Which retailer is looking like a chocolate teapot?

Stephen Sumner, Retail Growth Consultant
By Stephen Sumner, Retail Growth Consultant

In business there are a couple of sayings that are quite apt for this article; “Don’t Build Your House on Rented Land, and Don’t Buy a Chocolate Teapot”

The latter should be obvious and I’ll explain the former later on.

We know that all forms of retailers (on/offline) are finding these digital times extremely frustrating. Despite the gloomy headlines we also see lots of positive retail news, so perhaps it’s not all doom and gloom as the likes of ‘Selfridges’ at one end and ‘Primark’ at the other seem to provide a spark of retail hope.

The traditional retail sector has lumbered along for many years, when the internet arrived far too many of them simply saw it as a threat to ‘cannabilising’ the physical store network and did very little, a few of them followed the herd and added a website, but all done at a very slow pace.

In my experience, you can introduce new processes, new technology, and yes even new people, but if the mindset of the company (culture) doesn’t change then it’s all wasted time and effort.

The definition of what we consider as retail and “marketing” is changing and becoming broader. No longer is it just about branding and advertising, marketers must work together with other departments to focus on building great customer experiences and engaging customers for long-term relationships. The growth of online content has given consumers more power. They are no longer a passive party when it comes to learning about products. They’re not waiting for you to tell them how great your products are. Instead, they’re going out and doing their own research.  So you have to offer them something more than information.

We see lots of companies who are keen to change but decline to discover the internal ‘change makers’ because of the lame excuse called ‘culture fit’ which roughly translated means they’re a threat to the incumbent leaders. Change is pretty scary for many people, particularly if it seems like it’s your job that could be cut as part of that change, but what if you had a crystal ball, what do you think M&S, Thomas Cook, Mothercare, Debenhams and others would have done differently back when the sun was shining and before this crazy ongoing pandemic – the correct answer is NOTHING, yup that’s right, nothing!

We are all consumers of someone else’s business, every day we make an unconscious bias in our decision to shop with one company/brand over another.  When we in multi-channel retail reflect on the past 18 months what have we really learnt about the key drivers in consumer behaviour. Changes that as we now know were enforced on many businesses by this pandemic and not by foresight and innovation by its leaders.

With HoF, Debenhams, John Lewis, M&S, Sears, Nordstrom and others finally succumbing to the reality that simply stacking the sales floor with the same old same old doesn’t quite cut it in today’s digital and socially savvy multi-channel world are we now seeing the green shoots of change from several innovative retailers?

Over the years I’ve seen and been involved with all kinds of ‘transformation’ projects. Very few have been proactive in nature, and most have been driven out reactive necessity to a decline in growth, loss of market share, along with the inevitable decline in profit.

Every company is in constant search of that ‘silver Bullet’ that will change the way the company can perform, operate, and grow. We all know there is no such thing as a silver bullet but it doesn’t stop the deluded from buying into the tech vendors view of what ‘Digital Transformation’ should include, and of course, it has to include their latest game changing technology solution. After all isn’t that what we mean by being ‘digital’?.

According to the MIT Sloan Management Review, companies that have embraced digital transformation are 26 per cent more profitable than their average industry competitors and see 12 per cent higher market valuation which has encouraged retailers jump into ‘digital’ feet first without considering the ROX (return on experience) by consumers.

Despite what you hear transformation isn’t about digital, channels, tech, Apps, websites, or other fixed mindset stuff, it’s totally about being consumer centric, then working out how you can add value by leveraging what you have to build the transformation bridges to the new future. Many retailers have done an amazing job during these trying times and have had no choice but to look inwards to resolve the external abandonment by consumers of their brand and proposition.  I’m not going to name all of them but a few are literally standing out for all the right reasons and unfortunately many of them still stand out for all the wrong reasons.

A big shout out to the entire Marks and Spencer teams who have reinvented the food shopping experience but still seem totally lost with the fashion element as ‘guest brand’ partnerships are akin to the department store days of old.  The website is so Web 2.0 I wonder why anyone would use it, the inclusion of the video link to the TV advert with the call to action saying ‘Watch our TV advert’ suggest the eCommerce team are still following the rules set out by the brand police because the ‘local’ store teams are producing some great ‘social media’ content of their own.

