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Wednesday 18 September 2019

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Retailers are ‘shooting themselves in the foot’

Written by Hannah McGrath
02/05/2019

UK retailers should are partly to blame for their current travails and should stop shooting themselves in the foot, according to former Sainsbury’s chief executive Justin King, who also suggested that reports of the implosion of the High Street are overhyped.

Speaking at the RetailExpo in London, Justin King, who led the supermarket chain from 2004-2014, warned that bricks and mortar retailers were inadvertently driving customers online channels by participating in discounting events such as Black Friday.

“Black Friday was created by bricks and mortar retailers, how dumb is that?”, he asked.

“Maybe not reloading the gun and shooting our feet as quickly as we have sometimes before would be a good idea, he suggested, adding “The industry has got to stop inflicting pain on itself.”

In a speech focussed on the question of a “retailpocalypse” or the so-called death of the High Street, King sought to challenge the gloomy outlook for bricks and mortar retailers with lessons drawn from his own 40 year career in the industry, suggesting that challenges and technological change have always been part of the retail landscape.

“I have a much more bullish view of the future of retail than it seems to me is the centre of gravity these days,” he said.

Citing businesses that have endured for decades such as Marks and Spencer and John Lewis, he said: “Business have been able to reinvent themselves time and time again through periods of very significant change, at least as challenging as today.”

“I guess what I’m saying is I think it was ever thus,” he explained.

However, given the spate of major High Street retailers entering administration and embarking on restructuring and store closure strategies to head off the transition to online shopping, he conceded that it was “hard if you read the press not to conclude that something profound is going on.”

Citing the administration of the likes of Debenhams, Maplin and Toys R Us, he noted: “all of them to a greater or lesser extent felt to me very inevitable and a very long time coming and all of them I would argue had issues that were very particular to those organisations.”

“It’s clear that technology has been at the core of that change, change has been on a steeper curve as far as technology is concerned [compared to decades past]”, he said.

“There is of course an argument to be made that there is a tipping point, an arrival at a moment in time of so many factors any industry that the back is going be broken by the straw.”

However, King argued that the rise of online shopping was only part of the picture, and that in fact sales at High Street retailers with successful omnichannel strategies were thriving, while consolidation in the e-commerce space was resulting in online retailers focussing their strategy on taking on digital rivals rather than pursuing the target customers of traditional retailers.

“I think it’s much more likely that Boohoo’s targeting is in the same space as ASOS customers rather than M&S,” he noted. “The very nature of change is that change also eats itself, many of the online retailers in clothing are struggling much more with their fellow online clothing retailers than bricks and mortar.”

Citing strong sales growth from the likes of Next and Marks and Spencer, he said King said it was important to look at the facts in order to “disabuse us of the idea that there really is some kind of implosion taking place. It’s not, quite clearly,” he insisted.

Looking ahead to the future of retail, King predicted not only that the UK would become the “playground of the world” for online retailers in the coming decade.

However, he warned that UK retail would need to have the appropriate infrastructure and safeguards in place: “if this is your playground you have to be equipped with it, because some of the world that comes here will be quite big bad bullies.”

However, he said that on the current trajectory, the 20 per cent of retail market share taken up by online is likely to rise steadily to 30 per cent by 2030.

However, he said that the distinction between online and physical retail is likely to “all blur into one” within the next ten years, as retailers adapt to a fully omnichannel future incorporating in-store ordering and online browsing.

“I think by 2030 we won’t recognise the distinction. Because the distinction will meaningless,” he concluded.


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