Retail

Forecast

Technology

Interview

Recruitment

Raincoats ready

New kid on the block

Trading places

Train to gain

After a stormy 2011, this year is set to be

Multi-channelling is the latest trend that

Alex Gourlay of Alliance Boots on the future

The retail industry is still spending big on

just as challenging | Page 5

could be the saviour of shops | Page 9

of our high street favourite | Page 13

training despite the conditions | Page 14

business-reporter.co.uk

February 2012

Distributed within The Sunday Telegraph, produced and published by Lyonsdown which takes sole responsibility for the contents

Business Reporter · February 2012

an independent report from lyonsdown, distributed with the sunday telegraph

Retail – in this issue

Open all hours?

Figures for 2011 reveal a gloomy outlook for the retail sector. Many high street names are now applying creativity online to give sales a much-needed boost and bring customers back through their doors

By Carol Jenkins

Publisher Bradley Scheffer brad@lyonsdown.co.uk Managing Editor Lucie Carrington lucie@lyonsdown.co.uk Editor Carol Jenkins Creative Director Martin Nolan studio@lyonsdown.co.uk Sub Editor Amy Dickson amy@lyonsdown.co.uk Journal Assistant Natalie Luketic natalie@lyonsdown.co.uk Project Manager Justin Payne justin@lyonsdown.co.uk

For more information on any of our supplements please contact us: Telephone 020 8349 4363 Email info@lyonsdown.co.uk Online www.lyonsdown.co.uk

business-reporter.co.uk

All too frequent news reports announcing the latest high street name to fall foul of the economic recession have made for depressing reading for the UK’s beleaguered retailers over the past year.

Low consumer confidence underpinned by the worst recession the country has experienced in recent years has proved testing for many high street favourites that have been forced to close their doors for the last time. In 2011 alone, names such as Jane Norman, Past Times, TJ Hughes and Habitat have all succumbed to the threat of administration.

Retail commentators say increasing competition and customer choice, together with the fact many businesses are failing to stay relevant and capture the imagination of their once-loyal customer base are reasons why many household names are disappearing without a trace.

However, behind the bleak headlines lies a glimmer of hope in the form of the multi-channelling revolution.

Savvy retailers are now capitalising on the increasing popularity of online shopping and greater use of mobile technology to integrate the online and instore shopping experience.

Indeed, buying online can be a fast and convenient way to shop, but what if you are a busy professional who won’t be at home to sign for that all-important delivery? With stores such as Boots and Marks & Spencer offering “click and collect” services, and Amazon trialling online collection lockers in shopping centres, consumers are being encouraged to pick up items in store on the way home from work or on a Saturday in the hope they

just might spend more money while they’re at it.

Customers are now also using mobile technology to research their purchases while out and about, but although they use the internet for the research, they still choose to go into the store to buy their products.

With this in mind, retailers must ensure that websites contain relevant information to make it easy for shoppers to take part in the multi-channelling experience. Details of nearest stores, opening hours and up-to-date stock information are a must – and it’s something many major

Behind the bleak headlines lies a glimmer of hope in the form of the multi-channelling revolution retailers need to work harder to achieve or risk facing losing customers forever.

While it is now common practice for senior retail managers to visit their stores to ensure that customer service levels are high, how many managers actually go online to inspect whether their websites deliver the same levels of service?

There is no doubt that multi-channelling is here to stay, and the retailers who get the most creative with this medium are the ones with the most secure long-term futures.

The irony is that the medium many retailers once feared could spell the end of the high street as we know it could turn out to be the very medium that saves it from extinction.

Contributors Carol Jenkins is a journalist and editor with experience writing for numerous publications including local, trade and national press. She has contributed articles in subjects ranging from retail, lifestyle and wider business and marketing issues.

David Burrows is a freelance business and environment writer. He has written for the likes of Marketing Week, The

Grocer and Sustainable Business and is also editor-in-chief of Grocery Footprint.

Linda Whitney is a national newspaper journalist with experience in writing in retail and marketing and has followed developments in retail technology since the early days of electronic funds transfer.

3

183

is the number of retailers that fell into administration last year P5

51%

of consumers who shop online would like the option to pick up goods instore P8

59,000

is the number of orders that were placed via M&S’s mobile-enabled site, a year after its launch P9

£1,275

is the average amount that retailers invest in training for every employee P14

Supporters

Business Reporter · February 2012

4

an independent report from lyonsdown, distributed with the sunday telegraph

Industry view

Seconds out It may look pretty but a slow-loading web page can drive your customers away – and they may never be back Worried your customers might not have time to visit your shop? No problem; your website will provide them with an opportunity to browse at their leisure and buy in the comfort of their homes and offices, won’t it?

If that’s your view of online shopping, you are wrong on two counts and your business is probably missing out on a lot of sales. Online shopping is anything but leisurely and you should not assume those doing it are at home or work.

Currently, 57 per cent of people who visit one of your web pages will leave if it takes more than three seconds to load. This is a significant shift from the early days of the web when designers were told pages should load in under 10 seconds.

Our impatience with slow sites is a product of faster connections. Another consequence of widespread broadband, however, is a tendency among retail website developers to load pages with bandwidth-intensive features.

In 1995, the average size of a web page was just 14 kilobytes but by the beginning of 2010 it had ballooned to just short of 500. Such pages may render quickly in a London-based web design studio but don’t take it for granted that all your customers will get the same result.

As reported at the time, some rural broadband connections in the UK in 2010 were slower than a carrier pigeon. It is far from certain that these links have improved much since.

And if you are counting on a lot of international custom, you should be aware that few foreign

countries have even the speeds that we do in the UK (the pigeon-versus-broadband race was inspired by a similar stunt, and result, in South Africa).

Furthermore, it is important to bear in mind that an ever-greater proportion of your customers are no longer accessing your site over broadband... or using a computer.

A recent study by eDigitalResearch and retailers group IMRG showed 8 per cent of consumers use tablets such as iPads as the main way of getting online. And ABI Research says mobile commerce will account for 12 per cent of all e-commerce by 2015.

This means your fancy web pages are increasingly likely to be sent via a device they weren’t intended for, on a connection they weren’t designed for, to someone who has an attention span of a couple of seconds. But it gets worse.

Of those many customers who will abandon your site if it doesn’t appear on their screen in a couple of seconds, 80 per cent will never return.

And almost half of those could go on to tell others about their negative experience.

And it’s not only human visitors that are turned off by poor website performance.

Your search engine ranking is also affected by how quickly your pages load; a slow site could be relegated to beyond the first page of search engine results where only 28 per cent of shoppers will find you.

The good news is there are now tools that

Eight per cent of consumers now use tablets to access the internet

can help.

For example, Level 3’s Site Transformer is completely integrated within its content delivery network, which re-renders your pages on the fly.

The result is optimised pages for whatever device or browser your customers are using, speeding up page delivery and improving usability.

And there may be other ways you can improve site performance.

But if you need to think for more than a couple of seconds about whether your page download speeds need reviewing, just remember: that’s more time than your customers will give you.

Derek Gough is director of product management at Level 3 0800 496 1000 www.level3.com

Key to success is connectivity A seamless shopping experience through all interactions with a retailer is integral to keeping the modern shopper happy

Helen Slaven of Torex believes connectivity is vital

Driving growth through a greater share of consumer spend and new customer acquisition (while keeping an eye on controlling costs) is prevalent in most retail boardroom strategies. But, with low consumer confidence driving promiscuous shopping behaviour, fuelled by instant access to price comparison via mobile phones and search engines, it has become essential that retailers identify and consistently deliver the value that differentiates their brand.

Tactical developments to initiate multichannel interactions have helped to protect revenues and income streams. Now the need is to synchronise the channels so that the whole is greater than the sum of the parts. The objective is to deliver consistent brand experience and value at each consumer touch point – whether it’s online or in store – while reaping the cost benefits of a consolidated supply chain, with one heart beating at the centre of the organisation.

With limited opportunity for growth in the domestic UK market, attention is naturally drawn to the opportunities in countries where the aspirational middle classes are expanding, opening up yet more channels to market either in physical stores or local e-commerce sites. Companies such as Mulberry, Reiss and Hunkemöller have

recognised the international appeal of their brand and mobility of their customers and are already working to implement common business processes to provide a local yet consistent customer experience.

Unlocking the potential of data held in silos around a business to provide the coveted single version of the truth across the channels and geographies has many benefits. The customer experience is enhanced by recognising the cross-channel buying habits, analysing preferences, locating stock from anywhere in the business for order fulfilment to avoid lost sales, and personalising the service.

This is matched by behind-the-scenes cost efficiencies in stockholding and transportation, full price sell-through, trend identification and improved staff utilisation.

