The Retailer Autumn Edition_2020

Autumn 2020




Thank you to all our members and partners for your support in 2020. We will continue to work - with you and for you – to build a brighter future for us all.

UK retail to emerge leaner, greener and even more agile than before Helen Dickinson OBE Chief Executive British Retail Consortium

In this last edition of The Retailer for 2020, I’m going to give a few reflections on the year that’s been. I touched on this, alongside Lisa Hooker from PwC and Mike Coupe, former CEO of Sainsbury’s, during our Annual Retail Industry Lecture last week. If you’d told me 12 months ago that at this year’s Lecture we would be 7 months into a pandemic, with all the effects that it has had and will have on people, the economy, our industry. Of course, I wouldn’t have believed you. What a crazy year it’s been! At the start of the crisis, panic buying and the public’s concern about food supply was front and centre. While that brought its own challenges, that was really only the start. And things hadn’t even really got going. Since then – and as the effects of lockdown started to be felt – we have been working flat out to support our members and wider retail industry, trying to make sense of it all for you. There are businesses that dealt with challenges and are now doing OK, on the whole. And there are businesses – perfectly healthy businesses eight months ago – that are now really struggling – struggling for survival in some cases – because of circumstances that are entirely beyond their control. We’re still very much in the thick of the crisis. So, it is difficult to draw meaningful conclusions, but is clear it has had a profound effect on our industry. We know the pandemic has seen a dramatic acceleration in the transformation that was already taking place in retail. Retailers have drawn on their competitiveness and resilience to respond brilliantly to the myriad of challenges faced in recent months. They have overhauled their online offerings, engaged with customers in innovative ways and kept the nation supplied with the goods people need. There are reasons to believe in UK retail. It is one of the most competitive sectors in the UK economy. The intense competition between retailers benefits consumers through lower prices, choice and quality – the hallmarks of true competition – and is driving productivity growth across the industry. Investment in new technology – the internet of things, machine learning, automation – has meant that retail productivity has significantly outpaced the rest of the UK economy in recent years. Retail will provide higher skilled, better paid jobs as a result, helping to raise living standards and support the UK’s public services in the process, and ensuring that UK plc remains at the forefront of retail innovation across the world. And as we emerge from the Covid-19 crisis, the retail industry is also committed to reducing its environmental impact - in its supply chains and the products people buy every day – to make a huge contribution to the UK’s aims on carbon reduction. The retail industry can emerge from this crisis recast – leaner, greener and even more agile than before. So, as we look toward 2021 and beyond, I just want to say thank you – to all our members and partners – for your resilience, innovation and sheer tenacity over the past 12 months. At the BRC, we will continue to work our absolute hardest - with you and for you – to build a brighter future for uUK retail. If you missed our Annual Lecture last week – would like to see Helen’s full speech, as well as the presentation from PwC and keynote from Mike Coupe – you can watch it on demand. Already registered? Watch on demand Need to register? Click here

this issue

06 How COVID-19 has changed the UK retail landscape // LUCY STAINTON, Local Data Company





// KAREN JOHNSON, Barclays Corporate Banking

14 How Retailers are Future-Proofing their business by going Direct-to-Consumer // SHIMONA MEHTA, Shopify Plus

16 Retail innovation during Covid-19

// JULIA COOK, Change Management Group

18 It’s time to redefine retail agility // LAURENT HOMEYER, Workday

20 What’s the model for next generation retail? // MATT CLARK, AlixPartners

22 Walmart Plus: The lessons for UK grocers // FREYA HANSEN, BJSS

24 Behavioural Biometric Authentication Is Key To Seamless And Secure Ecommerce // AMIR NOORIALA, Callsign 26 Impact of Brexit on e-commerce retailers selling goods across the UK-EU border // SALLY JONES, RUSHMILA ALAM, ey

28 Preparing for Christmas and beyond: the new era of commerce // ED WHITEHEAD, Signifyd

30 Australia – the new marketplace for international brands // Tyler Jarratt, Enrich Trading Group

32 THE RETAILER Digital Hub // BRC

34 Why the time is (really) ripe for Open Banking payments // JAMES RANDOLPH, Trustly

36 It’s Time To Make Recovery Audits Preventive // PAUL REDSULL, PRGX Global Inc

38 Galvanising your business against supply chain disruption and customer insolvency // PETER MANLEY, CHLOE BALL, DLA PIPER

40 Retail Rents – Why Do They Never Go Down?! // GRAEME BRADSHAW, Burness Paull LLP

42 The impact of Coronavirus on the Retail

Sector. Landlords or Retailers? Nobody’s a winner. // MICHAEL LEWIS, Sherrards Solicitors

44 Retailers need agility to reshape for the future EGÉ // EDI SIVA, RACHEL SILVERMAN, Aon


A training report for the new High Street // LIAM O'MEARA, AlixPartners

48 What’s your one almost-impossibly-small next step to optimal health?

// ERIC HO, Bumblebee Wellbeing, RACHEL PEARS, RPC

50 School leavers get taste for food and consumer goods industry through virtualwork experience programme // SARAH MCCARTHY, IGD

