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IREU Top500 The Customer Report: 2018

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Morrisons: Growing up with Second Mover Advantage

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Morrisons: Growing up with Second Mover Advantage
Morrisons: Growing up with Second Mover Advantage

Morrisons , which bought Kiddicare.com in early 2011, has been hiring in talent from across the retail industry to expand the baby products retailer into a multichannel, international business while preparing for its own dotcom launch. Emma Herrod spoke to the senior team leading Kiddicare and Morrisons.com about integration, expansion and what happens when digital meets a corporate brick wall.



Much is spoken of the speed of ecommerce, and the mix of innovation and entrepreneurial spirit required from serious practitioners, along with solid retail know-how, a sprinkling of retail theatre and handfuls of customer insight. With a roll call of digital, multichannel and traditional retail talent, the team behind Morrisons.com heralds leading edge retail and customer service for not one but three brands under the Wm Morrison Group umbrella: Morrisons (supermarkets and physical presence); Morrisons.com in its yet-to-be-launched food and general merchandise online guise and Kiddicare.com, the online and single store/warehouse business acquired by Morrisons in early 2011.



Whilst many details around the launch of Morrisons.com are being kept under wraps (see Morrisons.com boxout), the team is now happy to talk about the integration of Kiddicare and Morrisons, what it means for the two businesses and the integrated Morrisons.com team, and the speed with which Kiddicare is changing.



Morrisons looked at the acquisition of Kiddicare as a way to incubate and grow a successful business as well as the obvious launch pad it gives Morrisons into the digital arena, says Richard Pennycook , Morrisons’ Finance Director.



“We had ambitions to grow the Kiddicare business as well as it being a great technology platform to leverage into other categories," he explains. "That ambition hasn’t changed, but increased.”



In fact, Morrisons had pretty much decided to go down the route of in-house development for its dotcom business when it started talks with Kiddicare, having been put off acquisition by some of the other businesses it had investigated. “You look under the bonnet of many dotcoms and it’s not great,” says Pennycook; “platforms and operating models were poor.”



In terms of Kiddicare.com, “there’s no duct tape holding it together,” claims Scott Weavers Wright , CEO of Kiddicare (and Managing Director, nonfood online at Wm. Morrison Supermarkets). The customer is at the heart of the Kiddicare business and “we’ve developed systems not to get it wrong”, he adds - which is probably why he received 17 bids for the company before accepting the Morrisons offer.



Morrisons makes no secret of the fact that technology and the platform upon which Kiddicare.com is based, as well as the knowledgeable online team and leadership, was the main factor in the acquisition. It will be what underpins Morrisons.com. The initial announcement said it purchased “Kiddicare, together with the rights to its highly regarded technology platform, for a total consideration of £70m. The acquisition is the first step in developing Morrisons’ online business.”



Morrisons is late to the digital arena but isn’t worried by the fact that the three leading UK supermarkets operate online already. “When it comes to online shareholder value creation I don’t see any of my competitors making money out of food,” says Pennycook.



Kiddicare has continued to trade separately as Kiddicare.com, led by Scott and Elaine Weavers Wright , via its state of the art freehold distribution facility and Europe’s largest nursery equipment retail store in Peterborough.



What has been surprising since the acquisition is the speed at which the Kiddicare business is expanding, especially if you consider issues around integration of the Morrisons and Safeway businesses and the potential for a clash between the fast moving, innovative dotcom that is Kiddicare and the larger, corporate Morrisons business.



Many people at Kiddicare have dual roles, working on Kiddicare and its expansion as well as roles within the development of Morrisons.com. Extra talent from Mothercare, BP, ASOS, Boots and M&S has been recruited into the Morrisons.com team from across the retail, digital and multichannel arenas, while others have moved across from Morrisons to Kiddicare. Recruits include Alison Lancaster (online and multichannel pioneer at John Lewis, Debenhams, and more recently White Stuff), David Tarbuck (formerly of Argos) and Jody Goodall (from Autotrader). Four directors have moved from Morrisons to the Kiddicare business to bolster HR, stores and operations capabilities.



A Morrisons.com site for general merchandise is now set to launch in the late autumn, with a grocery site launching in the following financial year - “but only if we can do so profitably and in a way that will be good for customers.”



As far as the provision of groceries online is concerned, Morrisons signed a deal with US food retailer Fresh Direct in order to send a team into its business to find out how it operates and bring the learnings back to the UK. Whether the Morrisons grocery site launches as part of the general merchandise site or as a separate site using the same technology is not being disclosed.



KIDDICARE EXPANSION



Part of Morrisons’ original plan for Kiddicare was for it to become a wider reaching multichannel business, and this expansion has happened at a much faster rate than anyone envisaged at the time of the £70m deal.



Morrisons is enabling Kiddicare to expand to a further ten stores – superstores, in reality, since the sites were previously Best Buy stores totalling 500,000 square feet of retail space. The first of the crosschannel stores will open in Nottingham on 26 September and coincide with a rebrand of the business from Kiddicare.com to Kiddicare, reinforcing the multichannel nature of the business.



