Do Retailers Need Shops? - Freeformers

Do Retailers Need Shops?

You can trace the beginning of the end for traditional bricks and mortar retail back to 10 years ago this week when 807 Woolworths stores closed on January 6th 2009. So what better way to “celebrate” the beginning of the end by looking at what’s changed with retail stores in the past 10 years. Huge high street names such as House of Fraser, Poundland, Maplin and Toys ‘R’ Us have proven, if nothing else, that no one is safe. Regardless of how many shops you have, what you sell and at what price the ultimate punishment is served to those who do not change. In fact, 2018 is a year when the affected employees of said sector has been 40,292. That has only been exceeded twice before, hitting 48,142 in 2012 and a massive 74,539 in 2008. Yes, things aren’t as bad as they were in 2008, but they aren’t getting any better either.

But, why? In some ways, it’s unbelievable that there is still a UK retail industry at all, an industry that is being propped up by dwindling footfall and an ever decreasing amount of consumer spending. Brexit aside, UK retailers haven’t come to grips of what the future of retail looks like. Do they really know what they need to survive, even thrive?  Do retailers even need shops?

A quick wander down any high street or visit to an out of town retail park will tell you, no. Retailers are still operating shops in the same way they were 10 years ago. Despite the average spending of a UK consumer falling off a cliff, no one has seriously changed the way they do business. This may be harsh, some retailers have incrementally changed, but we are no longer operating in a society of extreme consumerism. This is no longer a warning sign for retailers, it’s now or never! Having worked in retail and hospitality for over 10 years I’ve seen business and jobs come and go. But, the clear point of difference for any customer facing business is exactly that. It’s a customer facing business! What do the people actually want to see?

There are two trains of thought here, the first, in the words of Jack Cohen (founder of Tesco) a retailer can “stack ’em high, sell ’em low”. A tactic that has paid dividends for brands like Aldi and Lidl, and for FMCG retailers a model that is clearly working. But what about those retailers that don’t want to join the race for the bottom. If you aren’t a destination for cheap shopping, then what are you?

Dixons Carphone represents a great case study, having recently lost 440 million pounds in half a year due to to a dwindling mobile phone market, what are they doing to change? A company bound to technology should surely have the answer of how retailers can survive in a digital future? Yes, the mobile phone market is slowing down, but go into a Carphone Warehouse or a Currys PC World and what do you see? Nothing new, nothing innovative… despite having some of the latest and greatest technology at their disposal. Retailers can make stores look great, but can they make the experience any better?

Creating engaging visual merchandising can go someway to enticing consumers into UK stores, but can it really generate a compelling reason to visit?

In this so called omnichannel world of retail surely the ease of online shopping negates the need to visit a store at all. While the banking world is facing a challenge in terms of how much money it invests into developing its branches, retail should do the same. Banking has had to innovate in the face of disruption from Monzo and Starling. A complete rethink about the function of their branches. The behemoth that is Amazon has been around for a while and as it takes over the world of retail, UK retail shops at least, have failed to innovate and differentiate themselves from the Bezos-run empire. The disrupter is here, it’s established and now creating physical shops. Change is needed.

Put your consumer hat on for a while. Write a list of 5 reasons you would visit a store. Now list the retailers in the UK that fulfill those 5 wishes. I bet that you can only name two, if that.

Apple are often used as an example of the holy grail of future retail. They offer things most UK retailers don’t, an experience. So when John Browett (former CEO of Tesco and Dixons Retail) joined them as Senior Vice President of Retail it was with some shock as he represents retail of old, steering a number of companies successfully through tricky times by perfectly executing the same old retail model. This is not a criticism, he turned ailing companies into profitable ones by doing what he knew worked, but it wasn’t innovation and was never going to set those companies up for a prosperous future in today’s retail industry. Apple saw this and within 6 months Browett moved on sighting a cultural mismatch, Apple recognise that they don’t need an expert in the retail of old, they need a retail boss for the future. So what are Apple actually doing different to most other retailers? Their shops are destinations and not based on volume and penetration. In the same vain, you don’t see huge numbers of Ikea showrooms dotted around. Going back to Dixons Carphone, unbelievably there are over 700 Carphone Warehouse stores in the UK. This represents a marked difference between the retail operating models of the past and the future. So retailers need shops, just not so many!

You probably haven’t heard of Andrew Khoo Boo Yeow or MUI, the company he is executive chairman at, but as the holding company that owns Laura Ashley they are all too aware of what the future of retail looks like in the UK. They are due to close 40 stores in the UK, and execute a strategy to open more in China, they are playing to what they know will work. China is embracing the model we were so keen to buy from 20-15 years ago, vast shoppings malls are the order of business and that’s fine! But, in the UK things are different and Andrew recognizes this:

“It’s more about showcasing the brand, It doesn’t really matter if customers buy online or offline, we just want them to get inspired.”

