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IRC 2014 KEYNOTE REPORT How shopping is set to transform

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• John Lewis Click and Commute shop opens today at St Pancras

• House of Fraser to launch pre-9am deliveries for orders placed by 8pm the previous evening, six days a week

The way we shop is set to change more in the next five years than anything we’ve seen so far, Mark Lewis of John Lewis told the opening session of the 2014 Internet Retailing Conference this morning.

Lewis, director of online at the multichannel retailer and keynote speaker at the event, said that some retailers may have cleared the first hurdle in the race towards giving customers the joined-up seamless journey from a brand, rather than a series of shopping channels, that they demanded.

“I think now a number of us have built quite sizeable online businesses in the UK there’s a temptation to think we’re close to the end of this race,” said Lewis. “But I think if anything we’re at the very beginning of it. This journey is ahead of us rather than behind us. These next three to five years will see more changes to retail than in our generation.”

He added: “This is not about building a nice shiny website. It’s about business model change and we’re at the very beginning of it.” And, he warned, it would not be easy.

Last year John Lewis turned over £1bn online and this year expects a third of all its sales to be online. Long-term investment had allowed the retailer to scale its innovations and investments. For example, in click and collect it started by enabling click and collect in John Lewis stores and then extended that to Waitrose stores. In a further extension of that trend, it today opened its new Click and Collect store at St Pancras, enabling commuters to pick up online orders and drop off returns.

“We’ve been able to innovate and scale that innovation so that now click and collect is responsible for more than half the orders that come through,” said Lewis.

Looking ahead, he said delivery, data and changing customer behaviour would drive change in the business.

Jérôme Cochet, senior vice president sales at Zalando , explained in his keynote address how Zalando had moved into 15 new markets quickly. Localisation, he said, was key to international success.

The company, which turned over euro 2bn in its latest financial year, expanded first from shoes into different product categories, and then moved into its different territories. Cochet said the key was to give customers in each market the prices, the products and the services they expect. “It’s hard to accommodate all this,” he said. “For us the question was: how can we be relevant, fast, and simple? And those three objectives almost exclude each other. We said, let’s be local where it matters, in the customer facing activities, but let us build scale and excellence in what we do and the background we have in technology.”

He added: “You can only build a great brand if you’re relevant and if you communicate correctly. The communication needs to be tailored to local consumers’ taste. If you want to be fast you need to capture demand locally. Online for us is like a high street with a lot of traffic but you need to capture this traffic.”

Answers, he explained, came through setting up buying and marketing teams centrally but boosting them through local buying offices and local language marketing specialists.

Exploring the refoundationing theme of the conference, final keynote speaker, Andy Harding, executive director, multichannel at House of Fraser , explained how the deparmtment store had rebuilt its online business by putting responsive, mobile design first. This had not only benefitted mobile customers but those using the website, since the design was now clearer. The financial payoff, he said, was also clear: where customers who only used the store spent an index value of 2.5, those who only used the website spent an index value of 1.5, but those who used store and website spent an index value of 6, and those who added mobile to store and website spent an index value of 8.

The retailer has also rebuilt its online presence around brands, rather than the traditional ‘department’ structure. Investing in delivery has, said Harding, put it ahead of the rest of the market while also enabling it to respond to customer demand. “The voice of the customer is telling us that home delivery is not convenient. Most people work, and taking time off work, even when you know which 15-minute window it will arrive in, is still a pain. Collection is also not convenient for everyone. We have developed a next-evening delivery service.” In three weeks House of Fraser will also launch a service for next morning delivery, six days, by 9am for orders placed by 8pm the previous evening.

“We’ll deliver before you go to work, after you come back from work or you can pick it up,” said Harding. “This is a key battleground, we believe, and next year we’ll be launching even more options.”

Like John Lewis’ Mark Lewis, Harding emphasized that restructuring wasn’t easy. “Some people can deal with change and some can’t,” he said. “Some people come on the journey with you and some don’t, but what you see is that the business keeps on growing, and then you have to do it again. But you have to change fundamentally because the market changes fundamentally. You have to adapt to that and be prepared for what the future will bring.”

He said multichannel could not sit in isolation. “What needs to happen now is the level of multichannel capability across the rest of the business changing at the same rate.” House of Fraser is responding, he said, through organisational change.

He said all innovation had to be “rational”. iBeacons fitted that mould. “The idea we can provide a more engaging experience to our customers when they approach mannequins and that shops can be more responsive at night time.” Its joint operation with Caffe Nero opened yesterday, where customers can order and collect online shopping while also enjoying a cup of tea. “We get additional footfall, it raises brand awareness,” said Harding.

Looking to an “unpredictable” future, he said that change would come in the areas of payments, with the launch of Apple Pay and Apple’s NFC enabled phones. This, he said, would see a big shift to digital wallets, which he believed would be a primary method of payment in the next two years. RFID tagging would also become “commonplace” in coming years, with uses including self-service checkout and stock management. Another change will come from the Internet of Things. Already Dixons Carphone has formed in response to this new connected world. “I think everyone should be making investment into insight and data management,” said Harding, who also cited wearable technology as an emerging influence.

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