K E Y R E TA I L T R E N D S
Retail is dead.
Long live Retail!
The last twenty years have been witness to seismic
economic, technological, social and political change.
Unsurprisingly, the way we buy has changed beyond
recognition. This is a revolution that has only just
got underway.
BWP’s three lead strategists examine the trends,
challenges and opportunities for retail businesses
and plot a course for successful retail strategy in an
increasingly complex and rapidly changing world.
TEAM BIOS
Meet the BWP team
Kieron has been working in marketing and advertising for over 15
years, during which time he has worked with brands such as Accor
Hotels, Bang & Olufsen, HMV, Waterstones and Esporta Health
Clubs. Kieron was prominent in the launch of new products to the
market across Europe for Mazda Motors and BMW MINI, where
he headed the team responsible for brand guardianship. After five
Kieron Weedon
years at BWP Group, Kieron’s client experience has broadened
to include such brands as Telefonica O2, STIHL, Intu, IKEA and
British Gas where he leads the strategic direction.
DIRECTOR OF
S T R AT E G Y
Rob has over 15 years’ experience, designing and developing
campaigns for some of the world’s leading brands including
Nike, Adidas, Sony, Intel, Warner Brothers and more. He is highly
technical and has an unusually multi-disciplinary background
and in innate understanding of the fine details of digital delivery.
Rob has worked as a brand, UX and CX consultant to major
Rob McCardle
brands and is particularly interested in startups, technology,
software as a service business for whom their UI and CX are
every bit as important to their brand as their visual marques.
I N N O VAT I O N
DIRECTOR
Jonathan has accrued client-side, agency-side and international
experience working for integrated, brand & advertising agencies,
including three years at BBH where his primary client was Audi.
His experience ranges from brand inception and implementation
through to naming, proposition and campaign development &
channel marketing. He began his career at Gartner before joining
Jonathan Staines
the UK & Global Brand teams at Orange. Major projects included
rebranding France Telecoms businesses in the EU and brand
projects worldwide. In 2012, he was one of the core team that
PL ANNING DIRECTOR
launched the EE brand. He writes regularly for the marketing press.
K I E RO N W E E D O N , D I R E C TO R O F S T R AT E GY
The changing value of ownership
The rise of the Sharing and Subscription Economies will continue to
disrupt standard business models. The most obvious disruption has been to
the sectors that have traditionally relied on very transactional models; the
car industry and ZipCar; the hotel industry and AirBnB; the music industry
and Spotify; the entertainment industry and Netflix.
We will see in 2017 how this trend will redefine how retailers engage with customers. We are
seeing an increasing direct impact on retail as new subscription services are being launched
across food (HelloFresh) fashion (Fabletics) and cosmetics (Birchbox). It’s worth highlighting
that these ‘new’ business models are less ‘new’ than we think. We’ve joined libraries, rented
houses and subscribed to newspapers for a very long time. What makes this trend so relevant
for retailers is the micro-trends it points to:
1. Customers are increasingly looking for flexibility, variety and personalisation
2. Relationship at the heart of revenue building
3. Data at the heart of building relationship
4. Customer experience continues far beyond end of transaction
Flexibility, variety and personalisation:
It’s not just innovative start-ups who have identified how they need to engage differently with
customers. Adidas have launched Avenue A (customers receive celebrity-curated apparel boxes)
so offering customers the ability to conveniently access a wide variety of products where they
have had some involvement in selecting preferences, but also with the element of serendipity to
reflect the excitement of the ‘discovery’ they experience in physical stores.
Relationship at the heart of revenue building:
Relationships are a two-way street. In 2011 Netflix lost 800,000 customers and its stock price
dropped eighty percent. They had split up their $10 all-in-one package into two $8-plans;
03 Retail is dead. Long live Retail!
effectively a 60 percent price increase on the customer base in the midst of recession. When
Netflix made a unilateral decision to change the relationship, without consulting the other side,
it damaged the brand and hit their bottom-line. Subscription based businesses are constantly
listening, assessing, improving, trying to figure out how to happily surprise their subscribers.
