Consumers in the driving seat

With the balance of power having firmly shifted into the hands of consumers it is a major challenge for all retailers to adapt their models to this dynamic and provide the best customer experience possible.

Offering up the optimum service is at the heart of healthy snacking business Graze, whose ability to deliver on this front has been made much easier by it viewing itself as a technology company rather than a retailer. Its IT focus impacts not only on the interface with customers but also the way it creates a constant flow of new products.

Speaking at the British Retail Consortium (BRC) CX conference in London in March Emma Heal, retail director at Graze, told delegates: “Our model is about data-based personalisation. Our product developers scour the world for new things and with our complete vertical integration we can launch a new product in 48 hours. Because our customers can ‘rate’ or ‘slate’ a product they receive then anything they dislike will never be sent to them again.”

Data driving personalisation

She suggested the company is “obsessed” with its consumers and data and that this was highlighted during its move into the US. Its data quickly showed that US tastes are different to the UK and therefore 40 per cent of its products were replaced in six months and a total of 90 per cent were ultimately changed.

This recognition of customer demand, via its data feeds, has also led Graze to launch its products into UK retail outlets – initially through Boots – and it now has its goods in 8,500 stores, which generate £30 million of sales annually. Heal said the company cross-pollinates data from across the various channels and that everybody in the organisation has access to it through the Tableau analytics solution.

Paul Martin, head of retail at KPMG, holds data in equally high regard and suggested that the power brokers of the future will be the data aggregators such as Google, Expedia, Baidu and smaller specialist startups.

“They understand the customer,” he explained. “Retailers will have to think about eco-system partnerships with these organisations because this will drive personalisation. Consumers will have a [personal] relationship with retailers just like they did in the 1950s. The growth of online has triggered the necessity to put the customer at the centre, and to drive growth traditional retailers need to understand their customers better.”

Deeply understanding your customers

Ryan Dawson, head of strategy and market research at Shop Direct, agreed: “Retailers need to understand who their bulls-eye target customer is. You need to deeply understand them. We have a CX laboratory and so we try to empathise with customers by understanding their life.”

This scenario should straddle both stores and online, according to KPMG’s Martin, who says the number one reason for customers to shop online is because it is open 24/7 and the primary reasons for visiting stores is to see and touch the goods, or to try them on before buying. These actions are very specific to each channel, he noted.

For traditional retailers the need to adapt to a multi-channel world that involves constantly evolving the model is a serious challenge. “They have to think about tomorrow while also keeping the business running, which is hard. It’s an evolutionary cycle and not everybody will make it if they do not change,” Martin argued.

Change urgently needed

Nobody probably knows this better than Argos, which had 700 stores and a 1,500 page catalogue in 2000, when its profits slumped and it needed a transformation. Katy Gotch, director of strategy and customer experience at Argos, said: “We faced up to the challenge in the market, which was not the economy but was a disruptive shift led by Amazon that had the lowest prices on millions of products and raised the bar on customer expectations and delivery.”

Whereas Argos received calls to sell off many of its stores, as sales were shifting online, Gotch said management recognised that it was a “true multi-channel retailer with a brilliant infrastructure”. She added: “The store portfolio was not a weight around our neck but was an asset. The fastest growing channel is Click and Collect, and we have [through our stores] mini warehouses nationally.”

A network of hub stores was created whereby deliveries could be made to the smaller spoke stores, which enabled same-day delivery to be offered nationally for online orders. But what this infrastructure needed was to be adapted to be more digitally-focused.

“We changed the way we did technology,” she explained. “We set up a digital hub and had agile teams working with apps. They now work across the whole business including the stores. We also replaced the catalogues with tablets and shrank the public space in-store.”

Evolving store formats

Argos management soon concluded that it did not need 10,000 square foot stores but could operate from much smaller 2,000 square foot units – receiving regular deliveries from nearby hub stores.

This drove the move towards Argos seeking partnerships with other retailers to set up collection points in their stores. Sainsbury’s introduced such units into 10 of its stores in early 2015 and the success of those trials ultimately led to Argos being acquired by the supermarket. Gotch said: “There is now an ambition to push forward with concessions. If we roll out across all of Sainsbury’s stores then there will be 2,000 points of contact with customers.”

The deal with Sainsbury’s has also given a more data-centric spin to Argos, because it is now able to overlay the transaction data from Sainsbury’s Nectar card with the data it has built up on its shoppers to give a much richer profile of customers who visit the two businesses.

Retail employees of the future

It is clear that changes in store formats (partly as they become used as collection points), along with data and analytics rising up the agenda, have driven a need for different people to be employed by retailers.

Lee Lucas, CEO of Fashion Retail Academy, said research has shown that: “Fundamentally new people will be required. Every role in retail will be an evolution of an existing one or an entirely new one. There is a significant challenge to train staff and recruit skilled people.”

There is a real struggle taking place to recruit sufficient numbers of people with IT and technical skills, because not only are retailers fighting among themselves for such people but against other industries also value such skills.

“Pure-play retailers do not even classify themselves as retailers,” observed Lucas. “They are technology companies. Some will only take people with SQL skills regardless of the roles they will have in the company.”

Although he points to the fact that there is an increased demand for degree-level people – in contrast to a reduction in demand for less capable individuals – research has shown that the industry could be on for a net increase in jobs in the future.

For the fashion retail industry, Lucas says two per cent of jobs are expected to be lost by 2020 but the offset of this is that a five per cent increase is expected for jobs in the back office, which will no doubt incorporate the logistics aspects of retail that are growing at a fast pace as a result of online sales and home delivery.

Despite the challenges there is still much evidence to suggest that retailers can turn these tough times to their advantage and benefit from the undoubted opportunities that exist, provided they remain fully committed to the customer experience.

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