52 Social purpose has never been greater in retail // ALISON HUTCHINSON CBE, Pennies

54 Tomorrow’s Supply Chain: The New Technology Revolutionising Green RetailLogistics of best practices // CRAIG MOORE, DP World London Gateway Logistics Park


brought to you by

How COVID-19 has changed the UK retail landscape


HIGHLIGHTS FROM THE LOCAL DATA COMPANY’S RESEARCH ON RETAIL TRENDS ACROSS H1 2020 The Local Data Company is the UK’s most accurate source of data and insight on the GB retail market. We are the only company to use field research methodologies to capture information about the changing store landscape in near-real time. We publish extensive research on change in the sector every six months which is made publicly available. Our H1 2020 report has been much anticipated with the reporting period spanning the first months of the COVID-19 pandemic including lockdown which saw 80% of the retail and leisure market close temporarily. We analysed 400k units across 1,200 towns to understand the initial impact of the pandemic with interesting results, a few of which I’m going to discuss here. Footfall Throughout the pandemic we have been tracking footfall across a sample of our LDC sensor network. When lockdown restrictions were at their peak, footfall volumes were approximately -80% compared to the same week in 2019 across the device locations. When non-essential retail opened, footfall increased to -62% year-on-year. When the rest of the market followed, footfall settled around -35% based on a representative sample.

Reopening of non-essential retail From June 15th we have been tracking the rate at which stores reopen across the non-essential retail market to understand how quickly different sectors have bounced back. At the end of September, 72.9% of all retail and leisure businesses that were forced to close in March had reopened. Categories such as auto services and shoe repairs saw high rates of reopening, while travel agents only reopened 51.3% of stores due to travel restrictions and quarantine rules. 71.8% of the comparison goods retail sector had reopened with car showrooms (87.6%) reopening the most and charity shops (54.8%) the lowest. This is a result of the challenge of adapting charity stores to become COVID secure as well as recruitment of volunteers. Much of the convenience sector was able to remain open throughout lockdown, but of the businesses that did close (vaping stores and some bakers such as Greggs) only 66.5% have reopened. Comparison goods retail saw the largest decline of all classifications in H1 2020, with a net loss of 4,975 units – over four times that of the other categories. The convenience sector shrank by 768 units, however it was the only classification where the decline was marginally lower in H1 2020 than in H1 2019 (-787 units). Across all classifications, net loss was more pronounced in the multiples market compared to independents. Comparison goods multiples lost a net 4.2% of units, compared to just 2% of independents. This trend was repeated across the convenience (multiples -1.7%, independents -0.2%) and the service sector (multiples -1.9%, independents +0.1) which saw marginal growth in independent service units. Net change across retail classifications


Weekly footfall volumes, March – September 2020 (Source: Local Data Company) The most dramatic change was when retail reopened on the 15th June, causing a jump in footfall as shoppers rushed back to the high street. The week commencing 14th September was the first week since April to see a week-on-week decline (fall of 1%) as COVID cases began to rise once more.

6 | Autumn 2020 | the retailer

The full Local Data Company report on H1 2020 is available as of 4th November to download free of charge at insights/reports

When lockdown restrictions were at their peak, footfall volumes were approximately -80% compared to the same week in 2019 across

Growing and declining categories Barbers grew the most in H1 2020, with a net increase of 430 barber shops. Barbers is the category which has grown the fastest for three years now as the popularity of men’s grooming increases. These businesses have been resilient and have been able to take advantage of pent-up demand created during lockdown. Beauty salons increased by 308 units, up from +179 in H1 2019. Nail salons also saw growth of 129 units, however the growth in both of these sectors was largely pre-lockdown. The biggest net decline in H1 2020 was seen in bookmakers, losing 867 units over the period with most closures taking place pre-COVID. Other declining categories were mobile phone stores (-586) and fashion shops (-371). Vacancy rate changes In H1 vacancy increased by 0.9% to reach 13% which is both the greatest increase in a half year period and the highest vacancy rate that we have on record. Looking at the retail sector (excluding leisure) the retail vacancy rate also increased by 0.9%, reaching another highest-ever rate of 14.2%. While the high street has had lots of negative press, shopping centres are faring the worst. Vacancy in shopping centres hit 15.6% in H1 2020, 3% higher than high streets (12.5%). While vacancy on retail parks has always been lower, a spate of closures for retail park brands has resulted in vacancy doubling from 4.9% at the end of 2017 to 8.8% in H1 2020. However, units on retail parks are in demand due to the availability of space, ability to accommodate drive-thru venues and plentiful parking, which with a cautious consumer and social distancing measures in place have new significance. These are just some of the key trends we have recorded for H1 2020, which has been intensely challenging for all. With about 23% of the market yet to reopen following lockdown, attention must be paid to what will happen to these businesses, which, if not trading already are increasingly unlikely to do so. No one could have predicted COVID-19 and the impact it would have on the retail landscape in Britain. However, we firmly believe that there are still opportunities in the market for retailers and reliable data on the changing landscape is the key to unearthing them.

