Author: Natalie Berg

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Amazon E-commerce Store closures Store of the future Technology

What is ‘The Amazon Effect’, really?

The phrase ‘the Amazon effect’ brings to mind images of boarded-up shops and retail bankruptcies.

We think of the 2,700 stores that shut or the 80,000 retail jobs that disappeared in the UK in the first half of 2018 alone. E-commerce, and Amazon in particular, is often positioned as the death knell for the high street.

I don’t buy into the ‘retail apocalypse’ narrative, but it must be acknowledged that this is a period of unprecedented change and naturally as spending shifts online, fewer stores are needed.

This isn’t rocket science, it is just about following the customer. Over the past five years, online sales of non-food products in the UK have doubled. Now, nearly 20% of all retail sales take place online. Today, people are ubiquitously connected. They live online. They have access to billions of products right at their fingertips that turn up on doorsteps, often free of charge, the very next day.

Online shopping has become utterly effortless, and that has shaken bricks-and-mortar retail to its core. 2018 was the year that retail chief executives finally pulled their heads out of the sand and acknowledged that there is an oversupply of retail space and there is retail space that is no longer fit for purpose.

Blaming Amazon

Amazon is an easy scapegoat. After all, it’s thought that around a third of UK e-commerce sales go through Amazon’s platform (in the US, it’s closer to the 50% mark).

And, after years of chipping away at the high street, Amazon is now among the top five retailers in the UK. Not many retailers can match ‘the everything store’ on range, convenience and, perhaps to a lesser extent, price. Not many retailers have 100 million customers around the globe willing to fork out roughly $100 annually just for the privilege of shopping with them. Not many have embedded themselves into the shopper’s life – and physical home – in the way that Amazon has; a testament to the strength of its ecosystem.

But it is also true that not many retailers have deep pockets like Amazon – it spends more on R&D than any other American company. It is able to constantly throw ideas against the wall because it has been afforded the luxury of long-term thinking – and not paying a whole lot of tax hasn’t hurt. Business rates account for less than 1% of its sales (for comparison, Debenhams’ bill as a percentage of sales is almost 4 times that amount). The playing field has been tilted in Amazon’s favour since day one and I believe retailers are right to call for legislation to be rewritten for the digital age.

High street woes go beyond Amazon

But the industry’s problems run deeper than Amazon. Retailers continue to grapple with the dangerous combination of rising costs and soft demand which has created considerable pressure and particularly exposed some of the weaker retailers with underlying issues, such as Toys R Us.

Real disposable income growth has been weak for a good decade and now the big unknown that is Brexit is added to the mix. In a similar vein to the weather, Brexit may be a convenient excuse for retailers reporting weak results, but it’s clear that shoppers will rein in spending during times of political and economic uncertainty.

What else is behind the high street’s woes? Although ‘the Amazon effect’ is often cited, what about ‘the Aldi effect’ or ‘the Primark effect’? There are a handful of very agile bricks-and-mortar disruptors that are weeding out the complacent incumbents.

We are at the beginning of quite a fundamental shift in consumer values, as shoppers prioritise spending on experiences over simply acquiring more material goods. Are we perhaps nearing ‘peak stuff’?

In any case, it’s clear we are at the intersection of major technological, economic and societal changes that are profoundly reshaping the retail sector.

Amazon isn’t killing retail, it’s killing mediocre retail

So it’s not all Amazon’s fault. In fact, in many ways Amazon has been a force for good. It has stamped out complacency and made everyone raise their game, all to the benefit of the customer.

What would retail look like if Amazon didn’t exist? In a nutshell, consumers would be more tolerant of mediocre service.

Amazon’s technology roots and passion for invention are what sets it distantly apart from rivals. Many of Amazon’s past innovations can, in fact, be easily forgotten because they have simply become today’s normal. Think back to the late 1990s: online shopping used to be quite a laborious process. Amazon cut the friction out by launching one-click shopping, personalised product recommendations and user-generated ratings and reviews.

