The Physical Attraction of Retail

Comm update_11 June3Traditional retailers are working hard to make customers fall in love with stores all over again. If affections are to be won back, it will entail providing a more blended, personalised experience, whereby mobile presents the opportunity to send tailored offers and discounts, while the store itself becomes a place for shoppers to evaluate products with their own eyes, consult experts and socialise.

Stephen Smith, Chief Customer Officer at supermarket chain Asda, says: “The work we are doing around reinventing our large store formats is important for long-term growth. People are making fewer visits to large stores so we’ve got to continue to invest in the physical space and give people reasons to shop in store… [which means] making that physical space work as hard as possible for us. After all, it’s still what drives the bulk of our sales and profits.”

Customers will choose to visit a physical store if it means they can have an experience, either service or product led, which is not available to them online. Gary Favell, CEO of retail concern Bathstore, comments: “In our sector, customers want support, advice and guidance. We offer a personalised, full service solution through ‘service by design’, which can only truly come to life face-to-face. Our website educates customers about [this service], then signposts customers into the store.”

Naomi Wells, Head of Future Planning and Sustainable Development at Waitrose, part of the John Lewis Partnership, says: “You’ve got to make sure you are constantly introducing new experiences for your customers. For example, in our York branch of John Lewis, we’ve partnered with Hotel Chocolat to open a cocoa bar café in the store. Then there’s our tie-up with [luxury travel operator] Kuoni, which offers concessions inside our Oxford Street department store… we’ve also introduced a dry cleaning service in our Waitrose branches and extended our click-and-collect service so that it operates between both John Lewis and Waitrose stores.

“It’s about those extra offers you can deliver that encourage the customer [to shop in a physical store]… They can get everything on the web, so when they come into a shop they are looking for an experience, rather than a transaction.”

Pushing the boundaries

It’s clearly in traditional retailers’ best interests to find new ways to drive footfall in stores as part of their multichannel offering. After all, according to research from EY, online sales still make up just 12 per cent of total retail sales in the UK.

Julie Carlyle, Partner and Head of Retail at EY, says: “The question has moved on from asking ‘is the high street dead?’ to ‘what will the high street look like in the future and what purpose will it serve?’. Whether that’s showcasing products in stores, using space to click and collect… [it’s whatever] supports the current retail model.”

Cross-sector partnerships are becoming more important as is the ability to maximise the in-store experience through digital and the use of customer intelligence. Julie continues: “If you look at the fight for the pound spend [in retail], some of that’s coming from hospitality, some from what you would call old-fashioned retail and some from media. And I think there’s a real blurring of the lines between what is actually retail and what are other subsectors, so thinking about who your competition is has become more tricky.”

As new technology becomes available, that all important customer experience can be enriched. Take Apple’s iBeacon app, which goes beyond tracking a smartphone user’s location to estimating their proximity to, for example, a display or checkout counter in a store, in order to offer personalised discounts and special offers to customers.

Peter Williams, Chairman of online-only fashion retailer and former CEO of department store Selfridges, says: “There is no doubt that people like a bargain. And actually, if they’re being given the opportunity to buy something that’s 10 per cent off and the store they’re in just tips them, they may well take it up. So, if you can get the technology right and persuade the consumer that [in-store smartphone tracking] is accepted behaviour, then it might just have some mileage in it.”

Other companies moving in this direction include European property developer Hammersons, which introduced the Kudos loyalty app last year to enhance the multichannel experience for the retailers it houses. Steve Muylle, Professor and Partner at Vlerick Business School, and a Criticaleye Thought Leader, explains: “[Kudos] fires discounts for a meal or a coffee at customers after they were in the store for a while, making them rest and enjoy the break, so that they can continue shopping afterwards. The app also tracks their movement.”

Of course, the use of this technology needs to be carefully judged. Julie comments: “Retailers need to strike a balance between being able to find out data about their customers and guide them in the right direction without inundating them with offers or getting to the stage where customers are actually a bit worried about… [the retailer] knowing everything about them and following them around.”

