New study envisages dramatic changes to retail in-store and online
Saїd Business School, University of Oxford

Today, the Oxford Institute of Retail Management at Saїd Business School announced the launch of a major 18 month study into the future of retail at a time of unprecedented challenge and change.

‘The traditional retail business model is clearly broken’ says Dr Richard Cuthbertson, Director of the Institute, who is leading the research. ‘The experience of high street chain GAME now on the brink of collapse, is no longer unusual as we see the negative impact of retail sector change – redundancies, bankruptcies and takeovers as retailers try to adjust to new channels and formats, reduce costs, improve efficiency and survive. At the same time, emerging technologies are providing the best retailers with new opportunities to interact with customers, with greater potential to improve service, and increase loyalty, sales, and profitability.’

There will be no lessening of pressure on retailers says Dr Cuthbertson. ‘It is well known that factors such as rising retail costs, changing customer expectations, the need to rejuvenate and reshape our town centres, remodel out-of-town stores, and develop the many opportunities presented by online and mobile technologies, all mean that the clock is ticking for traditional stores. Many retail businesses are actively reconsidering their business models and particularly thinking about the relationship between digital and traditional activities. The Institute has worked for more than 25 years in this area and the project will build upon that insight to chart the retail landscape and explore the challenges and opportunities facing retail organisations. We will talk with individuals from all parts of the retail sector and with policy makers, and will review retail experience overseas as well as technology developments, to shape and test possible scenarios for retailing in the years ahead. The outcome will be the most thorough picture available of what the future of retailing may look like.’

Sponsored by Intel, the research project will particularly focus on the relationship between digital and physical retailing as retailers look for the optimum approach to managing these two offerings.

‘Few retailers have yet developed a convincing strategic approach to effectively marrying online and in-store retail, and are failing to explore the opportunities the two platforms could present if aligned’ says Dr Cuthbertson. ‘For many retailers the two platforms are only loosely related at best, and at worse, they actually compete with each other. We anticipate much more alignment of the two platforms from the best retailers, with richer digital experiences in store as customers use these facilities to review and test products, perhaps purchasing online – even if in-store. Digital media will transform the retail experience, vastly enhancing communication of product and service information, creating opportunities for customization, and providing more options for customers.’

Such a radical reconfiguring of retail will present a series of new challenges to retailers, who must simultaneously address back office support and supply-chain issues to efficiently service these innovations and to exploit fully the opportunities of developing technology. The research will explore many aspects of this transition from advances in mobile technologies, consumer analytics and big data, the integration of new solutions with legacy systems, and the new security and privacy issues emerging as applications and data proliferate.

The scope of the study extends beyond technology alone and will take a broad view of retail change including the socio-economic implications such as new and varied employment opportunities and the reshaping of the traditional town centre.

‘The pace of change in the retail landscape is unrelenting’ says Dr Cuthbertson ‘and we will see a fundamental shift in retail practice and experience. The role of the store will be transformed by the presence of online in-store; the information in-store is likely to encompass competitive price, product and service information in an era where customers can use smartphones to instantly check alternatives, and retailers might identify individual customers through loyalty programmes and mobile devices. How should retailers manage? What information should they be providing in-store and how should it be used? The study will offer valuable insights into these issues. What is certain, is that the retailers who thrive will have embraced change and adapted, putting customer requirements at the heart of their plans, rather than just clinging to the wreckage.’

This is, in my opinion a good three minute read for all retail bosses:

http://www.inc.com/jeff-haden/the-5-qualities-of-remarkable-bosses.html

Remarkable bosses aren’t great on paper. Great bosses are remarkable based on their actions.

Results are everything—but not the results you might think.

Consistently do these five things and everything else follows. You and your business benefit greatly.

More importantly, so do your employees.

1. Develop every employee. Sure, you can put your primary focus on reaching targets, achieving results, and accomplishing concrete goals—but do that and you put your leadership cart before your achievement horse.