Delivery, meanwhile, wasn’t always fast and free. Prime significantly raised customer expectations, leaving competitors with little choice but to invest in their own fulfilment capabilities. Amazon went on to tackle one of the biggest barriers to online shopping – missed deliveries – with the 2011 launch of Amazon Lockers. Today, virtually every major Western retailer offers click-and-collect (though Argos was perhaps unknowingly ahead of its time).

Most of Amazon’s innovations catch competitors on the back foot, leaving them in the undesirable position of reacting to rather than leading change. So what is ‘the Amazon effect’, really?

It’s Tesco rolling out same-day delivery nationwide.

It’s M&S trialling scan-and-go technology, allowing shoppers to skip checkout queues ahead of an impending Amazon Go launch in London.

It’s Waitrose delivering groceries directly into your fridge.

It’s Asos allowing shoppers to ‘try before they buy’.

It’s Zara shoppers collecting their online orders through automated pick-up points in-store.

And this is a global battle. ‘The Amazon effect’ is Ocado finally securing a string of international deals, as the Amazon-Whole Foods acquisition accelerates demand for online grocery shopping.

It’s Carrefour partnering with Google to launch Lea – its answer to Amazon’s Alexa voice assistant. In the US, Walmart offers customers a far superior experience today thanks to Amazon breathing down its neck. The retailer has even had a name change: after nearly half a century as Wal-Mart Stores, in 2018 the world’s largest retailer dropped Stores from its legal name to reflect the new digital era.

Amazon has impacted all aspects of retail, and now everyone is scrambling to either keep up with or distance themselves from the online behemoth. The link may be slightly more tenuous but it could even be argued that ‘the Amazon effect’ is Debenhams adding gyms and beauty bars to its stores. It’s John Lewis sending staff to theatre training and democratising personal shopping. It’s Next putting hair salons and Prosecco bars in its shops.

The opportunity

High street retailers are recognising that for all its perks, shopping on Amazon is still quite a functional, transactional experience. It has taken the touch and feel out of shopping and there is a massive opportunity for retailers to distance themselves from Amazon’s utilitarian image.

There is an opportunity to inject some personality and soul back into their stores, providing an immersive, memorable experience that simply can’t be replicated online. It’s about WACD: What Amazon Can’t Do.

This is why in the future, stores won’t just be a place to buy but also a place to eat, play, work, discover, learn and even borrow stuff. Retail space will be less about retail.

In summary, Amazon is almost singlehandedly redefining retail, at least in the Western world. Yes, there have been casualties and the industry should brace itself for more short-term pain as it reconfigures itself for the digital age.

But this is retail Darwinism, it’s survival of the fittest. It’s evolve or die. Amazon’s existence has weeded out those underperforming retailers who can’t deliver on the basic principles of being relevant to their customers or standing out from rivals. But those left standing will be stronger for having reinvented themselves in the age of Amazon.

Amazon: How the world’s most relentless retailer will continue to revolutionize commerce, by Natalie Berg and Miya Knights, is published this month by Kogan Page.

    A version of this article originally appeared in Retail Week

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    E-commerce Retail trends Store of the future Uncategorized

    The future of retail? Blended. [VIDEO]

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    It was a pleasure to work with Dropbox on this future of retail campaign. There’s a lot of doom and gloom out there, but I believe the future is bright for those retailers willing to reconfigure for the digital age. In the future, retail will be more blended in that we’ll see an acceleration of the convergence of physical and digital worlds, but also in the sense that retail space will be less about retail. We’ll see a greater blurring of the lines between retail, hospitality and leisure.

    Categories
    Amazon

    Black Friday: Expectations & Amazon’s Pop-Up

    Tonight, I had the pleasure of attending the launch of Amazon UK’s latest bricks & mortar experiment – ‘The Home of Black Friday’ pop-up in Shoreditch.

    This is the second year that Amazon has opened a temporary showroom in a bid to raise awareness of the 10-day discounting bonanza that is possibly now only trumped by the retailer’s very own artificially created shopping event – Prime Day in July. But I digress.