A common misconception is that either wholesale replacement or significant changes to the existing technology architecture is required to achieve this synchronisation of the channels. In reality, many of the systems in place serve their function adequately and don’t warrant the risk of destabilising the business by changing them all at once. A flexible and agile workflow engine at the heart of the business, controlling and adapting processes according to operating decisions

based on market conditions, means customers can benefit from a retailer’s unified capabilities and also means the system changes can be paced with the behind-the-scenes organisational changes.

Store and multi-channel solution specialist Torex is working closely with many leading retailers to provide the central hub that controls dynamic business processes and synchronises the channels while allowing operational changes to be made by the retailer’s team, at any time.

The resulting central view of all stock, orders and customer data transforms an organisation’s ability to serve customers, wherever they are, and smoothes the purchasing journey as they move between channels.

Operational excellence in unifying channels is highly important in the world of the savvy shopper. Successful retailers will be those agile enough to move quickly in response to market conditions and deliver innovation in tune with their customers’ desires, while managing their back-office processes and costs. Most importantly, their customers will experience a synchronised heartbeat however, and whenever, they engage.

Helen Slaven is vice president retail at Torex. info@torex.com

Business Reporter · February 2012

an independent report from lyonsdown, distributed with the sunday telegraph

Retail

5

The storm clouds are gathering Despite respectable Christmas trading figures the British retail industry is still in the doldrums, with minimal growth reported for 2011

By Carol Jenkins The fact that UK retail sales values were 2.2 per cent higher on a like-for-like basis from December 2010, when the snow caused sales to fall by 0.3 per cent, brought little relief to pressured retailers.

Whole year figures show minimal growth in 2011, with the British Retail Consortium (BRC) describing it as a “pretty miserable year”.

According to BRC figures, food sales growth picked up and non-food also improved – but with sales often promotion-led. Clothing and footwear showed good gains on December 2010 sales.

Homewares improved but big-ticket items and furniture sales remained down on a year ago.

Non-food, non-store (internet, mail order and phone) sales growth picked up sharply from November’s low. Sales were up 18.5 per cent on a year ago, double November’s gain, but similar to the 18 per cent in December 2010.

Although retailers enjoyed a much-needed boost over the Christmas period, BRC figures suggest this was temporary. Total retail sales were just 2.1 per cent higher in January than the same month a year ago, making it the second-worst January since the BRC sales records began in 1995.

“A better-than-hoped-for December closed a relentlessly tough year for retailers,” said Stephen Robertson, director general of the BRC. “For many customers, economic reality has bitten again since the new year, and with consumer confidence returning down to levels last seen during the recession, 2012 is expected

to be an equally challenging year.”

Last year saw 183 retailers fall into administration, including familiar high street names such as Jane Norman, Oddbins, Habitat and TJ Hughes. Furthermore, as insolvencies hit the shops harder than consumers did, the average high street vacancy rose to 14.5 per cent in January.

The BRC has written to the government to lobby for greater support for retailers. It is objecting to the proposed rise of 5.6 per cent in business rates this spring which it estimates would cost the retail industry £350m. The proposition by the government has been met with contention, and with 10,000 town centre shop closures in

“A better-than-hoped-for December closed a relentlessly tough year for retailers” – Robertson the past two years alone, it is feared it will lead to more shops shutting their tills as business owners already struggle to meet rising costs.

London calling In London as well-known UK businesses close their doors for the last time, international companies are quick to take their place. London’s West End is proving an attractive opportunity for companies, especially from the US, with big-name brands vying for premium pitches

VACANCY RATE%

England vacancy by size of centre*

Average

40.0

Small Centre

35.0

Medium Centre

30.0

Large Centre

25.0 20.0 15.0 10.0 5.0 0.0

* Over 700 high streets and town centres monitored for three years.

Source: Local Data Company

in Oxford Street, Regent Street and Bond Street.

The West End is now a strong global market says Anthony Selwyn, retail director of Savills London – and international retailers are prepared to pay premium rates to secure the best pitches.

“Retailers are becoming more specific about where they want to trade and they are looking at where they are confident about doing the best business,” he says.

“We have seen international interest rising over the past few years and we predict this trend

will only increase.”

US clothing chain Hollister paid £10m for a prime Regent Street location. Other US names such as Forever 21 have opened up stores in Oxford Street, with Victoria’s Secret expected to make the trip over the Atlantic later this year.

Selwyn says that US retailers who are looking to expand into Europe and the rest of the world see London as an important first step in their plans.

Retailers are also becoming more creative about their shop fits in a bid to entice more customers into their stores.

Success stories Retailers Timpson and Homebase are bucking the downward trend and showing promising growth by championing innovation While many smaller high street names are struggling to continue trading in the current economic climate, Timpson is thriving with 30 new stores opening last year and 70 planned for the year ahead.

The family-run business was set up in 1865 by William Timpson in Manchester as a cobblers. It has now established itself as a familiar high street name offering key cutting services, engraving and, more recently, watch repairs – it is now the biggest watch repairer in the UK. The company reported an increase in like-forlike sales in December by 17 per cent, according to chairman John Timpson. His son James has been chief executive of the company for the past ten years, during which time he has helped grow the business five times over.

Despite still proving a formidable force on the high street, the company has teamed up with Tesco and Sainsbury’s to open up shops within their stores. There are now 35 Timpson stores in branches of Tesco, with more being planned for the coming year, and 50 stores in Sainsbury’s across the country.

John Timpson explained that as 85 per cent of sales come from offering a service rather than a product, the quality of staff was vital to its success.

“We are conscious that we have to pick the right people and invest in their training from the outset

as they are our most important currency,” he says.

The company runs a successful apprentice scheme where it trains 500 people a year. It has also set up a groundbreaking scheme where it trains and employs ex-offenders to provide them with a job and a fresh start when leaving prison.

Despite the fact that housing transactions are half what they were at their peak, DIY chain Homebase is confident of its long-term future. It has refitted a store in Aylesford, Kent, with stateof-the-art technology to allow customers to plan and design their own rooms. It has also employed interior designers to be on hand to provide expert advice. Customers can also access the service online and plan their rooms at home.

Managing director Paul Loft acknowledges that staff in his stores need to be properly equipped with the knowledge to provide advice to customers and to offer a service rather than just products.

“We want to provide a dynamic and interactive service where staff and customers are supported by technology,” he says.

Homebase has also launched a decorating service for the first time as well as an upmarket kitchen range called Odina, which it hopes will appeal to the mid to upper market.

“The long-term future of Homebase is strong.

We are still a relevant brand in the marketplace,” says Loft.

Business Reporter · February 2012

6

an independent report from lyonsdown, distributed with the sunday telegraph

Industry view

Show me the multi-channel money More and more businesses are developing multi-channel strategies but are they doing enough to ensure that their investment will pay off?

For many retailers the high street is no longer their sole battleground. These days, it’s a multi-channel arena.

Retailers are using email, mobile, social media and the web to capture customers’ attention and build a relationship with them. But are retailers utilising technology effectively to boost the return on their investment (ROI) from their multi-channel offering?

Email has long been used to communicate regularly with customers but, in a battle for the inbox, how do you stand out from the crowd?

Personalisation and managing customers’ preferences is essential to creating dynamic email campaigns, which give recipients added value and drive additional revenue. Discovering what they are interested in and even the time of day customers want to receive messages can raise the ROI of these campaigns; a timely sales recovery email can boost online revenues by more than 5 per cent.

However, retailers who rely on email alone are missing the real opportunity to capture the digital consumer.

And 2012 is the year for mobile.

More customers than ever are buying and using smartphones to interact with brands and purchasing through m-commerce. But fewer than 5 per cent of retailers have the kind of mobile-optimised site which would help them to capture some of this £1 billion a year market.

Mobile is becoming an important connection

between online and in-store. Text data capture enables customers to sign up for a digital relationship instantly in-store, while service-based text messages are a proven success, whether it’s updated delivery times or special offers online or in-store.

Sending these service messages directly to a targeted customer base can boost ROI and improve customer satisfaction. For example, a leading opticians used servicebased text messaging to save £1.5m per annum in missed appointments. The sky is the limit with mobile with mobile apps, NFC mobile payments, QR codes and mobile ads all on the rise.

More of us are spending more time on our smartphones and spending hours every day updating our status or tweeting about everyday events. It is a customer base that is accessible for retailers but, so far, few have started the conversation. Profiles which contain great campaigns, exclusive competitions and social commerce provide customers with multiple engagement opportunities and an instant chance to buy.

Social commerce is a tangible revenue stream which justifies the social media spend. We all understand the importance of including social media in our brand offering but when combined with innovative email campaigns, it can be much more powerful and engaging.

