As the industry pushes forward with a higher emphasis on omni-channel strategies Scott Longley examines why legacy bookmakers have to look to overturn the ageing demographic of their retail betting customer base. With a view of modernising its shops and retail points what can the industry learn from other sectors…
Much of the to and fro in the submissions to the Competition and Markets Authority (CMA) inquiry into the merger between Ladbrokes and Coral concerns itself with the issue of whether or not betting shop estates are in structural decline.
Ladbrokes and Coral understandably take the more pessimistic tack. The bleaker they can paint the overall picture, the more likely the CMA panel is to look kindly on their attempt to join together the second and third operators in the space while insisting that the merged entity should offload only a minimal amount of ‘local competition’ shops.
Taking the opposite line is major rival William Hill, currently number one in UK shops, and keen to show there is life yet in the UK’s shop estates. In its submission to the CMA, William Hill points to the inconsistencies of the position taken by Ladbrokes and Coral in their initial submissions and their contradictory public statements to investors in which they suggest betting shop revenues are robust.
Yet the evidence regarding the health of the UK high-street betting shop estates is far from clear. A survey of customer attitudes at Ladbrokes and Coral shops undertaken as part of the CMA’s enquiry shows that at the very least the betting shop audience is aging. This could have far-reaching implications for the sector overall.
The survey of just under 4,000 customers at 30 Ladbrokes and Coral locations across the UK was undertaken in January and February this year. Among the findings, the survey found that three-quarters of the respondents were aged between 36-45 (42%) or 60-plus (33%) in Ladbrokes shops and just slightly less in Coral shops (44% of 36-59-year-olds, 60-plus at 28%). The percentage of customers that were retired was correspondingly high: 28% at Ladbrokes, 22% at Coral.
As to the 60-plus generation’s shop usage, the survey unsurprisingly finds they overwhelmingly choose to use their betting shops to bet as opposed to playing machines (96% versus 8%). They are also creatures of habit; 26% of 60-plus customers visit the particular shop most days versus only 12% of the 18-35 age group while 37% visit shops in general most days compared with 19% of 18-35. The age-group split is even more evident in terms of their online usage. While 48% of those aged 18-35 had placed a bet online in the past six months, that figure was only 7% for the 60-plus age group.
Where betting shops come into their own with all age groups is their convenience. Nearly half of all customers at both chains choose to visit the shop that was closest to their home or work while another circa 20% chose the venue because it was close to other shops. For older people, the response ‘always come here’ was mentioned by 28% of over-60s compared to 19% of 18-35s. When asked what their response would be if the shop in question closed down, 11% of 18-35s said they would switch to betting/gambling online while only 2% of those aged 60-plus said the same. In comparison, 85% of of over-60 customers said they would go to another betting shop versus 67% of 18-35s.
Do not go gently…
One plausible response to these numbers is that the older age groups have always provided a large portion of the betting shop audience, and indeed the figures do seem to suggest how habits change with age. But while the success of the various omni-channel initiatives undertaken on the part of Coral, Ladbrokes and William Hill proves that a combination of land-based and online can provide incremental gains for both channels, some have suggested the one-off boost in online numbers might yet come at the expense of the longer-term value of the shop customer. With more shops customers being switched on to online, it is easy to envisage the omni-channel effort accelerating the land-based decline.
This might be the conclusion if we look for comparables in other sectors. A recent report from the financial services team at Citi looking at how technological disruption as affecting the financial sector highlighted how high-street banks were facing their “Uber moment”. Pointing to the increasing use of mobile as the main channel of interaction with the customer, the analyst team at Citi said “the return on having a physical branch network is diminishing”.
Using words that could apply as much to bookmaking as to the banks, the report went on: “The adoption of smartphones and other mobile devices have fundamentally changed the way consumers interact with their banks today… An omni-channel strategy is the winning solution for incumbent banks over the next decade because customers interact with their main bank via multiple channels rather than a single channel. The omni-channel strategy should be built around a competitive digital banking offering, a reduced and modernized branch network and lastly, a targeted channel strategy for different segments of customers.”
This will be the route the major UK bookies will be following – the only question being what does a right-sized UK high-street tally look like. Whatever the CMA decides on Ladbrokes/Coral, the discussion is about how many shops will be offloaded to an old or new competitor; it isn’t about shop closures. At least, not yet. We have seen all the major chains pare their shop numbers over recent years and that will likely continue regardless of the eventual CMA decision.
But will the bookmakers suffer the precipitate fall in outlet numbers that some are predicting for the UK high-street banks? There are cross currents here that make the question hard to answer. The irony is that a proportion of the betting-shop customer base will almost certainly be unbanked (for a variety of reasons, not all of which would be related to poverty) and will be more reluctant to move online regardless of any omni-channel inducements. Also, a further emptying of prime sites on the high street might encourage the bookies to actually open up some new shops.
Forecasts of the demise of the betting shop have been wrong before. Yet mobile might come to be seen as being more disruptive than desktop was to the high-street bookies and the efforts the leading operators are making with omni-channel recruitment suggests they have half an eye on capturing an audience before it disappears. Almost certainly there will be less betting shops in the future, and that will have implications for more than just the main bookmaking operators. The suppliers – and racing – should take note.