    Love it or loathe it, Black Friday has become a permanent fixture on the UK shopping calendar and we have Amazon to thank for bringing it across the Atlantic back in 2010.

    Three Black Friday observations for 2018:

    1) More like Black November. Black Friday is getting longer: Amazon, Argos and Debenhams are just a handful of retailers running week-plus long events. Consolidating the bulk of your Christmas trade into 24 hours tests even the most advanced supply chains. Doug Gurr, MD of Amazon UK, mentioned tonight that one of the reasons Amazon has extended Black Friday in recent years is to “take out some of the pinch points”, operationally speaking. So, although spreading the event out over a couple of weeks might dilute the sense of urgency traditionally associated with Black Friday, it should ultimately result in a more streamlined experience for both retailer and consumer and, ideally, lead to lower returns rates. Previously, many shoppers who got caught up in the one-day frenzy would end up with buyer’s remorse and by the time the returned product made its way back onto the shelf (particularly for an online order) it would have to be further discounted.

    2) Promotion fatigue/consumer scepticism. Consumer group Which? is warning shoppers not to get “duped by dodgy deals” since last year nearly 9 out of 10 Black Friday ‘bargains’ were cheaper at other times in the year. I’d like to think most consumers today are savvy enough to understand that Black Friday is mainly a lot of noise, with a few genuine bargains the mix. According to PWC, half of UK consumers are not interested in the event at all this year with 11% warning they would intentionally avoid shopping altogether.

    3) But peer pressure… Despite the many harmful effects of Black Friday – erodes margins, pulls spending forward, dilutes trust and credibility, etc – it’s equally risky to shun it altogether. This is the only time of the year when retailers genuinely have a captive audience. There is an appetite to spend, a reason to loosen purse strings, and not many national retailers are brave enough to miss out on the potential sales. B&Q is the only genuine exception I can think of (even Next took part last year). On paper, M&S is shunning Black Friday again this year but they have been running 20% off sales for Sparks members. Limiting the deals to loyalty cardholders is a more subtle approach, but a blanket discount can be just as effective when it comes to driving footfall.

    Amazon’s ‘The Home of Black Friday’ pop-up

    As with most of Amazon’s bricks & mortar experiments, The Home of Black Friday pop-up has very little to do with shifting product. In fact, it would be a stretch to call this a shop (to be fair, Amazon doesn’t). It’s a showroom designed to humanize the Amazon brand, to tempt shoppers into the retailer’s very sticky ecosystem, get them engaging with the app and ultimately driving adoption of its various devices. If you’re interested in why Amazon is pushing so heavily into bricks & mortar retailing, there’s a whole chapter dedicated to exactly this in my upcoming book which launches in just six weeks!

    The Home of Black Friday is located at 3-10 Shoreditch High Street, London, E1 6PG and will be open to the public from 22-25 November.

    Categories
    Discount Retail trends

    Jack’s – a last resort

    British supermarkets don’t have a great track record when it comes to running discount chains in parallel with their mainstream stores. But that’s not stopping Tesco from launching Jack’s – its final answer to the persistent threat posed by Aldi and Lidl.

    Why now?

    Aldi and Lidl have been trading in the UK since the nineties so why now? Well, shopping habits have evolved dramatically over the past decade. The 2008 financial crisis forced many consumers to re-evaluate their household budgets. Frugality went from being shamed to celebrated, and the notion of ‘smart shopping’ took off. What many didn’t realize at the time was that this would be structural, not cyclical, change. Some industry observers thought the discounters were simply enjoying their time in the sun, but the discounters recognized an opportunity to meet shoppers halfway, deviating from their lean operating model by broadening their ranges, investing in quality and the instore experience, and moving into better locations. As a result, Aldi and Lidl have become more credible, well-rounded competitors.

    The launch of Jack’s is an admission that the likes of Aldi and Lidl have fundamentally changed the way we shop and there’s no sign of them abating. Tesco couldn’t pay the discounters a higher compliment.