Retailers need to lead the charge on utilising digital channels to boost revenue with innovation and creative campaigns. Currently, they may be using various areas of digital but are then failing to integrate them to enhance the customer experience with one multi-channel offering. Retailers who offer free in-store Wi-Fi increase their ability to interact with customers in-store.

Everywhere you look there is an opportunity to be digital, whether it is in-store sign-ups, service-based messaging or even digital store-fronts using QR codes.

Higher engagement with customers leads to increased brand loyalty and greater incremental revenue, so ultimately boosting ROI. Retailers should be looking to improve visibility of the brand across the key digital channels of email, mobile, social and web. By offering added value, additional product recommendations and the opportunity to communicate at every point, they can ensure that those who are looking to buy have every chance to do so.

Ultimately it is important to enable customer relationships to build via many channels. In a digital world, retailers that are not operating with a multi-channel offering really are missing a trick.

Kirsty Burkill is multi-channel consultant at Communicator Corp 0844 870 8971 www.communicatorcorp.com

A new era of online regulation New rules governing online sales, advertising and data use present fresh and immediate challenges for businesses Growth on the high street remains subdued, with retailers enduring the tightest squeeze on consumer spending in a generation. Yet, market analysts report astonishing growth in online retailing. Last year saw online retailing grow by 16 per cent, making it worth a substantial £85 billion to UK plc.

With growth comes increased scrutiny from the regulators. We are seeing a swathe of new regulations taking shape, from the Common European Sales Law to the Advertising Standards Authority (ASA) playing catch-up on the largely unregulated online world. In conjunction with the stronger regulation of data usage, it means that retailers must be alert to risk and take action to minimise it.

According to the EU, about 53 per cent of the population buy goods online from UK businesses whereas only 9 per cent feel comfortable doing so from businesses based outside or sometimes inside the EU. With billions being lost as a result, the EU has attempted to find a solution by proposing the Common European Sales Law. It aims to ensure that the consumer will know exactly what their rights are, whether their transaction was in Lisbon, Lyon or London.

With specific pre-sale information to be provided by the retailer and an expanded range of pre-defined remedies for the consumer if something goes wrong, the new law aims to boost demand. Therefore, it is vital that retailers begin to think about if, and how, they will adapt to this framework.

Hilary Ross of DWF discusses the challenges of online regulation

As this change looms, retailers must battle with increased social media regulation. Mars was one of the first big businesses to bear the brunt, being investigated for paying celebrities to post photos of themselves with a Snickers bar on Twitter. The ASA will only get tougher, so it is important retailers understand what they can or cannot do when utilising social media for marketing.

Linked to this is the use of customer data, which is vital to the success of most brands and plays an important role in online marketing. Cookies offer an easy way to track what a consumer is doing, both on a retailer’s website and elsewhere, and this data is to directly target adverts based on browsing history. Cookies not necessary for the running of a website require consent from the user before they can be downloaded,

though this rule will not be enforced until next year. Similarly, traditional data protection rules regulating sign-up forms on almost every brand website or prize draw are being tightened with fines of up to £500,000 for breaches.

Simple mistakes also cost, particularly pricing errors. A misplaced decimal point on an item’s price tag can cost retailers dearly. It is more complicated where there are multiple offers running simultaneously that don’t state they cannot be used in conjunction with any other offer. It can then be possible for consumers to achieve huge discounts, and it is far more legally challenging to argue that these discounts were offered in error.

Regulators are turning their attention to the online retail world. This year is already being marked by increases in regulatory risks. It has never been more important for retailers and legal experts to work closely together to ensure that forthcoming legal frameworks encourage consumer demand.

As this new tech-savvy regulatory environment develops, retailers need to review compliance, horizon scan and undertake regular legal health checks. Only a legally robust e-commerce structure will provide a platform for double-digit growth while serving the needs of an ever-growing customer base.

Hilary Ross is partner and head of retail group DWF LLP 020 7645 7587 www.dwf.co.uk

Business Reporter · February 2012

an independent report from lyonsdown, distributed with the sunday telegraph

Industry view

7

Learning to accelerate growth Training academy teaches why buyers must understand how to operate, and why operators must understand how to buy After 27 years, Uniserve has become the largest privately owned freight forwarding company in the UK and one of the most profitable in any freight forwarding category. At a time when the economy is about to go through something of an unpredictable storm you would think that its founder and owner, Iain Liddell, would consider battening down the hatches. But he is an entrepreneur, and an entrepreneur thinks beyond the problem – and thinks broadly.

This would explain why Uniserve is an acquisitive company with a strategy for growth and a commitment to invest 1.5m sq ft of warehousing in the new infrastructures of port centric logistics at Felixstowe and the newly emerging port of London Gateway. It explains why Liddell has developed the use of customerfocused, collaborative software to serve his customers’ visibility and workflow needs.

What it doesn’t explain is why, after 27 years of building a profitable and successful company, he is about to open The Supply Chain Academy.

Indeed, in a downturn, when the rest of the competition is trending in one direction, the entrepreneur will see a clear path in the other.

Liddell bought Upminster Court in 2007. It was originally built in 1905 for Charles Williams, a man also in the shipping industry. Williams owned the property up until the war – when it housed evacuees Upminster Court

– and after the war it passed into the hands of the local council where for the next 60 years it was treated with functional disdain. When Liddell saw the building he saw more than a property opportunity, more than a piece of beautiful Edwardian architecture, he saw a way of supporting his industry.

Liddell spent five years painstakingly restoring the building back to its original condition, achieving the sort of finishes and standards that the original owner, Charles Williams, would have commissioned in 1905 but enhancing this with the essential trappings of modern technology.

Liddell has a long-nurtured vision of bringing professionalism and high standards of technical competence to the freight forwarding industry.

The purchase of Upminster Court galvanised his ambition to develop a leading operational training facility and to offer it on an open architecture basis to the industry.

The need for logistics and supply chain training is greater now than ever before – so many importers and exporters are handicapped by an ignorance of how their own supply chains work.

The fault lines in many organisations are internal and they run deep; nothing exposes them more than a stressed economy.

Thinking and organisation continue

to be in silos in many companies and the classic mistakes are still being made. For example, buyers often achieve gross margin targets by bulk buying when the supply chain needs a controlled flow.

The unnecessary cost of supply chain assets and the pain of excessive product markdown could be fatal in today’s economic environment.

The term “The T-Shaped Manager” was first coined by Hansen and von Oetinger in The Harvard Business Review in 2001; it is used to describe the development of a capability beyond any individual’s vertical specialisation to take into account the broader, horizontal aspects of a business. Only by doing this can a business’s activity be properly orchestrated to advantage.

Liddell intends to embed this philosophy into supply chain training. “It’s desperately important for people to look beyond their ‘vertical’ skill sets and to develop that ‘horizontal’ awareness and capability. Buyers need to know how to operate and operators need to know how to buy,” he says.

In 2012, the academy will offer a combination of course content, which integrates the key elements of the entire product journey, from production to the hands of the customer. It will provide training in mastering end-to-end supply chain practice, opening up awareness of how to optimise production, inventories, flows and supply chain spend, all with the end customer in mind. In short, the academy will be demonstrating how to squeeze out the locked-up value that exists in all companies’ supply chains.

The academy, at Upminster Court, will be the stepping-stone to move from traditional training to a webbased offer and the intention is to develop an accredited diploma structure to give participants an

opportunity to gain incremental recognised qualifications.

“Too many people in supply chain and logistics do their work without any formal training,” says Liddell. “We need to establish standards of professionalism and formal qualification. If we are going to compete globally as businesses, and to grow as an economy, we have to become better and more serious about skills training and establish qualification standards and accelerate our expertise.”

Liddell is supported by a number of strategic partners in the development of the training elements of the academy and, in the early stages, will include key courses from The Chartered Institute of Purchasing and Supply, The Chartered Institute of Logistics and Transport and the British International Freight Association.

The demand is clearly there; the academy is already taking bookings before the website has gone live or any brochures have been printed.

“But I want there to be more,” states Liddell.

“The academy will host a number of executive conferences, lunches and workshops this year.

We will need to drive senior thought leadership if we are going to develop a supply chain capability in this country, which is going to drive growth.”

The plan is to bring senior players in the supply chain together with the movers and shakers in the economy to inspire action – and Upminster Court is a fine location for that.

Liddell says: “It’s a measure of how serious and important training, development and new thought needs to be in the industry, and the supply chain generally. I want to provide the best training, the best environment for reflection and the best accommodation. I want the critical importance of the supply chain to be recognised.”