the device locations


the retailer | Autumn 2020 | 7



HOW SMALL RETAILERS CAN TAKE LEARNINGS FROM LOCKDOWN TO PREPARE FOR THE FESTIVE SEASON Over the past few months, we have witnessed many shining examples of small businesses doing all they can to survive. Whether that was through pivoting their business model overnight, getting online for the first time or updating their product offering to cater to previously unforeseen or unexplored demand. As more challenges continue to be thrown their way, help is at hand from a network of platforms including Down Your High Street and as the need for small businesses to adapt to these extraordinary circumstances continues. Since the pandemic hit, independent retailers have had to reassess how they engage with their customers in ways they may not have considered before, taking new and innovative approaches to keep serving their communities. The changes these retailers have made to their business have not only helped them through a difficult period but have ensured they are in a stronger position ahead of a tricky festive shopping season. At Visa, we have been heartened to see so many small retailers embracing the digital marketplace by setting themselves up online. Right at the start of lockdown, Visa partnered with platforms and marketplaces like, eBay and Down Your High Street to reduce the cost and fees for small businesses looking to sell online. Thousands of businesses who previously did not have a digital presence have now been able to sell online and reach customers through these platforms, with more than 2,000 businesses now signed up to the platform since the partnership was launched. Having an online presence with Down Your High Street proved crucial for independent cookware shop Kooks Unlimited when lockdown hit. Owner Chris Lynn-Thomas quickly recognised the importance of serving customers online to maintain the future of his business, as customers chose not to rush back in store. Chris comments: “Online has benefitted us greatly. With footfall down, many smaller independent shops were looking to sell online which can be a life saver, but expensive to put together a good, interesting and profitable website. Companies like DYHS have been a saviour as it meant I could still sell seasonal product which I would have been left with in store. It has been so busy online, probably busier than Christmas. People are cooking, baking and crafting so we have been able to continue trading.” Meanwhile, many small businesses have expanded their product offering during lockdown to reach new customers. It Started with A Stitch, a craft and embroidery business based in Cleethorpes, adapted its stock availability to create new kits that could be easily delivered to customers at home through a letterbox during lockdown. Commenting on how joining the platform has allowed her to create a new way to stay in touch with her customers, owner Gemma Winter said: “Lockdown has forced me to move my business in a direction that I wasn't expecting that has actually made it easier for me and my customers. Social distancing is here to stay, for quite some time and there's no escaping that. To be able to still support your local businesses by shopping online and then collecting or arranging delivery is the perfect way to maintain that support.”

At Visa, we are continuing our work with industry, technology and community partners to help retailers prepare for the upcoming festive season. From offering help to get small retailers online to setting up digital payments, we’re doing everything we can to help businesses keep serving their communities both online and offline. Our latest partnership at Visa is with Totally Locally, a grassroots initiative to help small businesses and communities work together to protect the future of independent high streets. Independent retailers can join with other small businesses in the local area to sign up, giving them access to free Town Kits and a network of peer’s support to help them collaborate with their local community over the coming winter months. Last month, over 100 towns across the country took part in Totally Locally’s Fiver Fest celebration , which saw small businesses host £5 special offers for local shoppers to thank the communities that support them. Following the success of the event, we are encouraging retailers to continue to find new ways to engage and connect with their customers as the Christmas shopping period begins. Independent businesses looking for inspiration can visit to find out more.

8 | Autumn 2020 | the retailer

Visa’s partnership with Totally Locally is part of its ongoing Where You Shop Matters campaign, a long-term commitment that recognises the essential role that small and independent businesses play in our communities. For the first time, Totally Locally is also creating a virtual shopping experience helping towns to get local businesses online – launching initially in Hebden Bridge, Leek and Crickhowell, with many more towns to follow. We’ve been truly inspired by the way retailers have remained resilient throughout this turbulent time by taking steps to prepare their business for the future. At Visa, we know the vital role that independent retailers play in their communities, and we are determined to play our part in supporting them as they look ahead to the upcoming festive season and beyond.


the retailer | Autumn 2020 | 9



WEATHER ANALYTICS HELP RETAILERS AVOID LOST SALES BY BETTER ALIGNING INVENTORIES WITH CHANGES IN CUSTOMER DEMAND. Taking advantage of selling opportunities when they materialise has never been more important. The pandemic has constrained spending, consumers are focusing more on need-based purchases than discretionary ones, and shoppers are making fewer trips to stores. All in all, retailers have a limited number of chances to get it right, capture sales, and satisfy customers before their competitors do. Staying ahead of shifting consumer demand patterns is difficult; after all, there are a lot of external variables that a retailer can’t control. For many of these uncontrollable factors – the economy, consumer confidence, and of course, COVID-19 – businesses can really only react and adapt. Many of these large-scale underlying factors tend to develop over time and evolve slowly. Retailers make the adjustments they can until circumstances begin to change, often months later. The weather is another uncontrollable demand driver. However, unlike the previously mentioned factors, the weather’s impact on demand will flip between positive and negative frequently and often dramatically, creating new opportunities (and risks) on a daily basis. There is another key difference between weather and the other external demand influencers – the weather’s impacts can be proactively managed by retailers.

