The Future of Retail by Lyonsdown

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February 2014

FUTURE OF RETAIL

The dragon in her de n

Exclusive interview with Kelly Hoppen | Pages 10-11

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Business Reporter · February 2014

Future of retail

Opening shots René Carayol

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T’S BEEN said that the best leaders know exactly when to leave – but for whose benefit? They rarely overstay their welcome, and might just be more concerned about leaving a positive and long-lasting personal legacy, rather than what’s best in terms of succession for the business. Retailing giant Justin King has decided to depart the top seat at Sainsbury’s this July – but should it really have been his call? No matter how good they have been, should it really be left to the CEO to choose exactly when they jump ship? If so, what is the role of the chairman and the board in the transition at the top? Research shows the average tenure of a Fortune 500 CEO in the USA is about 4.6 years. For the first time in living memory, the average term of European CEOs is even shorter, at 4.5 years. Therefore it’s becoming far more difficult to be really long term about vision and strategy for an organisation. Dangerous short-termism is beginning to rear its ugly head everywhere. We will probably not see a repeat of the 26-year reign of Manchester United’s Sir Alex Ferguson ever again. This is also proving to be the case in the fast-moving and ultraunforgiving world of retail. Sir Terry Leahy at Tesco, Sir Stuart Rose at Marks & Spencer and Justin King at

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In today’s world of retail, if you’re bold you might fail but if you’re not bold you will fail... Sainsbury’s have all chosen their own time to depart. It might appear to be the right thing to do by the organisation, but who should choose when? They may also have had too heavy a hand in the selection of their successor. Not only that, but it is beginning to feed the perception that, just like Sir Alex, they left just as the storm clouds were forming, and have left a less-than-perfect inheritance for their hand-picked successor. When Archie Norman and Allan Leighton left Asda, they had been at the helm together for eight years, but they had done things a little differently; they left a cadre of potential successors, not just one hand-picked favourite. Philip Clark and Mark Bolland were left many potential banana skins to navigate at Tesco and M&S respectively. Allan Leighton left the business on the up, although perhaps

that doesn’t appear to be quite the case at Sainsbury’s. Some 36 quarters of continuous growth is indeed a spectacular performance, but a little closer inspection shows that the overall profit margin is only 3.4 per cent, and it must be noted that the fifth largest supermarket, Morrisons, makes significantly more profit than Sainsbury’s – despite not having started an online business until this month. The well-documented travails of David Moyes at Manchester United beg the question – surely the appointment of a new leader should have been performed by the chief executive and board of directors and not steered and directed by Sir Alex. Chairmen and boards of directors, especially in the disruptive world of retail, need to stand up and be counted. In a world where the internet, discount retailers and a far more discerning consumer are changing retail for ever, boards might just need to “skip a generation” of leaders in order to find the new-age approach necessary for success. The style and tone of leadership that was necessary for a particular era may not be appropriate for the next era – especially in this rapid and uncertain marketplace. It’s not about length of service – it’s all about the right timing for the business. An outsider might just be more challenging of their inheritance and the status quo, but an insider might be better placed for continuity – every business is unique and requires the full attention of the board. In today’s dynamic and turbulent world of retail, if you’re bold you might fail but if you’re not bold you will fail.

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Stores enjoy ‘second wave’ of growth online ALTHOUGH the January post-Christmas sales period showed an improvement for retailers, there were winners and losers. Online sales were a standout performer as well as non-food retailers, while food retailers struggled. Richard Lim (inset, right), head of business information at the British Retail Consortium (BRC), says: “What we have seen over the last year has been an improvement in the retail environment in terms of sales. “The standout performer continues to be online – we measured non-food online sales in January and they were 19.2 per cent. That is

strong growth. What we are actually seeing now is almost like a second wave of growth online as the popularity of smartphones and tablets continues to grow. “Within non-food, furniture and flooring have done very well over the last 12 months. That has been on the back of a much improved housing market, that has fed through into a higher volume of house moves. This has supported sales in furniture and flooring. “There was a split between the sectors. Food sales over the last quarter in 2013 and in 2014 have been quite slow. This is due partly to lower inflation within food. Food inflation has

come down quite sharply and that obviously has an impact on top-line growth. “There has been an increase in market share with some of the discounters like Aldi and Lidl, and also people are changing their shopping habits. There are fewer people doing the big shops once a week and buying lots of food.” But the growth of online shopping could also be causing some retailers to struggle as new demand puts pressure on supply chains. A KPMG study recently uncovered a wide disparity in retailers’ fulfilment

and delivery capabilities. The last order dates offered by fashion retailers for guaranteed delivery by Christmas varied by a full week, from December 16 to 23, which could have had a severe impact on sales growth. Hamish Brewer, CEO of supply chain management group JDA Software, says: “There will be casualties and success stories. The challenge is whether companies can navigate where they are, to the history of where they have been, to where they have to go. Those that take the lead now will capture the loyalty of their consumers.”

Seamless customer experience: the holy grail of future retail By Joanne Frearson INTER ACTION and personalising the shopper e x p e r i e n c e i s v it a l t o understanding what customers want when it comes to retail. David McCorquodale, head of retail at KPMG, says: “When you look at the principal areas retailers are focusing on, one is information, which I think is the next real driver of business. “That drives on to smart personalisation. That is taking the big data and retailers trying to be personal with it. Consumers want to be treated like individuals and they want to be in continuous dialogue with their brands. “An awful lot of work is going on with retailers at the moment to harness this information, manage it, u nde r st a nd it a nd turn it back to make that into dialogue with consumers.” The digital revolution no longer means consumers have to go to a store just to shop –

they can seamlessly shop from one channel to another, whether it be TV, radio, direct mail or the internet. Companies that make the customer experience seamless have been attracting new customers and increasing sales. Mc Corquoda le say s: “That is where the Burberry story comes in. That store on Regent Street is outstanding because it combines luxury with digital imaging with everything they put in it through their advertising. It is really omni-channel in the best way. It is the way they lay it out, all hand-picked for you. It is the sense of community, connectivity that humans need.” Through data retailers can gain valuable insights into their consumer. Some retailers have been st r uggl i ng to u n de r s t a n d w h at c u stome r s wa nt. Consumers now have everything at their fingertips and have a lot more power and choice through t he digital revolut ion. By retailers

g e t t i n g t o k n ow t h e i r customers they can get some of the power back. Liz Claydon (left), head of consumer markets at KPMG: “One of the other things I heard the big players saying recently is around the changing profile of the consumer. I was working with one recently and they were saying how shocked they were that the consumer of five years ago has changed dramatically in some categories. “As the world becomes more and more global, a lot of these players have to think again around what was the traditional age profile, sex, ethnicity of the consumer. This is actually changing at a really rapid pace. “Being on top of that and thinking about how that impacts their whole marketing and sales campaigns is really interesting. They are trying to get a handle on that through the use of data and social media. They are trying to figure out who is showing interest in their brands. “What do we need to do to respond to that? The big point for me is the power of the data, how you use that data in a way. They

are going to be the winners in the digital revolution that we are seeing.” Not all retailers have been using data to get to know their customer, though. A recent KPMG survey found that after signing up with the retailer on their website, and opting in to receive offers and news, almost two thirds, or 62 per cent of shoppers participating in the study, received nothing other than an email to say their registration had been successful. McCorquodale says: “80 per cent of the world’s data has only been produced in the last two years, so the real challenge for retailers is trying to take very disorganised information and organise it to get a single point view of their customers and understand what that really means about consumer trends.

With thanks to... Publisher Bradley Scheffer...............................info@lyonsdown.co.uk Editor Daniel Evans.............................................dan@lyonsdown.co.uk Production Editor Dan Geary .................d.geary@lyonsdown.co.uk Reporters...........................................Dave Baxter and Joanne Frearson Production Assistant Alexis Trinh.............alexis@lyonsdown.co.uk Project Manager Aaron Mustafa......a.mustafa@lyonsdown.co.uk

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“Retailers will have to adapt to the digital revolution in order to understand their customers and keep them attracted to their brands. It is about how to personally interact

with consumers in the way they want to shop. “This does not mean all sales will be online; it is about combining the digital revolution with the shop experience as well.”

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Future of retail

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Retailers must create retail theatre or risk final curtain call INDUSTRY VIEW

echnology is changing the face of the retail industry and those that are not embracing the digital revolution are being left behind, missing sales opportunities and the potential to attract new customers. In a recent survey by Samsung, 94 per cent of retailers agreed the future of in-store customer experience depends on developments in technology.

