Special BRC report: people playing vital role in digital transformation of retail
Such is the complexity that digital developments are bringing to the retail industry that the roles of people in the sector are changing radically and the organisational structures are being disrupted. By Glynn Davis
Speaking at the BRC Retail Symposium 2014 in London this week Alex Baldock, group chief executive of Shop Direct, says the old days of “command and control” from senior management is not for the likes of Shop Direct in today’s digital environment as the “complexity is beyond a leadership team”.
Recognise changing roles
Instead the company has set in place a clear strategy alongside a set of values and against these the employees at Shop Direct are left to pursue their roles with some freedom and with room to be innovative and creative.
“It’s freedom within a framework. We all know where we are going and our company’s values so we [the senior executives] can then get out of the way and let them get on with their jobs. It’s not controlled by the corner office. We’re giving people the licence to come up with ideas,” he explains.
It is a similar story of changing employee’s roles at Argos where the impact of digital is being felt powerfully in the stores. John Walden chief executive of Home Retail Group (parent of Argos), says: “Instead of being behind the tills we now put store people out front. This is much more rewarding for them than working on the tills or moving boxes. There will also be a shift towards specialities in these jobs although that does not mean less people. It just means different skills will be required.”
Investing in digitising stores
This investment in change within the stores comes at a time when shoppers have ever higher expectations of service and when retailers are looking to reducing the investment in their bricks and mortar estates, according to Walden, who believes this means big decisions have to be made by merchants.
For Argos this has meant developing six new digitally-focused concept stores that incorporate iPads instead of paper catalogues, digital screens, and have new operational practices – especially around stock and logistics.
Such actions are essential says Walden as the “threat from the rise of digital on high street is acute”. What action retailers now take will determine the leaders from the laggards – and arguably those who potentially fail.
Massive impact of mobile
A key driver of digital’s impact is mobile, which is “exploding as a sales channel”, according to Baldock, who says it has grown from zero sales to 30% of total non-store sales in only three years.
Nowhere is this change more dramatic than in China and other emerging economies where Sir Martin Sorrell, chief executive of WPP, says people have leapfrogged PC ownership and moved straight to mobile devices for transacting online. “Retailers will have to change. It’s a drag on [traditional store-based companies] when you have e-commerce and also proximity (convenience store sales) growing rapidly,” he says.
The latter is disrupting the big box end of the market, which he says is “not dead” but there will have to be a more subtle mix in large retailers’ portfolios between big sheds and convenience stores. Dalton Philips, chief executive of Morrisons, is well aware of the challenges facing operators of large stores.
What future the big box?
But he did not – not surprisingly – believe the seismic changes in the market represented the death of the big four supermarkets. Despite the challenges faced he told delegates at the Symposium that the multiples controlled two-thirds of the grocery market in the middle ground and that it would be tough for the operators at the extremes to make an impact here as it would compromise their well defined models.
The chief threat comes from the discounters who he warned would find it tough to combat the two key advantages of the big supermarkets – scale and experience. But he was not complacent as he cited the example of the low cost airlines that have grown their share of sales to the point that they now account for nearly 50% of the UK market.
Philips pointed to five aspects that Morrisons was focusing on in order to counter the threats to its position in the marketplace. He cited the need to: confront the brutal reality of the changing market; to get in the game on price; to work out what matters most in the business; to manage the pennies and the pounds; and to stand for something that differentiates the organisation from the competition. “The combination of these will put us in a strong position,” he believes.
Testing middle ground
The middle ground – in terms of locations – is proving equally tough to operate in for fashion businesses like Monsoon Accessorize. John Browett, chief executive of the company, says digital is changing the way they are configuring their store estate: “Shops are critical but they have a different role to play today. The big destination stores are best along with [outlets in] good market towns whereas the middle is tough. Our store in Stockport is no longer used as people go into Manchester,” he says.
As a result Browett is looking to “reduce Monsoon locations dramatically to 125 stores” and to team Monsoon with Accessorize in some outlets. “There could be 300 such projects done over the next five years, which is a lot, but we’re helped by many leases coming to an end,” he says.
Another retailer with numerous stores around the country is Boots. But according to Simon Roberts, managing director of health & beauty UK and Ireland at Boots, the company is benefiting from the fact that as much as 50% of its online orders are now collected in-store.
People remain crucial
Boots also has a strong focus on care and for this to be delivered most effectively it requires one-to-one personal interaction in-store, he suggests: “We all want a level of loyalty to set up apart [from the competition] and at Boots it is care that has galvanised us. You can’t personalise care through a process. The industry is trying to process too much. A big part of personalisation for us is the store environment where we can be intuitive.”
Although digital has come increasingly to the fore there is still a need for personal service in-store that can give customers the re-assurance and confidence they are often looking for, which according to Roberts suggests the role of people in the retail equation has arguably never been more important.
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