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Change and change again – The Strategy and Innovation Report 2015

Retailers have to embrace a constant focus on “newness” to create strategies that will succeed in today’s digital world, says Liz Morrell

Check out any retailer’s trading statement or annual report and the word “innovation” will be in there somewhere. Once, retailers simply had to focus on new ideas around products, but now companies have to be seen to be innovating in every element of the business as a way to win both customer spend and customer loyalty.

Innovation was a key theme at Internet Retailing’s annual conference (IRC) in October and this autumn we have also published our first research report on digital innovation, proving just how much the need for business and process reinvention has come to the top of the agenda as retailers attempt to stand out from the competition. Companies that haven’t done so already must be looking at how to ensure operations are not only cross-channel, but 100% customer focused.

Our digital innovation report showed that nearly two thirds – 64% – of respondents said that digital innovation was vital to the business. It was either a number one priority or one of the top board-level priorities for the majority of respondents.

Indeed, leading from the top is key to a successful strategy that fully embraces innovation. Speaking at IRC in October, Patrick Bousquet-Chavanne, executive director of marketing and international with Marks & Spencer , said that having a digital-savvy board was vital as a way to drive change. “It sets the pace for dynamic transformation,” he said. “A lot of transformation journeys fail because there’s not an alignment between the board and the journey. Then you have to make sure the management makes it their own.”

Compiling the IRUK Top500 list of leading retailers, we focused on strategy and innovation in terms of the journey to being everywhere for the customer. For some, this is purely about initiatives such as click and collect, although this is now seen as less of an innovation and more of a must-have. For others, it’s about true cross-device capability, where the customer journey can be picked up at any stage on any device without interruption of flow, or about making payments easier, quicker and smoother than ever before.

State of the market

There have been huge changes in the market recently and the pace of change isn’t likely to let up soon. In just the last 18 months or so, we have seen the emergence of a number of new initiatives intended to speed up the pace of innovation in retailers even further. Including the likes of Argos , John Lewis , M&S and Boots , a number of retailers have opened innovation labs as a way to embrace start-up and Argos, involving click and collect and drop-off delivery services, has helped the auction site and online marketplace establish a physical presence. Many other pureplays have followed suit – supplementing online operations with a physical presence – be that via stores, concessions or pop-ups.

For Shop Direct, however, the clear focus is not on stores but on digital – something that it says allows an absolute focus on strategic priorities – although like eBay a partnership with Collect+ still gives it a physical presence. “It’s liberating,” said Rubel. “We are a company that’s able to obsess about the digital experience and have a retail boardroom that all the time is able to talk about that in detail. I can’t imagine what it is like to have the distraction of stores to worry about as well. That gives us an edge. Strategy is about choosing where to focus and where not to focus.”

The content factor

Content is also becoming an increasingly important part of retailers’ strategies, and there are multiple ways in which the likes of Asos can influence customers through content. At M&S, Bousquet-Chavanne believes that content is a key differentiator for retailers in today’s world. “I do not believe that retailers today can differentiate themselves without the content. We’re looking after up to 40 different touchpoints and different assets, so content publishing capabilities become very important,” he said at IRC.

How quick the company is to react here is key. “We have a team of younger editors with merged print publishing and online [capability],” said Bousquet-Chavanne. “If something is trending on social and online, we’ve been ready to have the right content for the consumer. Brands need to have that capability.”

Couple this with personalisation and retailers really start to motor. “[Thinking about personalisation is] a response to customers saying they are drowning in information,” said Shop Direct’s Rubel. “They want you to curate, inspire and show things that are relevant to them. We are delivering personalised home pages and personalising the research experience. We’re reacting to the customer need there and creating

real-time personalisation that makes the experience easier for them.

But he admits change isn’t easy to manage. “Transformation is tough not just because it’s busy, and there is a lot to do, but it’s also emotionally tough,” he said. “We’ve spent a lot of time nursing our colleagues through change, whether it’s directly affecting them or not. Changing customer habits have meant we’ve had to reduce investment in some areas and increase in others, and that can be painful.”

For some within the business, that means a huge cultural shift. “It’s about building a culture that embraces change and gets that it’s an ongoing reality for a digital business,” said Rubel. As our research shows, those retailers that have woven the need for innovation into strategic thinking are the companies that are best prepared for the changes that still lie ahead.

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