94% agree the future of the in-store customer experience depends on technology developments

In addition, 53 per cent of those interviewed claimed that the failure to address the changing technology needs of customers is likely to result in a significant competitive disadvantage, while only 6 per cent say they will experience little or no competitive disadvantage. Graham Long (below), vice president of the Enterprise Business Team at Samsung, says: “What we are finding is that the massive penetration of smartphone and tablet technology with consumers is accelerating the change of market dynamics in the retail sector. “There are so many aspects of our lives that are being impacted by this technology. This is something that we have seen reflected in the retail market. People are using this technology systematically now as part of their retail customer journey.” Long explains that the future of retail will depend on using technology to link the omnichannel experience seamlessly. There will no longer be barriers between the shopping channels available to consumers, such as television, radio, direct mail or catalogue, and they will have a common link through technology devices. Philip Oldham, head of marketing at the Enterprise Business Team at Samsung says: “Breaking down the barriers between the different channels is mandatory for the future of retail. We are absolutely reliant on technology to break down those barriers, making sure people can seamlessly move from one channel to another, however they want.” But not all retailers have been embracing new technology to attract consumers.

Figures from Samsung showed 41 per cent of retailers claimed to be technology pioneers, striving to be among the first to adopt the latest retail technology, while only 35 per cent have adopted relatively established technologies such as tablets in store. Retailers that use technology to interact with consumers can use it to help connect with them, increase sales and draw in new customers. One way of doing this is through creating retail theatre through technology. Graham Long says: “Retail theatre always used to be about what your experience was like when you actually go into a shop. Now retail theatre starts much before that. “On a Saturday afternoon my son sits on the couch with his tablet designing his latest pair of trainers. “After designing the trainers at home, he goes to the store where he is able to look at the different shoes and use the shop’s interactive format displays. “‘Retail theatre now starts in the home, in the office, on the train. It’s wherever you are with your mobile device and means that customers are now starting their research and therefore the retail journey far earlier.” The Samsung survey showed more than half, 54 per cent, believed developments in interactive and connected 72% agree investment in-store is technologies vital to compete with the online will better assist buying experience with selling opportunities, while reatilers singled out display screens as the most likely technology to increase spend in store. In the future, 59 per cent of small and independent retailers said they are likely to increase spend on display screens and digital signage. Display screens are another way of interacting with customers and drawing them in. Oldham says: “‘Retailers are now working hard to capture the attention of their shoppers in the store and keep them interested, Samsung has a range of displays in the retail market that we know are used for this purpose. They range right up to 95-110” sizes and are ultra high definition which means that the image is as clear as real life. It’s ideal for showing a life size model on a catwalk in a clothing retail environment, it has real visual impact.” Creating a visual impression to entice people into a store is vital for bricks and motar

Only 22% have adopted emerging technology such as video walls

retailers. Long says: “It is about having content on display which is relevant to your audience. We work with a number of fast food outlets and one of the things we are able to do with the display technology is control the content on those displays centrally. “If it is a particularly sunny day, the restaurant can centrally run a promotion on all of their displays in store around ice cream. If it is a particularly cold day then they run a promotion on hot chocolate, or some other seasonal products. “If they have to rely on the store manager to change the content then it very often does not happen due to time pressure. At the moment a lot of promotional materials in stores are paper based, and as we know with the English weather nobody can predict what we are going to get from one day to the next.” In the survey, the majority, 72 per cent, of retailers agree investment in-store is vital to compete with the online buying experience. Consumers also use their smartphones, tablets and computers to shop online and compare prices. Oldham says: “Retailers are very focused on turning footfall into in-store sales; that is a major objective for them. What they are trying to combat is the phenomena of of showrooming. People go into a store to see the products, to touch and feel them, but leave and then buy them online. “The key thing is to offer the same convenience in store as online. For example, if an item of clothing is out of stock in a particular size or colour, they are able to create that purchase in store and get it delivered to make sure everything is as convenient. There is the whole personalisation and customisation angle which can drive brand loyalty.” Technology can help the retail industry to understand their customers and give them what they want. By adapting to these changes in consumer buying patterns as a result of the digital revolution retailers can stay ahead, increase sales and attract customers to their brands. www.samsung.com/uk/retail www.linkedin.com/company/ samsung-business-uk

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Britain’s high streets need to be less retail-focused if they are to survive

Resurrecting the ghost towns By Joanne Frearson

S SHOPPERS flood to purchase their latest gadgets and retail goods online, the British high street has been suffering. Local stores are being hit as people no longer use the high street to do all their shopping. Figures from the British Retail Consortium show footfall in December was 2.4 per cent lower than a year before, while in the same month online sales represented 18.6 per cent of total non-food sales, against 16.5 per cent in December 2012. A recent government-backed report by the Distressed Town Centre Property Task Force found the amount of remodelling needed to revive the town centre was comparable to the building programmes of the Victorian era or the rebuilding of postwar Britain. T h i s g roup wa s set up fol low i ng recommendations from the Mary Portas (inset, right) review of declining high streets. Mark Williams (inset, above), chairman of the Distressed Town Centre Property Task Force, says: “Online shopping has been one of the drags for the high street. The fundamental difference between past recessions and this one is the dynamics have changed. The internet is not a short-term fad, the internet is here for the foreseeable future and is how we now shop.” According to Williams, the high street will not be revived if it is just flooded with more retail outlets; he explains the world has changed and local communities should adjust. “Retail consumption expansion is going on on the internet,” says Williams. “It does not hold that retail consumers spending more on retail goods equals a need for more floor space. Those models are outdated because of the internet. It

is about seeing places that are working with the internet – click and collect – digitising the high street, working with technology that is only going to get better and better. It is about providing places which are nice, enjoyable and that you can be proud of. “We have made some horrific mistakes over the last 60 years. Places which I defy anybody to say are nice. Let’s use this change to design and build environments that are attractive and will last for over 100 years. Places that we can be proud of. “It is almost like the introduction of electricity when we had been using gas lights. It is as f undamental as t hat. T he difference is we are still using gas, we just use it differently. Here we still use town centres, we will still be doing some physical shopping, but we will be doing it in a different way and we need to reflect that. “If you imagine town centres to be like ponds and we have allowed weeds or lilies to grow in this pond, what has happened is, that has choked out everything else. All you see in many town centres is retail, but it is now too much to be sustainable and we have to clear some of that out. We still want to see some lilies in the pond, but we also want to see fish, reeds and so on.”

Framework for communities

Part of the solution involves using the town centre for other purposes. “Retail has choked out all other economic uses in the town centre,” Williams says. “We need to bring back council offices into the town centres, the library back into the town centre, we want to have housing back in the town centre, we want to see cinemas and restaurants back in the town centre.” Since the report has come out Williams says government agencies and civil ser vice

departments have been phenomenally supportive. The departments have been working with the Distressed Town Centre Property Task Force and continue to work with them. They are looking at how each different recommendation can be taken forward by different departments. The report’s aim was to help provide a framework for communities to initiate their own programme to kick start their high street, not a one-size-fits-all approach. “We recommend a master plan for town centres to show how they can provide for the needs of their populace going forward,” Williams says. “What it will look like will be very different from town to town; and that is where it goes back to the localism, it is not about trying to provide some bureaucratic centralised masterplan for everywhere. The designs will vary according to the needs and wishes of the population in each place. “The locations we are talking about are economically deprived. They do not work and need to be rejuvenated. It is down to each town to decide how that manifests itself. The opportunity is vast.” Local communities are beginning to get together and are using this approach. “The first example of this was picked up at St Austell following the proposal of t he Coy te Fa r m development,” says Williams. “St Austell is a small town and has a small population. There was an out-of-town proposal to build a shopping centre which would compete with the town centre. “Off the back of our report, a number of land owners got together and produced their own masterplan, which talked

about offices, residential and leisure activities for their town centre and how they could fund it. “They published this as part of the opposition to the Coyte Farm proposals – this caused a huge furore, and the planning application was defeated. Different initiatives have been picked up by different organisations.”