“
The things you own end up owning you
- C H U C K PA L A H N I U K , F I G H T C L U B
Data at the heart of building relationship:
Data is orientated around the subscriber. Everything starts with the subscriber ID and the
associated data. How many is there? What’s their average value, both now and over the course of
their lifetime? Do any of them represent upsell opportunities? We can see with Apple that their
model has shifted from how many iPhones they ship, to how many Apple ID’s they can gather,
and how much revenue they can generate per ID. That’s why they rolled out their new “Upgrade
Program,” which is basically just an iPhone subscription.
Customer experience continues far beyond end of transaction:
Customer experience does not take place in a static moment in time; it’s fluid and organic.
Subscribers are looking to personalise product, to make it theirs, for example the way they
set up our own Spotify accounts. They are also looking for it to improve itself over time; Tesla
owners are always discovering new product enhancements on their vehicles. The relationship
moves from a transactional model to a partnership; subscription businesses proactively evolve
and subscribers provide the data to help them to that.
04 Retail is dead. Long live Retail!
J O N AT H A N S TA I N E S , P L A N N I N G D I R E C TO R
Rediscovering ‘discovery’: can charity
shops save the British high street?
It’s been a very tough few years for British retail. The metonym so often
used to denote the UK’s retail fortunes, the ‘High Street’ has evidently
suffered. According to IPSOS, national retail footfall was down 0.9% in the
first quarter of 2016, compared with the same period in 2015*.
The same IPSOS retail traffic index revealed that Newcastle Upon Tyne was the worstperforming location, with the number of shoppers down by 9.95%, closely followed by Stoke-onTrent at 8.1%.
Even in the traditionally buoyant M25 bubble, retail locations such as Ashford, Crawley and
Epsom, growth has been sluggish and five of the top seven best-performing shopping centres
were up less than 1% year on year.
There have been a number of high-profile casualties, including BHS and Austin Reed. Even the
traditional heroes of high street such as Next and Marks & Spencer have reported downbeat
trading. At the beginning of the year, Primark revealed its first drop in UK underlying sales for
12 years.
As 2016 has progressed, retailers have faced further economic volatility resulting from Brexit
and the rise in the price of UK imports, thanks to a weak pound. The implementation of the
national ‘living wage’ has also meant higher labour costs for retailers.
Macro-economic factors such as China’s slowdown, rising interest rates in the US and the
uncertainty surrounding Trump’s election victory are helping to create a ‘perfect storm’ of
national and local uncertainty.
This only serves to compound the effects of the relentless rise of ecommerce and mobile
commerce – both of which are driving down margins and arguably drawing shoppers away
from physical stores.
05 Retail is dead. Long live Retail!
In 2012, the coalition government tasked itself rejuvenating British high streets and engaged
Mary ‘Queen of Shops’ Portas to help. Her report led to 27 towns across the UK being offered
government funding to upgrade facilities and attract new shoppers.
The so-called Portas Pilots, achieved some success – notably with in Ashford, Kent, which saw a
1.6% uplift in visitor’s year-on-year thanks to the subsequent raft of retail initiatives, including
the local council’s decision to open pop-up stores in the underperforming Park Mall. Here was
an excellent example of stakeholders collaborating to dramatically improve both the town and
the centre’s fortunes.
“
Our real discoveries come from chaos,
from going to the place that looks wrong
and stupid and foolish.”
- C H U C K PA L A H N I U K , I N V I S I B L E M O N S T E R S
All of this leads us to ask – is there a ‘magic formula’ for UK retail success and, if so, what is it?
Portas famously has a wealth of retail sagacity, learnt on the shop floors and in the board rooms
of some of the UK’s most respected retailers. She runs her own brand marketing consultancy
and, in partnership with Save The Children, started a chain of boutique charity shops across
London and the South East in 2009.
A 2013 study by the think-tank Demos, scotched the claim that charity shops are contributing
to the decline of Britain’s high streets, and instead indicated that they might be the solution,
not the problem. “The growth and continued presence of charity shops may have maintained
footfall to high streets, which are suffering from the downturn”.
Indeed, the conventional response to the proliferation of charity shops on a British high street
is that they are a symbol of failure and economic depression. However, a case can be made
that charity shops represent some key principles for effective retail – from which commercial
retailers can learn.