“The Best Buy stores opportunity landed in our laps,” says Pennycook. But, as Weavers Wright explains, part of the decision was the generous car parking space at each of the stores, something that has become an issue at the Peterborough site since “cars queue” to get into the 250-space car park.



Weavers Wright has a strong belief in the use of technology to serve the customer so these new stores promise to showcase the best of Kiddicare and Morrisons’ ecommerce know-how, technology and traditional retail expertise.



“The new stores will be regional destination centres fusing the best of big retailing and the best of the web and technology,” says Alison Lancaster, CMO of Kiddicare and Marketing Director of Morrisons non food .com business. “It’s all powered by passion,” since everything that Kiddicare does is to help the customer she explains.



The new store concept, created by retail design company 20:20 with Kiddicare’s Brand Director Elaine Weavers Wright, is designed to “put the fun back into parenting by making it quick, easy and convenient” for parents to get whatever they and baby need. The 33,000 square foot superstore in Nottingham holds more than 3,000 products and plenty of digital innovations to make the shopping experience easier – along with a Very Important Baby shopping service, a café with a play area, a "try before you buy" buggy track, free car seat fitting and a brand new Baby Gift List and Registry.



“We aim to give a world class service and help people have a great baby experience,” says Weavers Wright, adding that the new stores and managers will be rated on service rather than by sales.



In due course, customers will be asked for their email address when they make a purchase in store and then sent an email a couple of days later asking them to rate the store experience and the person who served them. These scores will be updated in real-time and displayed online for everyone – customers and staff to see; this is the benchmark for the new stores’ success, not traditional retail KPIs. “We are a very transparent business,” says Weavers Wright. He explains that online Kiddicare has around 40,000 service reviews and over 200,000 product reviews from customers and was the first company to include unmoderated, 1 star product ratings on its site. SalesForce and Radian6, implemented for £5m, are used across the Morrisons business to monitor customer reactions with 60 people at Kiddicare alone empowered to address any social feedback and put right any problems. “If you are transparent it keeps standards high by creating real accountability,” says Weavers Wright.



SOCIAL EXPERIENCE



Kiddicare has been working on ways in which it can bring the spirit of social into stores and it hopes to achieve this with, amongst other things, community spaces for mum and baby groups, a play area in the café, baby showers and Baby Gift List and Registry which can be compiled in store and online.



These will help make the stores “a great place to be, increase footfall and loyalty". On top of this is Weavers Wright’s passion for technology as an enabler of customer service. Self-service kiosks will be installed in all stores with 30 or more in the largest stores, along with free WiFi and mobile queuing systems which send a text message notification to a customer when an expert staff assistant becomes available to help them with a car seat purchase.



Digital signage will be centrally controlled from Peterborough and managed with electronic shelf edge labels displaying live pricing and stock figures, giving Kiddicare the flexibility to change prices across the store portfolio and online instantly to promote time sensitive offers.



And, of course, click and collect will operate in addition to the timed next working day delivery service already offered by the business.



The technology is not only an enabler for Kiddicare but also a showcase for Morrisons to demonstrate what the underlying platform is capable of.



Two further stores will open in Birmingham and Thurrock before Christmas; no opening dates are yet being given for the remaining stores in Aintree, Rotherham, Bristol, Enfield, Hayes, Croydon and Southampton.



This store expansion plan comes on top of Kiddicare’s first foray into international markets with a launch of a bespoke Irish website. When visitors from Ireland visit the UK site, it resolves their IP address and displays Euro pricing. The infrastructure also gives Kiddicare full control over which products are presented to international customers. The company also currently ships to Sweden, Denmark and Finland.



BRINGING THE TWO BUSINESSES TOGETHER



The Kiddicare and Morrisons businesses are being woven together skilfully in a way that will really bring second mover advantage to the cross- channel businesses. CRM is the bedrock of the whole strategy, offering a single view of the customer across the group.



Weavers Wright explains that in simple terms it’s a single database and it’s “up to the thinkers in the business to decide what we do with the data. Technology is just an enabler”. According to Lancaster, “it’s a marketers dream”.



Pennycook believes that people will look back at this era of retailers gaining a single view of their customers as a major evolutionary step in retail in the same way that the advent of EPoS or online are viewed now. Second mover advantage is that “we have the luxury of not having legacy systems,” he says.



The group is gathering data on Morrisons’ customers who also shop at Kiddicare through the introduction of self-service transactional kiosks in the baby aisle of a number of Morrisons' stores. Customers can access most of the products stocked on Kididcare.com via the kiosks, along with full product descriptions, imagery and videos as well as other parents’ reviews of the items.



In terms of bringing together the multi award winning, young, fast moving and innovative £50m dotcom Kiddicare business with the century old, £18bn turnover traditional Morrisons, which has in the past been seen as anti-digital, may seem like a recipe for disaster. But rather than squashing the innovative, fluid can-do ethos of Kiddicare, Morrisons has embraced it with its own “can do and how do we do it differently” belief, says Lancaster. “Our philosophy is that if we want to do something we just get on and do it.”