Catalyst for change

He expects the bulk of the funding to come from the private sector, but the master planning, the land assembly has to be led by the local authority. “Local authorities will have to use compulsory purchase powers [power to acquire rights over an estate in land] to bring together mixed ownership into one ownership,” Williams says. “It needs a local authority intervention to assemble the site, decide what they want and then the private sector will respond. “We have seen it in the major cities of Birmingham, Liverpool and Manchester. Those cities are transformed. Manchester was brought about by a bombing, which was a catalyst for change. “In the other cities the catalyst for change was that suddenly you had strong local authority leaderships, which said, enough is enough, we need to do something with our city, and they were big enough to bring it about.” Changes are slowly coming to help revive town centres a nd t he h ig h s t r e et . Government bodies, local authorities and local communities are realising change is needed for the town centre in order to co-exist with the digital revolution.

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Supporting retailers’ digital strategies INDUSTRY VIEW Retailers are adopting more sophisticated digital strategies – not only with their online presence, but also on the high street. The IT and software sectors are working with retailers, providing multichannel solutions that enhance the shopper’s experience. Manchester-based Touch4 is a touchscreen solution provider, working with high-profile retailers. Alongside its in-house hardware capabilities, it also has a dedicated software development team who can create a complete solution, tailored to customers’ requirements.

Waitrose Touch4 initiated a trial to allow Waitrose customers to browse thousands of existing recipes based on products across its range. By installing this recipe selector in-store, the solution produced an increase in basket size against products detailed in the recipes. Customers were also able to get inspiration for meals to prepare at home, using new ingredients and influences. Customers have shown real interest in the recipe selector kiosk and the KPIs set by Waitrose were exceeded considerably.

Clarks Clarks approached Touch4, requesting a digital solution to keep young children occupied while their parents browsed the store. Touch4 designed and produced the Kids Panel – a 50-inch wall-mounted touchscreen kiosk with bespoke software, consisting of games and activities aimed at children. The trial was a success, leading to Clarks requesting further ideas from Touch4 that will contribute to its overall digital strategy. Touch4 is delighted to be involved in RBTE 2014 and will be exhibiting at Stand 263. 0161 663 0053 www.touch4.com

, l a w e n e R t e e r t S h Hig e l y t s l l i H Herne By Joanne Frearson

LOCAL community group, Herne Hill Forum, set up initially to act as a conduit between the local residents, traders and Lambeth and Southwark councils in South London has been taking initiatives to keep its high street alive, despite a flood last year which had devastating effects on the community. In May 2013, Herne Hill was one of the seven towns chosen for the High Street Renewal reward in May last year, and received £93,057 of the £1million which was up for grabs. It was chosen because of innovative ideas in the area for the high street. But in August last year a burst water main near Herne Hill station forced shops to close and threatened the livelihood of the high street. Giles Gibson, chairman of the Herne Hill Forum, says: “We have to fight back and get people to come back in the area and relearn their shopping habits. The flood was absolutely devastating. It showed that when you take a third of the traders out it will impact the others as well. “When you lose both your dispensing chemists, people think, if I have to go to the chemist I’ll go somewhere else now and while I am there I will pop into the newsagent and the bakery or what have you. Shopping patterns and habits change. “It has brought the traders to realise they are dependent on each other. If you get the right mix of traders and you work together, life becomes

better.” Since the f lood, the Herne Hill Forum has been working on initiatives to help revive the high street. The community group received the High Street Renewal reward money in November and the area is slowly undergoing a transformation. “We are making it greener, so there is a lot more planting,” Gibson says. “We have started removing some of the urban harshness. But we want to make the layout flexible, so we can change it as often as possible. “There could be themed markets or themed events and lots of little things like better signage or interactive rubbish bins and better street furniture. We want bins that are fun to throw rubbish into. We want bins that encourage kids to get into the habit of throwing litter into them, by making it fun for the kids to throw rubbish away. “For example, having a lid which, when you lift it up, you hear a roar of a dragon. We are working on whether we can get those done. Shop fronts are on the list of things to tackle. We do not have enough money to pay for shop fronts for everyone. What we are doing is encouraging the traders to improve their shop fronts. “We are putting colour co-ordinated planters around the place on the pavement, so the visitor’s experience is a little bit softer and nicer. This might encourage traders to make their shop fronts look nicer. “Having said that, I think there is a small programme that we might roll out that will focus on a few traders that will help them, if nothing else, to redo their shop window. Rather than have a shop window covered in stickers of cheap phone calls, removing them and seeing what the shop sells. “We want to make Herne Hill a nice social

Above and above right: Herne Hill is undergoing a local initiative to reinvigorate its high street after last year’s flooding

atmosphere, where people feel safe, somewhere where kids can come and play without the fear of traffic. There is a relaxed atmosphere, a bit like what a village green would be like, but more of an urban village green.” This is not the first time the Herne Hill Forum has taken on a project to help the high street; it had received local authority grants previously. Gibson says: “We had a small micro-grant from the local authority of about £16,000. We had achieved quite a bit and we had made a very good positive impact in the area. We have taken over management of the pedestrianised area outside the station, where most of the activity has taken place. “We introduced a whole range of activities and events following the grant, which were popular. Everything from the Halloween parties to the free film festival showing outdoor movies. We did a Charlie Chaplin movie with British composer Neil Brand playing the piano.” Their projects have certainly been paying off. “The area is on a roll,” Gibson says. “People have really seen the changes over the last couple of years. They have started enjoying living here and feeling proud to say they are from Herne Hill, which is great. “You monitor the social media and you see what people are saying in the street, you get the feedback from online surveys. All of those things, you start to take the temperature of the area and you think people are realising there have been difficult changes that they like.” A community group which took the initiative to turn around the high street is reviving the local spirit. Despite a devastating flood which hit a third of the traders, Herne Hill is fighting back.

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Payment card security: dreams, frustration and silver bullets managed service – consequently, it can take much of the customer-not-present payment environment out of scope for PCI DSS assessment as well. It does much more than just achieve PCI DSS compliance, also providing:

INDUSTRY VIEW

ince Payment Card Industry Data Security Standards (PCI DSS) first hit the payments card industry in 2005, UK merchants have dreamed of technology to facilitate simple and cost-effective PCI DSS compliance. By 2009, respected vendors had seized upon the opportunity to promote single-technology solutions to change the way merchants achieved PCI DSS compliance: point-to-point encryption (P2PE), which is the encryption of payment card numbers at the PIN entry device and secure transmission to a third-party management host who securely transmits the payment card data to the acquiring bank, being foremost among technologies promoted. However, there has been minimal adoption of P2PE – it has been found hard to implement and most UK merchants have procrastinated, being unable to find solutions capable of meeting their business needs. Publication by the PCI Security Standards Council (SSC) of common standards, by which components of a P2PE solution are audited and validated, was slow and few vendors were sufficiently prepared to present “ready to validate” end-to-end solutions; the technology “silver bullet” hasn’t been readily available and most UK merchants remain frustrated.

World’s first On October 30, 2013, European Payment Services Ltd (EPS) was revealed by the PCI SSC as the first entity in the

• Opportunities to revolutionise management of payment card transactions across all payment channels • Businesses with a multi-channel payments service capable of delivering real strategic innovation and growth

Nirvana world to achieve validation of its P2PE solution, based on N&Ts technology, against PCI P2PE standards for hardware solutions, finally providing merchants with the opportunity to securely take their customer-present payment channel out of the scope of PCI DSS assessment.