Indeed, a number of journalists, commentators and other retail experts suggest that they play
an important role in maintaining the vibrancy of town and its retail life. A 2013 article in The
Independent revealed:
06 Retail is dead. Long live Retail!
“Charity shops, which started life as Salvation Army “salvage stores” more than a century ago,
have become a big industry, with more than 10,000 across the UK. They raise £289m a year,
employ more than 17,000 people and have a volunteer workforce of more than 213,000. The
British Heart Foundation – Britain’s biggest charity retailer – has more outlets than WH Smith”.
In the same piece, Tom Ironside, The British Retail Consortium’s Business and Regulation
Director commented: charity shops have “a significant role to play within communities”, “The
most important factor in ensuring the long-term health of our high streets is having a good
retail mix”.
What’s more, when charity shops are well-implemented and run, they exemplify retail best
practice that is all too often lost in the automated, highly-rationalised ecommerce experience –
notably the all-important ‘surprise and delight’ factor: the prospect of finding something quirky,
interesting, unexpected and unique.
To summarise, what can retailers learn from retail’s traditional underdogs?
1. Discovery and spontaneity matter. Over-formatting and unimaginative buying practices are anathema to the joy of visiting a physical retail store – are you selling ‘the same old same old’ from season to season?
2. The power of merchandising and sensuality. One person’s ‘secondhand tat’ is another’s ‘vintage gem’.
3. Great employees recognise great products – and know how to sell them.
4. Shoppers appreciate and value responsible business – Marks & Spencer (Shwopping),
H & M, and others have incorporated a CSR / ‘bring in your unwanted clothing’ mechanic
that in turn helps drive footfall and cross-sell.
07 Retail is dead. Long live Retail!
RO B M C C A R D L E , I N N O VAT I O N D I R E C TO R
How digital destroyed physical
retail in order to create it
The story of the last twenty years in retail is predominantly that of
established businesses with incumbent physical footprints, relentlessly
adding digital channels to augment their existing business model to become
omnichannel enabling customers to browse & shop fluidly.
The past and future of bricks, clicks and books
Against this landscape, purely digital retail businesses (e.g. Amazon, Jet, Boohoo) made
significant inroads in a parallel, value driven model where the physical store was deemed an
unnecessary expense on the bottom line.
Current events such as the phenomenon of Apples retail stores, Amazon installing Amazon
Lockers in physical pickup centres and now launching a physical book store are bringing
retail back into the physical domain.
There is an old trope where underdog hero bookshops are subsumed by the leviathan which
even got the Hollywood treatment back in 1998’s in “You’ve Got Mail” with Tom Hanks & Meg
Ryan. From the perspective of a bibliophile mourning the closure of their physical book & coffee
store, one could say “Amazon destroyed culture in order to create it”. While we prefer to see
wider dissemination of books as a benefit to culture; the point is that omnichannel is leading
previously digital companies to explore the physical realm and previously physical businesses
to adapt to a new digital universe.
While innovation and technology are giving us ever more opportunities to augment real world
experiences, we believe the forces at work behind the reinvention of retail are driven by a
fundamental human interest in the physical space which will never go away and will always be
of value to business.
08 Retail is dead. Long live Retail!
Enter the brave new world
In parallel with all this, a new wave of industrial revolution has led to the strange circumstances
whereby “The world’s largest taxi firm, Uber, owns no cars. The world’s most popular media
company, Facebook, creates no content. The world’s most valuable retailer, Alibaba, carries no
stock. And the world’s largest accommodation provider, Airbnb, owns no property.”
Considering the future of retail brands and physical destinations against this backdrop, a useful
thought experiment to ask custodians of those brands is:
“
What would you do if your online/digital
business was so successful that your
physical store wasn’t a necessity?
How you answer this will shape your brand destiny. You need to examine what the function of
physical retail stores will be to know whether you will still need one in the future because the
role of the shop in the customer experience flow is changing dramatically.
We see trends around using retail space for non-retail functions already very prevalent in
the market, for example:
• Apple Stores using retail spaces as a learning environment where you book an appointment
to see a “genius” and a brand experience rather than simply a transactional store.
• Sweaty Betty use their stores as a gym for busy posh mums. Yoga, Pilates and training
classes are a critical component of the brand experience.
