The Great Retail Migration

Community Update Faces - 9 July 2013The exam question for traditional retailers is: ‘How do you devise an integrated model that reinvents the customer relationship without destroying the existing one?’ A polite answer might go along the lines of ‘painfully’, as the transition to multichannel requires heavy investment, an unsentimental approach to change and a way of interacting with customers that continues to be swathed in unknowns.

Debbie Hewitt, Non-executive Chairman of UK menswear specialist Moss Bros Group, says that “retail management required single dimension thinking ten years ago and that has changed significantly in recent years; it’s much more multi-faceted now”.

Customers want more than just neatly stacked shelves. John Allan, Chairman of electrical goods chain Dixons Retail, comments that the financial situation has made “customers more price-conscious and that’s probably increased the tendency to do more research, make comparisons and use the internet for purchases”.

Debbie adds: “Successful retailers have to be more analytical and understand consumer buying behaviour, retention and loyalty, alongside price. There are so many different buying channels and the interaction between them all is vital to managing customer satisfaction and customer profitability.”

It’s led to a rethink about bricks and mortar, online, supply chains and brand. Alan Giles, Chairman of clothing brand Fat Face, says: “Most retailers are still struggling to provide a truly seamless experience for customers across multiple channels. The constraints of legacy systems and organisational and cultural barriers are gradually being overcome, but for established retailers there is no instant solution.

“Many retailers have too much physical space, so it is important to engineer more flexibility into leases and find ways of either reducing or making better use of existing space.”

Matt Crosby, Director at global management consultancy Hay Group, says: “What you do with your stores is important because they can quite quickly turn into albatrosses… You have potentially long, expensive leases, ground rent, public opinion about moving into locations, or public objections about leaving an area because of the negative impact it might have locally on a town centre.

“So where should you have a store and what should that store experience be? Will stores become a brand experience, a shop front for what is essentially your e-commerce offer? Or something else – a different retail mix entirely?”

Bricks, clicks and a cuppa

There are plenty of examples of retailers mixing it up, from the way pet-shop chain Pets at Home utilises its space within its stores to include grooming salons, veterinary treatments, health checks and nutritional advice, to the hipster assistants in Apple’s retail stores with their remit to provide detailed product knowledge. Another example of the drive to be different can be seen with pop-up shops, whereby landlords with empty space allow retailers to temporarily move in and try out new ideas.

Naomi Wells, Head of Future Planning and Sustainable Development for the retail chain Waitrose, which is a part of the John Lewis Partnership, says: “We launched a unique membership card last year which recognises and rewards customers with tailored promotions and experiences, including a free coffee or newspaper every time they visit a branch.

“It has been hugely successful in giving customers [an added] reason to visit stores… Consumers are not as brand loyal as they [once] were and retailers are really having to entice, value and… look after [them].”

Rachel Barton, Managing Director of Accenture’s Sales and Customer Services division, says: “There’s an opportunity for stores to go through some kind of reinvention to embrace the latest technology that is available right now, and make stores interesting and exciting places which have seamless integration across channels.”

As can be seen around the UK, if stores are in undesirable locations or simply don’t warrant heavy investment, retailers are exercising break clauses or letting leases run their course. Other alternatives include creating a ‘click-and-collect’ service, sub-letting the space or creating exclusive showrooms. Time will tell whether some of these ideas are borne from inspiration or desperation, but clearly they demonstrate the need for a dramatic flight from the old school of retail.

“The downturn has forced retailers to push on with digital strategies and those retailers who don’t have a well-thought through digital strategy are basically dead in the water,” says David Soskin, Chairman of SEO specialist Smart Traffic and Non-executive Director of price comparison website Mysupermarket.

John says: “It’s learning to live with the internet and seeing it as a positive asset to building a business and a relationship with customers. For the store portfolios, it’s about recognising that because of changing shopping habits – particularly internet shopping – you don’t need as many large stores as would have been the case historically. That, of course, leads to pressure on high streets and some of the weaker shopping parks and centres.”

Retailers are broadly in agreement about where they need to be strategically, it’s how to get there on an operational level that remains a matter of interpretation. What the upheaval has done is remind everyone that unless you focus on the customer, you really don’t stand a chance and that means you have to work feverishly hard at winning their loyalty.

I hope to see you soon.

Matthew

https://twitter.com/criticaleyeuk

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