    Over the years, Tesco has attempted to stem the discounters’ growth through endless price cuts. They’ve reduced the number of promotions in a bid for more honest, consistent pricing, taking a leaf from the discounters’ book. They’ve launched their own discount brands and even created dedicated pound zones instore. The reality is that none of this has stopped shoppers from defecting to the budget supermarkets. Aldi and Lidl’s combined market share has grown by 80% over the past five years. Tesco has exhausted all their tactics – launching Jack’s is very much a last resort.

    Will it work?

    Let’s be clear – the odds are against them. But I’d argue that it’s better than standing still. Tesco needs 3 things to make this work:

    • Scale – you can’t run a successful discount chain with a handful of stores. If this is going to work, Jack’s will need to go big quickly.
    • Discount differentiation – ahead of launch, the biggest question for me was ‘What can Jack’s do that Aldi and Lidl can’t’? If Tesco wants to be a discounter, then they need to start acting like one. The model is based on simplicity and ruthless efficiency. So, Tesco must ensure that they distinguish themselves from the very well-established competition *but* without adding cost into the business model. Tesco has always had muscle but they’ve further strengthened their buying power recently, having acquired Booker and teamed up with Carrefour for joint purchasing. Tesco will differentiate by undercutting Aldi and Lidl on price. It really is as simple as that.
    • Distinct offer – some self-cannibalisation is inevitable, so it’s vital that Jack’s distances itself as much as possible from Tesco’s mainstream stores. To do this, and of course to keep costs down, Tesco’s own brands will feature heavily and all the traditional components of a full-service supermarket (loyalty scheme, online offering, counter service, etc) will be stripped back. 

    So, what’s next? At best, Tesco will have won back some of its more price-conscious shoppers. At worst, Jack’s becomes another costly distraction. Either way, Aldi and Lidl aren’t going anywhere. This is about co-existing with the discounters, not stamping them out.

    For more, check out my interviews on the Today programme (15 min in) or BBC Breakfast below:

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    Open "Natalie Berg of NBK Retail on Tesco / Jack’s" directly

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    Technology

    Retail Week Tech Race – My Experience as a Chip & Pinner

    This week I’ve taken part in the Retail Week Tech Race. Using only chip and pin, I had to spend as little as possible on: a home assistant, Asos branded clothing, 500 penny sweets, original Nintendo Game Boy, personalised item, £5 scratch card and a build your own robot arm.

    The aim of the race was to demonstrate the importance of payments as a frictionless part of the customer experience.

    My opponents:

    • Team Cash – George MacDonald, Executive Editor, Retail Week
    • Team Contactless – Andrew Busby, Founder & CEO, Retail Reflections
    • Team Crypto – Peter McCormack, Cryptocurrency Trader, Miner, Blogger and Advisor, What Bitcoin Did
    • Team Mobile – Rachel Arthur, Chief Intelligence Officer at The Current Daily

    Team Chip and Pin: Key takeaways

    1) Shopping habits have evolved, payments not so much.

    My initial reaction to being assigned chip and pin? NO. ONLINE. SHOPPING.

    That alone was going to be a challenge for me. And that’s not because I don’t shop in stores, but when faced with a long list of disparate items – some of which are near impossible to find in a bricks & mortar shop – my first instinct is to get online.

    Having to physically trek around individual stores (in 32 degree heat no less) in the hope of some very specific items being in stock was a stark reminder of just how spoiled for choice we are today. We have access to millions of products right at our fingertips – and they turn up on our doorsteps the same or next day!

    Even if I attempted to use click & collect, I would have had to pay for the item online which ruled out using chip and pin. Argos was an exception here, so reserve and collect (ie. pay at the store) came in handy. I even resorted to calling a few stores to see if items were in stock – very 2003!

    2) With low-value items, cash is still king.

    Bearing in mind that the goal was not only to source all items on the list but to do it as cheaply as possible, I ran into some issues when trying to purchase low-value items like the £5 scratch card and personalised item. Retailers would charge an additional (50p) fee or simply wouldn’t accept card payment. It was a reminder that, in some instances, cash is still king.

