Special Retail Bulletin report from the BRC Retail Symposium 2012
Many retailers responses to the internet have been slow and now the same is happening with mobile technology. But a number of retailers recognise the opportunity rather than the threat of these new channels and they are the businesses positioning themselves for a bright future. By Glynn Davis
Speaking at the BRC Retail Symposium 2012 in London this week Simon Burke, chairman of Hobbycraft, asked delegates: “How did online retailers operators take on and beat so thoroughly the bigger, better-funded retailers? By the time they’d noticed the competition it was too late. They lived and breathed online...whereas many [traditional] retailers grapple with online and how to integrate it.”
Don’t miss out on mobile revolution
He warns that mobile will be the next “revolution” that retailers could see as another threat whereas it should be regarded as an opportunity that could be used to the benefit of their physical stores.
“The majority of the retail community’s response to this technology has been slow. Some of the characteristics of mobile are the same as online and it’s moving along an exponential [growth] line,” he suggests.
While Burke says many retailers are “held back by fears of new channels not being profitable or cannibalising store sales” there are a number of merchants that are grasping the opportunity. Among them is John Lewis that now derives 25% of its sales from non-store channels.
Andy Street, managing director of John Lewis, says the company’s response to growing online sales is a bricks and clicks strategy, which has led the company to developing three formats – its traditional 150,000 sq ft flagship regional stores; At Home, which are a quarter of the size of the full department stores, and prompt an online sales uplift in their catchment area of 40% when they open; and a new ‘small full-line department store’ at 70-100,000 sq ft, with the first due to open in Exeter in October.
Bricks and clicks approach for John Lewis
The latter is the most definitive response to the bricks and clicks approach, as Street says: “The full offer is put in less space, which can bring us into secondary cities, and will cement our view that we understand how to link bricks and clicks.”
John Lewis is also rolling out of a Click & Collect service utilising the sites of its sister company Waitrose, and Street revealed to delegates at the Symposium that the company was also planning to partner with other retailers to use their stores as Click & Collect points.
This type of service has also been part of the omni-channel strategy at Aurora Fashions, which is another retailer that regards new channels as an opportunity to grow. Mike Shearwood, chief executive of Aurora Fashions, says the approach has been to develop any operational “mutations” rather than kill them and that these have led to some of the company’s most successful innovations.
One of these was to leverage the store base, which has led to it offering a 90-minute delivery option at 95% of its stores. The next innovation was ‘Anywhere Everywhere’ that translates into shipping from stores whereby each outlet has a daily batch of online orders to be fulfilled.
Shearwood says ongoing projects involve mobile, social media, and personalisation/localisation are having to “happen at pace” but he states that this is necessary because the customer is demanding such services.
Despite each involving various technologies he believes it is “the harmonisation of minds in the organisation that will be the hardest part, more so than dealing with technology.” But such efforts will be worth is as people are such a vital component of any retail business.
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People remain vital component
Nobody exemplifies this thinking more than James Timpson, chief executive of Timpson, who says: “They are absolutely the key to our business as we’re a customer service business. I’ll take 50-60% more money in a store with a good manager.”
Uniquely, one in 20 of Timpson employees have previously been in prison, partly because he works on recruiting solely on personality and has found some “crackers” in prisons. “We don’t even look at CV’s because most of them will be fantasy,” he adds.
To retain their loyalty the company offers very generous perks including days off for certain Birthdays and access to the company’s holiday homes, which Timpson says all ultimately helps the business: “If we’re good employers then our employees will be good with customers.”
This is also recognised by Richard Reed, co-founder of Innocent Drinks, who highlights ‘people’ as one of the five key lessons he has learnt from building Innocent into a global brand. “Get world class people. Things start to go right or wrong with recruitment. At Google the founders still sign-off new hires. We look for people who think like entrepreneurs,” he says.
His other lessons are: have a core mission, which helps drive motivation and the direction of innovation; don’t underestimate the effect of packaging; continually ask the customer for their feedback; and ethics helps a business to be innovative.
Don’t forget ethics
Peter Marks, chief executive of The Co-operative Group, knows all about ethics as it is an underlying pillar of his business: “We try as hard as possible to be ethical but it’s a nebulous subject and means different things to different people. But any business that ignores their social purpose will be in trouble.”
He suggests there should be a recognition and focus by all businesses on the impact they have on their local communities, as well as on society as a whole, because this will become increasingly important in the future.
Another business with ethics and sustainability in its ethos is Hotel Chocolat that has developed a vertically integrated model, which incorporates a cocoa growing estate in St Lucia, which helps ensure the growers are treated fairly.
The company has also developed its offer through its Roast + Conch concept in London and a restaurant will follow as Angus Thirlwell, owner of Hotel Chocolat, says: “The paradox of aspirational luxury brands is you have to limit them. We have to develop it without splashing around and also not making it ubiquitous. The strategy for the UK is to not multiply the store number but to deepen the relationship.”
Overseas increasingly important
Another plank to his expansion plan is overseas stores, with the first unit due in Copenhagen. It is a Roast + Conch that will have small batches of chocolate made on the premises. With so many projects on the go Thirlwell says it is a “constant juggling act so out of 10, four of them will succeed amazingly well while the other six will likely have different levels of success”.
For Ian Cheshire, chief executive of Kingfisher, the skill is to back the winners, which is the strategy he employs for the company’s international expansion: “You can’t be successful everywhere. At some point you have to decide where you should be. We’ve chopped out five countries, including Canada and Italy, for different reasons. You need to take a hard look and focus on the key markets.”
This is one of the key lessons from his many years of expanding overseas, which remains a major part of the Kingfisher growth story, and is also proving to be the case with an increasing number of other UK retailers.
“There is an imperative for international growth that wasn’t there 20 to 30 years ago. The reality now is that there is a need for an international dimension otherwise you are limited [in the UK market] and there is growing competition from global players. International is not an option because if you don’t go to the world, the world is coming to you,” he explains.
But Cheshire adds that all retailers with overseas ambitions should accept the fact that it is “unbelievably difficult to make money”.
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