Multi-channel benefits Merchants have traditionally been left with little choice other than to consider separate technology solutions to achieve PCI DSS compliance, in both customer-present and not-present payment channels. Most payment service vendors have sought to market integrated multi-channel platforms, often acquiring proven technology to integrate with their existing platforms, with the burden of significant integration and development work. EPS’s managed payments platform is fundamentally different, built “ground-up” as a multi-channel payments service, with P2PE already at the core of the standard

EPS’s solution is a really compelling product, enabling merchants to meet the significant challenges of PCI DSS compliance, and genuinely allowing acceptance of any payment card in any channel in any country, in any currency and via any acquirer. It is also extensively proven, being live with large international retailers in more than five countries, successfully processing more than 250 million transactions per year. EPS is now represented in the UK by International Payment Services Ltd (IPS), which takes on the role of main contractor, merchant support and managing all partners involved in the payment solution. Visit www.ips-inter.com to download a complimentary white paper on the full IPS-managed solution. sales@ips-inter.com www.ips-inter.com

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Trying them online for size By Joanne Frearson HAVE you been worried about purchasing clothes online? Are you sick of the changing room experience? Virtual changing rooms have been transforming this experience. Metail is one such company which has been revolutionising this concept and is reducing people’s concerns about buying clothes online and helping retailers understand what their customers want. Tom Adeyoola (inset), CEO at Metail, says: “Metail came about through a combination of two things. One was a personal problem for my girlfriend-now-wife. She was complaining a lot about buying stuff online and also about the changing room experience, the rigmarole of trying clothes on and them not fitting right.” It was a cold call by Adeyoola to Cambridge professor, Roberto Cipolla, an information engineer, which really got the ball rolling. Adeyoola was working at the time on product development for a gaming company and called him for his expertise in computer vision and robotics. Cipolla showed Adeyoola his research, which took photographs of sculptures and turned them into a highresolution 3D computer model. “That I found very interesting,” says Adeyoola. “That helped me. It could be the beginnings of the way in which you could create a 3D version of people and start to solve this online clothes-fit problem. Roberto then introduced me to one of his PhD students, Duncan Robertson, who I commissioned for this project. He became my co-founder for Metail. “The power of the visual image to allow people to find what works for different body shapes, I felt, was the key to solving this problem.” The product works by the consumer

clicking on an icon when they want to purchase an item of clothing. They input some basic information to create their body model. They can then see that piece of clothing against their body model. They can spin it around 360 degrees and get sizing recommendations for the garment. “The process of creating a body model and actually buying is really quick,” Adeyoola says. “You can go from start to the process of buying a garment in under a minute, with basic information you do not need to leave your computer screen for. “It is all about speed of process in helping users decide if they want to buy something. We went to Warehouse changing rooms and we talked to people there. We asked them what their frustrations were with the changing room process. What would they like to do? “The thing that came back was when they went to a store. They would really like to try on as many garments as possible, rather than being restricted to four to take in. We wanted to try to replicate that online [customers being able to change garments as quickly as possible]. That is what you get, you point and click and they are dressed on.” Metail has been able to get valuable data insight for the retail industry off the back of consumers inputting their body size and shape on the system. He says: “We can start to tell retailers, of people that buy size 12, this is actually their size and shape profile. These are the size and shape profiles of the people who return stuff because they potentially do not match the cut of your clothes. “These are really interesting insights that you cannot get anywhere else. That is the really exciting bit – we are not only helping people buy clothes, we are now in a position where we can start to help retailers with purchasing and production decision making. How they should be making their clothes, are they making the right cuts for their

Online changing room sites such as Metail are providing valuable customer data to clothes retailers

customers, are they making the right sizes?” The product is also helping retailers solve problems they face when people buy online, such as return and sales conversion rates. British online clothing retailer ASOS claims that a 1 per cent reduction in returns is worth £10million to the firm. “Different retailers have different issues we can help them with,” Adeyoola says. “For example, in Germany, where return rates are 60 to 70 per cent plus, it is about reducing these. But in the emerging markets [it is different] – a customer in Brazil has only a

5 per cent return rate. In Brazil it is all about increasing sales. “We started to see great results from our partners in terms of how the product works. It is a difficult problem for a lot of retailers and they are really keen to understand if you can help them make better sales.” Virtual changing rooms are taking the worry out of consumers buying online. They are also providing valuable insights to the retailer and helping them reduce returns and understand their customers in how their clothes fit.

Burberry going strong during festive sales period UK LUXURY fashion retailer Burberry is a cut above the rest when it comes to selling clothes. Its strategy has been extremely successful with consumers. At a time when many other retailers are struggling, the high-end fashion group is going strong. Recently recognised as Menswear Designer of the Year at the 2013 British Fashion Awards, Burberry’s retail revenue in the third quarter increased by 14 per

cent, while comparable sales growth was 12 per cent. Men’s accessories and tailoring grew strongly. The halo effect of the marketing campaign launching the Brit Rhythm for Men fragrance helped Burberry Brit apparel increase penetration slightly, particularly in menswear and women’s outerwear. Scarves, small leather goods and beauty benefited from the

co-ordinated festive offer across all customer touch points. Angela Ahrendts, chief executive officer, says: “In the

all-important festive period, we are pleased with our 12 per cent comparable sales growth, which was in line with our expectations. “This performance reflects continuing strong brand momentum and our team’s intense focus on retail execution, supported by a planned increase in investment in marketing, customer service offline and online and our retail portfolio.”

Digital outperformed, enabled by investment in areas such as service, including additional languages, collect-in-store and fulfilment. Sales growth was strong not only in the UK, but in other areas of the world. Asia Pacific delivered double-digit percentage comparable sales growth, led by Greater China and a continued improvement in Korea. America and Europe,

Middle East, India and Africa (EMEIA) both delivered mid to high single-digit comparable sales growth. During the third quarter, Burberry opened a net five mainline stores including two in China, a fourth store in Mexico and the first Burberry Beauty Box in Covent Garden, London. In addition, one store and two concessions previously operated by a franchisee were acquired in Thailand.

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Retailers need to be relevant INDUSTRY VIEW “Consumers have changed and so must retail.” That’s the argument made by Shankar Narayanan, UK&I country head, TCS. “Tough times have led to greater price sensitivity, but we’ve also seen consumers becoming more technologically savvy and willing to shop via different channels. These forces have shifted the balance of power into the consumers’ hands.” TCS argues that retailers need to learn that a one-sizefits-all approach does not work in the new world order of omni-channel retail. Similarly, pricing competitively has its limits as a strategy where similar ranges of products at similar prices can always be found quickly via alternative channels. Instead, a differentiated personalised experience is required to make customers want to buy from a given retailer and come back in future. “In practice this means offering a consistent, coherent experience to a customer, personalised at every touch point via any channel. Through the use of appropriate technologies coupled with the right underlying architecture, retailers can become more relevant,” says Narayanan. “Tools such as rich e-commerce personalisation engines, social media listening platforms, big data, cloud and augmented reality are making it possible for retailers to realise this aim. The ability of the business to utilise these tools will determine the quality of the customer experience.” But to be successful, this approach requires a CxO level buy-in and a top-down initiative focusing beyond the operational elements of the business. It requires CIOs within retail to take on a strategic role, focused on an innovation and growth agenda rather than being tasked with driving functional cost savings. Narayan concludes: “At the retailers that are succeeding, CIOs have taken on this challenge, stepping out of the back office and leading innovation.” +44 20 7245 1800 www.tcs.com

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By Joanne Frearson

HERE is a warm, homely vibe when I walk into the design studios of Kelly Hoppen, MBE. Earthy colours and open spaces give a relaxing, natural vibe to the room. Kelly, who recently launched her first luxury online store, greets me upstairs in her work space and makes me immediately feel welcome by telling me I have a good strong handshake. I am impressed. The designer, author, educator and Dragons’ Den entrepreneur has been working on three different design projects that day. “Everything and anything inspires me when I design,” she says. “But the thing that makes me really inspired is travel. All I need is a day away. I have just come back from Paris and St Moritz, where I was working for three days. When I came back, I just could not stop designing. “As an artist, a designer and an architect, you are constantly inspired by everything around you. It is not just one thing. It is also conversation. I am very much inspired by people. My whole world has been built up on conversation. “I think you cannot be creative, expand and grow unless you can do that. I was thinking the other day, everyone can create a dream, but if you create that dream on your own, then you have not created a big enough dream. I believe you need to be able to talk to lots of people and learn from them.” Her new retail luxury online design store, www.kellyhoppen.com, is part of her dream of bringing her own range into people’s home, and to make people feel connected with the surroundings of their homes. Kelly is an expert when it comes to retail. She tells me how on QVC, the home shopping channel, in an hour she can sell £100,000 of her products. “Funnily enough since I was younger, I always wanted to sell on QVC,” she says. “QVC last year was voted the second most trusted firm, with John Lewis coming out top. It is a very easy way to be face to face with your customer. Their analytics are quite extraordinary. They know exactly who’s buying, what part of the country, what age.” Creating a connection with the people who buy her designs and making them feel a sense of warmth in their home is important to Kelly. Her new website has that feel with its Art of Home area, which includes videos and tips for customers to create their own dream home.