So why not showcase the brand? Is retail too concerned with footfall and average transaction value, do the metrics need to change to force the ‘right kind of retail’ for a dwindling UK market? Take the idea that a retailer hands over the reins of their bricks and mortar operation to a marketing department? I bet you’d have something totally different to what you have now. Do away with the archaic rhetoric that shops have been built on, shops are now an operation in brand awareness and advocacy.

In an Apple Store in Hong Kong a 3 floored store showcases some of its products, however on one the these floors the focus isn’t on their products at all. It features a number of powered tables, with nothing on them. Sparse tables, a few members of staff and a floor of potential consumers. Why were they there? Some were working, some were there for help. But all were there for an experience of some kind. By experience I don’t mean some grand Secret Cinema-esque show, but something that humans value. Worthwhile human interaction. No sales patter, no “do you want this or that in addition to what you came in for”, just a place to work and talk. Next time you visit an Apple Store, just take a note of the space given to showcase the products, and then note how much is given to the customer experience. They teach, inspire and build brand advocacy, they hardly sell. Angela Ahrendts the current Senior Vice President of Retail has a long term vision is to turn them into Town Squares rather than stores, the kind of vision Browett lacked. However, it is important to note that when they do sell, it’s a slick tech and people powered operation. A true omnichannel experience that isn’t separated as online and in store sales, both work together to enable sales.

What about the products? The focus of this floor of an Apple store is it’s people, both those who work for Apple and those who come to use the space to work. Anything for sale on this floor plays second fiddle to this.

Now this model works for some. And I stress, some. Waterstones is another great case study. In a world where you can hold an infinite amount of books in your hand, Waterstones is still going. Why? It delivers great experiences for avid readers. HMV could learn a lot from this model. Whilst they are clinging on by a thread and busy diversifying their offering into technology, you feel that if they were to focus on the experiences of music and film you’d actually want to go to these stores and they could capitalise on the resurgence of physical music sales rather than portable speakers and headphones. (ed. –  this was written before 28th December 2018, when HMV called in the administrators)

There are some pop up shops that are also working to this effect, the car industry is a great example.  Tesla and Mercedes often open pop up shops in malls to showcase the brand rather than actually sell cars, why? Have they uncovered the true value of running a shop into a space for brand awareness and advocacy. However, this can go the other way. Numerous banks have redesigned branches that offer coffee and a space to work. Most lie empty. It is not just a case of serving some coffee and offering some space to work. I go back to the Apple example, they had nothing but empty tables and people. The people make the difference.

Therein lies the true answer to the question posed in the title of this blog, “Do retailers need shops?” Yes, but the approach in how they are run needs to be innovated and driven by its people. Until we reach a point where valuable human interaction can be delivered digitally, combining a digital experience with human one could be the answer to the survival of shops. Whilst Amazon move into bricks and mortar retailing with very few people in their stores, they could be missing a trick. Over in New York the Amazon Go store is driven by digital, with only one or two people working in the store. Consumers have noted  it feels empty and pointless. Of course it does, why try and put what Amazon does best in a shop, it makes no sense. Every retailer in the UK has an army of people ready to deliver for its employer, but are they being enabled to?

So whilst I may hypothesize that retailers should give over their retail estate to marketeers, the key here is to make sure that retailers use people to drive an experience. In a world where digital will take away much of the mudande elements of work, the value of human interaction is only going to get higher.

Back to Ikea, where the first half of your experience isn’t a shop. It’s walking through different dream living rooms, bedroom and kitchens. Increasingly the people are being equipped with technology to make these dreams a reality for people. Especially in kitchens where there are bank of computers and design experts ready to make your space as good as one of theirs. Ikea present the dream experience, then a human tries to make that work for you. Traditional retailers assume that the desire is there and people will just wonder in and buy the biggest and/or shiniest product they can. We now operate in a market where the desire is waning, so retailers need to establish it. Show what life could be like through an experience, then sell it. Marketing does this all the time, so why not make retail a more marketing led experience?

There are some easy wins here to make people the real driving force behind retail. And I really mean put them behind it, not just for a CEO to write it on a mission statement somewhere, actually do it. Make your people and the experience the focus and the sales will come. It just won’t be instantaneously gratifying like the retail of old, when a customer walks out with a smile on their face, rather than having parted with cold hard cash. But, it will eventually.

Retailers need to support its people to be ready for the future. Being a salesperson or customer advisor is not enough anymore. One of two things will happen, either they won’t have jobs anymore, or their jobs will be different from what they are now. Technology has the power to make retail great. For all their losses Carphone Warehouse staff can sift through the best deals and handset for customer at the touch of a button giving its people the time to focus on the experience. Unfortunately, it would seem they are not providing the support to make visiting a Carphone Warehouse an experience.

Use technology and use people to drive an experience. Those shops that are slowly gathering dust can become something new. Retail as we know it is dead. Retailers don’t need shops. They need a gateway to their brand, unless they are going to “stack ’em high, sell ’em low” which is seemingly a limited business model in an increasingly digital world.

It’s time to change the definition of a ‘shop’.

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