Peter Williams: A chairman’s view (IRM55)
Peter Williams has been on the board of many great retail names. Now chairman and non-executive director of a number of European pureplays, he shared his experience and views on the direction of travel for UK retail with delegates at the InternetRetailing Conference. Emma Herrod caught up with him afterwards.
Way back in time, retail meant a market or bazaar that occupied one section of a town square alongside the church, school and government building. From these mainly niche stalls grew department stores but when these lost their appeal consumers started to turn back to niche outlets. These niche retailers have gone on to expand internationally.
The consumer experience has also evolved. In the past, if you were wealthy enough you would send your servants to do the shopping for you. The advent of department stores meant that for the first time people were able to browse many types of products all under one roof. They heralded the start of mass-produced ready-to-wear clothing rather than low-volume made-to-measure fashion.
Opening hours have progressed, too. When Peter Williams first arrived in London 40 years ago, shops in central London opened until 6pm, late night shopping was on Thursdays till 8pm and none opened for business on Sundays. John Lewis even used to close at lunchtime on a Saturday casting hundreds of people out onto the streets to go somewhere else to shop, explains Williams, something he was grateful for when CEO of Selfridges.
He adds: “Up until 10 years ago, the retailer was in control, dictating how and when consumers shopped. It’s all changed now.”
Today, the internet allows you to buy anything at anytime from anywhere. Consumers have choice and plenty of it. With multiple channels and multiple delivery points they don’t care where the DC is located. “They want everything that’s in the store and more besides,” he says. “Consumers are now demanding the service that they want, such as John Lewis delivering their order to the local Waitrose rather than driving up to Oxford Street.”
There’s more of this to come, he believes, mentioning InPost locker boxes. “There are numerous numbers of these things evolving and the consumer likes having all this choice.”
With time will come the ability to compare price on a wider basis. “Why should I pay £85 for something in Selfridges when it’s $60 in Macy’s and made in Vietnam,” he asks. He thinks consumers will find the lowest price point and this will continue to evolve.
CHANGING HIGH STREETS
It presents a fantastic opportunity for internet pureplay retailers, like Amazon, Asos and Mister Spex and Boohoo.com, which Williams chairs. “For the rest of retail it’s been a bit of a headache,” he says. Retailers might be seeing pretty strong growth in their internet businesses year-on-year, but a lot of that is cannibalisation: “It’s coming from their stores.”
If you are a mature retailer it might still be quite difficult. If you were a fashion retailer wanting a nationwide presence 10 years ago, you probably would have thought you needed about 200 to 250 stores around the country and that would pretty well be it. Now you probably need only 100 or 150, plus an internet site, he explains. He adds that retail is fantastic when you’re adding stores but if you have to cut them it’s an extremely painful process: you have leases you’re committed to, lots of employees and the infrastructure to support a 250-store chain when actually you need only 150. That’s proving quite a headache for retailers.
The market is polarising. The top 1-100 retail locations nationwide are getting better but those ranked 101-250 are struggling to a certain extent. In these secondary areas the rents will have to come down or shops will remain vacant. That effect may encourage more people to start up their own business, thinks Williams. He adds: “It may also result in some stores changing use, to residential or leisure, because we simply don’t need the physical retail space that we had 10 years ago – it’s just not necessary.”
He also believes that competition is increasing in these top 100 locations and the high street stores are having to pull out all the stops to attract people and give them a reason to visit them rather than buy online. Williams explains: “For those who do go to store, you have to up your game, make it a more interesting experience so that consumers choose your stores.” This isn’t anything new; what has changed is that people have massive choice as they can buy everything online and that is an added pressure on retailers to improve.
Consumers can also quickly work out why a retailer is failing: the store doesn’t have a clear proposition, the place feels a bit dowdy, the products aren’t interesting and there is no pizzazz. He says consumers get that message within the first 30 seconds of entering a shop and walk out never to return unless they know it’s changed. He adds: “It’s the hardest thing to do to keep that constant level of interest going and there’s been some famous cases of companies losing the plot.”
It’s usually clear that the retailer doesn’t know what differentiates it from others on the high street. “Once you become part of the back drop that’s a recipe for disaster,” he warns.
The top 100 locations – which include the capital’s Oxford Street, Bond Street and Westfield London – remain pretty strong and vibrant.
Williams recommends retailers differentiate themselves from each other with a combination of pizzazz and technology, linking the physical store with the digital world, because stores often don’t have a full range of stock. “That’s annoying for the customer if they have to go home to order it,” he says.
So, the answer can be to offer advice and online ordering in store via shop assistants with tablets, though Williams cautions against relying on technological gimmicks that don’t work. “People have to be realistic about the degree to which they use technology – use it in a sensible way,” he advises. In addition, staff have to be completely at ease with using the technology so they can offer the maximum customer support. He also comments that store merchandising is like looking at a new flat; you want customers to be attracted by the space they can see around them. “That’s a great opportunity for the store,” he adds.
When it comes to monitoring customers’ every move to mirror the analytics of online, he warns that retailers need to pick certain themes as it can be quite dangerous to be over-analytical. For example, it’s great online to be able to show items that people may be interested in if they’ve already bought a certain product but people and their tastes change. If retailers make too many assumptions about the consumer in-store then that’s dangerous too, he warns. For example, they may be buying a gift for someone or their circumstances may have changed.
Retail is moving so fast and has moved so quickly, Williams says that retail boards “have to have a constant refresh”. Even the digital skills of today will be out of date in 5 or 10 years.
