TheRetailer_Summer_19

Summer 2019

//  Helen Dickinson on BRC’s Acquisition of OSS Retail

//  Checkout ‘The Retailers new Digital Hub’

//  A spotlight on kyle monk, brc’s new head of insights and analytics

‘‘Our recent acquisition of OSS Retail will allow us to directly influence the training of colleagues across the industry as we build on their 90 years of experience

in leadership development.’’

Does retail have an image problem?

Helen Dickinson OBE Chief Executive British Retail Consortium

Our 2018 Employee Perceptions Survey showed that almost 60% of retail employees think so. While the unprecedented transformation of the industry poses many challenges to retailers, it also offers a unique opportunity to reinvent itself and its image. As the UK’s largest private sector employer, the retail industry is committed to equipping its colleagues with skills for the future. New technologies and channels to market, as well as changing customer behaviour, mean that new skillsets are needed in order to succeed. As such, leaders in the retail industry need to be appropriately trained to meet these challenges. We, at the BRC, are playing out part in helping to develop the careers of those in the industry. Our recent acquisition of OSS Retail (formerly Oxford Summer School) will allow us to directly influence the training of colleagues across the industry as we build on their 90 years of experience in leadership development. Nurturing the talent of future retail leaders will be essential as the industry adapts to transforming environment. Yet, it is not just developing existing talent, but finding untapped potential. Our Rethink Retail portal, which showcases some great people doing jobs that many wouldn’t necessarily think of when considering a career move, aims to help reposition retail as a career of choice among school leavers, graduates and those moving from other sectors. We want to see retail much higher up the list of career choices for people of all talents and abilities. To do that, the public must see the breadth and excitement of the opportunities that retail offers. The future is bright for those entering the industry. The recent BRC Apprenticeship Survey found that that 95% of retailers plan to increase the number of apprenticeships they offer over the next two years. To help retailers, we are urging Government to realise the need for increased flexibility in the way firms use their apprenticeship levy funds, including for staff time, backfilling and travel. Furthermore, we would like to see the broadening of the levy to include non-apprenticeship training too. And it’s not just through policy changes that the BRC are making a difference. BRC Learning launched the BRC Retail Leadership and Management Level 5 Apprenticeship last year as a way of helping retailers maximise the return on their apprenticeship levy. We are excited to be collaborating with Joules, the UK-based premium lifestyle brand, who have signed up over a dozen of their employees, from functions across the business, to the programme with the support of their line managers and the business. Joules chose to work with the BRC, and our provider partner Corndel, because of the flexible delivery, the retail customised content and the high-quality support provided by the professional development experts which enables apprenticeships to be delivered successfully in a fast-moving retail environment. As Joules continues to grow, so does their focus on recruiting, retaining and developing the best possible people, which will secure a bright future for both the business and the workforce. Retail is an industry of opportunities. Many retail careers that started in the stockroom, end in the boardroom. Yet this opportunity relies on clear opportunities for training and progression. Together we must embrace the training opportunities that exist and share them with those outside our industry. We have a great story to tell. Let us improve our image by telling our stories together.

this issue

03

British Retail Consortium response The reinvention of retail // Helen Dickinson obe, BRC

06

MAKING APPRENTICESHIPS WORK FOR RETAILERS // BRC learning Solving the unplanned absence equation // NEIL PICKERING, kronos

08

10

Brexit - is your workforce ready? // LOUISE SHAW, pinsent masons

12

Changing the future of retail with data // FREDRIK NEUMANN, wirecard

14

REPORT REVEALS TIPPING POINT FOR ONLINE RETAIL – TO REACH 53% BY 2028 // GAVIN MATTHEWS, Womble Bond Dickinson 8 moments of truth - are you ready to embrace new technologies? // MARTIN MUSK, P w C UK THE FUTURE OF FOOTFALL COUNTING: CREATING CUSTOMER-CENTRIC RETAIL // PETER LUFF, Ipsos Retail Performance Can businesses really get closer to consumers? If so, how? // LINDA ELLETT, kpmg

16

18

20

22

THE RETAILER Digital Hub // brc and partners

24 How do you stop people from stealing when they don’t think it’s stealing? Behavioural Insights and selfservice checkouts // James martin, brc

28

Highland Show demonstrates need for balanced approach from Government // Ewan MacDonald-Russell, src

29

BRC secures more time for online retailers to prepare for new rules // Andrew Cregan, brc

30

Competition for Cards: Why SCA CouldOpen the Door Online // ROBBIE MACDIARMID, cmspi

32

Fragmenting the reverse logistics supply chain // SIMON MCWILLIAMS - EMMA HAWKINS, jll

34

Support for the high street is crucial for local economies // SUNDEEP KAUR, visa

36

Alternative Arrangements- Light at the End of the Tunnel or Just a Dead End? // Aodhán Connolly, nirc

38

What do the ‘IR35’ tax changes mean for retail businesses? // BETHAN GILL, Grant thornton

40

Spotlight on: Kyle Monk // brc

41

TRENDS AND OUTLOOK FOR THE RETAIL SECTOR // kyle monk, brc

44

Changing the future of retail with data // JOSHUA REMI, valpak

46

A Smarter Future for Retail // Elle McCall, hubbub - Leah Riley Brown, brc

48

With Like-for-Like Weather Rare, Like-for-Like Surprises Are All Too Common // DAVID FRIEBERG, planalytics

