Special Report: Retailers need to drive innovation and force change on their existing practices
Innovating and embracing a more entrepreneurial approach is the best way for established retailers to adapt and prosper in a multi-channel world that is putting great pressure on their existing business models. By Glynn Davis
This was an underlying theme from many of the presentations given at the recent British Retail Consortium Omni-Retailing Conference 2013 in London, with John Walden, managing director of Argos, among a number of merchants revealing how they are developing multi-channel models.
Time for change
“Argos had four consecutive profit declines and in October 2012 we went to the City to announce a new strategy for re-inventing the business as a digital leader. We’re investing £300 million in the first three years of a five-year plan. The market is in cyclical decline and new competitors entered our market and eroded our USP of value, convenience and choice,” explains Walden.
The elements he is focusing on include expanding its own label range (beyond the present 16% of sales) that give it differentiation, replacing the in-store technology for ordering goods and improving the queuing system, and effectively extending the range in each store with the offer of same day or next day delivery from ordered goods.
Stores play major role
He is also building a new IT infrastructure with new data capabilities that will enable the segmentation of customers to allow more tailored communications. Integral to this strategy is the retention of the company’s existing 740 stores, which Walden says: “We’ll take advantage of our national chain and we’ll re-position them as points of collection and [of great] customer experience.”
Stores are proving both a liability – to those retailers who have too many – and a boon to those who are using them to boost their multi-channel proposition, which helps differentiate them from pure-plays.
But what all merchants have to do is adapt their physical space to the increasing customer adoption of digital channels. Karen Dracou, head of omni-channel development at John Lewis, says click & collect has highlighted the benefit of stores.
“There was a step-change from 16% to 20% (and up to 35% at peak) of our online orders for click & collect, which was driven by the addition of Waitrose stores [as collection points]. It’s very successful and very simple,” she says.
Introducing technology in-store
The company has also created a “flexi-format” branch in Exeter that has utilised technology to enable it to have the same in-store assortment within its 60,000 sq ft space as is available in the full-line 250,000 sq ft John Lewis stores.
A combination of large digital screens, small informational displays, iPad bars in the catering areas, and kiosks for buying online have given John Lewis an idea of how its stores might look in the future and it continues to refine its use of IT in-store.
Such is the potential value of physical stores that Paul Kendrick, marketing director at N Brown, says the mail order and internet retailer is running a trial of seven stores that give it a multi-channel proposition. Rather than viewing them as just profit centres the idea is to evaluate the level of online sales they also drive within their catchment areas.
Laura Wade-Gery, executive director of multi-channel and e-commerce at Marks & Spencer, has also been experimenting with stores – by adding technology into some outlets as she also sees a future where the store remains at the heart of the mix.
“For clothing and footwear online – our big web sales – going five years out then 70% of sales will be influenced digitally but still 80% of sales will be touching a shop. Bricks and clicks will be increasingly important,” she suggests.
In-store employees can add great value
Within 15 of its stores M&S has introduced ‘Style Online’ elements that incorporate various digital devices, but Wade-Gery says the real “secret weapon” that established retailers have in their stores is their employees.
Andrew Harrison, chief executive of Carphone Warehouse, agrees: “We’re trying to use people to be the added value in-store. We’re using price to drive customers into our stores, and then our people to drive the basket size – through selling packages and accessories. They need to be focused on what they are doing.”
To help this he says the company is trying to transfer as much of the non-added value pre-sale processes online so that the store time can be used to the greatest advantage for both the customer and Carphone Warehouse.
Having the right people is just as crucial to Tesco. It is seeking to innovate itself into having a relevant model for what is a rapidly changing retail landscape and to do this Ian Crook, online marketing director at Tesco, says the company has set up offices in London’s Shoreditch.
*Click here to register your interest in the Retail Bulletin’s 5th Retail HR Summit, 8th October 2013.
Constant innovation
Into this environment the grocer has recruited people from Amazon, eBay, O2 and Expedia as part of a move to “capture the thinking and technology for the next decade and [introduce] an entrepreneurial spirit”.
Being a “bit Google-ish and having a bit of fun” has contributed to Tesco developing Drive Thru’s at 150 of its stores, introducing F&F virtual fitting rooms, launching a digital film service Blinkbox, and constantly improving its grocery shopping service that is now 15 years old.
He adds: “It’s about changing the culture. Half the things may fail and half work. Nobody really knows what will work but that’s all part of the journey.” What continues to help the company stay “relevant” in the multi-channel world is Dunnhumby, which runs its Clubcard programme, and provides insight from data collected across an increasing variety of channels.
Data proving increasingly important
Data is certainly becoming an increasingly valuable commodity, but Hash Ladha, deputy managing director of Oasis, gives a warning: “We’ve now got so much data that it could be overwhelming. You have to understand which insights are important and could be put into your strategy. It’s a challenge for the industry to deal with data that we’ve not had before.”
Luke Jensen, group development director at Sainsbury’s, suggests its Nectar loyalty scheme is the “bridge across its different channels” as it allows customers to identify themselves at each interaction with the grocer and for this to then translate into behavioural data attributed to each individual.
Using this data the company is able to run its coupon-at-till initiative that drives £8 million extra sales per week from its relevant targeted promotions. It is also used on product launches, new store openings and on ranging.
The most recent move involves the use of mobile phones to enable customers to “check-in” to a store when they enter – via a QR code – and to then use their device to scan goods as they shop. “It’s a three store trial…and will be a big development in the coming years,” predicts Jensen.
Mobile figuring big time
He is clearly not alone in looking to utilise mobile devices to enhance the shopping experience for customers (and to allow retailers to collect rich data). Ebay already generates significant revenues from mobile and tablets and Clare Gilmartin, vice president of Marketplaces at eBay Europe, says the rise of their use has “changed things fundamentally”.
Whereas on a desktop, shopping was concentrated on weekends and evenings and the average number of visits was 1.5 times per week, on mobile devices shopping volumes are consistent through the week and visits number five to six per day. “You have to think differently about how you merchandise, and customers expect things to be updated constantly on the site,” says Gilmartin. *Click here to register your interest in the Retail Bulletin’s 3rd Mobile Retailing Summit, 24th September 2013.