WEATHER-DRIVEN DEMAND ANALYTICS IDENTIFY OPPORTUNITIES Leveraging analytics that pinpoint when, where, and how much demand will be increasing due to changes in the weather is a very effective way to boost sales without sacrificing margin. Favourable weather is like a promotion or markdown, without the cost. Retailers can ring up healthy sales in outerwear when items are discounted 40% but retailers also see sales volumes jump when cold, wintry weather sets in. Warm, sunny days will move as many or more units of bottled water as a “3 for the price of 2” deal. The right weather will generate demand and, for retailers that are prepared, a chance to satisfy customers and increase sales. Of course this only works if a retailer has the inventory on hand to meet demand. The easiest path to increasing turnover and profit is to minimise lost sales due to out-of-stocks. Overstocking stores (or warehouses for online orders) is not the answer – this just balloons inventory costs and leads to operational inefficiencies, deeper markdowns, and/or increased waste. Businesses can capture sales opportunities sensibly and repeatedly by using weather-driven demand analytics to better align inventories with consumer demand. Typically, retailers can grow revenue by 50 to 200 basis points by optimising inventories for weather impacted sales.

10 | Autumn 2020 | the retailer

However, using raw meteorological forecast data to capitalise on weather opportunities does not work. Companies that try this approach quickly discover how challenging it is to operationalise the data and effectively integrate temperatures, precipitation amounts, etc. into demand forecasts, replenishment solutions, and decision making. Even businesses that bring weather data into ML/AI platforms do not come close to matching the accuracy improvement generated by weather-driven demand analytics. Weather-driven demand metrics are developed by modeling multiple years of actual product sales by location and time period with the corresponding historical observed weather. The process accurately identifies weather-to-sales relationships and precisely quantifies the impacts with percent or unit change metrics a business can action. A retailer can apply weather-driven demand insights to more optimally match up inventories with consumer demand in both pre-season planning and allocation and for near-term replenishment. From a pre-season standpoint, weather-driven demand is used to correct planning baselines for both positive and negative weather-based sales distortions that are highly unlikely to repeat from one year to the next. Retailers that do this will improve planning accuracy by 20% or more for specific categories and uncover the times and geographies where demand is projected to be higher and more merchandise should be allocated. By weather-adjusting inventories ahead of the season, retailers increase revenue by reducing lost sales. At the same time, companies decrease the costs associated with over-stocking in situations where demand will fail to match last year’s levels.

In-season, grocers and other retailers with fast turning categories utilise weather-driven demand projections that account for forecasted weather conditions over the next week or two. Weather- informed replenishment adjusts store-level demand forecasts to reflect how demand will be changing rather than simply restocking locations based on recent or historical sales trends. Just because the weather deflated demand in a location last week, doesn’t mean it will do so again this week. In this scenario, sales get missed because the weather has all of the sudden produced a bump in demand and there is not enough product available. “MIND THE GAPS” THIS CHRISTMAS SHOPPING SEASON How can weather-driven demand insights help retailers during the Christmas trading season? Broadly speaking, November will present a challenging “weather comp” for retailers looking to move seasonal items. Winter apparel (coats, knitwear, boots, etc.) and other cold weather categories (hot beverages, comfort foods, heaters, etc.) received a nice assist from the weather a year ago. November 2019 was the coldest in over 20 years for the UK overall with above average rainfall. However, December should allow for better like-for-like performance as last year’s temperatures were warmer than normal. Retailers using weather-driven demand insights will have planned for slower seasonal product sales in November but will also have planned to have enough inventory on hand to meet a stronger sales trend in December. Without this perspective, it is not unusual for retailers to react to lagging year-over-year sales by taking deeper by scaling back stock levels and/or taking deeper markdowns earlier. Should December sales begin to outpace year ago figures due to more positive weather, a gap will open between demand and inventories, resulting in lost sales. Additionally, retailers using weather analytics as they move through the Christmas season and replenish stores will be able to identify and fill the gaps that could be created due to day-to-day fluctuations in the conditions outside. Recognising and addressing the stock shortages that could arise due to weather-fueled sales spikes will help retailers maximise sales during this critical shopping season.