50

Labelling Requirements for Cosmetic Claims // david bolton, brc

52

WE HOPE THE PM WILL ACT SWIFTLY TO SUPPORT RETAIL’S SUCCESSFUL REINVENTION // David Lonsdale, src

53 Directory of associate members

brought to you by

MAKING APPRENTICESHIPS WORK FOR RETAILERS NEWS FROM THE BRC

Learning

BRC Learning held the first in a serious of roundtable events, entitled Making Apprenticeships Work for Retailers last month. Hosted by our provider partner, Leeds Beckett University, we welcomed colleagues from Asda, Carpetright, Matalan, Boots, Aldi, Mamas and Papas, Superdrug and Freemans Grattan Holdings. Here are just some of the key points that came out of the event:

Apprenticeships must be aligned to the business priorities and talent strategy It’s vital to think through how your apprenticeships align with your business priorities and your overall talent strategy before you worry about spending the levy. That includes picking employees that are right for the programme and will be able to successfully finish the apprenticeship, rather than using a blanket approach driven by the levy. The top benefits that came out of the discussions, which were also echoed by the recent BRC Apprenticeship Survey, are about upskilling, retention, and developing future skills. However, it’s a balancing act with Ofsted insisting that apprenticeships have to be relevant to the current role, whilst retailers are trying to equip people with the skills needed for the future. It’s essential that you gain buy-in from across the whole organisation from the board to the line managers. This is particularly important when it comes to managing the 20% off-the-job training, which continues to be a ‘hot topic’ among many retailers. The government has recently published some guidance, which seeks to address many of the myths around the 20% requirement, for example this does not need to be taken on one day, it could be flexibly spread over the week. Feedback from one retailer was that training needed for some current roles would also be included in the Apprenticeship programme. So, it’s important to see the bigger picture and sell the benefits to the entire business. Buy in must be sought from across the Business

The development of new standards is too slow The group felt that new standards were needed to meet their business priorities, including improving current frameworks to be reflective of workplace trends e.g. digital, yet the process of developing new standards could be very slow. Also when new standards are confirmed, there is the need for more quality EPA (End Point Assessment) organisations. The industry needs to sell the benefits of apprenticeships in retail As an industry it’s clear we need to do more to sell the benefits of apprenticeships both to help attract and retain talented employees and build the champions and advocates within the retailers which are essential to making apprenticeships work. Feedback on the roundtable event was very positive from all participants, who appreciated the opportunity to discuss their successes and challenges, whilst networking and building relationships with other colleagues in the industry. Our next apprenticeship roundtable will be held on 26 September at our BRC London Bridge office. To register your interest email apprenticeships@brc.org.uk.

6 | summer 2019 | the retailer

BRC Learning collaborate with Joules to make apprenticeships work for retailers NEWS FROM THE BRC

Helen Dickinson OBE, Chief Executive of the BRC said: “At a time when the retail industry is going through a period of profound change we have an opportunity to shape the future of retail by delivering our vision for better jobs - those that are more productive and rewarding for employees. To achieve that vision, it is essential that we make apprenticeships work for retailers, so we are really excited to be working with Joules and welcome the investment they are making in their retail workforce, today and in the future.” Aleisha Riley, L&D Partner of Joules Ltd said: “I am looking forward to continuing this journey with the BRC and Corndel. I feel passionately about creating development opportunities for our colleagues here at Joules, giving them continued chances to learn new skills and gain confidence in their roles. I look forward to seeing individuals succeed and progress as a result of this programme.”

We are delighted to be collaborating with Joules, the UK-based premium lifestyle brand, to support the development of future retail leaders. BRC Learning launched the BRC Retail Leadership and Management Level 5 Apprenticeship last year as a way of helping retailers maximise the return on their Apprenticeship Levy. And we’re delighted that employees from functions across Joules have chosen to sign up to the programme with the support of their line managers and the business. Joules chose to work with the BRC, and our provider partner Corndel, because of the flexible delivery, the retail customised content, and the high quality support provided by the professional development experts which enables apprenticeships to be delivered successfully in a fast-moving retail environment. As Joules continues to grow, so does their focus on recruiting, retaining and developing the best possible people, securing a bright future for both the business and the workforce. We will be following the apprentices’ progress in future editions of The Retailer!

Working together with our hand-picked partners, BRC Learning offers high quality leadership and management apprenticeship tailored specifically for the retail industry. For more information visit brc.org.uk/learning or contact us on 020 7854 8921 or apprenticeships@brc.org.uk.

the retailer | summer 2019 | 7

Solving the unplanned absence equation

NEIL PICKERING MANAGER OF INDUSTRY AND CUSTOMER INSIGHTS IN EMEA Kronos Incorporated

