What is the future of retail over the next decade?
10th March 20
The one thing that is 100% certain for retail is that there will continue to be change and probably at an even faster pace than we have experienced so far.
In the 1960’s, Harrold Wilson said “A week is a long time in politics”. In today’s ever-changing world, a decade is a very long time.
So, I am going to be so bold as to say I don’t know the future of retail in the 2020’s. And I suggest you heed Andrew Marr’s advice on predicting elections of “cock an eyebrow, smile politely and turn your back”, if anyone does tell you they do know the future of retail.
I can’t tell you what is going to happen so I will share my 4 top tips for thriving in retail whatever the decade gives us to deal with.
- What is your differential? Being clear on what you stand for and deliver to customers is essential to growth. Brands that have a differentiated position and offer based on meeting customer needs are the ones that thrive over time. As well as long standing consumer brands such as Coca Cola and McDonalds; retail brands such as Apple, Selfridges, Greggs, Costco and even the dreaded and admired Amazon have stood the test of time.
Yet the retail scene has “also ran” brands that are often in the middle ground of their sector. They do well when the whole sector is buoyant yet struggle when there is change in their sector and a contraction in consumer spending.
The way to outperform your sector is to know what difference you deliver for your customers and keep a laser focus on delivering it.
Tesco is a great example of a brand who lost focus and suffered decline in sales and profit. A tough turnaround programme centred around the things it has always stood for – range, price and loyalty; has delivered results culminating in higher sales growth and a reported 34% increase in operating profit last spring.
A rising tide might lift all ships, but don’t just wait for the tide to come in. Know what you stand for and use that clarity to fuel your own growth.
- Put your money where your brand position mouth is and invest in the things that deliver your differential to customers. How much of your operating costs are invested in the things that make you different and matter most to your customers? In the tough retail environment that we continue to operate in managing costs is essential. In workstudy there is a way of categorising operating costs that gives a useful context on spend. Costs are split into Value Added – that is investment that directly impacts the customer and directly drives delivery of your differential. The second is Essential Non-Value Add – a mouthful that means the activities that don’t directly add value in of themselves and yet must be done. In a retail setting this means things like filling the shelves, cashing up and all the admin and governance needed to operate the business. You need to get these things done as slickly as possible – or outsource them if the cost and quality hurdles are met. The third category is Non-Value Add – essentially the waste in the business from lost time on things like colleagues waiting for customers with no other work to do; or time wasted from chatting and taking longer breaks than planned.
The aim for all retailers is to optimise spend on the supporting activities to get complete them as efficiently as possible and push released resources to driving growth. Minimising time in the Non-value add wasted time is a good source of productivity quick wins.
Stand back and look at your operation. Are you getting the balance right? What opportunities are there to free up time from essential, supporting tasks to deliver more of what makes you different and drive growth.
- In my retail leadership training, I was taught that the things that sets good senior leaders apart from the rest is that they manage the context – looking at wider trends and influences that inform the competitive environment for the business. In changing times, it is essential to look internally to keep your operating model as efficient and agile as possible; but not at the expense of looking externally to monitor and understand the customer, technical and competitive context you are operating in.
Your differential will remain constant and the tactics needed at any one time to deliver it will vary.
Keep testing, learning, developing and innovating. There is a whole genre of business books on the benefits of failure and all are based on the principle that successful businesses understand the context they are operating in, try new things and learn quickly.
Consider how you can bolster your expertise in your current model with additional expertise from external advisors and your board members.
- Expert advice – measurement and benchmarking. You can go a long way by keeping a critical eye on your own business – you will spot opportunities and identify ways to thrive and grow. It is difficult to keep that critical eye over time and it gets harder to see room for improvement in a business you have shaped. Before your growth starts to stall; consider work study measurement. It gives you a statistical basis that shows where you are spending time and resources to reinforce your views and identify additional opportunities. Benchmarking adds richness to your sector context – how does your operating model stack up against your competitors? Or similar businesses in other sectors?
No doubt more things than we imagine will be different by the end of this new decade. My recipe for success is: stay agile, keep close to your customers and consistently deliver your differential.