DAVID FRIEBERG // +1 610 407 2905 (office) // +1 484 682 7626 (mobile) //

the retailer | Autumn 2020 | 11



FACED WITH UNPRECEDENTED CHALLENGES TO THEIR BUSINESS MODELS, RETAILERS ARE RESPONDING WITH CONFIDENCE – AND INNOVATING TO SEIZE THE OPPORTUNITIES OFFERED BY NEW REVENUE STREAMS Last year witnessed one of the toughest periods of trading in recent memory for the UK’s retail sector. Beset by the uncertainty surrounding Brexit, 2019 saw the slowest rate of growth since 20101. The knock-on impacts for many retailers were job cuts and store closures, while we also saw a handful of high-profile firms tip into administration. And yet, 2020 has uncovered challenges that far outweigh those of 2019; challenges that few people would have thought possible. The lockdown enforced to contain the spread of Covid-19 forced all ‘nonessential’ physical stores to close, with only the likes of supermarkets and chemists permitted to remain open. The three- month shut down of nearly every high street store would have seemed inconceivable at the start of the year, but it happened. Signs of growth More recently, however, there has been cause for optimism. Retail sales have returned to growth after most stores re-opened, with the Barclaycard consumer spending index showing a 17.1% year-on-year increase in retail expenditure in August 2020, following 17.9% year-on-year growth in July – whilst DIY and home improvement stores have been some of the biggest beneficiaries, with growth of 22.9% year-on-year in August2. Meanwhile, digital sales have soared since lockdown began, and £3 out of every £10 is now spent online3. As retailers adjust to a post-lockdown period, one in which many people are still concerned about contracting Covid-19 and have less disposable income, there is a general acceptance that the landscape has changed inexorably.

How have retailers adapted? Against this backdrop, we wanted to understand how retailers were adapting to the changing climate, thinking about longer-term trends and planning to compete in the ‘new normal’. Earlier in July, we surveyed 300 senior managers (or above) from across the industry4, working in firms with between 10 and 500+ employees. This panel gave us a great cross-section of responses, and the views of retail leaders in fashion, food and drink, health and beauty, sports, electronics, home improvement/DIY and entertainment were all represented – as well as senior personnel from department stores, supermarkets and online marketplaces. The results are encouraging. Rather than revealing a picture of doom and gloom – which, in many ways, would be understandable given the scale of the challenges facing the industry – our research found evidence to the contrary. Retail leaders are confident about the prospects of the companies they work for – not only in the longer term, but also across the next few months. One advantageous factor for retailers is that when consumers are going out to shop, they are increasingly doing so with the intent to purchase rather than to browse. Retailers are seeing average basket sizes increase as a result. However, it’s a tough job to keep conversions high when financial belts are tightening, and retailers need to make their customer experiences and journeys as smooth as possible. We have seen many retailers using the current situation to innovate and refresh their business operations. Many have used lockdown as an opportunity to open up new digital revenue streams, while others are seeking to extend the ‘community spirit’ that brought the country together through more localised supply chains and improved ESG policies.

“… when consumers are going out to shop, they are increasingly doing so with the intent to purchase rather than to browse”

12 | Autumn 2020 | the retailer

“… in the past three months we have seen more change than we’d typically expect to see in a three to five year period”

New models for growth Retailers that have invested heavily in their e-commerce platforms have managed to trade well throughout lockdown. This includes Hotel Chocolat, which said in a recent trading update that digital sales accelerated more than 200% year on year in the three months to the end of June, and that it is creating 200 jobs in response to surging online demand5. Similarly, Kingfisher announced that its second quarter sales were up 21.8% due to strong e-commerce growth6. Another key trend that has emerged is a shift to a more localised retail model. In large part, this is in response to a sharp increase in more people working from home – a trend that was illustrated when the CEO of UBS suggested that up to one-third of its workforce may never return to the office7. Local high streets, rather than those in big cities, perform better in that scenario. As a result, many retailers are looking at how they can grow their community footprints. For example, John Lewis recently announced a vast extension of its click-and-collect partnership with Co-op, to include 400 new stores – taking the overall number to nearly 900 locations.

Greater utilisation of local stores may be complemented by an increase in local suppliers, according to our research. This will unfold as businesses not only battle to rebuild disrupted supply chains, but also aim to improve their environmental credentials. Retail was facing significant structural change as we came into 2020, and the pandemic has only served to accelerate this trend. In fact, in the past three months we have seen more change than we’d typically expect to see in a three to five year period. Whilst this rate of adjustment is a daunting prospect for the whole industry, if the results of our research tell me anything it’s that retailers in the UK are determined to meet these challenges head on.


References: 1. centre/press-releases/Consumer-spending- grew-0-point-2-per-cent-in-August.html retailindustry/timeseries/j4mc/drsi Barclays Corporate Banking commissioned Censuswide to conduct the research group--hotc-/rns/trading- update/202007240700039482T/ trading-update/202007220700066836T/ sergio-ermotti-mulls-shrinking-office-space- due-to-virus-crisis-20200721