HOW ADVANCED WORKPLACE TECHNOLOGY CAN IMPROVE MORALE, BOOST THE BOTTOM LINE, AND KEEP CUSTOMERS COMING BACK FOR MORE For any business, the consequences of unplanned absence can be a significant drain on employee productivity and the bottom line, especially with so many retailers feeling the squeeze in such a challenging time. More than ever, retailers need to explore every avenue in order to retain their workforce and cultivate an exceptional customer experience — but without a present, engaged workforce, this becomes extremely difficult. According t o a recent survey by The Workforce Institute at Kronos Incorporated, retail managers across the globe revealed that last-minute absenteeism leaves their stores understaffed a quarter of the time, while more than half of retailers surveyed (52%) cited unplanned absence as one of their organisation’s most difficult, complex, and time-consuming issues. In the U.K. specifically, more than half (53%) of retailers are given less than three hours’ notice when an employee is not going to show up for work, and close to half (44%) of these retailers report their absenteeism striking hardest on the weekends. From holiday breaks, to seasonal vacations, and unexpected social moments in time such as the Game of Thrones finale, it can be difficult to account for when — and why — employees might call out from work without advanced notice. However, there are steps that retailers can take to relieve the burden that absence creates on their workforce and reduce the likelihood of unplanned absence altogether. Recognise the impact of unplanned absence on store success and staff morale Across countries, headcounts, and sectors — from groceries and warehouses to department stores — the challenges posed by unplanned absence are universally felt and can directly impact a store’s bottom line: At least one in 10 in-store labour hours budgeted is essentially “wasted” due to staffing misalignment resulting from absenteeism. Retailers have long been working to get ahead of the absence curve. Particularly as organisations begin to prepare for the upcoming holiday shopping season, it’s not uncommon for managers to proactively overschedule a busy shift in anticipation that associates may call out. However, without accurate and actionable data to inform when and where additional staff support will be needed, overscheduling can often lead to wasted labour hours — both for managers and their staff, who ultimately feel underutilised and unchallenged. But the opposite can be just as corrosive: If managers don’t overschedule, they run the risk of depleted coverage and vacant shifts, creating unnecessary stress for store managers who are trying to optimise schedule hours and reduce the risk of overtime among their associates. Filling shifts on such short notice also leads to at least one in four retailers working at least half the time with staff that have the wrong or lack of skills. Not to mention, tapping into overtime and increasing individual workloads can swiftly impact morale of current employees — in fact, they’ve been found to be two of the three largest contributors to burnout.

Reduce unplanned absence with strategic workforce management Identifying the root causes of unplanned absence can be tough, and even when retailers know what can help to address the issue, they aren’t always taking advantage of it in their own organisations. Only 55% of retailers worldwide — and just 41% in the U.K. — have technology in place to help manage unplanned absence compared to three-quarters of retailers using automated technologies to track time and attendance (76%) and manage planned absence (73%). And although more than half (59%) of retailers worldwide believe scheduling technology has a positive impact on staff productivity, 28% are still using either spreadsheets or pen and paper to manage staff schedules. It’s clear that retailers are embracing at least some workforce technology, but increased adoption of solutions that specifically mitigate and manage unplanned absence would further enable managers to improve retail performance. Building accurate demand forecasts, creating stable schedules that promote strong teams, assigning shifts based on associates’ preferred availability and roles, and automating shift-swapping approvals to ensure real-time coverage for vacant shifts would reduce manager administration burden, improve sales performance and engage employees. The good news? These solutions are already here — and they’re getting smarter, thanks to the incorporation of AI (artificial intelligence). Recent innovations in workforce management technology can meet modern expectations of workers and provide associates with self-service, mobile-friendly and device-agnostic solutions to request time off, swap shifts, confirm their schedule preferences, view holiday and time balances, and record time and attendance. It’s no surprise that employees who can select shifts that fit their needs without manager intervention are less likely to call out at the last minute. And, as a bonus, data gathered by these solutions enable patterns of attendance and activity to be visualised, giving managers early insight into potential issues with staff that can be addressed – thereby helping to sustain performance and customer service. Solving the unplanned absence equation can significantly reduce operating costs; the key is to empower employees with technology that enables them to manage their work schedules to accommodate flexibility and preferred availability while still delivering the coverage required by their employers. This in turn allows managers and teams to optimise productivity and cultivate a great customer experience. Retailers have the opportunity to deliver a differentiated customer experience by first delivering a differentiated employee experience. By embracing next-generation workforce management technology not only to plan shifts accurately and fairly,but also use AI-driven labour forecasting to intelligently predict when more or fewer employees will be needed, retailers can ensure their staff remain happy and motivated with schedules that harmoniously balance their individual needs with the needs of the business. Enhance the employee experience, see better business results

8 | summer 2019 | the retailer

NEIL PICKERING //neil.pickering@kronos.com //+44 118 978 9784

the retailer | summer 2019 | 9

Brexit - is your workforce ready?

LOUISE SHAW SOLICITOR Pinsent Masons

FOLLOWING THE BRC’S ROUNDTABLE ON “THE FUTURE OF THE IMMIGRATION SYSTEM”, LOUISE SHAW COMMENTS ON HOW BREXIT WILL IMPACT THE SECTOR. In a sector with high turnover, seasonal demand and low margins, access to labour is crucial. So what to make of the Government’s proposals to end Free Movement and develop a new immigration system “for all”? The End of Free Movement The good news is that European Economic Area (“EEA”) nationals who are already here can stay. They need to register under the EU Settlement Scheme. In a no deal scenario the timescales for residency and registration will be shortened. Retailers are advised to take steps now to reassure colleagues and encourage registration. Many of my clients have already done so. The majority by signposting colleagues to the government guidance and explaining that the process is simple, particularly compared to the 80+ page form for Permanent Residence under the EEA rules! Colleagues need to be aware that if they don’t register they risk losing their right to live and work in the UK. Employers who effectively communicate on this will foster a welcoming environment, which may contribute to improved retention rates. The Post-Brexit World Current government policy is that after Brexit (and any agreed transitional period), EEA nationals will be subject to the same rules as migrants from the rest of the world. This principle means that employers will need a sponsor licence to support work visas for EEA migrants. Basic requirements include conducting the Resident Labour Market Test, a role at degree level and a minimum £30,000 salary. A 3 year visa costs up to £4,400 and the sponsor is bound by strict record-keeping and reporting requirements. The government has proposed changes to the Immigration Rules from 1 January 2021 (ie after the Withdrawal Agreement transition period). These are contained in a White Paper published late last year:

Low skilled options The key challenge for retailers is the sudden narrowing of options for low-skilled labour. This will also impact the supply chain and sub-contractors, all in a challenging trading environment. The 12 month option may prove useful for peak trading periods. However, it doesn’t sit well against the agenda of Retail to create fewer, better quality roles. 12 months disappears quickly once a migrant has found a job and received training. Additionally, the visa cannot be extended and the migrant will be subject to a 12 month “cooling off” period where they will need to leave the UK before they could re-apply. A consequence of a temporary 12 month visa route may be two tiers of employee; (1) settled workers who receive quality training and opportunities and (2) short-term workers with few opportunities. UKVI are currently consulting on the proposals for the low skilled visa route. The sector could seek to persuade them that it would be beneficial to have a cooling off arrangement that sits better with seasonal requirements. Sponsorship Many retailers won’t have a sponsor licence, or their usage of it will be low. The White Paper proposes to reduce the skill level to RQF 3-5, which opens up sponsorship to a wider variety of roles. For example, project administrators, buyers, and team leaders (customer care). This relaxation, coupled with the requirement to sponsor EEA nationals, is likely to lead to a heavier reliance on the sponsorship scheme in future. However the jury is still out on the £30,000 salary threshold. If the threshold is not reduced significantly, then sponsorship will remain out of reach for many roles particularly in the regions. Furthermore, sponsored migrants are still expected to work within one “job code”, which means they cannot move between projects and gain experience in different roles. This type of programme is increasingly common, particularly in Retail head offices. It is a good example of how the immigration rules do not flex sufficiently to meet the needs of modern employers.

• A relaxation the sponsorship regime, including reducing the skill level. • A 12 month visa for “low risk” countries, with no work restrictions. We assume that EEA countries will be included.

10 | summer 2019 | the retailer

The To-do List We know it is going to get more difficult to employ EEA migrants. Fortunately, there are actions that retailers can take now. Brexit Impact Assessment Assess the impact of reduced EEA migration on your business. If your right to work records are in good shape, then start there for the data. Once armed with the facts, prepare a mitigation strategy. Consider how to attract settled workers, upskill current employees and budget for increased recruitment costs. Window of Opportunity? The EU Settlement Scheme is more relaxed than other permanent options for EEA migrants in the UK. This is a window of opportunity for employers to recruit before Brexit, particularly if there is a transition period. Sponsor licence Do you have one? (and have access to it?) Do your HR team know how to use it? If the answer to any of these questions is No, take action now. The current sponsorship licence scheme will be amended to incorporate EEA migrants. The licence application process can take a number of months, so it is worth getting one in place now. Also consider an audit of your compliance records to ensure the licence is in good shape for a higher usage going forward. Finally, it is always worth considering if there are any alternatives to Tier 2 sponsorship. HR staff should be trained on these options, so that they can identify the most suitable route for the business and migrant alike.

LOUISE SHAW //louise.shaw@pinsentmasons.com

the retailer | summer 2019 | 11

Changing the future of retail with data

FREDRIK NEUMANN VICE PRESIDENT SALES RETAIL Wirecard

ENGAGING WITH TODAY’S CROSS-CHANNEL SHOPPERS ON THEIR TERMS Retail is in the process of reinventing itself, and retailers who adjust their sales strategies and react to their customers’ needs will be future-proof with a solid loyal customer base. Today’s shoppers are highly connected, switching between nearly 10 channels and numerous devices when shopping.¹ Customers need to be engaged with, and their needs don’t only have to be met, but anticipated. How can retailers keep up with consumers’ constantly evolving tastes and demands? The answer is in the data. Data-driven retail enables the perfect tailored offering and aligned customer experience. A true unified commerce experience, which unlike omnichannel, collates data from multiple channels onto a single platform in real-time, can only be achieved by capturing, analysing, and understanding data that customers provide with their shopping behaviour, payment preferences, and participation in loyalty programmes. Most modern retailers already possess these bits of information, but have yet to take full advantage it. Predict the future by analysing and understanding past behaviour Shoppers should have the freedom to shop whenever, wherever, and however they prefer. This includes having the freedom to pay with their preferred payment method, pick up their purchased goods at a time and place that is most convenient to them, and participate in relevant and worthwhile loyalty programmes. As a result, retailers need to meet customers where they are and on their terms. In the UK, accepting card and contactless payments is close to standard, which means that shoppers expect to be able to pay with their preferred payment method in most, if not all, shopping scenarios. Even before considering additional systems which capture data, retailers can already gain insights into repeat customers’ purchasing behaviour and preferences by analysing payment data. Value-added services, including loyalty programmes, vouchers and gift cards, which leverage on analytics in the backend, offer benefits to both customers and retailers. Analytics-based value-added services allow retailers to better understand their customers, and as a result, offer an extra service that adds true value to the shopping experience.

