Last week was the third and final Economic and Social Research Council (ESRC) retail workshop which has been held at Nottingham Business School on all occasions. This initiative has brought together academics, practitioners and industry thought leaders to see how academic/business partnerships can have an impact on retail. There are some great projects people have been working on from Fair Trade Gold to Fashion sizing apps to feeling fabric through an ipad to transacting in-store by just walking through the door. A room full of very bright people (present writer excepted!) with some innovating ideas that have become reality in many cases over the three workshops.
Alan Giles, Associate Fellow at OXIRM and a seasoned retailer himself introduced the day and what he said was so good that I would like to share it with you as it accurately sums up the challenges retailers face in being both relevant and profitable in the 21st Century!
Alan broke his talk down to a number of key factors that are creating opportunities and problems for retailers and these include’
- Growth in economies and consumer spend is hard to come by with the UK looking at c.2.2% growth annually from 2014-2025. This is a slim figure and therefore to attract sales you have to be more efficient and more desirable than ever before.
- Technology is massive and is empowering, enabling and disrupting everything from manufacturing to supply chains to retailing to customer engagement.
- Internationalisation has been seen by many as the way to grow as growth has taken off in the emerging economies but this is much harder than you think. Just ask Tesco and Kingfisher!
- Retailers are faced with a legacy infrastructure. Just look at Tesco Extra with 247 stores with over 17,000 sq m of floorspace which equates to 47% of their total footprint!
- Whilst populations are growing the main growth is from an ageing population where we are now seeing more people over the age of 60 than under the age of 50.
- The millennial consumer is very different from anything before and they have serious spending power with 2.6BN aged 12-32 globally. These people are never offline but also require hand holding in making decisions more than ever before.
- Consumers are multi channel (I call this total retail) where they are channel agnostic as each one serves a purpose. 78% of purchases are made using both on and offline channels.
- Purchasing models have changed and for those of you old enough you will remember renting your first TV from Granada Rentals and this has come back agin but in the form subscriptions, sharing and renting. Just look at what has happened to the music industry and what might happen in the book industry. Alan had a great stat that the average new power drill you buy in a shop is used for less than 20mins in its entire life! (I can relate to that!)
- McKinsey has done quite a bit of work in this area and they put it down to the four Ps – Pervasive, Participatory, Personalised and Prescriptive.
- The technological revolution is not everywhere (for example smartphones are not everywhere in France) but in the UK there is a move from tablets to smartphones BUT the conversion rates are much lower than tablets which are much lower in turn to desktops.
- A big issues in the market is that less than 20% of retailers have a single view of the customer which makes customer delight near on impossible.
- Technology enables geolocation, personalisation and recognition which may or may not be to everyone’s liking but an example of where it is done well is Shopdirect where they have a personalised home page for every customer. Amazon are also clearly very good at directing personal offers to you based on what you have viewed and bought.
- All of the above present massive data challenges which most if not all retailers are ill prepared for
- Space and formats are also changing significantly and the changing face of the UK grocery market is testament to this. From the weekly shop the average number of grocery trips by consumers has increased to 24 per month with Aldi now having higher sales densities than any of the top 4 supermarkets having increased them to £1,075 psf today. Whilst convenience store roll outs are the hot news in the UK, we are still outside the top 15 global convenience markets.
- So what of the future as now we are in an era where the customer really does control all and size no longer matters when it comes to vulnerability to changing fortunes – Woolworths was the first recent (2009) real retail testament to this.
The real challenge lies in how to better understand the consumer but how much do they want to be known by you the retailer and what’s in it for them? No longer can you pigeon-hole people and many of the gravity catchments of old are no longer fit for purpose as Ian Thurman (recently retired from CACI) made clear in his blog.
The new buzz words are CONVENIENT, INTERNATIONAL and EXPERIENTIAL
now there’s a challenge to ponder when you have hundreds of shops, thousands of staff and lease obligations out to 2030 and beyond!