the retailer | Autumn 2020 | 13

How Retailers are Future-Proofing their business by going Direct-to-Consumer


2020 HAS ACCELERATED THE SHIFT TO ONLINE SHOPPING, REVEALING THE IMPORTANCE OF ESTABLISHING A DIRECT RELATIONSHIP WITH CUSTOMERS GOING FORWARD Lessons have been learnt in 2020. For retailers, a key one has been the importance of direct to consumer (DTC) selling. For digitally native DTC brands, the transition to a lockdown environment was undeniably easier than for traditional wholesalers and offline businesses. Despite this, there have been some great examples of prompt ‘pandemic pivots’ from brands that have decided to literally overhaul their entire strategy and offering overnight. Moving fast to offer digital discounts, virtual consultations and curbside pickup, as well as adopting cutting-edge technology to create a seamless user experience—certain DTC brands have managed to attract significant online traffic even faced with lockdowns, border closures, and major supply-chain disruptions. The pandemic has rapidly accelerated consumer buying behaviour—what many expected 2030 to look like regarding digitisation is suddenly happening now. This means that selling direct is vital for staying relevant to customers who are increasingly shopping online. With new consumer habits, of course, come new consumer expectations. Businesses that accelerate to adopt advanced tech such as drone deliveries, AR and 3D are differentiating their brand and creating standout experiences for customers to return to. There are many benefits of selling direct and that applies whether it’s a small mom-and-pop business or a large multinational consumer goods brand. With the onset of COVID-19, Heinz U.K. quickly realised many of its consumers were unable to get to physical stores. For the first time in its 150-year history, Heinz launched a DTC offering to make food products available to vulnerable populations and essential workers—and it did so in just seven days. Similarly, the Swiss chocolate brand, Lindt which has been operating since 1845, launched its first ever online store in just five days and began selling chocolate directly to Canadian customers just in time for Easter. So, a brand has decided to go DTC. What needs to be considered? Before launching, it’s important to define the goal of the DTC strategy, and consider how this can be integrated into a retailer’s holistic strategy. DTC is not only vital for replacing in-store sales during lockdown, it’s also about creating the ideal omni-channel experience which blends the digital and physical worlds. This allows retailers to tell a consistent brand story that customers can choose to interact with wherever, however and whenever they want. It’s not online versus offline—it’s about merging both together in a way that works best for the particular brand and creates a consistent relationship with customers across channels. Social commerce and storytelling are also significant components of the DTC journey. Perhaps the most important aspects to action in moving DTC are providing value to the customer while creating a frictionless customer journey. If a customer thinks they can buy the product or service for cheaper or more easily with a department store, the impact of being DTC is minimised. There is a misconception for some businesses that DTC means cutting out or bypassing trusted retail partners altogether.

On the contrary, going DTC adds more space to tell the brand story and increase its equity, from which partners and retailers in turn can benefit. Customers can have the option to buy from both and make their choice based on convenience and preference. It can even benefit retail partners if a brand is recognisable and has its own identity and narrative, as customers are more likely to buy a product they are familiar with. There’s no one size fits all approach. In making the move to DTC, brands should consider, for example, what tech would be most advantageous for its user experience. That doesn't mean using technology for technology's sake. It's about being strategic and seeing what works for a brand. Consider the context—the circumstances of this year may mean that a strategy that would have worked in 2019 may not in 2020. It is important for retailers to always ask ‘how do we stay relevant to this moment?’ and going DTC is no exception to that. Direct selling simply gives more control to businesses looking to carve out their own space in the market and establish an exceptional brand identity. While online shopping patterns are on the rise, businesses should not forget that it is a period of financial uncertainty and anxiety for many and this should be acknowledged. Offering instantly redeemable promotions, discounts or ‘buy now, pay later’ options have a clear benefit—they allow customers to enjoy making a purchase despite the financial uncertainty. This demonstrates a commitment to the customer that can only be demonstrated by brands that are DTC. Now, more than ever, there are clear incentives for brands to move DTC. With the uncertainty that lays ahead, transitioning to direct selling could be a very effective way for retailers to future-proof their brands. Selling DTC online ensures that they can continue to sell in the unfortunate event of further lockdowns, travel bans or store closures. They will also rely less heavily on distribution partners and are able to control brand identity and form a connection with both customers and community. In determining how to go DTC, it is important to create a strategy that is right for that brand. There are various factors to consider but that doesn’t mean it can’t be done quickly and seamlessly, even when faced with a crisis—2020 has been clear proof of that. If you’d like further information on moving DTC, have a read of Shopify Plus’ Direct-to-Consumer Guide. Link to download DTC Report: source=BRC&utm_medium=content_syndication&utm_ content=direct_to_customer_guide&utm_campaign=BRC-retailer- aug2020