01708 259 400 www.uniservegroup.co.uk

Business Reporter · February 2012

8

an independent report from lyonsdown, distributed with the sunday telegraph

Retail

Brave new world Whether it’s US chains setting up in the UK, or British firms eyeing overseas markets, many businesses are looking abroad for their next move

By David Burrows The UK market is a tough nut to crack but despite the economic woes of the past few years, those from across the Atlantic haven’t been put off.

Clothing retailer Forever 21, for instance, opened a flagship store in the capital last summer – a bold move considering the company had little experience of the UK market other than its Birmingham store, which opened six months earlier. Feedback from the London store has “exceeded our expectations”, according to executive vice-president Larry Meyer. “The UK market represents a huge opportunity to grow our business.”

Lingerie retailer Victoria’s Secret is expected to follow suit, having confirmed the opening of a flagship store in New Bond Street, while three smaller stores will be tested in other locations around London. US fashion house Max Studio has already opened a store in London.

Many in the fashion world see England as

an important springboard into the continent, but there are also UK brands that are looking to expand into Europe, or even farther afield. Home Retail Group – owner of Argos – has teamed up with the Haier Group to launch a trial store and internet delivery service in Shanghai.

Debenhams, meanwhile, wants to double its 65 overseas franchise shops within five years by expanding to nations such as India and Vietnam. It is such emerging markets, with new middle classes and new wealth, which are sucking brands in.

“Nearly every brand I see is fancying a bit of the international action,” says Tristan Rogers, CEO at Concrete Platform, which advises the likes of Gap and Debenhams on international expansion.

“With franchising a mature and well-proven formula, there are big businesses in these markets ready to nail your name on their door for a slice of the pie. Margins can be skinny, but on a cost plus model any extra sales generated are free of the fixed overhead a retailer carries in their home market with rent and staff.”

Prime spot: American retailer Forever 21 has set up shop in London’s Oxford Street

Online and on the money Ease of access, fast delivery, now even virtual changing rooms…new ways of developing the online world are paying off as sales continue to grow

By David Burrows Christmas came late for some retailers in 2011. On Boxing Day, there were 96m UK internet visits – a 19 per cent jump from the previous year, according to Experian Hitwise.

Online retailers Amazon, eBay and Asos were the big winners on the day, with UK shoppers spending a total of 13 hours on their sites.

The convenience of the web, combined with the massive discounts, free postage and next-day delivery some brands were offering, proved “incredibly tempting” for people keen to avoid the hurly burly of high-street sales, says Experian Hitwise marketing research analyst James Murray.

There was also some rather smart marketing by the big retailers using TV, radio and the web which helped drive transaction volumes. The likes of John Lewis, Debenhams and Marks & Spencer have recently reported substantial increases in their online sales, too.

Mintel head of retail research Neil Mason says some of the traditional retailers were slow off the

mark regarding online, but with some innovation and investment they are “keeping the pureplay online retailers on their toes”.

Online sales are expected to continue to grow, albeit more steadily as the market matures. And as more high-street retailers make a play for a slice of the online cake, it makes for an intriguing battleground; one in which technology will drive retailers to innovate in areas such as delivery speed, price, service and convenience.

“If you’re not constrained by bandwidth you can do some pretty clever things,” says David Tarbuck, head of multi-channel operations at Argos. Research by Verdict shows mobile shopping alone could deliver a £4.5 billion boost to Britain’s economy by 2016, and a further £13 billion by 2021.

Online already has its own retail success stories. Take Asos, which has targeted sales of £1 billion by 2015. According to product and trading director Robert Bready, apparel as a segment is growing massively, but there is a long way to go. “Sometimes we get the impression everything is bought online. Only 12 per cent of [clothing] sales are online, which means that 88

At the centre of attention From Amazon lockers to personal stylists, retailers across the country are looking at new ways to enhance the consumers’ shopping experience

By David Burrows Leading shopping centres such as Bluewater in Kent and Manchester’s Trafford Centre are working with retailers on new ways to attract customers and boost spending.

Trevor Pereira, commercial director of Capital Shopping Centres – which operates and manages 15 centres across the UK – says the key to boosting sales is to tap into the trend of shopping as being a leisure activity rather than a needs-driven activity.

Capital’s centres includes Bluewater, the Trafford Centre, the Metro Centre in Gateshead, St David’s in Cardiff and the Victoria Centre in Nottingham.

“We have introduced features in many of our centres such as mobile changing rooms with stylists on-hand to advise shoppers on the clothing that suits them best. We’ve had events to help women find the best jeans, little black dress and prom dresses,” says Pereira.

In addition, four centres took part in a trial with Amazon to install lockers on their premises so that customers could have their online purchases delivered to the centre for them to pick up.

Shopping centre One New Change, located in the City of London, also took part in a trial to install an Ocado Wall – which allows customers to order their shopping by touching barcodes on a giant wall.

Richard Akers, managing director of retail

business Land Securities, says shopping centres have transformed their approach to marketing, encouraging retailers to be more “energised and excited about the future”.

Land Securities manages 23 shopping centres in cities across the UK including Portsmouth, Leeds, Bristol and Exeter.

A kers predicts centres w ill become increasingly focused on providing facilities such as free Wi-Fi and ways for customers to conduct product searches in order to enhance the multi-channelling revolution.

Digital and social media have become an important part in the development of Trinity Leeds – a new shopping centre in Leeds due to open next year. Members of the public and local businesses are being encouraged to have their say on the facilities they want included via a Facebook page. A local film company has also been commissioned to shoot a short film to promote creativity locally.

The Trafford Centre in Manchester

Business Reporter · February 2012

an independent report from lyonsdown, distributed with the sunday telegraph

Retail per cent sales are still from bricks-and-mortar stores,” he says. “The big question is, where does this balance end up?”

Across the board, IMRG (Interactive Marketing in Retail Group) puts online sales at “somewhere between 10 and 20 per cent” of all sales. “The cake is shrinking, but online is still growing,” says chief marketing officer David Smith. But that doesn’t mean life is easy. Asos’s Bready admits that times are tough with companies working harder for every sale.

Delivery speed has become a hard-fought battleground: Next recently pushed the boundaries with a 9pm deadline for next-day delivery, and Bready at Asos admits he would love to know how they do it.

It’s not just home delivery where retailers are constantly jostling to out-do one another. A study conducted by Postcode Anywhere found that 51 per cent of consumers who shop online want the option to pick up goods in-store. This gives those with a high-street presence a huge advantage, and perhaps explains why some of the online retailers have begun popping up in towns. eBay opened a shop in London’s West End in the run-up to Christmas, following similar schemes run by Amazon and House of Fraser.

Gabrielle Hase, director at the digital commerce advisory firm Soleberry Advisory, says this blurring of the lines between online and in-store shopping is set to continue. “Making the experience more personal will always win the hearts and minds of consumers,” she says.

Deliver y isn’t ever y thing, it seems.

“Convenience, price, availability and breadth

“Retailers must bear in mind it’s not the technology [that’s important], it’s the experience it gives” – Shearwood of range will be the key battlegrounds,” adds Ocado head of grocery Lawrence Hene.

Retailers will also have to innovate to keep up with young consumers who are stimulation junkies. Recently there has also been a trend for virtual shopping walls and windows, a concept which the likes of Ocado and Net-A-Porter have trialled. The idea of virtual fitting rooms is also out there, and the technology is improving, while shopping via Facebook is being tested and could be “another strong commerce channel”, according to BrandAlley UK CEO, Rob Feldmann.

But with all these possibilities come warnings.

“Retailers must bear in mind it’s not the technology [that’s important], it’s the experience it gives,” says Mike Shearwood, CEO of Aurora Fashions.

“The objective is to give the customer the best experience, whatever the channel.”

Speed of delivery is an area hard-fought by retailers

9

Combine to conquer Multi-channelling is the buzzword among retailers – new customer buying trends and the increase in mobile technology mean the sky’s the limit

By Linda Whitney Who would have predicted 15 years ago that the British would swarm to buy clothes online – even without trying them on? Or that it would be possible to buy an entire kitchen via your mobile phone? And yet the UK e-tail market is growing at 16 per cent a year.

Retailers are competing hard to win the multi-channel war.

Group (IMRG), a membership community of e-retailers.

Sma r ter reta i ler s a re ensuring that online sales do not rob them of sales in stores by combining channels. Many now offer click-and-collect services, whereby goods bought online are shipped to a store close to the buyer for next-day collection.

Once at the store, customers may well buy again.

A significant feature of multi-channel over the past

“Winners will be those that research their customer demographic effectively and offer them highly relevant items” – Mulcahy You can now purchase items on computers at home or in highstreet stores, on laptops, tablet computers, mobile phones and via Facebook.

Online sales are often the high point of a retailer’s performance. At Tesco, likefor-like sales rose 1.7 per cent in the six weeks to 7 January 2012, prompting a profit warning. However, its online sales were up a healthy 14 per cent.

