developers and local government can step into a stewardship role, taking a long-term view to create sustainable change,” says Rob Arthur, Senior Consultant at CinemaNext Consulting, with a background in real estate and cinema. “Destinations that understand their local audiences, that offer variety, opportunities for people to get together and give reasons to return are likely to be successful over the long term,” he says.
In the UK, The Light cinemas have pursued a strategy of working closely with local councils in opening cinemas in town centres that have a ‘halo’ effect for the night-time economy. While this has also worked for operators like Everyman, Curzon, Picturehouse and most recently Odeon, Arthur cautions against writing off out-of-town destinations. “Altrincham Town Centre and Market, Westfield, Bicester Village and Gloucester Quays continue to grow through innovation, a focus on customers and regular investment” he notes. There is a trend, particularly for Millennials and Gen Zers to shift their consumption from goods (stuff) to experiences (Instagrammable). This shift is seeing malls and shopping centres shift the tenant mix to more drink, food and activities. “Creating and developing experiences in a high-quality environment is essential,” Arthur stresses.
5. Food & Beverage – Super-caffeinated Speed of Delivery
A recent study done by Spigit.com found that 75% of companies said their top objective was to improve the customer experience. Technology advances and payment capabilities make up a large part of transforming that experience. “There is much cinemas can learn from the likes of McDonald’s and Starbucks that are forging ahead with pre-order, self-order and self-pay to speed up transactions,” says Prill Brewin, partner at The Blue Stocking Partnership which does work for Coca-Cola and Odeon AMC.
Speed of payment, even more than food delivery is the issue, particularly for younger generations. Worldpay found in a recent study of restaurants that three-quarters of those surveyed don’t want to wait more than five minutes to pay, with a fifth annoyed after three minutes. On the flip side, just a fifth get frustrated waiting for food to arrive, though this rises to a quarter for 16-34-year-olds. Only 6% of diners find restaurant service “quick and efficient, with Millennials twice as likely to find eating out stressful.” Compare this to coffee chains or high-end quick-serve restaurants (Shake Shack, Five Guys, etc.) where a buzzer notifies you when your food’s ready. “Millennials are huge fans of convenience,” noted Yohan Varella, a marketing executive in Vancouver, in an interview with NBC. “We don’t want to wait 30 minutes to be seated at exclusive restaurants, we want food to be available whenever we want it.” Cinemas are embracing this with pre-ordering of combos via apps, separating the POS and delivery counter spaces and in-seat ordering.
6. Streaming – Cinema On Demand
With Netflix, Amazon and other OTT providers streaming numerous hours of content, cinemas can no longer simply rely on new releases. Many have embraced event cinema, with the arts, sports and e-games selling out in multiplexes. Cinema equipment and vendors are betting that the ‘cinema jukebox’ concept is the next big trend. Cinema-on-demand is already a reality on a small scale — Tugg in the US and OurScreen in the UK are enabling film buffs to take control of the schedule. The likes of GDC Technology, Nagra/Kudelski and Ymagis’ Eclair are betting this can be replicated widely. With cinemas having a better understanding of audiences, and now more comfortable marketing films themselves, instead of relying on distributors, they can access services such as GoGoCinema (GDC), myCinema (Nagra) and EclairPlay (Ymagis). These offer film downloads as DCPs or streamed directly — and they provide marketing material and support for cinemas to create promo material.
The Technology View:
Laura Chaibi Head of Digital Research & Analytics at MBC, in the UAE
“To become Entertainment-As-A-Service (much like how other industries are moving into service offerings) will give the opportunity to increase the value per ticket sale and will require a cinema theatre to think more like a hotel: what kind of seats, do they offer blankets, is alcohol served, is there close captioning, is there a meal offering and the level of dining experience, are there heat controlled chairs, recliner or not, 3D, IMAX, 4D and — more importantly — what kinds of experiences are current cinema goes seeking and where can new audience segment be found. What do audiences demand to bring them into the cinema-going experience.”