14 | Autumn 2020 | the retailer

SHIMONA MEHTA // // +44 (0) 7718 403 573 //

the retailer | Autumn 2020 | 15

Retail innovation during Covid-19

JULIA COOK FOUNDER AND CEO Change Management Group

HOW THE RETAIL SECTOR HAS EMBRACED INNOVATION DUE TO THE PANDEMIC “…When there are no constraints on the creative process, […] people follow the path-of-least-resistance, the most intuitive idea, rather than investing in the development of better ideas. Constraint provides focus and a creative challenge that motivates people to search for and connect information from different sources to generate novel ideas for new products, services, or business processes.”1 “Business as Usual” ended with the start of lockdowns. Retailers who had to close doors saw sales and profits fall immediately and in food and beverage categories, supply chain demand was difficult to meet. Lockdowns imposed unexpected and dramatic constraints: closing ports, stores, restaurants and warehouses; and locking customers in their homes. Business schools teach that a key method in developing innovation is to impose constraints. Therein we find an interesting sub-story. Constraint has driven innovation. ''In 2017, Prof. Haught-Tromp’s research into constraints and creativity concluded that constraints “help cut down the number of choices to subsets that we find manageable. This allows us to explore less familiar paths, to diverge in previously unknown directions.”3 The closure of restaurants and pubs channelled 100% of food distribution into the retail supply chain, an approximate 40% increase. Majestic Wine responded by expanding their fleet of delivery vehicles, converting stores into ‘mini-warehouses’, refocussing colleagues on order fulfilment and delivery and re-inventing their range. Their new model fulfilled demand while closing stores to keep people safe. On October 1st, their innovation was recognised when they won two awards at the 2020 Drinks Business Awards.4 Gap Inc was required to close most shops. Some analysts downgraded their forecast for the group, but the lockdown catalysed change: • focussing on the needs of consumers, Gap rapidly converted factories to produce masks which they sold to businesses and governments as well as consumers. In the last quarter, mask sales topped $130m and more than 10m masks • in June, they formed a partnership with Kanye West to connect with new customers • they significantly scaled e-commerce across the group Their share price is now up 3.8% YoY and 12.7% this week. In June, their CEO said “strong performance in the second quarter reflects the customer response […], particularly as we’ve rapidly adapted...We nearly doubled our e-commerce business, with approximately 50% online penetration”5 In the Middle East, luxury group Chalhoub saw revenue drop 100% and they permanently closed 60 stores. By June, they’d launched more than 12 new websites, engaged in strong social media campaigns, created virtual assistants and shifted associates into warehouses to fulfil orders. They hit their 2025 e-commerce target in just one month. The business is back to 60% of trading levels and expects to recover to 100% in 2021.6

The volume of consumers shopping online has increased by 28% since the start of lockdowns.7 Retailers raced to enable this. From re-engineering warehouse operations to spinning up social media trading, our sector has reinvented, re-engineered and innovated at an exhilarating pace. Examples tumble into headlines: Walmart launched a new membership program, Walmart+. For $98 a year, customers receive unlimited deliveries from stores. Last week Walmart launched an app that supports self-scanning, store navigation and contactless payment. Best Buy implemented virtual consultations, a ship-from-store model and same-day delivery to customers. Their CEO said: “… we are on a path to develop a flexible workforce model that leverages technology and provides associates the ability to work whenever and wherever they want.” 8 Waitrose teamed up with Deliveroo to provide rapid delivery as 77% of Waitrose customers shop online, compared with 61% last year. Build-a-Bear ran Workshop Wednesdays for family entertainment. VC investment in retail tech dropped in the first half, but we have seen technology innovation and adoption increase: • E-COMMERCE: Shopify, an e-commerce platform for SMEs, saw revenue double in the second quarter9 and the firm is rapidly releasing new functionality such as multi- lingual multi-currency to keep up with demand. • FRICTIONLESS: Mishipay had a sharp upturn. Mishipay is an app that allows customers to use smartphones to “scan, pay, disable a security tag and go”. It’s frictionless, eliminating queuing, bagging and checkouts. It can be used from home for ‘Deliveroo-style’ delivery or click and collect. • 3-D BARCODES: Restaurant chains have moved to contactless 3D for menus, and malls are using 3D for directories. In addition to reducing contact, this creates savings in printing and carbon and increases flexibility (e.g. changing menus on the fly). • QUEUING: We already had apps for table, car and flight reservations, now queuing and shopping reservation apps are here (Skiplino, SafeW8 and QLess were launched). In May, ASDA launched its own queuing app.10 • FORECASTING: Retailers are looking into forecasting and planning solutions that apply machine learning, as we can no longer predict the future by looking at the past. When the world has healed and constraints are behind us, we can expect to see these new innovations and customer, behaviours remain. Home working, home living, frictionless tools, home delivery and a new race to keep ahead in the digital world of retailing are now fixtures in the landscape of retail.

16 | Autumn 2020 | the retailer

Restricted choicestimulates innovation and creative success

References: 1Harvard Business Review, November 22, 2019: 2Haught-Tromp, C. (2017). The Green Eggs and Ham hypothesis: How constraints facilitate creativity. Psychology of Aesthetics, Creativity, and the Ar 3 restrictions-can-actually-boost-creativity 4 scoop-for-buying-team 5Business Wire, August 27, 2020 04:15 PM Eastern Daylight Time, home/20200827005650/en/Gap-Inc.-Reports-Second- Quarter-Results 6Retail and Leisure International 21 July, 2020 https:// in-one-month/ 7 coronavirus-impact-online-retail/ 8 record-results-doing-things-differently-in-the-pandemic/ 9Wallstreet Journal: shopifys-revenue-nearly-doubles-as-covid-19-pushes- shopping-online-11596057094 10 launches-virtual-queuing-system-as-it-prepares-for-social- distancing-to-last-for-the-rest-of-the-year/

