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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.

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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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.

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INFOGRAPHIC: 2018 UK Retail Predictions

NBK Retail launches today with an infographic charting the forces impacting retail in 2018.

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Day one

After 15 years at two of the world’s leading retail analyst firms, I’m beyond excited to transfer those skills over to my new venture: NBK Retail.

I have always been captivated by retail and the way we shop. I have fond memories interning at a Connecticut shopping mall, where my career in retail started out by counting cars in the parking lot and, on Black Friday, making sure the store managers had access to endless donuts and caffeine ahead of the 6am craze.

Even in the quietest of times, retail is a fascinating sector. It is always evolving, becoming more convenient, more connected, more customer-dictated. But today, the scale and pace of change facing the sector is unprecedented.

A decade ago, Amazon was the 47th largest retailer in the world. Today, they’re number 3 – and could very well become the world’s first trillion dollar company.

A decade ago, online retail was the holy grail. Today, pure-play e-commerce is dead. As technology breaks down the barriers between physical and digital retail, having a bricks & mortar presence becomes vital for both brand engagement and ultimately driving online sales.

A decade ago, multi-day lead times were acceptable. Today, Amazon wants same-day delivery to become the norm.

A decade ago, we put the success of the discounters down to temporary effects of the recession. Aldi and Lidl’s share of the UK market has more than doubled in that time.

A decade ago, click & collect was just something Argos did. Today, virtually every high street retailer offers click & collect, as it enables shoppers to marry the benefits of online shopping – assortment and price – with the convenience of collecting instore.

A decade ago, the purpose of the bricks & mortar store was predominantly transactional. Today, the store is being reconfigured as a hub for both experiences and fulfilment. It must become a place not only to buy but also discover, play, eat, work, and collect.

A decade ago, the thought of food in our cupboards being automatically restocked sounded like science fiction. Today, frictionless commerce is becoming a reality thanks to the rise of voice technology, simplified and auto-replenishment capabilities.

And the list goes on.

I’m looking forward to sharing my views on both UK and global retail via this blog. In the meantime, if you’re attending the Summit E-Commerce Scorecard event this morning, I’ll be there taking part in a panel debate. Please come say hello!