It is this “fleet of foot,” entrepreneurial spirit that Morrisons wanted to retain rather than “crunching” the two businesses together, explains Pennycook.



More a morphing together of energy and ambition. According to Weavers Wright, “there are fantastic synergies between the two businesses” and there is “lots of joining up” across the Morrisons and Kiddicare businesses. From a Kiddicare point of view, the move into ten more stores would not have been so swift without Morrisons, not only from a financial standpoint but also on the supply chain and operational side.



In a move reminiscent of John Lewis’ acquisition of Buy.com and the integration of dotcom and development of multichannel, the decision was made to base the Morrisons.com team at Kiddicare in Peterborough. “Rather than making it a small part of Morrisons’ HQ in Bradford” it has become a part of the Kiddicare operation, says Pennycook. In fact, pretty much everyone in Kiddicare has a dual Kiddicare and Morrisons.com role.



And for the 11 million people who shop in Morrisons on a weekly basis, they too will be looked at with a dual Morrisons/Kiddicare gaze. The cross-pollination of customer data across the businesses, from Morrisons’ foodie followers who appreciate quality and provenance and its "field to fork" philosophy to Kiddicare’s young families, could be more game changing than its customers’ appreciation of good service. If Pennycook’s feeling that single view is as significant a development as online or the advent of EPoS is proved correct, then Morrisons’ delayed arrival onto the digital scene will prove to be more check mate than second mover advantage.



Alison Lancaster will be keynoting the Internet Retailing conference on 9 October so will be able give an update to delegates on the day.



Morrisons.com Launch



Morrisons’ first dotcom site “is very much on course for launch in Q4,” according to Richard Pennycook, who spoke to IR before the company’s trading statement in early September which cites an H2 launch. Morrisons Cellar will specialise in “an outstanding range of wines at great prices, with fulfilment from our distribution centre in Peterborough,” says the statement.



It continued: “We have now completed our review of Fresh Direct’s online food operation in the USA and the Morrisons team that had been working in New York has now returned to the UK. We have learnt a lot from our relationship with Fresh Direct and are continuing to evaluate opportunities to develop a unique and profitable online food model in the UK.”



According to Alison Lancaster, “other categories are in planning for next year.”



General merchandise in stores only accounts for 6% of Morrisons' sales but the company understands that the highest growth rates for these categories will be online. Growth into further categories “could be organic, through partnerships or by acquisition,” says Pennycook - in essence, whatever offers the best proposition for each category.



As with Kiddicare, Morrisons values customer service so “every category we take we want to be a specialist in, be authoritative,” says Weavers Wright. “As we acquire or grow new categories we need to show expertise.” It is in this way that Morrisons.com aims to differentiate itself “rather than being a ‘me three’ of the other grocers. We want to wow with world-class service.”



In the way that you will find an expert butcher behind the meat counter in Morrisons supermarkets “we have 25,000 staff who make fresh food every day,” says Pennycook - the ethos for expansion is that “if we’re going to do something we’ll do it well in a way that serves the customer and makes each category a great destination.”



History of Morrisons



Morrisons is the UK’s fourth largest food retailer by sales, with an annual turnover in excess of £17bn. It has grown from a single market stall in Bradford in 1899 to 476 stores, ranging in size from 3,000 to over 40,000 square feet. More than 11 million customers visit the stores each week and are served by over 131,000 employees.



Morrisons completed the takeover of rival supermarket Safeway in 2004 and finished converting the Safeway stores to the Morrisons format the following year.



In 2010 the company outlined its vision to make Morrisons ‘different and better than ever’. Different in that it has a distinctive offer to customers centred around fresh food, craft skills and vertical integration through its manufacturing business.



Better “is about improving the way we do business – doing more of the things that matter for our customers – making great food, offering outstanding service and being more efficient so we can pass on the best savings possible. It also means seizing opportunities to grow the business profitably through new formats, channels and categories, to meet more of our existing customers’ needs and to reach new customers.”



In March 2012 Morrisons announced a 7% year-onyear rise in turnover to £17.7bn in the year to 29 January, and an 8% rise in pre-tax profits to £947m. However, its September H1 announcement reported like-for-like sales fell by 0.9% with turnover up 2.3% to £8.9bn.



History of Kiddicare



Multiple award-winning, baby specialist Kiddicare was established in 1974 and became part of the Morrisons family in February 2011. Turnover in the last financial year was £37.5m and has grown by 75% in the past three years through the use of leading web technology, picking software and innovations such as one hour delivery time slots which were introduced with a 98.75% success rate. Over 85% of sales are through the online channel, which has over 1m customer visits each month.



Some 67% of sales at the Peterborough store, which is the largest baby category store in Europe with 56,000 SKUs in stock, are self served. Peterborough is about to be trumped in size by the new Kiddicare store in Thurrock. By the end of 2013 over 1,000 staff will be employed by Kiddicare.

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Featured In
InternetRetailing - September 2012, Volume 6, Issue 6

InternetRetailing - September 2012, Volume 6, Issue 6

Featured In
InternetRetailing - September 2012, Volume 6, Issue 6

InternetRetailing - September 2012, Volume 6, Issue 6

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