    3) Less choice on the high street further limited my options with chip and pin.

    This year’s high-profile collapses of Maplin and Toys R Us made it more difficult to source some of the more peculiar items on the list – ie. build your own robot arm. The superstores I visited also, unsurprisingly, had a much-reduced electronics section as this category has largely shifted online.

    In the end, I managed to purchase 5 out of 7 items on the list using chip and pin – all but the Asos-branded item of clothing and original Nintendo Game Boy. It was only at the very end that I had a lightbulb moment – I could have saved myself a ton of time and energy by using Amazon Top Up!

    Main takeaway of the race? Consumers demand to be able to shop on their own terms and they expect that experience to be completely and utterly seamless. But when it comes to payments, there’s still a whole lot of friction.

    You can hear all about the #RWTechRace in our session at the Retail Week Tech conference, 12-13 September, and for video updates of the race check out the NBK Retail YouTube channel.

    https://www.youtube.com/watch?v=P1P4TLdtOcU

    Categories
    Amazon E-commerce

    Takeaways: Amazon UK Analyst Day

    I had the pleasure of attending the annual Amazon UK analyst briefing this morning where we heard from senior executives across various parts of the business. The event kicked off with UK Country Manager Doug Gurr dismissing the broader doom and gloom. According to Gurr, the fundamental basics of retail – selection, price, convenience – haven’t changed. However, the future will be a more blended retail experience. “There’s still no substitute for touching, feeling, seeing the product. We’ll see more merging in the future,” he said.

    There was lots to take in but here are my highlights:

    Amazon is quietly ramping up its private label portfolio in the UK. The big difference at this event versus last year’s was the sheer amount of AmazonBasics signs plastered around the room. In FMCG, the retailer has brought its Mama Bear, Happy Belly and Wickedly Prime over from the US. In fashion, the well-publicized launch of Find last year has since been followed by Truth & Fable, Iris & Lilly and Meraki ranges. It’s worth pointing out here that Amazon just quietly added new FMCG lines to its US site – Solimo and Mountain Falls (the latter is exclusive rather than owned by Amazon) and I imagine these too will eventually come to the UK as Amazon builds out its global grocery offering. Why the big push into private label? It will help Amazon inch closer to sustained profitability. With its own brands, Amazon can widen margins without raising prices. It gives them greater leverage over suppliers and allows them to sweeten the deal for Prime members, as many own label items are sold exclusively to them. With the sheer amount of customer data Amazon holds, no one is better positioned to understand customer needs and then develop ranges specifically for them.

    To disrupt fashion, Amazon must adapt. The big challenge in fashion, according to Head of Apparel, Nick Pope, is “balancing the discoverability and fun of fashion with the practical excellence that Amazon delivers”. For all its perks, Amazon is still a utilitarian shopping experience. Sure, they can shift a ton of socks and underwear (they’re expected to become the largest clothing retailer in the US by the end of this year) but, when it comes to customer perception, Amazon is simply not a fashion destination. Amazon is looking to change that by adding more brands to its site, ramping up private label, introducing a more visual layout, using its Shoreditch photo studio for consistency in imagery, and they’ve just begun integrating video on their UK site (piloted with the Truth & Fable range). 

    Higher-margin private label clothing allows Amazon to fill gaps in merchandising while simultaneously boosting the bottom line, which will become all the more important as they move further into groceries. At the same time, more fashion brands are succumbing to Amazon’s platform – they can no longer ignore Amazon’s incredible reach and many also want greater control over pricing and presentation (if their brands are already present on Amazon’s marketplace). In addition to signing on major global brands such as Calvin Klein and Tommy Hilfiger, Amazon is working with local brands in each market (ie Coast, LK Bennett in the UK). They’ve taken a similar approach in Italy, France, etc. There was no mention of initiatives like Prime Wardrobe or the Echo Look which are both currently available in the US, but these innovations will play a major role in Amazon’s plan to disrupt fashion so I’d be very surprised if these weren’t launched in the UK within the next 12 months.