• Lulu Lemon organise events in a similar vein and market to a comparable audience
and premium price point.
• The make-up brand Sephora uses their spaces for classes and events.
• Hollister and Abercrombie & Fitch are in essence nightclubs for tweens. To young
audiences devoid of a parentally sanctioned place to see and be seen by their peers, their
stores fulfil a cultural function masquerading as a clothes shop.
09 Retail is dead. Long live Retail!
From a technology angle, we’ve seen users buying online using their mobile anyway despite
physically being in store to circumnavigate inventory shortages, poor staff or to take advantages
of ‘online’ promotions and convenience. Tools like SquareUp leverage mobile to allow small
retailers to remove the IT overhead of POS (Point of Sale) meaning that digital is the only
transactional mechanic anyway. Waitrose have opened a cashless shop recently also which
complements this thinking.
In another example of cross-pollination and redefinition of retail space; gyms are becoming
retailers. The gym at exclusive members club Stoke Park in Buckinghamshire stocks clothing
by brands such as PlayBrave & UnderArmour as well as regular pop up shops and own brand
products sold in the foyer. Why not take the store to the audience? When will this stop? Will
bars sell clothes? Will any physical location that generates footfall become a retail opportunity?
e.g. doctors surgeries, post offices, places of worship, high street banks etc. if the products/
services are complementary?
Coming back to the question of “what would you do if your online/digital business was so
successful that your physical store wasn’t a necessity?” — for your brand; would shutting your
physical stores save you more money than you would make by repurposing your physical retail
space as an art gallery or a meeting place for friends for example?
Your approach here can be guided by exploring these apparent dichotomies:
• Rational vs Emotive
• Value vs Premium
• Logic vs Magic
This is not to oversimplify matters; it is entirely possible to fit into both camps as one could
argue John Lewis in the UK do but as with the Agile Manifesto, the objective is to consider this
thought experiment “while there is value in the items on the right, we value the items on the left
more.” as a way of codifying priorities.
Plot the results on a Venn diagram like the one below — if your brand fits in the rational
category it might perhaps be best to shut your stores and keep the money to either profit or
reinvestment in tactical digital sales activity:
10 Retail is dead. Long live Retail!
Logic
Rational
Brand
Emotional
Magic
Is your brand here?
However, if you are or aspire to be driven by emotion and human experience (and this isn’t
incongruous with your business model and objectives), perhaps you should consider turning
your physical retail space into an experience venue:
Logic
Rational
Brand
Emotional
Magic
Or are you here yet?
Beyond being a physical transaction machine what does your physical retail environment mean for your brand?
Brand is an abstract concept and a word all too often used as shorthand for the logo or collateral
a company uses to advertise itself which is erroneous.
BWP consider brand as the aggregate sum of customer experiences. We see it as a living
thing that may be influenced and shepherded. The BWP proposition ‘Shaping Brand Destiny’
carefully acknowledges that ‘Brand’ is both malleable and transcends visual identity and tone
of voice. We believe it extends to every touch point of human experience and have more than
20 years’ experience shaping the destiny of retail brands. We want to hear from progressive
retailers. When you’re ready to change, we can help guide you through the critical steps to
transform your business.
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Overall Conclusions
1 Retailers need to review and improve their collection and use of data to improve not just their
marketing but to open up new commercial models and opportunities.
2. The ‘rules’ of retail are changing rapidly and dramatically. Charity shops demonstrate
a number of retail ‘best practices’ from which retailers can learn and benefit. What’s more,
the presence of charity shops on British high streets improves footfall, prevents empty units
remaining empty and delivers community, social and environmental benefits and locally,
nationally and internationally.
3. A retail space can transcend transaction. The physical store plays a role beyond purchase –
by building brand awareness, enriching the customer experience, driving NPS and complementing digital experiences and revenues.
12 Retail is dead. Long live Retail!
To find out more about how you can open successful,
attractive and engaging destinations, or to book an initial
workshop, get in touch with us:
BWP Group
Rebecca Myers
Jubilee House, Third Avenue,
Head of Business Development
Globe Park, Marlow,
[email protected]
Buckinghamshire SL7 1EY
+44 (0)1628 625 900
+44 (0)7572 425142