Without great employees, no amount of focus on goals and targets will ever pay off. Employees can only achieve what they are capable of achieving, so it’s your job to help all your employees be more capable so they—and your business—can achieve more.

It’s your job to provide the training, mentoring, and opportunities your employees need and deserve. When you do, you transform the relatively boring process of reviewing results and tracking performance into something a lot more meaningful for your employees: Progress, improvement, and personal achievement.

So don’t worry about reaching performance goals. Spend the bulk of your time developing the skills of your employees and achieving goals will be a natural outcome.

Plus it’s a lot more fun.

2. Deal with problems immediately. Nothing kills team morale more quickly than problems that don’t get addressed. Interpersonal squabbles, performance issues, feuds between departments… all negatively impact employee motivation and enthusiasm.

And they’re distracting, because small problems never go away. Small problems always fester and grow into bigger problems. Plus, when you ignore a problem your employees immediately lose respect for you, and without respect, you can’t lead.

Never hope a problem will magically go away, or that someone else will deal with it. Deal with every issue head-on, no matter how small.

3. Rescue your worst employee. Almost every business has at least one employee who has fallen out of grace: Publicly failed to complete a task, lost his cool in a meeting, or just can’t seem to keep up. Over time that employee comes to be seen by his peers—and by you—as a weak link.

While that employee may desperately want to “rehabilitate” himself, it’s almost impossible. The weight of team disapproval is too heavy for one person to move.

But it’s not too heavy for you.

Before you remove your weak link from the chain, put your full effort into trying to rescue that person instead. Say, “John, I know you’ve been struggling but I also know you’re trying. Let’s find ways together that can get you where you need to be.” Express confidence. Be reassuring. Most of all, tell him you’ll be there every step of the way.

Don’t relax your standards. Just step up the mentoring and coaching you provide.

If that seems like too much work for too little potential outcome, think of it this way. Your remarkable employees don’t need a lot of your time; they’re remarkable because they already have these qualities. If you’re lucky, you can get a few percentage points of extra performance from them. But a struggling employee has tons of upside; rescue him and you make a tremendous difference.

Granted, sometimes it won’t work out. When it doesn’t, don’t worry about it. The effort is its own reward.

And occasionally an employee will succeed—and you will have made a tremendous difference in a person’s professional and personal life.

Can’t beat that.

4. Serve others, not yourself. You can get away with being selfish or self-serving once or twice… but that’s it.

Never say or do anything that in any way puts you in the spotlight, however briefly. Never congratulate employees and digress for a few moments to discuss what you did.

If it should go without saying, don’t say it. Your glory should always be reflected, never direct.

When employees excel, you and your business excel. When your team succeeds, you and your business succeed. When you rescue a struggling employee and they become remarkable, remember they should be congratulated, not you.

You were just doing your job the way a remarkable boss should.

When you consistently act as if you are less important than your employees—and when you never ask employees to do something you don’t do—everyone knows how important you really are.

5. Always remember where you came from. See an autograph seeker blown off by a famous athlete and you might think, “If I was in a similar position I would never do that.”

Oops. Actually, you do. To some of your employees, especially new employees, you are at least slightly famous. You’re in charge. You’re the boss.

That’s why an employee who wants to talk about something that seems inconsequential may just want to spend a few moments with you.

When that happens, you have a choice. You can blow the employee off… or you can see the moment for its true importance: A chance to inspire, reassure, motivate, and even give someone hope for greater things in their life. The higher you rise the greater the impact you can make—and the greater your responsibility to make that impact.

In the eyes of his or her employees, a remarkable boss is a star.

Remember where you came from, and be gracious with your stardom.

The food retail sector has always struggled with two conflicting factors. Firstly, many consumers like the idea of ordering groceries on the internet and having them delivered. Secondly, the process of retailer taking on the cost of the journey to deliver them to the consumer’s front door is enormously expensive and often complex.