elly’s design services are already shipped to around 39 countries around the world via her multi-million pound export business. To her it is also all about exporting talent to different areas around the world. “I try to look at it like it is a chain of events,” she says. “I find this sofa, but someone has made it and it comes from a factory. It is actually exporting a lot of different stages. I am all about the craftsman and exporting that.” She is a big supporter of British business and helping people with their ideas, and believes the economy and the retail industry are definitely on the up. “I have also worked with UK Trade & Investment [UKTI] to be a voice for that and part of the GREAT campaign for the government [which encourages British entrepreneurial spirit]. “I think Britain has become so much. We

The big interview

I am ve inspire My w has b on con are at the forefront of architecture, design, fashion, art, photography and food. We are an incredible hub of activity here. I do think the government has played a huge part in that – the GREAT campaign and having ambassadors from all walks of life around, whether it is Victoria Beckham or Vivienne Westwood.” In her work with the GREAT campaign, she helps to mentor people getting started in business and is also an ambassador for The Prince’s Trust, and believes it is passion and focus which sets the people on top apart. She says: “Around 200,000 entrepreneurs started up businesses last year, of which many were young entrepreneurs who started with under £2,000, which I thought was brilliant. Young business is incredibly important to the economy.” When she decides on who to invest in on the hit TV show Dragons’ Den, watched by 3.5million viewers on a Sunday evening, Kelly looks for passionate people. She says she saw a bit of herself in the entrepreneur behind Reviveaphone, Oliver Murphy, and the founders of Skinny Tan, Kate Cotton and Louise Ferguson, when she decided to invest in them. “The first thing that hits me is the person,” she says. “That person has got to have my passion, my focus, my belief, the feeling that I have. I am quite good with that. Then obviously I am looking at the product – is it scalable? Is there something else on the market? Can I take a punt on it? You’ve got to instantly make that decision. “Nothing is a new idea, just a new version of old ideas. The better version is the one that is going to make a better business. I think we are a world where people want service. They want everything now. They do not want to wait for it. I think you have to constantly think of how to be

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Kelly Hoppen at studio; left, at work in her th Television Aw e National ards in Januar y

Kelly Hoppen

The Design Masterclass Book by Kelly Hoppen is published by Jacqui Small

ery much ed by people. whole world been built up nversation the best you can be in your business to make you Kelly believes problems can be good for stand out in the crowd. businesses. “Mistakes are good to have because “An idea cannot just be anything as there are you learn from them,” she says. “The earlier you so many of those ‘anythings’ around. I think a make mistakes, the earlier you can learn from good idea has to have many legs on it. You’ve got them, the better your business will be later.” to look at every aspect of it. I think a lot of She advises people to not be “frightened of businesses t hat are built today don’t making mistakes, do not cover them up, or pretend necessarily look at all the different avenues and they do not exist. When I first started in business, all the pitfalls that can happen. I think that is I would get very exasperated by problems and TCS_262x105.qxd:262x105mm 31/1/14 09:22 Page 1 why a lot of businesses fall apart.” panic and do all those things because I was young

BRITAIN’S

2013

and on my own. But I think today I have a motto in this business: it’s that if someone hasn’t died it is not really a problem. Death is the worst problem. “If a sofa does not get delivered or there is a late delivery, that is a problem; but it is not something to lose sleep over as you just have to go back to the source and know you will never use those people again and you will find someone

else and you will learn through that.” Kelly is passionate about design, business and helping the entrepreneurs of the future. She is involved in many different projects from her own design and online businesses, government initiatives and The Prince’s Trust, which all inspire potential business leaders of tomorrow.

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The $3trillion business that no one is talking about It will be the businesses that build effective strategies to deal with abandonments that will be the biggest winners INDUSTRY VIEW

here’s a good chance you’ve done it today. Or, if not today, then you’ll almost certainly do it later this week and the majority of times you shop online this year. ‘It’ is basket abandonment – the act of putting something in your basket on a retail website but not completing your purchase – and, according to remarketing company, SaleCycle, in 2014 we will abandon a whopping $3trillion worth of products across the globe. The numbers stack up. In 2013, the average abandonment rate online was 68 per cent (Source: Baymard), with more than two thirds of consumers finding their way to a retailer’s website, identifying and selecting products they are interested in, but not completing the purchase. With online spend in 2014 forecasted to be in excess of $1.4trillion (Source: Rakuten), there is a huge pile of potential revenue left on the table for retailers who are smart about how they turn these “almost customers” back into sales. The figures aren’t surprising for companies that have long since taken abandonment seriously and, as Dominic Edmunds (inset), founder and CEO at SaleCycle says, it’s something that won’t change any time soon. “As shoppers we tend to lean into one of a wide spectrum of categories, from cautious types who like to take time to consider a purchase, frugal types who like to shop around for a good deal and the impulsive purchasers who buy first and think later,” he says. “These buyer-types existed long before the internet and contribute to the broad mix of reasons for abandonment online today.” The list of most popular abandonment reasons is long and varied, from shipping costs, consumers using the basket as a wish list, elongated checkout processes, connectivity problems, a lack of reasonable shipping options, payment issues, or simply not being ready to

purchase yet. Whatever the reason, basket abandonment is far from the end of the road for retailers. Edmunds explains: “More and more brands online are realising the marketing potential that abandonment gives them. After all the money and effort you put into getting customers to your website in the first place, these are the ones who have found their way to your website, told you the products they are interested in and demonstrated they are considering a purchase. The second a customer abandons, they become a red-hot prospect and the marketing man’s best friend. They might not be ready to purchase just yet, but you want to make sure it’s you, and not your competitor, at the forefront of their mind the moment they are.” Remarketing companies such as SaleCycle, which combine email and on-site messaging to help brands achieve online sales uplifts in excess of 10 per cent, are harnessing the power of this data and marketing automation to great effect – but there are still a large proportion of companies online not doing anything to remarket to consumers after they abandon a product online. They are fast becoming the minority however, as the world’s biggest brands realise the huge revenue potential of remarketing. In consumer electronics, where big-ticket items ensure abandonment rates significantly higher than the retail average, Sony has recognised that abandonment is merely a natural part of the purchasing journey. The electronic giant has increased online sales by more than 7 per cent with its remarketing email programme, which features the headline: “Don’t Worry, We’ve Saved Your Basket”. Sent two hours after a customer abandons their purchase online, the email contains full details and imagery of the products the customer was so close to buying and even includes an estimated delivery date, helping consumers to paint a mental picture of when they could be unboxing their shiny new Sony products. While email has established itself at the forefront of cart recovery solutions, it is not alone, with brands able to utilise the full range of solutions available such as online chat and display retargeting. Chat can help to reduce abandonment rates by providing consumers with live access to customer service or sales staff, while display retargeting, a wellestablished marketing tactic, enables brands to follow consumers across their internet journey and display ads based on their

recent browsing (or abandonment) habits. The next frontier being pushed is helping consumers before they leave the website or at the exact point of abandonment. As Edmunds explains, on-site remarketing is another step in improving customer experience online. He says: “Online retail is about selling, and selling starts and finishes with good marketing. Anything you can do to help give customers a nudge in the right direction should be embraced, whether that’s illustrating the number of other people currently looking at the hotel room they’ve picked out, recommending other items that might be of interest, or reminding them that you offer free shipping and returns. It’s so often the small things that make the biggest difference in online conversion.” While that 68 per cent abandonment statistic covers the world of desktop, mobile and tablet browsing, the future could see in-store abandonment messaging, with the potential offered by Apple’s latest iBeacon offering. iBeacons, which enable retail stores to push messages to mobile devices through

Bluetooth 4.0 technology, will enable retailers to track how consumers shop on the high street and give them the opportunity to send push messages based on this information. Notice that someone leaves shortly after seeing the length of the queues for the changing rooms, then perhaps send a message offering them a voucher for a coffee at Starbucks next door and give them a fast-track time to come back to try on their items. Or notice customers leaving your store because of the length of the queues, then send a message offering to hold the products and home deliver with a quick mobile payment. The possibilities are exciting as the lines between online and in-store retail become ever more blurred. With ecommerce set to grow year on year, the value of abandoned baskets will soon exceed $3trillion. As such, it will be the businesses that innovate and build effective strategies to both prevent and respond to abandonments that will be the biggest winners. www.SaleCycle.com 0191 305 5210

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Social proof – the future of retail Online reviews critical to purchase INDUSTRY VIEW

he typical buying journey has changed for good. We live our lives in a digital world, where people of all ages are constantly plugged into devices, digital platforms and social media and, as a result, consumers expect every interaction and experience tailored to their needs. Collapses on the British high street have only cemented the fact that retailers can no longer afford to neglect digital channels, and they shy away from providing a fully integrated digital and social experience at their peril. Customers expect each brand experience not only to be genuine, but also to be engaging and aligned to them, wherever they are – whether they’re shopping on their iPad in their living room, using their smartphone on their commute, or buying from their desk at work. Brands need to be consistent across every channel and every device, offering not only an omni-channel experience but also the ability to demonstrate real-time social proof of their value to customers through a constant stream of two-way dialogue, something which can be harnessed through online reviews.