How the retail sector has embraced innovation due to the pandemic


// //

the retailer | Autumn 2020 | 17

It’s time to redefine retail agility


IT’S HARD TO THINK OF A YEAR, IN RECENT HISTORY, WHEN SHOPPING PATTERNS CHANGED AS DRASTICALLY AS THEY DID IN 2020. IN FACT, A RECENT REPORT FROM ACCENTURE REVEALS THAT, AS A RESULT OF THE PANDEMIC, THE RISE IN ONLINE SHOPPING ALONE HAS LED TO 10 YEARS WORTH OF GROWTH IN E-COMMERCE IN A MATTER OF MONTHS. AS WE ENTER A SECOND WAVE OF COVID-19 IN THE UK, THERE’S NO DOUBT THAT THE PACE OF CHANGE IN RETAIL WILL NOT SLOW DOWN AND THAT RETAILERS WILL NEED TO CONTINUE TO ADAPT SWIFTLY TO SURVIVE THE NEXT SIX MONTHS. For the retailers who find themselves in a position of having to make big changes now, there’s inspiration to be taken from those that are already thriving. Retailers who are doing well are the ones that embraced agility head-on such as Ocado and Tesco — recognising early on during the pandemic that they needed to do more than just respond rapidly to changing consumer patterns and new social distancing measures. These retailers are continuously redefining their operations to become more proactive, rather than reactive, and are using data to their advantage. A new normal for retailers To look forward, retailers need to look back. When a UK-wide lockdown hit consumers back in March, the rush to stockpile items resulted in a record month for grocery stores. While this was good news on paper, it presented unprecedented challenges. Retailers had to deal with product shortages, supply chain issues and had to prepare staff to follow new health measures. At the same time, the rapid growth of online grocers like Ocado - which has now overtaken Tesco as the UK’s most valuable retailer - made traditional supermarkets realise they needed to turbo- charge their plans for digital transformation and quickly invest in e-commerce and click-and-collect solutions. What they needed were new platforms for their changing consumers, and better data to manage their supply chains. Grocers quickly learnt that agility in digital transformation, and data, was the key to success in the new normal. While many supermarkets started thriving in lockdown, other non-essential retail businesses were lower down on the learning curve. When these retailers reopened their doors, after several months of lockdown, they found that customers had new priorities. Retailers such as department stores and clothing shops were faced with consumers who are still wary of going outside and had new spending habits. Yet, they had to find a way to recover from months of lost revenue. Again, many of these retailers learnt that online shopping and within that digital transformation provided a way forward. This was proven by online-born brands such as Farfetch and Zalando both growing, instead of declining over the last six months. Looking back it quickly becomes clear that the retailers that have been successful, and will likely continue to grow, are those that championed digital transformation efforts. But more importantly, the successful retailers did not just transform themselves digitally, they did so with their consumers changing behaviours in mind. And, critically, they had the ability to take action quickly to meet demands — they had agility built in.

The barriers to agility in retail Agility has never been more crucial in retail than at this moment. A Workday study on organisational agility showed that top- performing companies were ten times more likely to react quickly to market shifts. These companies found agility by establishing some key processes such as continuous planning as well as data-driven and empowered decision making. The same study surveyed retail leaders to identify the key pain points that exist within the sector. Only 58% of retail leaders surveyed felt they had the ability to quickly re-allocate employees when their skills were needed elsewhere – a much lower number compared to other industries. Furthermore, only 29% of retail leaders said their employees had full access to the data they needed to make faster decisions. If a store manager doesn't have easy visibility of their employee’s own time sheets, the capacity across the business, or consumer spending, how can they decide who to allocate or where to prioritise resources following an overnight change in lockdown measures? Only by shifting their approach to focus on data analytics, agility within their organisation, and a continuous approach to planning will retailers be able to adapt quickly to protect their staff, customers and bottomline. Jill Standish, senior managing director of Accenture’s global retail consulting practice, summarised very well what retailers need in order to become agile in a recent podcast: “Be really fast with your decision making, use as much information as you can, and leverage tools and capabilities that you’ve never had before, so you’re not doing it alone”. In other words, retailers need more fast, data-driven decision making. One of our retail customers, for example, was able to use intelligent automation to provide multiple pictures of their budget based on different assumptions about what lies ahead. With the right data in their hands, they were able to get quick answers to the questions that mattered to their business — ‘what if half of our shops have to close? What if a third of our frontline workers get sick?’ Having access to data across all aspects of the organisation is a game-changer when it comes to driving agility. It’s why John Lewis Partnership decided to accelerate rolling out a unified cloud system across both HR and payroll that provided it with the ability to reduce its operational workload. Reducing the workload has helped John Lewis to allocate the right staff to continue to feed the nation, via Waitrose, while also ensuring that employee engagement across all staff components remains high. As we enter a second wave of COVID-19, the investment John Lewis has made will be fundamental in ensuring it stays ahead of the curve as new lockdown measures are put in place. With all retailers still recovering, being quick to adapt in case a second full lockdown hits can be what separates those that survive 2020 from those that don’t. Building a strong foundation for an agile future

18 | Autumn 2020 | the retailer

Made with FlippingBook Online newsletter