Retailers first need to capture agreed-upon customer data, for example through a loyalty programme, and then need to analyse and understand it. Information such as preferred payment methods, purchasing behaviour and patterns, as well as brand preferences allows retailers to target each individual customer based on their unique behaviour. With this valuable data on hand, customers can be sent individualised offers, at the right time, and via their preferred channel. Customers benefit from relevant offers, and reward retailers with their loyalty. Data on purchasing and returning habits can also help retailers know when flexible shopping services are needed, such as click and collect or “buy online, return in store”. Click and collect is already being offered by 64% of UK retail chains, but only 58% allow the in-store return of items bought online.² Regardless, most shoppers prefer to return items in-store, meaning that they no longer differentiate between the online experience and the in-store one.³ Retailers have long struggled to merge the various channels needed to meet their customers wherever they decide to make a purchase, whether that be via an online shop, a mobile app or in-store. However, demand for these services is increasing and the benefits of offering them are clear: Wirecard merchants who introduced click and collect reported a growth in online sales of up to 30%. Analysing customer behaviour can also help retailers understand customer churn, and reactivate customers before they are lost. The better the purchasing patterns of customers is known, the better one can identify unusual or changed behaviour.

¹ Salesforces Research, Trends in Retail and Consumer Goods Marketing, March 5 2019: https://c1.sfdcstatic.com/content/dam/web/en_us/www/assets/pdf/reports/salesforce-state-of-marketing- research-retail.pdf ² Statista, Multichannel capabilities of retail chains in the United Kingdom (UK) as of October 2018, May 2 2019: https://www.statista.com/statistics/984786/multichannel-capabilities-of-uk- retailers/. ³ Publicis Sapient and Salesforce, Shopper-First Retailing, 2018: https://www.publicissapient.com/insights/shopper-first-retailing ⁴ Statista, Omnichannel aspects retailers are prioritizing in the United Kingdom (UK) in 2018, April 4 2019: https://www.statista.com/statistics/987776/omnichannel-retailers-areas-of-prioritization- uk/ ⁵ Salesforces Research, Trends in Retail and Consumer Goods Marketing, March 5 2019: https://c1.sfdcstatic.com/content/dam/web/en_us/www/assets/pdf/reports/salesforce-state-of-marketing- research-retail.pdf

12 | summer 2019 | the retailer

Data-driven retail enables the perfect tailored offering and aligned customer experience.

Analytics-based value-added services allow retailers to understand their customers and offer extra services that add true value to the shopping experience

Capitalising on data, the right way Retailers are already turning to data to improve their offering. When UK retailers were asked which omnichannel retailing aspects they are prioritising, the single view of the customer came in at first place (19%), followed by personalising individual consumers’ experiences (14%).⁴ Clearly, most retailers are aware of what they need to do to engage with today’s cross-platform shoppers. The next challenge is to unify data, which can come from a multitude of sources and service providers. Retail and consumer goods marketing organisations use an average of 16 data sources to create a personalised shopper experience.⁵ Unifying all available customer information into a single platform remains a challenge for retailers using multiple data capturing systems, but also a top priority. The case for capturing and unifying data Wirecard is leading this space by having supported many European retailers, including Karen Millen, Lidl, Olympus, and Printemps. Onboarded merchant figures show that, upon integration into Wirecard’s ecosystem which offers a 360-degree view of the customer, loyalty and sales are driven up by an average of 10% or higher. Data-driven retail offers unlimited potential when it comes to bridging the gap between online and offline commerce, and shoppers can enjoy an exceptional consumer journey. By unifying sales channels to offer a true unified commerce experience and consolidating customer data, retailers have the opportunity to differentiate themselves in an already highly competitive market.

FREDRIK NEUMANN //fredrik.neumann@wirecard.com //+49 89 4424 191974

the retailer | summer 2019 | 13

REPORT REVEALS TIPPING POINT FOR ONLINE RETAIL – TO REACH 53% BY 2028

GAVIN MATTHEWS, HEAD OF RETAIL Womble Bond Dickinson

ONLINE SHOPPING WILL ACCOUNT FOR MORE THAN 50% OF RETAIL SALES (UP FROM 19% CURRENTLY) IN THE NEXT TEN YEARS ACCORDING TO A NEW REPORT, THE DIGITAL TIPPING POINT. Commissioned by law firm Womble Bond Dickinson (WBD) which advises a wide range of retailers, the report reveals that this growth will be powered by three primary factors: the changing demographic of the UK adult population, the development of faster, cheaper, in-home deliveries and fewer physical stores. However there are also potential risks ahead for retailers that don’t prioritise data security when embracing the new technologies needed to thrive in a digital future. Digital natives: Gen Z and Millennials will make up half of adult consumers in 10 years As the UK adult population evolves over the next decade the shopping habits of younger groups will become more dominant. The research conducted by Retail Economics showed that 62% of 16-24 year olds (Gen Z) shop online at least every fortnight (compared with just 29% aged over 65 years), averaging around three online purchases per month. Millennials also spend the highest proportion online currently (22.1%), averaging £42.32 per online transaction and spending £110.45 online each month. Over half (53%) of Gen Z consumers said smartphones influenced them most in terms of ‘awareness’ of new retailers/brands compared with just 3% of those aged over 65. This reveals how much more online marketing impacts younger adults. However almost a quarter of Gen Zs also said they are more likely to do shopping in high streets and shopping centres highlighting the complexity of the customer journey and the importance of shopping experiences for these younger consumers. Delivery demands - faster, cheaper and in-home will drive online purchases The top three factors that would accelerate online shopping for consumers are cheaper (47%) and faster (26%) delivery and easier returns (26%) all of which are key areas of investment for retailers looking to own more of the digital market. Again easier returns are more important for Gen Z (28%) and Millennials (30%) than any other age group highlighting their significance as dominant consumers in the future. In addition to this there is a rising trend of in-home deliveries (deliveries while homeowners are out) which is expected to grow. Also driving the acceleration of online shopping are emerging business models such as subscriptions and auto-replenishment which are powered by online and further increase in online penetration rates for repeat purchases.