For consumers, there is no distinction between how they shop online and how they shop offline; it’s how they shop, full stop. Their interest lies in what you as a brand can offer, and if that doesn’t match their needs then that’s where your brand will fall down. It’s the failure to understand this need for increased consumer engagement where it matters that has seen the likes of Comet, Blockbuster and Woolworths go under – the consumer wants to be in control, and retailers need to be ubiquitous in order to be present when and where a consumer needs them. The modern customer journey is multifaceted, and it’s up to retailers to meet all customer expectations and tick every box before a buying decision is made. Online reviews play a huge part in the decision-making process, from looking for proof that the brand is trustworthy to ensuring the customer service meets expectations. The opportunity to promote good service and satisfied customer feedback in real time is something every retailer should seize with both hands, as it gives prospective customers the push they need to convert. With the advent of social media and constant updates, image sharing and online peer recommendations, it’s no surprise that 61 per cent of customers read

online reviews before making a purchase decision. Reviews provide a first port of call for any potential customer to understand the product from a consumer point of view, giving them honest and impartial insight from their peers. Online reviews provide a real-time fix for the constantly connected, switched-on nature of the consumer’s digital buying habits. Businesses have the opportunity to react and mitigate in real time as well,

boosting shopping loyalty. But reviews bring a lot more than just trust – retailers have reported an increase in sales of up to 60 per cent after implementing online reviews. What’s obvious is that retailers need to be capitalising on the power of reviews. Social proof has never played a bigger part in retail. 0800 011 2822 http://business.trustpilot.co.uk

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Inspector Dogberry

Dogberry has been enjoying the Ziferblat in Shoreditch, London, where everything is free inside except the time you spend there,

but was surprised to discover it could be closing down. Customers pay for the time spent inside the facilities and can use it for almost any purpose they wish – they can create art, talk with friends or bring their laptop to do some work to hatch out ideas for the next big retail story. Everyone is welcome at Ziferblat. Each guest becomes a micro-tenant of the space. Customers have free use of the kitchen where they can help themselves to tea and coffee or use the facility to cook their own food brought from home.

As an enthusiastic Mr Selfridge fan, Dogberry will be going to Homebase to recreate the style of the show at home. The British period television drama about Harry Gordon Selfridge and his London department store Selfridge & Co returned to our TV screens in January for a second series. Co-produced by ITV Studios and Masterpiece/WGBH, the second series picks up the story in 1914 as the store celebrates its fifth anniversary of trading. Harry is played by Emmy award-winning American actor, Jeremy Piven (right). Dogberry discovered Homebase has many items which have that period look. These include a metal decorative armillary sphere, a clear optical hurricane lamp and a sewing storage box. Twitter: @dogberryTweets

By Matt Smith, web editor

u Editor’s pick Retail Design Blog

Dogberry himself has used it to make falafels when staying at Ziferblat to work late into the night. But the inspector was saddened to hear Ziferblat had been given notice to leave the premises, because the landlord believes the concept is a café/ restaurant or a kind of leisure place rather than an office space. However, no food is sold on the premises and guests have to make their own tea and coffee. The founders of Ziferblat have launched a campaign to help save it.

http://retaildesignblog.net The image-heavy Retail Design Blog brings you photos of stunning, original store, café and hotel designs from around the world, focusing not just on looks, but also on how the designs reflect the values of brands themselves and direct customers towards certain areas and products. Check back regularly for the latest photos.

The Retail Blogger

Flavour of the month A boutique Kit Kat chocolate store is being opened within the Seibu department store in Tokyo’s Ikebukuro district, which will offer customers exclusive varieties of the chocolate bar. A cult product in Japan, three varieties will be created in collaboration with Japanese chocolatier Takagi: Sublime Bitter, Special Sakura Green Tea and Special Chilli. Kit Kat has been Japan’s favourite chocolate since 2012 and its success has been fuelled by the launch of hundreds of unusual flavours. Other varieties enjoyed by Kit Kat fans in Japan include Purple Potato, Cinnamon Cookie, European Cheese, Bean Cake and Wasabi.

These special editions are available only in certain regions of Japan, using ingredients and flavours linked to the local area.

New Retail

www.theretailblogger.com

www.newretailblog.com

For news and thoughts on all things retail, visit The Retail Blogger. Covering both the on and offline industries, some of the site’s most interesting articles are on how best to approach multi-channel retail, including opinions on how best to use apps, click and collect services, and consumer data.

From Super Bowl ads to mobile technology, the New Retail blog covers the whole industry, including predictions for future developments. It’s not updated as frequently as some of the other sites here, but its archives are interesting to browse nevertheless.

The Mobile Retail Blog www.themobileretailblog.com

Amazon (FREE – Android, iOS)

Cloud Retailer App for MS RMS (FREE – Android)

Browse, purchase, review… Amazon is a great example of how a good app can make finding and buying goods easy for customers.

Link up with Microsoft POS 2009, Dynamics RMS Store Operations, and Dynamics Headquarters for real-time sales information.

This blog examines the area where retail and mobile technology overlap, bringing you news on trends, opinions, and best practices for using handheld tech within your business. Subjects range from mobile marketing to using mobile technology to offer your customers personalised experiences.

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Business World France

Canada

Walmart Canada is launching 35 supercentre projects in the country. Each store carries more than 100,000 products ranging from groceries to apparel, home decor and electronics as well as specialty services such as pharmacies, garden centres and vision centres. The investments will include more than $376m for store projects, $91m for distribution network projects to grow Walmart Canada’s fresh food capability, and $31m for e-commerce projects. The combined expansion is expected to generate more than 7,500 jobs over the next year, including construction jobs.

United States

ExpertInsight

US retail and food service sales fell 0.4 per cent in January economy suggesting a sluggish start to the economy this year. Cold weather kept shoppers away as the United States was gripped by freezing condition over the holiday period. Clothing and furniture stores as well as restaurants took a hit due to the decrease in footfall. The automotive sector was also hit as people spent less on vehicles.

France’s PSA Peugeot Citroën contributed a positive $4.5bn euros to the country’s trade balance in 2013. The Group exported 579,000 vehicles from its French plants and imported 262,000, for a trade surplus of 317,000 vehicles. The French automobile industry accounts for almost one out of 10 jobs in France, either directly or indirectly and has nearly 100,000 employees in its five automobile assembly plants and 11 mechanical component facilities and foundries.

The mother of inventories

China

Furniture store IKEA is looking towards the emerging markets to countries like China as an important source of future growth. The group has ambitious growth plans and is aiming for 50bn euro sales by 2020 and expect the emerging markets with contribute to a large part of that growth. In 2013, the IKEA opened two more stores in China.

Are “dark stores” really the future of online retail? Joanne Frearson reports

ou might just think of a “dark store” as a dimly lit warehouse where people are pushing around shopping trollies collecting the orders you have just purchased online. They are more sophisticated than that. Instead of people, machines pick your groceries in huge automated stores, while software determines the demand so customers can get the freshest ingredients possible. Dark stores are all about making online shopping easier for the consumers, and cheaper for businesses. Chris Webster, vice president of Consumer Products

and Retail, Capgemini UK, says: “Non-food stores have been driving a large amount of the growth going back 15 years. But what we have seen more recently is strong adoption of food shopping online. “Last year it was about 5 per cent of all food sales. We expect online food shopping will double over the next three to four years.” Supermarkets are expanding dark stores as online shopping increases among consumers. Set up in 2000, Ocado now has partnerships with Waitrose and Morrison’s to capture this market. Sainsbury’s, meanwhile, has unveiled plans to support its rapidly-growing online grocery business by opening its first dedicated online fulfilment centre in Bromley-by-Bow, London. Its online business has sales growth of 15 per cent per year.