Hayley Tatum, Senior Vice-President for People at retailer Asda, comments: “Customers just want convenience, which means shopping on their terms, in their way, however it suits them. It’s vital to make sure that physical stores remain relevant to what customers are interested in… whether that’s to browse or meet friends, so it provides a hub, a meeting centre and a purpose for people to visit.”

Ultimately, this is what creates loyalty. As Steve puts it: “Retailers that support the consumer decision journey with the right offline-online combo will certainly have the competitive advantage.”

I hope to see you soon.



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.


The Great Customer Obsession

The power of the customer is growing and the businesses that can’t provide top quality service across multiple channels are being cruelly exposed. In this complex environment, world-class competitive advantage belongs to the alchemist CEOs who make the customer the focal point of the whole organisation.

Steve Pateman, Head of UK Banking at Santander, says: “You have to be focused on delivering an exceptional level of service to your customers, in every product and interaction. You cannot afford to be slack, because as soon as you are, two things happen: one, your customers move, because there are so many options, and two, your shortcomings become widely publicised.”

This is posing a number of questions for companies. Bridget van Kralingen, IBM’s Senior Vice President, Global Business Services at IBM says: “CEOs are reporting that technology is changing, from back office transactional support to really enabling connectivity with customers and clients… [However,] it has put a lot more power in the hands of the consumer. If you look at social media, there is no such thing as the corporate veil anymore.”

It goes way beyond the old mantra of ‘listening to your customers’. Chris Merry, CEO of accountancy firm RSM Tenon, explains: “The voice of the client is important to everyone. You need to filter feedback through the business to provide your people with the material to help them communicate effectively.”

Get connected

For many organisations, the issue is that, as they’ve grown and technology has evolved, various silos have emerged which frustrate customers and inhibit decision-making. In fact, recent research from IBM suggests that although a large number of UK and Ireland CEOs (63 per cent) agree that customer relations is a key opportunity for sustained success, three-quarters of them feel they need better information to make that happen.

It’s about those at the top being able to drive strategy by making informed decisions. Stephen Leonard, IBM’s UK and Ireland CEO, comments: “Around 40 per cent of CEOs are saying they don’t have access to the right amount of data they need to make decisions, let alone the decisions that other people in their organisation need to make… [Success is about] arming people with the facts.”

After all, data has to be acted on for it to be effective. Jim Waller, Group Commercial Director at Carphone Warehouse, says: “The issue is just making sense of it…  It comes in from lots of different sources and is a complete scattergun… What’s important is being able to interpret that data, and its implications.”

Bridget says: “In terms of how you lead an organisation, one of the key differences between overperformers and underperformers is how much data is embraced – the drive to access it, analyse it and act on it… There is so much out there about your customer that is unstructured and needs context and analysis, and now there is the means to do that in real time.”

When you have the data, allied to the perennial ability to get out there and find out what’s happening on the ‘front line’, you have a winning combination. Henri Winand, Chief Executive of clean power technology company Intelligent Energy, says: “If you are a CEO who never talks to your customers, then you won’t have the insights, and can’t organise your business in the way you need to. Without insights, it’s difficult to do good business.”

Steve certainly likes to take a hands-on approach, as can be seen by the way customer feedback is handled at Santander. He says: “Complaints are the best perspective on your business… I read all of those that reach executive level and will personally send them to the relevant business head to find out what will be done…

“Originally, annoyed staff asked why I was interfering when the complaints team were designed to deal with these things, but it has actually started to change the way people engage with complaints… Now we are starting to get a sense of ownership… they look at them, understand what went wrong, and they make sure it doesn’t happen again.”

Keeping pace with customer expectations must be a strategic priority. As we’ve seen, from Kodak to Woolworths, even the largest, time-honoured of companies can become a casualty if it is unable to understand change and adapt accordingly, whether that’s because of new products, technology or levels of service.

Stephen explains: “A lot of companies are struggling and failing; it’s not that they don’t see what needs to get done, they just don’t get it done… Think about the UK high street – in recent years it has been essential that high street stores sub-optimise their business model to get to market fast enough… [but] they can’t.”

The successful CEO will be the one who thrives in such a connected, fast-moving world.

Please get in touch if you have any comments about the issues raised here.

I hope to see you soon