The first factor has led every established and large (bricks and mortar) food retailer to experiment with how to satisfy the consumers requirements. Many of these retailers would reject my terminology of experimenting, claiming they are seriously in it for the long term. However, there is an undeniable fact: no one really makes any money at it! If you already have a large shop based business then the extra cost of delivering the groceries is just too expensive to be compensated by the profit made on the sale!

Not to mention that the complaint levels regarding selection of product is such that an additional department of staff is required to constantly calm angry e-consumers when either their ‘out of stock’ product was not substituted with an alternative or when substituted, the chosen product was not what the consumer would have chosen had they been in the store!

Now there is a new idea to try to move the whole idea onto a profitable footing – click and collect! The concept is to deliver the groceries to a point that dramatically reduces the cost to the retailer and is convenient to the consumer. Petrol filling stations, post offices, even churches are being considered across Europe to provide a service which can reduce the final 2-3 kms for each individual delivery and drop off many consumers requirements at the same time.

This concept will be pushed hard by the retail industry, as the follow up is the consumer will eventually be charged for the privilege of having the final leg of the journey to their front door done for them!

As for the substitutions issue, the best practice is continue to learn how to satisfy the majority!

Analysts who believed the retail press when Aldi and Lidl entered the UK market in 1990 that they would sweep all in front of them away, often ask me this question.

The truth is the discounters had an impact much quicker than is generally understood! The impact on the market came from the reaction of the largest players. The market leaders saw the signals of what was to come and reacted quickly to restrict the growth potential!

Knowing it would take these discounters time to build volumes needed for successful private label brands they put their own muscle behind inventing a discount range and putting it in store as quickly as the discounters could manage it themselves. This lowered profit margins but with sales growth still available, the best of the food retailers covered their tracks with profit growth from expansion.

Meanwhile these large supermarket operators streamlined their costs with improved processes and squeezed their suppliers a little harder than before. In fact ask a major branded supplier about the impact discounters had on the market and he will probably not smile!

Meanwhile the discounters themselves just chewed through the years to build up there store numbers, product reputations and teams. There is still a long way to go for the format to be mature, but my guess is 3000 stores and 10% market share will arrive in the future for the two famous facia.

It was once the notion in the West that all Eastern European retailing was far behind its Western counterpart. Well on average, it still is, but it is catching up real fast!
Large markets such as Russia and the Ukraine are now populated by many Western retail brands who have simply exported their business to these markets and this has encouraged the smarter incumbents to modernise their businesses.

The biggest hurdles currently for these incumbent Eastern European companies are:

• The cost of real estate is very high by comparison, to the available sales
• The consumer is not so mobile so you need more stores
• Their understanding of store organisation, which can be laced with outdated processes, which are grossly inefficient

The first two points are the same for the foreign invaders, the last point however, can be a real competitive weakness!

If ever there was an example of good idea that needed time and money to be developed, Amazon is it! Even now, they do not have the profitability of a very successful retailer (this year will be less than 3% of revenue). However, everyone thinks the concept will prove lucrative.

These Amazon guys always understood that ordering product on the internet instead of ‘going shopping’ in the traditional sense would be popular as long as it was well priced and simple. Time poor, cash rich Westerners now spend $11 billion a year via this company whose sophisticated trading platform allows themselves (and all manner of other partner companies) to offer their product successfully.

However, Amazon beware, many retailers are now adding more cleverly an informational and transactional website to their Bricks & Mortar business. When they learn how to do that in an integrated way, so their consumers can shop online and offline seamlessly, Amazon will have much greater competition than it has right now. Consumers prefer multi-channel. That is not the Amazon way!

A retail brand can be compared to a plant, it has to be nurtured! At any time if you just leave it to produce fruit (or profit) without the proper care (or investment) it will slowly, and then suddenly, die!

That is what is happening to Schlecker. The locations were always inconsistent, the store format is outdated, the uniqueness of the offer is hard to recognise, and the news clippings for the last 10 years were always weighted negative.

The probability that Schlecker can survive is low, the costs of putting things right are higher than the break-up value and the time needed to do it will not be graciously given by the competition.