An outstanding array of innovation Expert advice on the main retail challenges INDUSTRY VIEW

ore than 9,000 visitors are expected at RBTE 2014, held at London’s Earls Court on March 11-12. RBTE is firmly established as the leading retail solutions event in Europe for retailers looking for inspiration and advice and is the must-attend event for the whole retail team – from marketing, merchandising, fraud and supply chain to e-commerce, IT, operations and payments. Now in its fourth year, RBTE is the largest and fastest-growing retail solutions event in Europe for retail, hospitality and leisure organisations looking for the right tools, solutions and strategic advice to best run their business. Matt Bradley, RBTE’s event director, commented: “RBTE 2013 in March had the highest volume of retail visitors we’ve experienced so far – well over 7,000, and not just from the UK and Europe but across the globe. RBTE 2014 is set to be bigger and better. We’ve rebooted the Innovation Theatre making it even more compelling for retailers to come along and see what’s on offer. “Working in partnership with Eccomplished, we’ve taken six of the biggest challenges that we know retailers are facing, and invited companies to put

forward their solutions and ideas on how they can help retailers tackle these issues. There will be three streams on both days of RBTE. Each session will be introduced by leading retailers, including Nick Wheeler, owner of Charles Tyrwhitt, who will provide an outline of the challenge, and then open the floor to the innovators who will present and demonstrate their ideas, solutions and products.” The organisers of RBTE carried out extensive research to find out what areas retailers are prioritising for investment and have launched some new initiatives to help address these challenges. In addition to the three conference theatres (one of which will be completely dedicated to payments), RBTE 2014 will be hosting a two-day boot camp devoted entirely to e-commerce. These will be highly practical workshop sessions, providing hands-on advice on every key element of e-commerce. Attendees will be able to learn about a subject and then be able to go away and implement what they’ve learnt. The in-store customer RFID experience is a purposebuilt store which will demonstrate the various ways that RFID can de deployed throughout the retail estate, including the changing room, warehouse, delivery process and security.

RBTE has also increased the amount of networking opportunities in response to requests from its visitors, and facilities will include a retailer-only lounge. The Retailer Lounge will not only offer catering and lounge seating but will also incorporate an extensive networking programme run in association with International Women in Business and the Retailer Advice Centre. Among the 300 exhibitors will be many leading companies such as Aures, Datalogic, Epson, EE, HP, Ingenico, JDA, Lexmark, Micros, Motorola, Panasonic, PayPal, Samsung, Star Micronics, Toshiba and VeriFone, who will all be showcasing their newest and most innovative products and solutions.

RBTE also boasts an extensive free education programme, with more than 100 conferences, seminars and workshops, featuring leading retailers including ASDA, The Co-operative Retail Group, Dixons Retail, Dr Martens, Furniture Village, Homebase, Hotel Chocolat, M&M Direct, Marks & Spencer, Moss Bros, Otto and Tesco. Retail Business Technology Expo, March 11-12, 2014 is at London’s Earls Court, South Hall. Visit the website to register today for your free fast track badge at www.rbtexpo.com or call +44 (0)20 8874 2728. marketing@rbtexpo.com www.rbtexpo.com

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It is still early days for dark stores, though, as supermarkets are looking at ways to improve their efficiencies for both the customer and the retailer. Webster says: “We expect the efficiency of the dark stores to increase and they should become just about profitable [as the scale of them improves]. There are a number of different competing economic models which are being trialled. They include using the existing store base to pick. But clearly as the volumes grow, putting products on the shelf in a customer-friendly presentation only to take them off again and give them to an online customer… one would argue that is quite an expensive way of doing it.” There has been a move towards supermarkets automating their dark stores to make it more cost effective, whereby machines pick the products rather than people. “The highly automated ones have the ability in the longer run to bring marginal costs down to make it profitable,” says Webster. “The advantage is if you are organised you can get supply directly from the suppliers rather than going through a distribution network. “You can get products in and out of the warehouse more quickly. Therefore you can increase the date life to customers – one of the things that really upsets people when they get a grocery home delivery is short coded out of date products.” Supply chains are key in making this process work smoothly by being able to establish how much inventory a store has, where it is in the store and what the store potentially needs to fulfil for its customers. Lee Gill, vice president for retail strategy at supply chain management firm JDA Software, says: “All this running together really begins to drive profitability through quite serious efficiency improvements. “It also helps in customer service – we should see very few product substitutions because inventory is put into what demand is going to be. “In a dark store you are doing two things when it comes to placing inventories. You are placing inventory against absolute known orders. But also in some products, when supply is difficult, you are placing inventory in anticipation of orders coming in. That is the risky bit. In the early days

there was a little bit of waste as a result of not being able to market them to get it clear.” Click and collect services are also helping to reduce home delivery costs. Tesco has launched its own service, where customer orders are fulfilled in a dark store. The company has been trialling customers collecting orders from such places as schools, libraries and sports centres. Gill says: “In France and Germany they have the Drive programme. They have collection points within car parks in an attempt to start to drive efficiencies. They have this continuous flow from store to car park. Customers come in at a scheduled time slot and drive away. They really promoted Drive as an alternative to what they saw was an expensive exercise in UK home delivery. “The biggest single trend is efficiency, if you think why click and collect has been promoted so heavily by retailers as an alternative to home deliveries. Even though they may charge £2.50 for a delivery slot, it probably costs them £10 in total.” Dark stores aren’t expected to take over completely from the in-store shopping experience, though. Webster believes they only work in highly populated areas. “In areas of high population density you need to build high automated dark stores,” he says. “But if you want to capture online sales in areas of low population density it probably does not make sense to put a dark store there, you just will not get the volume. “What I expect to happen is a mixed economy: high population density with a high take-up of online shopping serviced by dark stores, and lower population density with lower take up of online shopping – either a very simple dark store or pick-up from an ordinary store.” The popularity of online shopping is changing the way consumers want their groceries delivered. Although it is not likely dark stores will take over the shopping experience, it is changing the way customers are getting their groceries. Still in its early days, the cost efficiencies are being worked out by retailers with dark stores at their disposal. But it is likely the next time you order food online, a machine will be getting it ready for you.

Business Reporter · February 2014

Future of retail

Business Reporter · February 2014

Future of retail – Industry view

Business Zone

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The future

Shoppertainment: the next step for the customer A generation ago, few people could have imagined visiting a commerce site that allowed customers to buy virtually any product instantly and have it shipped to their door within a day. Few foresaw the commerce functions that are now commonplace, including features that allow shoppers to instantly access product information and conduct transactions in multiple languages and payment platforms. Now that consumers are comfortable with the idea of shopping online, what’s next for commerce? How will the store of the future look? The short answer is that no one knows for certain. But instead of focusing on the next new technology, the future of commerce might involve a disruptive new business model that alters the industry by changing consumer behaviours. For a moment, consider a store of the future built beyond traditional buying processes and places. Think of an integrated commerce process that allows customers to buy products for instant pickup at any nearby high street location. Imagine a loyalty programme that tracks actual product usage to reward consumers. All of these concepts blur the boundaries of traditional commerce as we see it today. In the future, products will automatically connect consumers to immersive, highly personal commerce experiences. The data behind these interactions will be relayed to manufacturers, completely altering how they relate with their consumers and nurture their ongoing relationships.

Bricks-and-mortar and online shopping venues will also change dramatically, fusing shopping and entertainment to create a space where consumers can shop while still at home, watching their favourite shows or playing a game. With “shoppertainment,” customers will browse a store, experience products and interact with store clerks without ever leaving their sofa. And if customers go to the physical store, they will be automatically recognised based on their online profile. These exciting scenarios hold incredible implications for how

Station, aims to do for the merchant what smartphones did for the mobile consumer, by providing a robust hardwarebased solution not only suitable on the frontline but open to support their business behind the scenes as well.

