Hiperpool recently hosted the first of a series of online panel discussions with strategy leaders. Our first instalment focused on the retail industry as we welcomed Timothy Windmill, Head of Strategy at John Lewis and Charlie Wilson-Marklew, Head of Strategy at M&S to join us. Read on for their takes on the current and future retail landscape.
The Future of Retail After the Pandemic
Following the first wave of COVID-19 and subsequent lockdown, there has been an increased acceleration in trends which were already growing. From an increase in the uptake of online shopping to faster delivery and more localised shopping, customer behaviour has dramatically shifted. International markets have been forced to go through an even more dramatic change as many are less advanced in Ecommerce than the UK. Another increased consumer preference has been for companies with a strong focus on sustainability and purpose. Retail companies that introduced initiatives to support local communities through the crisis saw a strong positive response.
For many companies the crisis has drawn attention to the omnichannel customer. Plans to improve digital offerings which were scheduled to take place over the coming year have instead been rapidly executed to deal with consumer demand.
A consensus was held that predictions of the death of the high street are overreaching. Whilst there will be a continued move to online channels, brick and mortar stores still play an important role in brand awareness. The high street channel should be well integrated with online channels to create a seamless multi-channel experience for the consumer. Over various lockdowns in different countries, M&S saw that markets where they have both stores and an online presence outperformed markets with only online channels, even whilst shops were closed.
Successfully Adapting an Omni-Channel Model
M&S found that because they have many international franchise partners, underlying systems are often not well integrated. This poses a challenge for providing a seamless multichannel experience. This has been highlighted during the pandemic as online partners had to shift stock sitting in closed stores through online channels. The company is now putting greater emphasis on ensuring customers can access stock that’s available near to them as well as in distribution centres further away.
Many retail companies have moved from having digital orders packed in a distribution centre to using their stores to fulfil online orders. Whilst this may sound simple, legacy systems and processes have made it harder and this is a challenge many retailers will face.
John Lewis is in the middle of a strategic review as well as a larger piece of customer research aiming to understand how customers want to shop with the company. Their strategic approach is to build from a customer perspective rather than a channel perspective. One thing they’ve identified is that stores need to play a much greater role in supporting the online channel.
Moving to ‘Multichannel’ Models
In many international markets, running an online branded digital property doesn’t satisfy consumers’ preferences for shopping. For example, in China, it’s more effective to have a listing on an online marketplace such as TMall. In addition to this, Google Marketplace, apps, Facebook and Instagram shops etc. and you can begin to see how online channels are fragmenting. The question is no longer simply just digital and stores, but a range of channels across online and offline. Retailers need to carefully consider how these interact.
With a multichannel model in place, constraints around range become less prevalent. As such, retailers will have an opportunity to offer a wider range of products to suit every consumer.
Changing Customer Habits in the Future
As more consumers move online and expect faster deliveries, retailers need to respond with further digital advancement across mobile and desktop. Additionally, consumers are becoming increasingly concerned with sustainability. Retailers will need to make it much easier for customers to shop sustainably. John Lewis has begun some trials in this area with fashion buy-back schemes and items without packaging which saw strong results. M&S has committed to a sustainable business model and last year certified all stores, offices and distribution centres as carbon neutral. The challenge for retailers will be scaling such initiatives.
An important change in consumer habits has been in how people find products and brands. With more attention shifting to social media channels, retailers are increasingly spending marketing revenue here. At the same time, PPC is becoming increasingly expensive causing retailers to search for alternatives. M&S’ marketing mix has been substantially affected by this change in consumer behaviour, with a much stronger emphasis on social than traditional print or Above The Line media.
Technological Innovation in Retail
Charlie Wilson-Marklew (Head of Strategy at M&S) argued that retailers need to be more than consumers of technology, and become innovators instead. Currently, the majority of retail companies still buy other people’s technology rather than creating their own. Notable exceptions can be seen with companies such as Amazon creating AmazonGO, a chain of stores with no checkouts. In order for large retailers to succeed they must also be technology companies. A major barrier for retailers in this arena is the large investment cost associated with developing such technologies.
Surviving in a Tough Economic Climate
Retailers today are facing a difficult economic marketplace and are developing numerous initiatives to combat this. For M&S internationally, the height of the pandemic and lockdown saw the company try to conserve cash as much as possible. This meant avoiding unnecessary expenses and thereby having some tough conversations with suppliers as well as pausing professional hiring. On the positive side, the forced pace of innovation led to the company signing up to more international marketplaces in three months than they had in over two years prior. The strategy has been to put a hard brake on costs whilst pushing as hard as possible to find the revenue.
John Lewis had a similar experience with regards to conserving cash and ensuring their financial position was as strong as possible to safeguard the company’s resilience. Whilst this led to tough business decisions in the short-term, it also led to a clarity of focus which allowed the company to aim for some ambitious targets. A key focus for Waitrose was increasing online capacity and they were able to hit targets set for much later in a short period of time.
Big Retail Ideas For the Next Decade
With disruption and innovation in retail inevitable over the next decade, we asked the panel which ideas they thought could be game-changers for the industry. Charlie felt that retail as a sector has improved its ability to manage itself more efficiently. This can be seen where retailers hold much less stock than previously. A real game-changer could be for retailers to hold almost no stock, rather having the ability to manufacture products at the point of order and bring them through an expedited supply chain to the consumer. This lean retail model would allow for super personalisation of products, fast becoming an important trend, and would allow retailers to not worry about the cash they are holding in stock. Subscriptions could help with building such a model as they allow retailers to know the demand for products ahead of time.
For Tim, the next game-changing idea for retailers may be to move beyond retail. Tim described an opportunity for retailers to identify and engage with their most loyal, dedicated subsegment of customers. Retailers can use this group to stretch into new areas outside of retail. John Lewis, for example, is moving into financial services and considering horticulture. Companies can stretch into more areas of the lives of consumers who truly buy into their brand and what it stands for.
Personalisation was also discussed as key for the future. Creating more specialised products for each consumer is already an accelerating trend which can result in greater brand loyalty. In addition to Tim’s point, communities of customers can be activated and incentivised to become brand ambassadors and advocates.
Competing with Aggressive Competitors
With increasingly aggressive competition from Amazon, retailers need to find new ways to capture and retain consumers. Our panel discussed the strategies they’re using to stay relevant.
M&S continues to focus on developing and stocking its own product in home and food which can’t be bought elsewhere. With this focus on product development and satisfying the needs of the customer, they feel they have an edge over retailers such as Amazon. Amazon has cost convenience as a result of considering investing in technology and so, a strategy for M&S going forward is to hold onto their culture of strong product design whilst being equally aggressive in investing in technology. This would bring about efficient, cheap operations and fast fulfilment, allowing the company to match Amazon whilst outperforming them on the product side.
John Lewis is concentrating on the service that they offer consumers, particularly during important milestones in life such as a child moving away or moving home. They aim to be the store customers think of when they need trusting, rounded advice. The challenge going forward is ensuring that consumers are able to access this advice however they would like, whether in-store or digitally.
With the pace of change in retail much accelerated as a result of the pandemic, this is an exciting time for retailers who can use this disruption to drive change. Whether moving to seamless omnichannel or multi-channel models, focusing on sustainability or investing heavily in the development of new technologies, the next few years are sure to see considerable growth in this field.