    Amazon is getting more comfortable with the exclusivity of Prime. At its 2005 launch, Jeff Bezos described Prime as “all-you-can-eat express shipping”. Today, it was referred to as the “gateway to the best of Amazon”. Lisa Leung, Director of Amazon Prime, said that there are now millions of UK Prime members and that the major difference with this year’s Prime Day (details of which I won’t go into here) is that Amazon “wanted to make the benefits come alive”. As such, they’ll host an entertainment extravaganza on 15 July, the evening before Prime Day, with events ranging from a family screening of Paddington 2 to an exclusive Take That gig. Whole Foods Market stores will also get involved in Prime Day this year with special discounts and free instore massages.

    Prime Now serves three shopping missions particularly well: crisis, gifting, top-up grocery. I can personally attest to all three! Jason Weston, UK Country Manager for Prime Now and AmazonFresh, said that Christmas Eve is one of the most popular days for Prime Now. He gave the example of a Manchester customer placing an order for women’s jewelry, perfume and a PlayStation console at 10pm on Christmas Eve, which was delivered by 11pm. Meanwhile, cut-off times are getting later and later in a bid to cater to the ‘for tonight’ shopping mission. Today, customers can order by lunchtime and have their delivery arrive by dinnertime. In some postcodes, this can be as late as 4pm. I was surprised to learn that Prime Now covers 30% of the UK, although this is largely limited to cities. I asked Weston if he thought same-day delivery would become the norm in UK grocery (Prime Now has been such a catalyst for change as I describe here in this BBC article). His reply? “Time is becoming a more important commodity for everyone.” I couldn’t agree more.  

    Too early for a book plug? My and Miya Knights’ book on Amazon is now available for pre-order here.

     

    Categories
    Amazon E-commerce

    Tesco can’t out-Amazon Amazon

    One of the fundamental reasons for Amazon’s success is its unwavering commitment to a vision laid out two decades ago: to relentlessly innovate in a bid to create long-term value for customers. Amazon’s USP is disruption and they continue to finetune it. Every action is guided by a vision that hasn’t changed since Amazon’s inception.

    Most publicly traded retailers aren’t afforded the luxury of such long-term thinking, and turnover at the top often brings a change in strategic direction. However, retailers can compete with Amazon by honing in on their own strengths and streamlining anything that does not add value to their core proposition. In this climate, it’s differentiate or die. Being ‘all things to all people’ is no longer an option.

    The closure of Tesco Direct is an admission of defeat to Amazon: it was after all designed to compete with the behemoth head on by replicating their marketplace format, extending Tesco’s product range beyond the confines of their superstores. But if there is one rule in retail today, it’s this: you cannot out-Amazon Amazon.

    Aside from racking up Clubcard points on big-ticket purchases, there was very little incentive for shoppers to choose Tesco Direct over Amazon. Tesco’s site in comparison was confusing and full of friction. Pricing was inconsistent, it lacked product recommendations and reviews, and the range was neither broad nor compelling enough to make it the go-to destination for general merchandise. Let’s not forget that many shoppers today begin their product search not with Google but with Amazon. Amazon has become the first port of call for even the most obscure products – from silicone wine glasses to cat scratch turntables – which when combined with Prime delivery becomes a very compelling proposition.

    Tesco Direct was loss-making and contributed very little to the topline, which sparks a lesson to be learned from Amazon: admitting failure and swiftly moving on. Offering 94 types of treadmills online won’t help Tesco to retain its title as the country’s largest food retailer. There’s no time for costly distractions when Amazon is on your doorstep. Tesco will be far better off to merge grocery and non-food onto one platform, as some competitors did several years ago, and then focus on logical category extensions to mirror what shoppers would find instore.