“Social treating” launches in the UK this year with Givvit, enabling social users to “treat” low-cost gifts to one another, redeemable through leading high street retail partners. Treating is a natural evolution for social platforms such as Facebook. It’s a tangible, accessible expression of affection to celebrate, commiserate, or simply unlock a random act of kindness. Through social media integration, Givvit lets users send everyday treats via their smartphones, redeemable on the high street for things like cups of coffees, snacks, drinks, meals, magazines, cinema tickets, chocolates and cosmetics. James Cullen, CEO of the company behind Givvit, says: “Givvit will be the link between social media and the high street, letting users treat Facebook friends and contacts in their address books in just a few taps. Givvit treats make a great ‘thank you’, ‘I miss you’, ‘good luck’ or even ‘IOU’. People can treat for any reason or, in fact, for no reason at all!” Givvit opens a completely new sales channel to UK retailers in addition to established gifting occasions; benefiting from increased sales, footfall, new customers and the sale of incremental products. “Testing is almost complete and we plan to launch this spring, supported by media partners to help us drive recruitment, and we also benefit from the cumulative marketing support of our Treat Partners,” says Alex Kennedy (COO). “Our range of Treat Partners will quickly expand as Givvit’s light-touch approach to integration and redemption means retailers can easily unlock exciting new customer engagement opportunities.” For more information or to discuss joining the Treat Partner programme, contact: treatpartner@ givvit.com

FDMSMarketing @firstdatacorp.co.uk

020 7043 3429 www.givvit.com

businesses will monetise their products in the future. Critically, the store of the future is much more than a few new technologies grouped together. Businesses need to think not only about how they can adopt new innovations, but how these innovations will materialise and transform the shopping experience of the future. Digital River is already crafting this experience with customers globally – enter the store of the future vision at http://driv.ws/storeofthefuture +44 (0) 845 603 5070 info@digitalriver.com

In focus: Going beyond the transaction

O Tommy Cooper I went window shopping today. I bought four windows.

“

wning and running your own business is no small feat, indeed it is a 24/7 responsibility. Be it tracking sales and cash flow, balancing the books, organising staff timetables, taking a stock check or introducing offers and discounts, the to-do list is an unrelenting battleground. With time of the essence, small-business owners are often forced to adopt disjointed methods for managing their business; perhaps using a till to track sales, separate software to help with accounting and balancing the books, a manual spreadsheet for the staff timetable or a trusted pen and paper for stock checks.

While these distinct methods serve a purpose, they are time-consuming and siloed, making it incredibly difficult for a small-business owner to establish a unified view of their business. To this end there are undeniably lessons to take from smartphones and tablets that afford consumers both knowledge and freedom through intuitive set-up, customisable apps, clean design and, crucially, remote access. For a merchant, an all-in-one smart device takes things one step further – with the opportunity to produce powerful analytics and reports from across the business to

give insight and inform the decisions that are made; from loyalty solutions, pricing and offers, to suppliers and cash-flow management. The adoption of new technology to help manage a business doesn’t have to be time-consuming or intimidating. An all-in-one solution, such as the Clover™

Social treating comes to the high street

Business Reporter · February 2014

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Future of retail – Industry view

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The debate

What is the future of retail? Stu Hill Co-founder and managing director wnDirect

Miles Quitmann Chief commercial officer Proxama

Glenn Porter General manager of international identity verification, GB Group

For fashion and lifestyle retailers, addressing the needs of tech-savvy, brand-savvy consumers who are always “connected” is a major challenge. Omni-channel retailing – the ability to provide customers with a seamless shopping experience no matter how they choose to interact with your brand – will continue to drive the agenda. Consumers want to start in one channel and continue seamlessly in another, with a completely consistent experience wherever they go. Done well, omni-channel links consumers, devices and data to provide an integrated mix of offline and online experiences with individually personalised offerings. Delivering this concept will set the winners apart. Improved supply chain control will also become more critical. The missing link here will be Electronic Data Interchange, or EDI, which previously was out of reach for smaller retailers, but technology has changed everything. We see huge potential for EDI to deliver more and it will be especially important to lifestyle brands that now see the global market as their shop window.

Duty payments is a term most of us are familiar with in the context of international delivery but something which few of us understand. That is hardly surprising when, in reality, it is a minefield. More than 200 countries, representing 98 per cent of world trade, use HS codes. This is a complex system and it is up to the importing country to make a final call on their interpretation of the six-digit code. However, understanding the process should be at the top of a retailer’s list if they wish to expand globally, as duty payments go far beyond legal or financial obligations. They can mean the difference between successful and unsuccessful delivery which can mean the difference between victory and failure in a region. wnDirect has spent considerable time and investment developing a bespoke online solution which takes the pain out of this. Our solution has automated the process, enabling the end-broker to calculate and apply all relevant duty and taxes to an order and also identify any other local requirements (such as proof of ID). Retailers tell us they love it.

“90 per cent of shopping was done on the UK high street in 2013”. People still want a shopping experience, that’s why high street retailing will endure. But to repulse the digital invasion, retailers must harness it to their advantage. The opportunity and challenge for retailers is that people carry phones with them when they shop! Retailers must create shopping experiences that engage people on mobiles in store. It means retailers are able to drive their own agenda, rather than having it hijacked by a competitor. Today’s shoppers are very well connected. By using technologies, such as Near Field Communication (NFC) or Bluetooth beacons, retailers can connect physical stores to a consumer’s mobile and transform the retail experience:

Online retail is clearly booming, with global sales figures looking set to hit $1.5trillion this year, but this growth also creates its fair share of issues too. When retailers operate in an online, cross-border world, understanding and knowing who their customers are is crucial but can be very difficult. We are noticing a significant trend in retailers looking to verify the identity and/or age of their customers and understand their behaviours online, while maintaining a positive and non-abrasive customer experience. This can be difficult where consumers operate with relative anonymity and fraud can be hard to detect. Many businesses will be looking to prevent fraud and ensure international compliance, essential when dealing with new and evolving payment methods such as mobile payments, and cryptocurrencies such as Bitcoin. Retailers face a massive challenge in ensuring they protect themselves from the dangers of not knowing their customer. Only then can they confidently maximise the opportunities of online retail.

info@futurauk.com www.futura4retail.co.uk

01753 760 697 shill@wndirect.com

ExpertInsight

Tina Royall Director of marketing Futura Retail Solutions

• Oﬀer incentives directly to a person’s mobile in store • Personalise the shopping experience • Track and provide value for loyalty • Turn show-rooming into an advantage, not a drawback The future of retail is connecting stores with the device that people check on average 110 times per day! www.proxama.com

01244 657333 www.gbgplc.com

The new consumer behaviour Consumers today use various modes of access: online, offline or mobile. INDUSTRY VIEW

hopping is being revolutionised: e-commerce means consumers can shop any time, 24/7. But that’s not all: smartphones and tablets allow consumers to shop online from everywhere – the world is at their fingertips in a few clicks. But what are the consequences for retailers? Changing consumer behavior means merchants are faced by major challenges. It’s not enough to focus only on bricks-and-mortar business. The so-called “everywhere commerce”, or the merger of the online, offline and mobile sales channels, will increase quickly in the digital age. Retailers who miss the boat for current trends may miss out on key sales linked to the new consumer behaviour. They are well advised to keep pace with the everincreasing convergence of bricks-and-mortar and

bricks-and-clicks shopping. The internet is penetrating new media and dissemination channels at a rapid pace. This results in new fields of business and strong growth opportunities for companies, with massive potential for merchants. Even physical wallets aren’t a must-have any more when it comes to shopping. Consumers are familiar with in-app payments, mobile optimised payment pages, and now mobile wallets in their smartphones. So it is very clear that payments will always plays a key role. Finally, it is critical to understand that everybody wants secure payments – regardless of the sales channel. Retailers who work together with experts for payment processing and risk management receive the tools needed to ensure a cross-channel, international shopping experience, allowing them to focus on what’s important: – running their own businesses. Well established and experienced companies such as international payments expert Wirecard offer a wide range of payment and risk-management tools combined with banking technologies – for all sales channels. www.wirecard.com

Lars Flottrong Director-Partner RUSSIA CONSULTING

The Russian retail market has been booming for a number of years. Russians have earned a new stereotype as big and lavish spenders. However, times of change have arrived for the Russian retail market and to meet the challenges, a clear focus and a powerful IT infrastructure are a must. Russian shoppers expect yearround, minimum 12/7 operating hours. In big towns, malls have overtaken shopping centres and kiosks run by small businesses. The big Western retail brands have arrived and started to venture into budget markets. Internet shopping writes huge success stories in urban centres. Russians have noted that shopping sprees may turn out to be cheaper abroad and take to more sophisticated shopping landscapes. And in Q3 and Q4 , retail volumes have decreased for the first time in years. However, opportunities are still ample for retailers with a clear-cut target customer and who are able to provide quality service. Lean business processes and integrated IT systems will be key success factors for retail businesses under pressure to make increasingly demanding clients happy. www.russia-consulting.eu