Online growth has to be part of the strategy if retailers are to be successful, but the online world is even more competitive than the high street.

“The winners will be those that research their customer demographic effectively and then offer them highly relevant items in as seamless a way as possible,” says Andy Mulcahy of the Interactive Media in Retail

year has been the growth in sales through mobile phones.

In the first quarter of 2010, mobiles accounted for just 0.4 per cent of all e-tail sales, but by the third quarter of 2011 that had leapt to 3.9 per cent (see mobile payments p11).

But it takes more than online sales to make a company a good investment, says Martin Carr, independent retail consultant and strategic retail adviser to Ernst & Young. “Online success will not usually dig a retailer out of a high-street hole, and in 2012 some will be forced to consider closing some of their channels.”

Investors should look at the whole package. “Retailers should have a strong and unique proposition, a good reputation for price, quality, reliability and delivery across all their channels,” says Carr.

Consumers can now shop on laptops, tablets and smartphones

Playing their cards right Multi-channelling has been the ace in the pack for some businesses John Lewis

Online and mobile sales account for 21 per cent of John Lewis’s total sales, with mobile sales growing the fastest. The company recently launched an iPhone app that allows customers to scan barcodes of items in stores which will then display details on the phone or home PC. It has also trialled a window display in a Brighton store that allowed phone users to scan the QR code of items displayed, thus linking them to the item on the johnlewis.com mobile site.

Purchases can be picked up in store the next day, through its click-and-collect operation.

Simon Russell, head of multi-channel,

believes that success lies in giving customers a consistent experience.

“It’s about more than making the website look like the shops. Staff have to think in a multi-channel way.

“We have found that shop-only customers who convert to multichannel spend more in the shops as well as buying online, and show increased brand loyalty,” says Russell.

Asos, online fashion retailer

Asos is more than a website. It has a Facebook store and last year launched the UK’s first online styling session using Skype. Fashion stylists offered online consultations to a limited number of customers, and then suggested Asos

products and new ways of wearing them. Many of the customers went on to buy – and to tweet about the experience. Last September, it launched its first apps for the Apple iPhone, iPad and iPod Touch.

At present, about 10 per cent of asos.com’s traffic is through mobiles, but chief executive Nick Robertson says: “I would be amazed if mobile shopping wasn’t between 20 and 30 per cent of our sales within the next three to five years.”

Marks & Spencer

Marks & Spencer was the first major high-street retailer to launch a mobileenabled website – in May 2010. A year

after launch, the site had more than a million visitors, generating more than 59,000 orders. One customer even bought a full Sonoma kitchen, worth over £5,000, using their mobile.

M&S is also on Facebook and Twitter, and is trialling Style Online – multimedia areas in stores that are staffed with a style adviser, where customers can browse a wider range of fashion products than the store may hold, and build outfits before ordering through touchscreens.

The move is part of the company’s bid to become the UK’s leading multi-channel retailer, growing sales to between £800m to £1 billion by 2013-14.

Business Reporter · February 2012

10

an independent report from lyonsdown, distributed with the sunday telegraph

Industry view

If the price is right An unclear pricing system can be the difference between sale and fail. One company argues that a simple and cost-effective way to replace manually created price tickets saves precious time and money With the economy in slow recovery it is more important than ever for retailers to find a pricing system that works. Sales may provide the incentive for customers to reach for their wallets, but a lack of clarity can lead to serious confusion and the temptation to just save the money.

A bad pricing system is a problem that can cost dearly, as it interferes with the impulse to buy. It forces the consumer to think about the purchase while struggling to decipher handwritten labels, and whether or not the 20 per cent off poster is already accounted for on the discounted ticket.

For the retailer, a manual price-marking system ties up valuable staff hours. Employees sit in the stock room writing tickets when they could be on the shop floor closing a sale. Studies have shown that a customer who has contact with a staff member is 60 per cent more likely to buy.

James Ussher-Smith, director of The Pricing People, says: “In these tough times it is important for retailers to differentiate from their competitors – and one way is to sort the pricing out. Retailers spend a fortune making the stores look good and then overlook something as crucial as the price tickets. Common sense dictates that you have to put the least amount of obstacles between you

and your sale.

“A t T h e Pricing People, we’re good at making that a much simpler and more af fordable process. We’ve invested heavily to create technology which is adaptable to individual requirements, so medium-sized retailers can enjoy the same efficiency as larger organisations – at a surprisingly low price.”

In the 21st century the days of red pen reductions should be long gone and the Retail Business Technology Expo, 13-14 March in London, is the perfect opportunity to see how this should be done.

The Pricing People have recently transformed the way one major international sportswear retailer prices goods for sale with a system that was rolled out across six countries in just two weeks.

Simply put, The Pricing People are here to save the retailer time and money when pricing

merchandise, significantly reducing the time it can take to price and reprice a store during a sale. This frees up the workforce to focus on restocking the shelves, decorating the store, or maybe even helping a customer and selling something.

If your business is looking for a low-cost, high-impact solution to the pricing problem or

Can social media predict the future?

There are promising signs that data mined from social media can add value to online businesses by improving customer insight and predicting future demand What record jumped 262 per cent from 6,939 to 25,088 in 2011? What first took three years and now takes less than five days?

The answer to the first is tweets per second.

The answer to the second is the time taken to send one billion tweets.

Social media, in particular Facebook and Twitter, are the most active conversations on the planet. Where Facebook is younger with more gossip, Twitter, with its older demographic and 140 character limit, tends to be more direct and factual. This has made the micro-messaging channel the main focus of researchers looking for ways to deepen customer insight to improve their product offering and predict future demand.

This is proving particularly interesting in politics at the moment where companies such as Mashable and Globalpoint are examining social media messages, assigning semantic meaning and trying to predict results of the Republican primaries. They are having some success, for example in spotting swings, but it’s early days and attaching meaning to informal social language is difficult.

Other companies are looking to how this can be applied to e-commerce. Colbenson, makers of search engine analytics tools, are used to working with user language to try to connect potential customers to the products they search for.

“It’s difficult, as customers think differently than sellers,” says Ángel Maldonado, founder and head of Colbenson. “We always start by looking

at how users search and how much gets little or no success.

“Social media can give us insight into their behaviour. We can have search terms already hooked up to results with proven track records for conversion.”

But how about predicting the future? The theory runs that what is talked about today on social media channels gets translated into demand tomorrow.

“Semantics is less important in e-commerce.

Nearly 90 per cent of user product reviews are positive, so it’s a reasonable assumption that notoriety of catalogue items on social media will translate to demand.”

According to social commerce experts Bazaarvoice, some 53 per cent of Twitter users talk about products and offer recommendations, and 48 per cent of those deliver on purchases.

This makes Twitter a powerful reservoir of information about potential purchase behaviour and demand.

Maldonado says: “The thing is, no one knows what they’re missing out on. Businesses don’t measure the empty spaces: who came in the store and asked for something that’s sold out, or who searched your site but couldn’t find the product. Businesses measure sales – supply. Twitter measures demand.”

E-commerce is particularly well poised to take advantage of this opportunity, with the UK being the largest e-commerce market in Europe.

“This is not just about predicting an increase

in umbrella demand when it’s predicted to rain, it’s about a demand you didn’t anticipate or a connection you didn’t make,” says Maldonado.

“At Colbenson we have been looking at how to respond when a catalogue item is mentioned next to something we didn’t think of; maybe Julia Roberts was seen in a pair of Hunter boots and those four words show up time and again – Julia, Roberts, Hunter, boots – it won’t be long before that search hits your site and you need to connect it to the right product before you’ve lost a sale or maybe even a customer.”

John Tomlinson is head of communication at Colbenson www.colbenson.com

an innovative way to burst into the 21st century, then see The Pricing People.

The Pricing People will be at the Retail Business Technology Expo, stall 600, showcasing two very different solutions, providing for all budgets.

0800 083 5435 www.thepricingpeople.co.uk

Business Reporter · February 2012

an independent report from lyonsdown, distributed with the sunday telegraph

Retail

Shop window of opportunity Government-appointed retail expert Mary Portas has set her sights on bringing economic and community life back to our high streets

By David Burrows Portas’s independent review, unveiled in December last year, makes 28 recommendations on what can be done – by government, local authorities and business – to help high streets become more prosperous and diverse.

And with town centre vacancy rates doubling in the space of two years, the focus is firmly on putting the heart back into the centre of our high streets, re-imagined as exciting social hubs for shopping, learning and having fun.

Portas’s recommendations to free up the high street from constraint and mobilise landlords and communities include putting in place “town

Aim: a home for independent retailers

Room for everyone But just how realistic are the recommendations?