Fewer stores in the future to channel consumers to digital retail There have been five consecutive years of net closures of retail stores and with dwindling levels of footfall across high streets, shopping centres and retail parks this trend seems set to continue. Indeed 10% of consumers say they will shop less in physical stores in next 12 months outweighing those who suggested they will shop more frequently in-store. With more consumers turning to online for even mundane purchases, demand for retail property is at its lowest since 2007 and the role of the store has become polarised with flagship ‘destination’ stores continuing to attract sustainable levels of footfall, while other secondary locations with dwindling levels of footfall remain under pressure. It’s no exaggeration to say that the retail industry is undergoing a period of unprecedented change. Despite concurrent waves of political and economic upheaval in our midst, our work with retailers suggest this is a mere distraction from the seismic structural shifts reshaping the retail landscape.” Successful retailers have always had to reinvent themselves to stay relevant. However, the pace of change will inevitably prove too fast for many – as shown by the number of CVAs hitting the headlines. While the impact of future technologies and consumer acceptance is highly uncertain, it definitely feels like the digital retail-revolution is only just getting started. Risks to a digital future – the data keepers Whilst consumers demand better technology from retailers for a seamless shopping experience they are also increasingly aware of the need to protect their personal data. Over a quarter of respondents have taken some action to limit the amount of data shared with companies, reaching almost a third for 16-24 year olds. Consumers attitudes towards sharing data overwhelmingly showed they believe businesses benefit far more than consumers. In fact, two thirds thought companies benefit more from the sharing of data compared to just 8% of who thought consumers benefited the most. Only a quarter (26%) said there was an equal exchange of value. Financial rewards, free and discounted products rank most highly for consumers in terms of benefits they would still be willing to exchange their data for. Online retail is being driven on apace due to a combination of factors and early adopters in the retail market who can flex and adapt their business models quickly will rise to the top. However, as retailers leverage new technologies to support this growth, new risks also emerge. Consumers are increasingly conscious of the need to protect personal data and their privacy in order to reduce the risk of fraud, identity theft and misuse of their data. Real damage can be done to a retailer’s brand and reputation with any data breach and loss of trust can have far reaching consequences for any business and its bottom line.

14 | summer 2019 | the retailer

GAVIN MATTHEWS //02380 20 8260 //gavin.matthews@wbd-uk.com

the retailer | summer 2019 | 15

8 moments of truth - are you ready to embrace new technologies?

MARTIN MUSK DIRECTOR - DIGITAL OPERATIONS P w C UK

WE ALL KNOW THAT ADOPTING NEW TECHNOLOGIES CAN REALLY ADD VALUE TO ANY RETAILER LOOKING TO TRANSFORM, DRIVE EFFICIENCIES AND GROW. HOWEVER IT’S EASY TO BE SEDUCED BY PROMISES FROM TECHNOLOGY VENDORS OR SCARED BY THE MYRIAD OF OPTIONS. One key factor, which will significantly influence your chances of success, is your culture. When considering how digitally ready and fit for the future your organisation is, consider the following moments of truth, which illustrate how day-to-day behaviours can make a profound difference in your ability to drive technology-enabled transformation. 1. When the engineer meets the data Imagine a very experienced engineer who has been working with a piece of equipment for many years. When that engineer is presented with a new data set, with analytics and recommendations coming out of a new technology solution, and they find something in that data that they don’t agree with: is the engineer’s first reaction to reject and dismiss the data and recommendations and say that they don’t make sense? OR do they make suggestions and work to improve the data and its interpretation, so that the insights and recommendations are more accurate next time? Data and analytics are rarely perfect first time. But too many companies use this as an excuse not to embrace new technologies. 2. Best idea wins In traditional retail organisations, the more senior and experienced you are, the more likely you are to be the decision maker. In digitally ready organisations, there is a recognition that more junior people often have more intuitive insights and capability around digital technologies. When given the space and the opportunity, they also often come up with the best ideas. At this key moment – will senior leaders embrace these ideas? Successful organisations are those that are open, willing and embracing of ideas from their junior people. 3. Are you ready for failure? Implementing new technologies and driving business benefits is not always easy. When failure happens, what is the reaction? Is the focus on diagnosing the failure and understanding how to fix and improve? Or is the initial reaction to stop work and potentially abandon the whole project? Similarly when people fail, is the reaction to congratulate them for trying, encourage them to learn from it and work together to make improvements? Or penalise them? Those who fix and improve are more able and agile to embrace digitisation. It’s important for any organisation to understand that to make progress you will have to take a leap of faith and appreciate that not every decision will pay off immediately.