    There is a renewed sense of urgency to strengthen these core non-food categories and it actually has nothing to do with Amazon. A combined Asda-Sainsburys-Argos will create a retailing powerhouse in toys, baby, clothing and home. Tesco needs to up its game fast in these categories and leave everything else to the specialists.

    The Direct business joins a growing graveyard of Tesco brands including Giraffe, Euphorium, Harris + Hoole, Nutricentre, Hudl, Blinkbox, Dobbies. What was once considered business-critical diversification is now seen as a pricey distraction. Tesco Direct won’t be the last of Dave Lewis’ and Charles Wilson’s strategic cull as they continue to tighten Tesco’s focus on food by offloading non-core assets. There is, after all, only room for one everything store.

    Article originally featured in The Grocer

    Categories
    E-commerce M&A Store of the future

    Sainsburys-Asda: dare we say #amazoneffect?

    ‘The Amazon Effect’ is one of the most widely used phrases in retail today. High street shops closing? It’s the Amazon Effect. Retailers investing online? The Amazon Effect. Acquisitions, CVAs, redundancies… These days, we can find a way to link, however tenuously, most retail developments to the Seattle-based behemoth.

    And for good reason. Amazon continues to spread its tentacles, diversifying into new categories and even sectors. It has its sights set on food and fashion, but also entertainment, shipping, healthcare and banking. It doesn’t just go after share of wallet. It goes after share of life.

    This is why the Sainsbury’s-Asda merger is happening now. It’s a pre-emptive move against Amazon. It’s about generating scale and ultimately ensuring survival before Amazon gets serious about UK grocery. Today, despite the acquisition of Whole Foods Market and supply agreements with Morrisons and Booths, Amazon still isn’t a food destination. The infrastructure is in place, but it lacks a compelling range. That will change. It will differentiate in grocery just as it does in non-food: through product choice and convenience. Despite its negligible share of the UK grocery market, Amazon has already been a phenomenal catalyst for change in areas like delivery speed, voice technology and checkout. Its relentless dissatisfaction with the status quo is leading supermarkets to raise their game, all to the benefit of the consumer.

    Amazon will revolutionise the way we shop for groceries. Within the next five years, it will have acquired a UK retailer (we can now rule out two) and considerably enhanced the in-store experience.  I believe entire product categories will be removed as Amazon looks to make auto-replenishment a reality. If shoppers run out of bleach or toilet paper, they can press a Dash button or ask Alexa. In the future, this will go even further by being automatically replenished. This will test brand loyalty in a way we’ve never seen before, while also freeing up space to focus on what can’t be done online – fresh food halls, cookery classes, cafés and restaurants. The experience will be highly personalised and utterly frictionless.

    The move into grocery is of huge strategic importance to Amazon. If it can convince UK shoppers it’s a credible alternative to the supermarkets, it will have cleared the final hurdle to becoming the ‘everything store’. Capturing that high frequency purchase makes it easier to cross-sell and bait shoppers into its ecosystem. And that is when things get ugly, not just for the supermarkets but all of retail: Amazon shoppers tend to be loyal, lifelong customers.

    Joining forces won’t help Sainsbury’s and Asda solve the Amazon problem overnight, but it will certainly lead to better terms with suppliers and consequently lower prices for customers. Also, not to be overlooked in this deal is Argos. An unexpected gem, Argos can now deliver to 90% of the UK population in just four hours. Argos concessions will be rolled out across Asda stores, and possibly internationally through Walmart, giving the retailer an edge over supermarket rivals and more importantly an answer to the mighty Amazon.

    Article originally featured in The Grocer

    Categories
    E-commerce Retail trends Store closures Store of the future

    Debenhams: department stores doomed?

    Weather. Calendar shifts. Experiential spending.

    Retailers have many “dog ate my homework” excuses for when trading is less than stellar, but when a late snowstorm forces you to temporarily shut over half your stores, it’s bound to impact the top line.

    While it’s important to acknowledge the impact of the Beast from the East, it doesn’t take away from the fact that Debenhams, like many department stores today, is struggling to stay relevant.