Can the high street ever regain its role as heart of the community? The Exchange Mall shopping centre in Ilford High Street certainly thinks so, and is proof that community-based shops can withstand the competition from out-of-town complexes.

The centre faced stiff competition when Westfield opened in nearby Stratford in September, but it is continuing to attract customers by ensuring it is truly representative of the people it serves.

General manager Marc Myers who is also chairman of Ilford Business Improvement District, emphasises the importance of getting to know the demographic make-up of the local area. In Ilford, 50 per cent of people are from Asian communities and the centre has worked hard to reflect this.

“We’ve done this in a number of ways including staging events that celebrate their festivals and culture as well as extending our trading hours until 7pm to take into account that our Asian communities tend to like to shop later in the evening,” says Myers.

“We are proof that community-based centres and high streets can still survive and flourish and that we have a role alongside the bigger centres such as Westfield. There is room for us all.”

Not all retailers have struggled during tough economic times – outlet stores are celebrating after a very happy Christmas

With customers hungrier than ever for a bargain, outlet centres have posted some impressive Christmas figures.

McArthurGlen, the designer outlet group which has seven UK centres, reported a sales and footfall increase of 11.6 per cent and 11.1 per cent respectively from 7 November to 31 December.

An early boost in November was followed by two record-breaking days after Christmas.

“On December 27 and 28 we had close to doubledigit growth [in sales], and that’s on the back of 22 per cent growth at the same time last year,” says Henrik Madsen, managing director for northern Europe. “If you’d told me six months ago that we’d have had a Christmas like that, I wouldn’t have believed you.”

Outlet centres have certainly worked hard for their sales; perhaps harder than ever given the shadows cast by the gloom on the high street and soaring fuel prices.

“It’s been even more important for us to offer something imaginative,” says Madsen. “The prices we have [up to 60 per cent discount] and the brands are important, but we have to have events, too.”

Cards not cash

teams” to manage high streets and local shopping centres and empowering business improvement districts to take on more responsibility and provide greater support for businesses.

The government is now reviewing the recommendations and will publish its response in the spring.

Bagging a bargain

By David Burrows

11

In York there was a Winter Wonderland opened

by Torvill and Dean, while Cheshire Oaks had a visit from Alexandra Burke.

Andrew Duncan, head of marketing at Realm, which manages six outlet villages, also admits that “much of our time now is spent improving the experience with better catering choices, imaginative on-site entertainment and promotions”.

Many brands are recognising outlet retail as a key part of their business strategy So can the strong performances of 2011 be carried into this year? The likes of Madsen certainly think so, especially with many brands recognising outlet retail as a key part of their business strategy.

Graeme Ellisdon, MD of Osprey London, which has eight outlet stores, says: “Outlet is not a guilty secret – it’s a smart way for customers to buy. Our outlet stores give our brand exposure to a much wider demographic. In our best stores, we typically take more than £1m and on a Saturday we can serve 1,800 customers.”

Forget the pennies or even the pound coins. With several major players getting involved, contactless payment could soon be the way to spend

By David Burrows The Brits are often mocked for their love of queuing, but retailers are all too aware that there is a tipping point. For two-fifths of us, it comes after just two minutes, according to research by Barclaycard.

In fact, 68 per cent of shoppers regularly abandon purchases as a result. It’s therefore surprising that the idea of faster, contactless payments using near-field communications (NFC) has been a hard sell.

A survey by MasterCard last autumn showed that just 5 per cent of British consumers had made

Seventy-three per cent of UK shoppers feel contactless technology would ultimately become more commonplace than cash as a payment a contactless payment. And though there are now 70,000 contactless terminals in operation, it still represents a small percentage of the whole.

But this year will be different. Visa says it has 20m contactless cards in circulation – an increase of seven million since last March. The results of its Contactless Barometer survey last month also showed 73 per cent of UK shoppers felt the technology would ultimately become more commonplace than cash as a payment. And experts agree with that prediction.

“A long-standing joke has been that retailers refer to NFC as ‘not for commerce’,” says Paul Vlissidis, NGS Secure director.

“However, with the backing of technology giants such as Google and rumours that the next iteration of the iPhone will be NFC enabled, 2012 could well be the year that near-field communications breaks into the western world as a means of making payments,” he adds.

“How consumers are convinced about the security of this technology will play a big part.”

Banks and retailers will have a critical role in the success of any such technology wave, but it’s

consumers that will create the demand, according to Visa Europe head of acquiring and acceptance David Goodridge.

“Consumer demand for contactless payments generates a self-perpetuating virtuous circle: an increase in contactless users means more retail outlets adopting the technology, and more retail outlets adopting the technology will stimulate further user uptake,” he says.

Some retailers have already shown the potential of the technology. McDonald’s rolled the system out nationwide last year, for instance.

“The technology is perfect [for us] and we believe this is going to drive footfall,” says director of IT Mark Fabes.

Starbucks has followed suit this year with an iPhone app which allows customers in 600 UK stores to pay with their phone. Ian Cranna, vice-president of marketing at Starbucks UK, says fewer customers want to use cash these days and there has been a “great response” to the new app.

“In our US stores there have been more than 20m mobile payment transactions since the launch of the technology over a year ago,” he adds. “We’re hoping it will prove as beneficial to our UK customers.”

Fast food retailers have led the way thus far, hardly surprising given the speed of transaction and the spending limit of £15. However, Visa is working “with a wide range of retailers” and “fully expects these to begin adopting the technology in the near future”, says Goodridge, who believes the Olympic and Paralympic Games will create a huge tipping point of consumer understanding thanks to 3,000 contactless paypoints.

“For the first time, consumers will not need to use cash at the games unless they choose to do so, and we expect this to trigger a wave of interest across retail.”

Barclaycard has witnessed a 150 per cent rise in the number of PIN-less transactions and that will be “dwarfed” by growth this year says the company’s head of UK payment acceptance, Richard Armstrong.

And Tesco director of internet retailing Ken Towle agrees that “using their phone as a wallet is something that more and more consumers will want to do”.

Maybe this will be the year of the mobile wallet after all.

Business Reporter · February 2012

12

an independent report from lyonsdown, distributed with the sunday telegraph

Industry view

Small businesses take a bite of technology

Can retail reinvent itself?

Pre-paid cards and tailored downloads are among the innovations helping independent high street retailers to participate in the multi-channel shopping revolution

Technology advances, tough markets and canny consumers create a challenging new world for retail. But with challenges come opportunities.

Will retail reign supreme?

Is the retail sector stuck? Yes, in that the British Retail Consortium reports that total sales values are up by just 1.5 per cent in a year, and consultancies such as Deloitte believe there will be no sustainable growth in sales until 2013.

But a big no, since the pace of change in the sector is extraordinary.

For example, online retailing is growing dramatically – by roughly 15 per cent in the past year in the UK alone. And it is advancing the internationalisation of retail at breakneck speed as businesses discover new markets around the world that they can reach and supply.

At the same time, communications technologies are revolutionising consumer attitudes and behaviours.

Mobile phones, tablets and every other means available are being used to test price comparisons, research recommendations, take soundings from friends and others; the impact of digital technologies extends well beyond online transactions themselves.

Technology does not put space between consumers and retailers; paradoxically, perhaps, it brings them closer together, enabling personal communications, tailored promotions and instant feedback. It creates opportunities for what IBM, for instance, has called smarter commerce.

T his creates movement i n t he economics of the indust r y and new business models emerge to challenge traditional approaches.

And it changes relationships with consumers who are looking to create personalised and interactive experiences. Customers in the digital age are connected, vocal and demanding.

The combination of technological advances, tough markets, global competition, sophisticated consumers, improved supply chain management and, let’s not forget, media scrutiny and the expectation of ethical and responsible behaviour – this sets quite a challenge for the modern retailer.

It is a challenge that management consultancies and members of the MCA (Management Consultancies Association) are responding to as well.

There are fantastic opportunities in this new market. Cost control will remain a priority. High street presence and brand building can be critical.

But innovation and imagination remain top of the list in the reinvention of retail.

Alan Leaman is CEO of the MCA 020 7321 3990 twitter: Alan_Leaman_MCA www.mca.org.uk

Gone are the days when shopping was limited to a weekly trip to the local supermarket or visit to a nearby retail park or mall. Nowadays, consumers can shop at anytime, anywhere, for almost anything, thanks to the increasing capability of smartphones, evolving technology, and the innovative approach of retail brands.

But what does this mean for smaller high- street shops? How can they compete?