4. Why are you doing this? When putting new technology into an organisation, it can be easy to lose sight of your business objectives. Experience tells us that organisations that are relentless and continuously focused on the issues they are trying to address, the opportunities the technology provides and critically how this links to the end customer, will get the greatest benefit. Those that get lost in the detail of the technology solution without focus on the end point are less successful. 5. Procrastination There is so much noise out there in the market, so much complexity and uncertainty, and information on the latest technologies, it is not surprising that many retailers can end up in analysis paralysis. It can be difficult to know where to start and how to identify the best solutions for your business - and then to formulate an overall transformation programme cutting across internal silos. But the worst thing you can do is to do nothing. Your competitors are not hesitating. 6. Look around you If you’re involved in a technology project, ask yourself, are you surrounded by people in the same part of the business you usually work with? Are you sharing and receiving ideas across the organisation or are you keeping everything close to your chest? Organisations who bring together teams from across the business to examine the opportunity and the practical considerations from multiple angles, and who collaborate to co-create the optimal solutions will be the most successful. Not just as an individual, but as a company, are you trying to drive digital transformation all by yourself? Those that are most successful are those that leverage external partnerships and alliances. They are the ones who understand that to move quickly, effectively and cost efficiently, it’s a great idea to partner with those that already have capabilities in areas you’re looking to build. 8. It works perfectly well already! “Why do we need to invest in new technology? It works perfectly well already” Sound familiar? Often what works now can constrain your thinking about what could be possible with technology in the future. 7. Are you trying to do this all by yourself?

16 | summer 2019 | the retailer

MARTIN MUSK //+44 (0)7764 235552 //martin.s.musk@pwc.com //www.linkedin.com/in/ martinmusk/ //twitter.com/martinsmusk

the retailer | summer 2019 | 17

THE FUTURE OF FOOTFALL COUNTING: CREATING CUSTOMER-CENTRIC RETAIL

PETER LUFF PRESIDENT Ipsos Retail Performance

THE BUSINESS OF RETAIL HAS NEVER BEEN AS TOUGH AS IT IS NOW. WITH THE DOMINANCE OF CONVENIENCE DRIVEN THROUGH ONLINE SHOPPING, THOSE OPERATING TRADITIONAL BRICKS AND MORTAR SPACES ARE HAVING TO INNOVATE TO KEEP UP. Here, Ipsos Retail Performance president, Peter Luff explains how a revolution in footfall counting is helping retailers deliver a service advantage over online competitors. Since the 90s, e-commerce has significantly changed the retail game, revolutionising customer expectations and behaviours when shopping. From online stores to social media ads and the rise of influencers, consumers are always surrounded with opportunities to buy. Traditional retailers now face incredibly stiff competition from the 24/7 convenience of online, so this is forcing traditional bricks-and-mortar stores to adapt rapidly to make the most of their walk-in trade. For them, the challenge is to deliver something e-commerce can sometimes struggle with - a personalised service. With technological advances in observational research, many retailers on the British high street continue to invest in people counting systems to optimise store performance. Any retailer big or small, global or independent needs to know how many people walked through their doors and with manual counting presenting an arduous if not impossible task for many companies – footfall counters are the answer. These technological solutions allow data to be collected accurately, efficiently and with no effort from the retailer. By measuring the flow and behaviour of people in-store, retailers can identify consumers’ buying habits and trends. This technology allows store managers and those in head office to compile detailed and accurate pictures of store traffic on an hourly, daily, weekly and year-on-year basis. Looking beyond this, footfall counters enable retailers to make the best strategic and operational decisions, including improving merchandising and store displays, optimising staff resources, maximising sales potential and ultimately boosting productivity and conversion rates.

Over the years, footfall counting has progressed from its beginnings as a simple number counting system. Through the introduction of a variety of new sensor technologies, retailers are now able to build detailed pictures of shopper behaviour. Retail stores use counting systems to help with operational tasks such as planning staff rotas and deploying employees across the store. It is now possible to use data to optimise store layouts based on how people behave in different areas. Through artificial intelligence, retailers can calculate gender split, shopper sentiment and dwell times. The data gleaned from these new intelligent systems can be capitalised on much in the same way online retailers have been able to for years, by iterating experiences quickly to be more customer-centric. While these improvements in technology have helped retailers propel their operations forward, there are still limitations to these tracking systems. These pitfalls are highlighted in high-end retail settings, such as jewellers, designer boutiques, and luxury car dealerships, often where shoppers choose to shop because of the service level they receive. Counting systems are crucial in these kinds of environments. By understanding when the store is likely to get busy, and how that footfall volume is expected to behave, retailers can plan accordingly to ensure higher rates of conversion. These kinds of stores often have a higher density of staff members, but this can prove a problem. Traditionally, footfall counting systems haven’t been able to determine between members of staff and shoppers. In a high-end retail setting, the number of associates in the store is often at a higher ratio to customers compared to high street retailers. This can affect the accuracy of the data presented by the systems, which when interpreted, can lead to inefficiencies. These latest systems use small tags, worn by associates, which identify them to the system, which is then able to discount them from the final data analysis. What may seem like a minor evolution of the system translates to considerable gains for the retailer.

“Through the introduction of a variety of new sensor technologies, retailers are now able to build detailed pictures of shopper behaviour.” “A high level of accuracy means that retailers can now adapt space and staffing to work in harmony to deliver the highest standards of service.”

18 | summer 2019 | the retailer

The data presented from these new systems offer a level of accuracy that wasn’t possible before. Now retailers can understand how its associates are behaving in the store in relation to customers, they can adapt accordingly to a level of granularity that they did not previously have access to. It is through this high level of accuracy that retailers can now adapt store space and staffing to work in perfect harmony to deliver the highest standards of customer service. As each counting system operates independently in each store, managers can iterate experiences on a store-by-store basis, ensuring the best possible conversion rates. As decision makers within each retailer move into the future, they will be able to more closely match their store experiences with their own (and competitors’) online experiences. This means they can deliver over and above the experience customers come to expect when interacting with any retailer. I’m pleased to be a part of this development in footfall counting, as our advances in technology are the first of its kind and will influence the future for so many retailers. Future predictions suggest the British high street will experience lower footfall, as customers continue to enjoy the convenience of shopping centres or opt for online. With the lure of e-commerce growing, our technology will allow retailers to analyse and adapt, helping them create winning experiences with levels of customer service that will keep online on the run, for now.