    Strategically, Debenhams is doing all the right things, but today’s results highlight the scale of the challenges confronting UK department stores. Not only are they facing a perfect storm of rising costs and subdued demand, but the original concept of a department store – one-stop shopping – has become completely eroded by online retail. Unfortunately for Debenhams, many stores are tethered to long-term leases so there is no quick fix for addressing the shift to online shopping.

    Twenty-five stores will be reviewed as their leases come up for renewal over the next five years. In an ideal world, they’d be more bullish but with an average lease length of 18 years Debenhams doesn’t have the luxury of simply closing stores overnight. Instead, the focus will be on reinvention and rightsizing – they see potential for at least 30 stores to be downsized, in a similar vein to competitors like M&S and House of Fraser.

    But make no mistake – the department store model is under threat. In the past, it made sense for retailers to dedicate 100,000-plus square feet to these ‘palaces of consumption’, aggregating lots of brands under one roof. But today, shoppers have access to millions of products at their fingertips, so the idea that a bricks and mortar retailer can still offer ‘everything under one roof’ becomes laughable. Department stores must reposition themselves to be less about product and more about experience. Winning in retail today means excelling where Amazon cannot.

    Under Sergio Bucher (ex-Amazon), Debenhams is trying to do exactly that. They’ve embraced store reinvention, recognising that the department store of the future will be a place not only to buy stuff, but also to eat, discover, play and even work. Partnerships with brands like Swoon and Maisons du Monde create a point of differentiation, while the installation of gyms and beauty bars and potential collaboration with WeWork allow Debenhams to make better use of excess space while simultaneously driving footfall. Store reinvention’s not cheap but it’s better than standing still.

    But amidst all this talk of transformation, it’s easy to lose focus on the basics of retail – price, product, service. This is where Debenhams shoppers have arguably been left feeling underwhelmed. Pricing must be sharper and more trustworthy, range must be simplified (though more compelling) and the overall proposition must become more experiential and service-led. Otherwise, they risk a lot of empty treadmills and brow bars.

    Categories
    Store closures Store of the future

    The cost of complacency

    NBK Retail Toys R Us

    A sad week for retail and a stark reminder of the dangers of complacency.

    Toys R Us and Maplin ultimately collapsed because they failed to adapt to changing shopping habits. Let’s not ignore the elephant in the room. What would make a shopper choose Maplin over Amazon? The retail titan’s endless assortment, low prices and increasingly speedy delivery left Maplin with limited fighting power. The high street retailer was doing everything it could to distinguish itself from pure-play online rivals – focusing on customer service, product expertise and the instore experience – but clearly that wasn’t enough.

    While Maplin may have been a victim of the Amazon effect, Toys R Us was simply a victim of complacency. The customer experience was, at best, underwhelming due to a lack of investment both in stores and online. They sat idly by as new competitive threats – from B&M to Smyths – chipped away at their business. In toy retailing, you need be either cheap, convenient or fun but Toys R Us failed to deliver in each of these areas, leaving them stuck in a retail no man’s land.

    As a specialist, the Toys R Us experience should have been a magical one with instore events, dedicated play areas and product demonstrations. The reality was a soulless shed with very little innovation or technology to draw shoppers in. Saddled with debt, Toys R Us was unable to flaunt its specialist credentials and reposition its stores as genuine destinations.

    The demise of Toys R Us should serve as a powerful reminder of the need to rejuvenate the instore experience. Bricks and mortar retailers can’t compete with Amazon’s breadth of assortment and delivery capabilities, so they must leverage physical assets and reconfigure stores to become proper destinations. As I say time and again, the future role of the bricks and mortar store will be less transactional and more experiential. But sadly, many more stores will need to close to reflect the shift in spending habits.

    Meanwhile, the combination of rising prices and subdued demand is putting considerable pressure on retailers, and particularly exposing those with underlying issues. Burdened by debt, Toys R Us was simply unable to adapt to a changing retail environment.

    You can hear me discuss more on Toys R Us on the BBC World Service here.