HASTINGS 40th ANNIVERSARY: CEO Marmaduke

SEPT. 29 | HASTINGS 40th ANNIVERSARY: John Marmaduke, Hastings Entertainment’s president and CEO for the last 32 years, explains one aspect of his business strategy with a West Texas aphorism: You can always spot a pioneer, he says, by the arrows in his back.

For that reason, Hastings prefers to be a “fast follower,” according to Marmaduke, letting others take the risk involved in the early development of new products and markets, then getting in quickly as consumer demand is established.

But he might be too modest. Certainly it’s true that Hastings is a follower in the digital realm. In terms of in-store merchandising, however, Hastings has been a leader in expanding product offerings to offset declines in the music business. With its stores now packing videogames, consumer electronics hardware, Webkinz, action figures and gift wrap, in addition to music, books and movies, the chain has outperformed most other retailers with six consecutive quarters of profit.

At a time when retailers from Best Buy to Blockbuster are trying, mostly in vain, to get a piece of Apple’s iTunes business, Hastings has a basic Web site that sells new and used books, music, DVDs and videogames but not downloads. It has no online DVD rental plan and no download kiosks in its stores. But the Web site is currently being revamped to better reflect the merchandise mix in stores and to deliver media products digitally (see related story, page 8).

“We are investing in a totally new Web site, which will serve as a platform next year for digital delivery,” says Marmaduke. “Although digital delivery is currently not profitable for most, we see a future for this as an adjunct to our bricks-and-mortar business. When it is done right, clicks and bricks works.”

His goal is to double the company’s Internet sales (which it doesn’t break out) with the new site.

Regarding manufacturing-on-demand, a hot topic in media retailing that has nevertheless generated more press coverage than sales, Marmaduke says Hastings believes MOD “has a future for unlimited catalog availability.” But he offers no timeframe for deployment and says it could happen either in stores or centrally, via the Web.

He’s similarly cautious about Amazon’s much-hyped Kindle portable media reader. He says he likes it for traveling and reading periodicals but doesn’t enjoy it for reading a book. Either way, Hastings has no plans now to follow with its own branded device.

When it comes to merchandising physical products in its stores, however, Hastings is ahead of the curve. The chain is rolling out a new store layout that enables it to better merchandise seasonal and trend product, such as toys and T-shirts, and to beef up its children’s departments.

Such changes, and its emphasis on used product, videogames and consumer electronics, have helped Hastings post six consecutive profitable quarters while competitors continue to struggle to offset declining music sales.

“We are constantly changing our stores to better reflect new products and technologies and changes in customer tastes,” says Marmaduke. “Customers have many more options, but we find they only choose them if we fail to deliver our brand promise. Packaged entertainment is a great value, especially when you can trade it in when you tire of it.”

Used book sales were a key factor in Hastings’ profit during its last fiscal year.

“Used product allows us to double our customers’ reasons for visiting the store, while trading drives additional and often impulse purchases. It allows us to expand our assortment and sell more new releases,” he says.

In the company’s 40-year history—Marmaduke has been there virtually the entire time—its product mix has expanded (from just books and music in the beginning), but its role in local communities is the same.

“Our role remains the same—help our communities discover their entertainment,” says Marmaduke. “When we deliver our brand promise, customers are as excited as ever. Mass market retailers have lost the emotional connection to entertainment products, but not Hastings!”

The company’s business was built in small- and medium-sized markets, and there are no immediate plans to change that, Marmaduke says, though he notes that Hastings chooses markets because they are underserved by media retailers, not just because they are small markets. Albuquerque, [N.M.,] one of the markets where Hastings has stores, is sizable with “three-quarters of a million people,” he says.

Looking 10 years into the future—a forecast for another 40 years is just not possible, Marmaduke says—Hastings stores will have “a lot more products, many of which will be digital.”