PETER LUFF ipsos-retailperformance.com

the retailer | summer 2019 | 19

Can businesses really get closer to consumers? If so, how?

LINDA ELLETT UK HEAD OF CONSUMER MARKETS KPMG

WE COMMONLY SPEAK OF GETTING CLOSER TO CONSUMERS, BUT WHAT DOES THAT ACTUALLY ENTAIL AND WHERE MIGHT INSPIRATION BE SOUGHT? Retail and consumer businesses more broadly are undoubtedly undergoing reinvention, but amidst the drudgery of negative headlines plaguing retailers and other consumer businesses, it’s easy to lose sight of the sparks of brilliance or key signs of where some players are actually managing to buck adverse trading conditions. More often than not, the solution to any longstanding issue lurks in the unexpected, requiring a fresh pair of eyes; venturing into unchartered territory, or looking to industries beyond your own. Businesses are increasingly urged to get closer to their customers, as traditional business-to-consumer relationships stretch beyond being merely transactional, and as the oversupply of retail clashes with lacklustre consumer demand. But what does this mean? Why is it important? Where can inspiration be found? Before delving into it, we have to appreciate just how tough the trading environment is. Recent updates from the BRC-KPMG Retail Sales Monitor recorded record low sales growth in May 2019, and June’s figures did little to ease the blow. Spend on retail is notably in decline, as shoppers hold back or spend elsewhere, whilst the gap between those seemingly ‘winning’ and ‘losing’ widens. Our recent Economic Outlook didn’t provide signs of relief to come either, suggesting that consumer spend will continue to slow, despite unemployment remaining low and inflation easing. A combination of ever-changing consumer behaviour; increased costs for retailers to digest, and the volatile economic and geopolitical landscape more widely, are giving rise to a mounting number of casualties as well as more restructuring. The fallout of all this is plain for all to see, but the antidote to such a lethal cocktail remains very much a work in progress. The fundamental truth however, is that customers need to be at the heart of any solution. Without their buy-in, there simply isn’t a business to speak of. Just think of the wave of traditional industries – not just retail – disrupted by new customer-centric competitors. Customer-centricity is a prerequisite for survival, and we must grapple the complexities of today’s – and tomorrow’s – consumers, however hard that task may be. Our Me, My Life, My Wallet report shed light on this, stressing the continuous assault of ‘pushes’ and ‘pulls’ thrust upon consumers. It’s not just retail, it’s all consumer businesses they interact with, while they’re attempting to save or pay off debt at the same time. Retail or not, all industries must be conscious of the fact that we’re all competing to remain relevant and on the consumer’s radar. We have to take a multidimensional view to understand consumer motivations; how to grab their attention; learn how to build a connection with them, and justify why we deserve their highly valued time and money. In its simplest form though, shoppers seek value, convenience and experience, and therein lies the key to reconnecting. The war on price goes without saying among us bargain-hunting Brits. But too many retailers look to ‘buy’ demand through promotion. As recent financials lay out rather painfully, such pressure on margins is unsustainable and becomes expected by shoppers – just think of Black Friday. Price remains important, but convenience and differentiated experience hold better

potential to engage the modern consumer. KPMG Nunwood recently outlined the correlation between customer experience and revenue growth, finding that those that deliver the best experience achieve 54 per cent higher revenue growth. KPMG Nunwood’s latest report – Power to the people – found that the UK is thankfully getting better at delivering customer experience – recovering from a record low in 2017. While many of the same brands from previous years remained top performers, lower performing brands realised the most improvement. Progress is of course welcome, but we have to remember that customer expectations continue to rise in parallel, so no brand can afford to sit on its hands where added convenience or better experience is concerned. The latest report also highlighted the key contribution employee engagement plays in improving customer experience, with satisfied and engaged employees a commonality among the strongest performers. Most organisations have venerable operating models that place the responsibility of experience for customers in a different place to experience for employees, resulting in confusion where language, vision and purpose is concerned. In our connected world, employee experience is just as important, especially given the impact on customer experience. All businesses need to look outside-in, and inside-out, with customer centricity front of mind. Retailers will no longer benefit from comparing themselves next to their nearest competitor. Consumers are increasingly rethinking their relationships will all businesses. By the same token, inspiration on how best to engage today’s customers may well come from an entirely different sector. So who might consumer businesses look to? One industry worthy of note is video game developers. They can certainly say a thing or two about putting customers at the centre of their business. As an industry, they are creating games to meet, if not surpass, the expectations of an informed, passionate and vocal customer base. They have to embed user experience into every aspect of their business. They have to use discipline to cut through any confusion that may mar product development. They use player psychology to support game design and testing. And more often than not, user experience is too crucial to be entrusted to just one group, with it being the responsibility of everyone. Yes, perhaps it’s time to start looking further afield as retail and consumer businesses look at redefining themselves before its ‘game over’!

“Customer-centricity really is a prerequisite for survival, and we must grapple with the complexities of today’s – and indeed tomorrow’s – consumers, however hard that task may be.”

20 | summer 2019 | the retailer