Although an independent newsagent might not be in a position to develop an iPhone app allowing customers to purchase a chocolate bar and a newspaper while they’re on the go, they can still diversify their product range and join the multi-channelling revolution. In the past year alone, epay has launched cards you can load with credit for online gaming, a Microsoft Office training package which can be downloaded simply by entering a code you buy in your local newsagent, and pre-paid cards used in the same way as debit cards but which allow users to manage their budgets and avoid overspending.

All of these products have helped attract new audiences and increase footfall.

Although products like these can be bought online, we know that not everyone is comfortable having a credit card associated with their mobile device or favourite online game. This means that, for retailers, although there will always be competition from evolving multi-channel technologies, there is also opportunity. Smaller, independent stores can embrace products which might be typically accessed via multi-channel means, yet offer them in a traditional way. epay is committed to developing solutions which keep up with the revolution in the way we shop and which meet the needs of all consumers – not just those who can be found ordering their weekly shop via smartphone during their train journey home.

Jason Thompson is MD of epay 0844 880 6362 www.epayworldwide.co.uk

Refocusing the meaning of retail With more channels available than ever before, the always-connected consumer no longer thinks about the different strands of commerce. So what impact does that have on the way retailers approach it?

Something inevitable is happening in the retail industry, which upon initial consideration may seem regressive. Originally we just had retail, and then came the great fragmentation and suddenly we had e-retail, m-commerce, f-commerce (Facebook) and TV-commerce.

There may be more to come as the number of available channels grows and the digital age becomes even further embedded into our everyday lives.

Retailers know the importance of forming the single customer view, but with this growth of devices and channels it has been a challenging one to find. However, over the past year or so we’ve seen retailers really begin to engage with technology in interesting ways to blend the offline and online experience to the point

where they are actually losing their definitions.

For the ever-connected consumer the distinction no longer exists anyway, and may not have done for a while. Whether through a desktop, mobile phone, social network, internetready TV or even in a good old-fashioned store, interaction with brands is always possible – and to that person, a brand is a brand, no matter where the communication occurs.

Wi-Fi availability is starting to become common in stores, as are kiosks, internetconnected tablets and innovative devices such as virtual mirrors. Most consumers entering that store will also have a mobile device with internet functionality, so the idea that offline can even exist anymore is debatable.

Different channels have different capabilities

and the context in which they are used influences the best strategies for engagement through them. This will remain true, but we are swiftly entering into a new era where we will need to stop thinking in terms of all these different strands of commerce and just think once more in terms of “retail”. Because that is how the consumer already sees it.

Retailers can gain a lot from positioning the right offer in the right channel at the right time.

But to the consumer, no matter what channel it’s in, it’s all retail to them.

Andrew McClelland is the chief operations and policy officer at IMRG 0207 716 5604 www.imrg.org

Business Reporter · February 2012

an independent report from lyonsdown, distributed with the sunday telegraph

Retail

13

From shop floor to top floor Working his way up from Saturday boy to chief executive of the health and beauty division of Alliance Boots has given Alex Gourlay a unique perspective of the business that he believes will help steer the company through uncertain times on the high street

awareness – it quickly became one of the most popular apps in the UK. Welcoming the revolution Multi-channelling is now big business and is something that Boots has embraced with its Boots.com website where customers can now order thousands of health and beauty products online and either choose to get them delivered to their homes or to their local store.

Gourlay has ensured that delivery times have been significantly reduced by overseeing a major project to speed up the supply chain and automate the warehouse, which now receives more than 200 pallets every hour.

The Advantage Card – Boots’ loyalty card – continues to be popular with customers and the company plans to further build on this success by giving customers more personalised offers based on their buying habits.

Another key success is its strategy to offer unique products developed by Boots and only sold by Boots. This includes its No7 range, which is the UK’s biggest skincare brand. Its Protect and Perfect serum was a marketing sensation and led to stock selling out in hours after it was featured in the national press. The product has also experienced strong sales internationally – particularly in the US. “Again this goes back to the fact that the public

By Carol Jenkins When Alex Gourlay started work as a Saturday boy in his local branch of Boots in Sauchiehall Street, Glasgow, in 1976, he began a love affair with the company that continues to this day through his current role as chief executive of the health and beauty division.

His remarkable rise to the top continued following university when he returned to the Elgin branch of Boots as a pharmacist; he is still a registered pharmacist to this day. Before taking up his current post three years ago, he held senior management positions in store operations and human resources and further moved up the ranks to managing director after Alliance Boots was taken off the FTSE 100 and acquired by private equity group Kohlberg, Kravis, Roberts in 2007 in a £12.4 billion deal.

His role now involves leading the Boots retail operations in the UK and Republic of Ireland, with close to 2,500 Boots stores and the UK-based Boots Opticians practices. But with uncertainty casting a shadow on the high street thanks to low consumer confidence, unemployment and inflation, the challenge is clear.

As a pharmacy-led health and beauty retailer, the company has an ingrained customer-care culture and its mission is to help customers “look and feel good”.

This has been developed over its impressive 163-year history, which began in 1849 when John Boot opened a family-run herbal medicine shop in Nottingham – the city that is still home to its headquarters.

Gourlay is conscious of the company’s unique history and his own experience of life on the shop floor has helped to enhance his position as a fierce exponent of its customer-centred culture. It is a culture that has served the company well over the years and ensured that it is still held in high regard and affection by its customers.

“The culture of the business is set up to look after others rather than look after itself,” he explains.

“We are a business that started out in healthcare and you can’t really be successful as a healthcare business unless you give people the right advice and the right products. It’s not about selling more – it’s about making sure you’ve got the right products and ensuring that what we do is driven by what the customer wants rather than by more choice. You’ve got to get things right for the customer.”

Weathering the storm Recent figures show that Boots UK retail seems to be weathering the storm amid a period of real uncertainty for high-street retailers, with like-for-like revenue increasing by 4.1 per cent

“The customer always wants more and they deserve more. What we are seeing is that they are becoming more empowered” – Gourlay

Alex Gourlay, chief executive of Alliance Boots health and beauty

over the Christmas period – an improvement from September last year when Alliance Boots had the weakest sales growth from its health and beauty division since 2007, at just 0.4 per cent in the six months to 30 September from the year earlier period. Total revenue for the quarter for all its health and beauty division businesses was flat compared with the same quarter in 2010.

Gourlay admits that while this was a good performance, there is always room for improvement and that the challenge in the months and years ahead is to ensure that Boots remains as relevant to its customers now as it was 163 years ago.

“The customer always wants more and they deserve more. What we are seeing is that they

are becoming more empowered – they have more information and more visibility about what is going on in the world. They want retailers not just to do better in terms of price and quality but also in other areas such as ethics and better responsibility,” says Gourlay, who is also a chairman of Business In The Community, a charity that promotes responsible business practice to ensure sustainability.

One of the key drivers of this newly empowered customer is the rapid growth in technology – particularly mobile devices – that has brought about a revolution in the way we all now shop.

When Boots Opticians recently launched a mobile app – The Eye Check, where users can test their eyes in four ways to encourage visual health

felt they could trust us to provide them with the best quality product. The Protect and Perfect serum was tested and confirmed by Manchester University as being proven to visibly slow down the signs of ageing.”

Gourlay acknowledges that one of the key challenges is to ensure the healthcare side continues to grow and provide better value and quality. A third of its business is still run on behalf of the government in its pharmacies and opticians – Boots employs 5,000 pharmacists and 1,000 opticians across the UK. It also sees work with charities such as Macmillan as key to its future. Through its partnership with the charity, pharmacists receive training in helping cancer patients.

Its No7 consultants are also given training in offering help and advice to patients going through chemotherapy.

Staff training also continues to be an essential part of the company ethos. It provides staff with a number of e-learning options and won an e-learning award last year in partnership with Mind Click for its Stock File Factor game – deployed to change the behaviour and attitude of colleagues towards stock file accuracy.

Gourlay wants customer care to continue to be at the heart of the Boots ethos in the coming year and sees it as an essential driver to the growth of the business.

“Our customer care scores continue to grow and we can see the links between stores that have high customer care and strong sales.”

Business Reporter · February 2012

14

an independent report from lyonsdown, distributed with the sunday telegraph

Retail

Fielding your best team All successful businesses need good people. When it comes to recruiting the right staff, training and getting the best out of them, the retail sector is ahead of the game

By David Burrows At the end of last year the number of young people out of work in the UK hit 1m.

The news came hot on the heels of some pretty grim figures in October suggesting that in the third quarter, retail employment was down 0.8 per cent year-on-year – in other words, there were 23,000 fewer jobs.

“There is no doubt it’s tough out there,” says Christina Tolvas-Vincent, head of retail employment at Bond Pearce.

“Retailers are being battered by the same economic conditions that have led to the highest unemployment rate for 17 years, but [they] are showing their determination to hold on to market share by keeping redundancies low and riding out the storm as best they can.”