At no time in retailing history has consumer inertia been so much in the consumers favour. Today your website is probably one of the last places the consumer will go to look at products and services and find out who you really are.  The reality is that the pace of change, opportunities and dynamics associated with the internet were for many retailers largely ignored other than those that bolted on a me too website and stayed in protectionist mode around the store portfolio. Social Commerce is simply the transactional part of that process today its purpose is to distract the purchaser from having to go to your very expensive SEO driven eCommerce website!

Recruiting more ‘leaders’ from companies where innovation is evidenced to have been pedestrian would suggest that real ‘change’ is unlikely to happen – it’s a sign that a retail incest strategy isn’t all it’s cracked up to be.

A retail game changer for me has to be the work that’s going on at ‘Frasers Group’  in particular with both the ‘Flannels’ and ‘Sports Direct’ portfolios – the speed of change around store design and aesthetics is nothing short of amazing and from what we know about the growth numbers it seems consumers are voting very positively with their wallets continuing to take the transformation strategy in the right direction.

Clearly, the drive to move away from ‘pile it high and sell it cheap’ served owner Mike Ashley extremely well during his growth years of the 80’s and 90’s but for the likes of ‘Flannels’ and other ‘Fraser Group’ fascia’s on their mission to become ‘ the Harrods of the High Street, they need to be able attract luxury brands who previously would have steered well clear of Mike and is retail proposition – so far so good!

The great transformation is being led by incoming CEO ‘Michael Murray’ who I see as the key visionary behind most of what’s going on whilst ably assisted by his COO David Al Mudallal who between them are not only reinventing retail that was but also breaking down the old school ‘command and control’ hierarchy management structures by empowering and rewarding respective portfolio teams to ‘get on with the job’. The recruitment drive for young talent is breathtakingly insightful.

Company culture and brand are now merging and some experts already consider them to be synonymous. To put it another way, your branding and content marketing strategy can’t be separated from your company culture as a whole. Employees who work in a trust-based company culture are 8x more likely to say they’re proud to share where they work, which helps to promote the company brand.

The entire ‘Frasers Group’ social media presence is not only strategically aligned to each brand and proposition, it’s as customer focused as it gets so no wonder they are harnessing great engagement and obtaining feedback all in real time.

For brands to succeed in the new era of influencer marketing, where brand advocates are their own employees rather than celebrities and social media personalities, it’s vital to build this culture of trust.

So that was a quick summary of some of the ‘good’ – what about troubled retail waters?

  1. Q) Is working with ‘The Hut Group’ like buying a Chocolate Teapot’ and building your house on rented land?

In the run up to the festive season and beyond,  we will be keeping a very close watch on ‘THG’ given the ongoing issues in relation to shareholder revolts, underlying performance issues, and the knock-on effect of cash reserves that’s seen the share price plummet in the last quarter of 2021 and confidence rocked in the City.

THG (LSE: THG) has had a torrid time this year. Formally known as The Hut Group, its market value has plunged by nearly 75 per cent, from a share price topping 800p in January, to around 200p in November and currently trading around the £1.48 mark (Jan 24/2022).

It’s the small but growing division ‘THG Ingenuity’ that’s causing a stir. Ingenuity is an end-to-end technology platform that provides eCommerce solutions for consumer brand owners, including offering marketing services, brand development and global fulfilment.

There are many D2C brands that have signed long term (10 year) deals with THG on the basis of the ‘Ingenuity’ platform, along with gaining access to so called expertise in logistics and associated resource infrastructure. These include PZ Cussons and previously troubled retailer ‘Homebase’ so a careful eye needs to be hovering over these brands whose operations could end up as collateral damage if things continue to decline.

Finally: Sainsbury’s acquired Argos, Habitat and Homebase in 2016, and then splashed out buying loyalty card Nectar in February 2018 what on earth did it think was a key priority? The reality is, after a number of years trying to grow through a variety of acquisitions it hasn’t worked.

Today’s retailers need to cease p****** about as if they have another 10 years to sort stuff out, they not only need to create an internal disruption team by identifying the internal ‘change makers’ (every single company has these) and get them to look at the business as if it is going t*** up anytime soon because it probably is…….

I’ve said it before and I will keep saying that retail in essence is a simple business, today it seems to be complicated by the arrogance and ignorance of senior leadership teams who don’t seem to understand that it’s the digitally savvy consumer whose in the driving seat, and the days of ignoring those at the retail coalface is no longer going to stack up.

I for one will be looking forward to seeing what happens in this first retail trading quarter of 2022, what about you?


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