FT Future of Retail summit
‘There is no price too much to earn loyalty’
Industry figures gathered at London’s May Fair Hotel on October 6 for the inaugural Financial Times Future of Retail conference
M
edia and industry figures gathered at the May Fair Hotel for the Financial Times’ first retail
conference in early October. McKinsey & Company global retail practice senior partner Peter Child kicked off proceedings with the question, ‘Do we really need retailers?’ With business changing all the time in a dynamic environment, the fundamentals of a retail business (aggregator of demand, range curator, logistics manager, price guarantor, trusted advisor, payments processor, platform provider) are being challenged by a process of unbundling. Individual companies have entered the specific parts of the market, identifying consumer needs or pain points and providing solutions, taking away from the retailer. However, Peter believes that if a retailer can
focus on delivering a sustainable competitive advantage by improving performance in one of six areas, they will remain relevant. He highlighted stocking distinctive and exclusive product, employing a structural cost advantage (for example Aldi), superior customer insights (such as Amazon, where a third of sales come through recommendations), employing remarkable people (citing the reputation of John Lewis), delivering emotionally engaging experiences and having compelling ecosystems. However, to deliver these, he noted, the
important element was not to listen to him, but to your customers.
Moody’s vice president and retail analyst
David Beadle, consumer futurist William Higham and Financial Times economics correspondent Gemma Tetlow discussed the broader socioeconomic context of the retail market. Gemma said: “Before the EU referendum, economists predicted that a vote to leave the EU would mean businesses and consumers would hold off on big purchases, which was perhaps overblown, and put a long term dampener on growth. Unfortunately we know almost nothing at the moment about the long term, what effect there will be on standards and regulations, services agreements, and we don’t know what the Government will do and trade off might be.” David added: “Moody’s has updated its outlook
for retail across Europe, with relatively low growth and increased uncertainties for UK retail. The weakness of Sterling particularly will affect those sourcing from dollar-led products, where either consumer costs go up or margin is lost.” William noted: “The consumer has really been in flux since 2008, and has budgeted accordingly. Initially consumers looked for ‘cheapness’, but now it’s ‘value’ – for time and money.” Shop Direct group chief executive Alex Baldock made the case for a pureplay enterprise. “The orthodoxy now is omnichannel – people say you need stores to inspire customers, to let them look and feel, and deliver service and advice,” he said. “Amazon is experimenting with bricks and mortar, and nine out of 10 purchases still involve bricks and mortar at some point of the consumer journey.” However, he added that online, “everything
is different.” You are dealing with a different customer, and the market is growing rapidly. “All retail growth is coming from online, and almost all online growth is coming from mobile,” he said. “For us, 9% of sales came via mobile in 2012 and it’s 66% in 2016.” He continued: “You can now reach your
The FT Future of Retail summit brought together many key retail figures to discuss trends and opportunities in the market
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customer all the time, but you have very little proportion of their time; you have about three seconds to grab their attention online. However, thanks to their data we know our customer a lot better online than in bricks in mortar – it’s about how to apply that information. “The big prize online is personalisation. Give
different customers different things. Relevance wins. The best stores continue to inspire and
offer service. But the advantages that ‘also ran’ stores hold compared to online are eroding. There’s no right to exist, so some retailers are in for a surprise.”
‘Technology is shaping consumer behaviour’ Tesco Online managing director Adrian Letts discussed how the company has tried to bring elements of Tesco’s store profile and ethos online to give consumers a connected journey. “Technology is shaping consumer
behaviour,” he said. “Traditional retail is about having the right product at the right price. Now it’s about the experience, whether that’s in-store service or logistics. “We’ve moved to an ‘unplanned planned economy’ – for example, who knows what they’re having for dinner tonight? Think about booking a taxi compared to using Uber. Customer expectations are for a seamless approach.” He added: “Our customer’s expectation is not set by retail; it’s set by everything else they interact with.” Enjoy founder and former Apple senior vice
president of retail operations Ron Johnson discussed forming a point of difference. When Apple stores were introduced, he explained, physical in-store sales increased as online sales were increasing everywhere else. The desire for advice and personal service is clearly there. The concept behind his new company is
to transition from e-commerce to personal commerce – a delivery person comes to the home, but then sets up the product and explains how to use it and spends time with the customer in their own home. “The service is shifted to where you’ll use the product, not the point of sale,” Ron explained. “You have someone loving the product straight away, rather than getting it home and trying to work it out for themselves. That eliminates returns and call centre calls. “Having good people is key. There is no
price too much to earn loyalty. Good profits come from good loyalty.”
Notonthehighstreet.com chief executive Simon Belsham and The Dandy Lab co- founder Julija Bainiaksina discussed their companies’ objectives.
October 2016
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