Retail is a sector that has seen it, done it and got the T-shirt when it comes to tough economic climates. Even in times of prosperity the competition is cut-throat – but this is part of what makes it such an attractive career.

There is also the long-held reputation for nurturing talent – former Tesco boss Sir Terry Leahy and Alex Gourlay at Alliance Boots are examples of shop floor to top floor progression, but they’re not the only ones – as well as the pace at which the industry is changing with technology.

Industry pulling power But does all this make retailing the nation’s “favourite job”, as the British Retail Consortium (BRC) has labelled it? Is the training on offer still up there with the best? And are retailers still able to attract the candidates they need to survive?

Angela Williams, TUI resourcing manager, certainly believes so. “In the past the top graduates may have veered towards law and finance, but retail is now seen as an attractive industry for those looking to further their careers,” she says.

The likes of John Lewis and Marks & Spencer also suggest the graduate schemes are as popular as ever. “We’re still getting phenomenal numbers,”

says Carol Donaldson, head of recruitment at the former.

M&S’s head of learning Nigel Jeremy adds: “Normally there’s a six-week wait from the opening date and then applications pick up, but this year we have had thousands from the get-go.”

That retail is in the headlines more has helped – “It’s changed the image of the sector,” says Anne Seaman, chief executive at Skillsmart Retail – as have more prominent role models such as Sir Philip Green and Mary Portas.

In fact, heads are being turned even earlier, with some highlighting a trend for school leavers enticed by a career that starts with selling baked beans rather than spending three years eating them. “It’s definitely a trend that has started in the last year given the hike in [university] fees,” says John Lewis’s Donaldson.

Paul Riordan, a retail specialist at Hays, says there has been a growing emphasis on attracting

people at grassroots level for some years now.

Such a policy makes business sense, especially in the current climate. After all, recruitment costs money and businesses want career-minded

Retail is a sector that has seen it, done it and got the T-shirt when it comes to tough economic climates people, not those who get itchy feet. Next, for example, has been working with Hays to staff its business at certain levels with a view to some of the new recruits making their way up the ranks.

Despite the conditions, retailers are still spending big on training. According to the BRC, they are investing an average of £1,275 per

Stop, online thief!

employee in training every year. In finance the figure is £800. Take Morrisons, where more than a third of senior management started on the shop floor and 95 per cent of all store managers are appointed internally.

The company has a heritage of growing its own people, something it shares with at least one Manchester football club, as HR director Norman Pickavance explains.

“Look at the ethos at Manchester United where manager Sir Alex Ferguson has saved millions of pounds by nurturing young talent. That logic is one we have here, too,” he says.

Train to win Sport features prominently in some of the training at Morrisons, with the company having put thousands of its senior managers through courses at the UK Centre for Coaching Excellence in Leeds at a reported cost of £1m. The training uses key principles of sports coaching and performance to improve management skills.

This kind of investment is required in order to turn heads at senior level, say recruitment experts.

While there is plenty of talent around at some levels, given the demise of well-known chains in recent months, reports of further casualties have made for a stagnant market for recruitment at more senior levels, says Hays’ Riordan. “Some candidates see moving as a bit risky at the moment, and they don’t want to be the ‘newbie’ if things take a turn for the worse.”

The type of training on offer can make the difference between moving and staying put, adds Helen Moss, manager of marketing and communications at Badenoch and Clark. “More and more candidates are asking for certain training to be included as part of a package,” she says.

In return, retailers expect candidates – at all levels – to stay long term and live and breathe the brand. Given the opportunities and training on offer, some say that retail as a sector is still very hard to beat. “The great thing about this sector is that it provides great experiential training,” says M&S’s Jeremy.

“Ask today’s retail leaders what makes them great at what they do, and 90 per cent will say it’s the everyday experiences. There are so many of them that you can’t fail to learn.”

In-store CCTV, alarm systems and security personnel can help prevent theft from shops but what protection is available for online retailers when the perpetrators hide behind their PCs?

The internet is an opportunity for retailers to widen their delivery channel, enabling a wider audience to view and, hopefully, purchase their products. Their customers require simplicity of purchase and payment, recognition and loyalty and timely delivery.

Unfortunately, the online environment also provides the fraudster with a great opportunity to cause havoc using clever techniques such as identity theft and location masking.

Theft in a shop is dealt with in a number of ways: security personnel, in-store CCTV, and alarm systems that signal that a product that hasn’t been paid for is being “removed”.

So how should online retailers deal with theft when the perpetrator lurks behind a PC? Retailers have, therefore, some important decisions to make. Automated

fraud systems can block attempted false sales but this poses a question: how can you be sure you’re not preventing real sales or upsetting real customers?

The option of 3D Secure, a security protocol for online transactions, is also portrayed by many payment providers as the way to prevent fraud. This online equivalent of chip and pin requires the customer to remember the pin/password when purchasing.

Retailers need to consider various questions that arise from using this product.

How many customers may drop off the purchase process? Does it make sense to treat all customers in the same manner?

What is the true impact of 3D Secure on determining a successful sale or, indeed, a declined transaction?

Moreover, you cannot use 3D Secure across all card types. Although actively

monitored by Visa and MasterCard, there is still some suggestion that some card issuers, particularly from parts of Europe, are more eager to decline if 3D Secure is used. After all, they don’t want the financial liability.

Intelligent Payments with its awardwinning analy tics has developed sophisticated software to identify regular customers and determine when best to use 3D Secure. It covers age and identity verification, payment rhythms and irregular routines. These, combined with KYC (Know Your Client), AML, least cost routing, local culture payment solutions and payment gateway services, can revolutionise the way payments are carried out online.

David de la Yesa is fraud and payments director at Intelligent Payments Group 07715 851162 www.intelligentpayments.co.uk

Business Reporter · February 2012

an independent report from lyonsdown, distributed with the sunday telegraph

Industry view

15

Online shopping: imitation or innovation?

Online offers endless space, but is e-commerce filling it effectively? Retailers must apply the same visual pizzazz to online windows as they do offline, or risk losing customers E-commerce is the fastest-evolving sales medium of our age. Ten years ago many in the retail industry were doubtful that shoppers would engage with the concept of buying fashion online yet today shoes, clothes and accessories are one of the most expansive e-commerce markets, accounting for more than 4m searches per month on eBay alone (source: eBay Shareholder.com: July 2011).

The success of the online platform is considered a major retail innovation but it is important to keep in mind one overriding condition that governs success in sales – conversion rates. Online, a retailer can expect from 2-4 per cent of site visitors to complete a transaction. Liken that figure to the 10-15 per cent that traditional catalogue shopping generates and it starts to look pretty meagre.

In an offline world high-street vendors display their goods according to the principles of visual merchandising, which has itself become a science.

They strive to understand consumer habits, how to excite and engage a prospective shopper. Similarly, catalogue retailers appreciate that product positioning and presentation is crucial, involving imaginative photography and innovative design.

In both cases, visual merchandising becomes key

to communicating brand values.

Effective product imagery is a vital component in an online retailer’s multi-channel approach and must be delivered in a way that compels customer engagement. Effective product presentation needs to be evocative in a fast-moving virtual environment where images are channelled from on-site public domains directly to individuals’ online personas via smartphones, tablets and interactive touch screens.

Why, with a wealth of experience and understanding in offline customer behaviour, would retailers be content to market their products with small, uninspiring images online? In a highly competitive sphere it is not good enough to simply

be represented but to utilise thoughtful, powerful and engaging online display.

The few e-retailers who have openly acknowledged the need for innovation are now recognised as market leaders, companies such as Next, Asos and H&M. WMpS is a company that has been working with leading retailers to deliver double-digit online conversions through a unique approach to online visual merchandising. The Rich Collections is an innovative product presentation solution that maximises image assets by placing products in context for shoppers in a way that is both striking and relevant. When complemented with existing strategies Rich Collections can deliver increased ROI and help define online

Are you being served?

“Convenience, price, availability and breadth of range will be the key battlegrounds.”

Lawrence Hene, head of grocery at Ocado “Retailers must bear in mind it’s not the technology that’s important, it’s the experience it gives.” Mike Shearwood, CEO of Aurora Fashions

Comment and join the debate online at business-reporter.co.uk Lyonsdown.co.uk

brand identities.

Despite the perpetual advancements of modern technologies, the progression in online merchandising has become conservative. Yet the consumer continues to demand more from retailers. So isn’t it time retailers learnt from the past – diversified and delivered the online experience customers deserve through creative, communicative and engaging visual display?

Well, perhaps with a little help from us, they can.

WMpS is a multi-channel solutions provider. For more information on Rich Collections, contact Beth Gray on 0845 862 0416 www.wmps.com