In the past, the marketing director didn’t need to be good with numbers and the financial director didn’t need to be creative but now everyone needs to be in tune with digital, Williams says. In addition, he says the board needs to understand “the blackbox stuff, the analytics. You need the creative as well as the data as you know all of this stuff about people who are shopping with you and you need someone who can dissect this information and pull out the insights to maximise the opportunity. Data scientists are good but you also need people who can tell whether you have a good data scientist or not.”
He comments that digital is a bit like a racehorse and the board has to loosen the reins a bit. “A lot of people are making the decisions and signing off on things. In the old bricks and mortar world, most of us moved up through the ranks so we knew how everything worked.” Nowadays, Williams says you have to recognise the good people with the skills and fit for the business. Today’s multichannel leaders are the CEOs of tomorrow.
His advice to them is “to be open to new ideas, listen to the customer a lot, make sure you go out and see things and try things yourself. You can travel to any part of the world to see stores and via the web you can look at anyone’s website. You need that open mindedness because you’re not going to think of everything yourself and a lot of what gets done is pulled from the inspiration that comes from the other places.”
According to Williams, the key to success for all retailers – whether they are pureplay or bricks and clicks – is to have a clear and distinct proposition and focus on that and then “work like hell at it”. He advises retailers not to get distracted by too many non-core things as they’ll find they can’t do everything all at once and they’ll risk the proposition being blurred, and at that point they’ll lose the consumer. He adds: “Be focused on what you stand for, what the customer gets when they land on your website and keep that to the fore.”
When it comes to hiring a non-exec director, he comments that it’s very important that the board has a mix of people with different backgrounds and attitudes and a broad range of views. It’s then the chairman’s role to bring them all together in a cohesive way.
Peter Williams finds internet retailing exciting and says he feels privileged to be part of the new generation of companies doing groundbreaking things. “I like being around businesses like that which have a positive outlook on life and not having to deal with closing stores,” he says.
He joined Boohoo as it floated in March 2014. The atmosphere both inside and around the company was very positive and it delivered dramatic growth which was forecast to continue. However, the company posted a profit warning in January 2015 before announcing 25% growth for the year to 28 February 2015. It had been forecast by the market to achieve 40% growth. “Relatively speaking, to most retailers 25% is a pretty good number but compared to what the market had been led to expect – the 40% number – that’s a big disappointment,” says Williams.
“It then takes time to build the confidence back up in the market and to get the share price back up. We’re making steady progress on that; in September boohoo.com reported H1 figures up 35%.
Williams explains that this last set of results “were very good and if that continues we’ll get back to the numbers that we promised but it’ll take a bit longer to get there than we originally anticipated. The business is in good health, has its differentiated position and we’re continuing to grow.”
This is where the experience of a long-standing retailer such as Williams shows. In the case of lots of pureplay start-ups, boohoo being no exception, many of the people who run them have never been part of a public company and haven’t had to manage expectations apart from their own. The only people who’d be disappointed if growth didn’t continue apace would be themselves. “Once you become a public company it’s a very different world,” he says, advising: “Don’t promise the earth. Always over-deliver if you possibly can and always keep your powder dry about how you are trading for as long as you can so you don’t end up in this horrible situation where you disappoint the market.”
He adds that it’s always better to under promise and over deliver: if boohoo had told the market it would deliver 20% growth and achieved 25% they’d have been heroes. He says: “It’s about using your experience to calm everyone down, saying business is doing well and managing the expectation down so that you overshoot them, rather than having a problem where you undershoot so that you don’t get your name in lights but attract negative publicity.”
When it comes to an IPO, Williams says it is important to make sure you have good advisors, including a carefully chosen advising bank: “Having good quality advice is really, really important.”
He’s been involved in a number of business transformations where balancing daily trading is key. He says: “It depends on what the situation is overall that the company is in. Pureplays started out life with fast growth and an ever-changing back drop and they are young enough and fleet of foot enough to be able to cope with change. What they have to watch out for – and it’s something that we were conscious of at Asos and is true at boohoo as well – is that you have to keep infrastructure up to the same speed and in line with growth. What I mean by that is, in the old days, if you have 100 stores and open another ten you know roughly what the economic size of the new entity of 110 stores will be. On the web, though, if you open up a dotcom you do not know how much business you’ll do or the degree of traffic you’ll attract. Some days traffic will be up 100% and on others it could be 10%. What’s important is that you don’t upset the customer when they first come to you.”
Williams also comments that everything has to work well at the front end so it’s attractive to the customer; the back end needs to work well so that it’s easy for customers to pay and their order arrives in a reasonable time frame. When you’re dealing with a fast growth business where you can’t actually predict precisely what that growth will be, making sure that the warehouse is the right size, that the payments system works smoothly enough, all these sorts of things have to keep pace with what’s happening at the front end. He concludes: “You don’t want to restrict the opportunity for the business simply because the infrastructure isn’t keeping up with demand.”
Peter Williams is Chairman of 2 online retailers – boohoo.com, a UK-quoted company selling young fashion, and Mister Spex, selling eyewear from its base in Berlin – plus the fashion brand Jaeger. He is a non-executive director at Rightmove, the UK’s largest property portal; Cineworld Group, one of Europe’s leading chains of cinemas; Sportech, owner of the Football Pools and an operator of gaming totes; and a trustee of the Design Council.
During his executive career he was Chief Executive at both Selfridges and Alpha Airports. He has also served on the boards of ASOS, Blacks Leisure Group, JJB Sports, the EMI Group, Silverstone, OfficeTeam, Erno Laszlo, Capital Radio and GCap Media.