Sir John Timpson and others spoke to Emma Herrod about the year just gone and the trends for 2019.
2018 was dismal for many as well as challenging and not without fallout. The Christmas period was the worst for the high street in ten years, according to the British Retail Consortium (BRC).
But online channels and pureplays had a much better year with growth for some hitting 40%.
Sir John Timpson, owner of the Timpson Group, believes that 2018 was an exceptional year for the number of retail formats reaching the end of their life. Change within retail is not new and looking back over the past 40 years there are retail formats such as television rentals which have become irrelevant as society has changed. HMV, the last casualty of 2018, also highlights how retail is affected by formats and products becoming obsolete.
There were a lot of other disruptors for retailers during 2018: retail was pressured by the beast from the east – which twice closed down the Timpson Group stores across Scotland for three days – the hot summer, which was “good for people selling ice cream,” royal weddings and the Football World Cup.
“I wouldn’t expect 2019 to be worse than 2018, but who knows,” says Sir John, adding that there’s starting to be a more positive feel about bricks and mortar shops. However, as he points out: “It’s a challenge for bricks and mortar retail to get people to think positively about our future.” There is always in the background the knowledge that bricks and mortar retailers are at a tax disadvantage to online ones.
Sir John adds, though, that while there has been too much emphasis on the negative news about individual retailers and shop closures which has deterred new models emerging on the high streets, there have also been some success stories. “No one has been noticing where things have been going well,” he observes.
There are towns up and down the UK where footfall is up, there are fewer closed shops and the local community is really doing something to make more people interested in their own town centre. This is down to individual people; inspirational leaders who are getting their local community interested in the future of their town.
This, says Sir John, has been the biggest surprise for him while conducting research for ‘The High Street’ report, a study of UK’s town centres for the UK government.
A town centre is more than just a place to shop, so the report has investigated Britain’s town centres from a community point of view, looking at what people want and need from their community. “It’s about creating the place that people want to go to,” says Sir John. This includes events, leisure facilities and medical centres, and could extend to mean more housing. “There are too many empty shop premises about and they should be converted to housing. You then have more people and more life in the town centre,” he explains.
He believes that changing town centres isn’t going to be led by retailers, “it’s community led”. He adds: “If they create the right spaces and the right atmosphere then the retailers will want to be there. You’re not going to achieve this by retailers changing the way their shops are.”
He explains that it’s a question of people creating the local spaces, the central part of the community in which they want to live, and for it to be somewhere that is relevant for today and somewhere that people want to go.
Online is one of the reasons why “in the future we’re going to need more social spaces, more face-to-face contact, more conversations, more places where people meet,” believes Sir John.
Human beings are social creatures and while many people walk around connected to their mobile phones this is no substitute for true, social contact. There is also the question of what will have replaced mobile phones in 20 years’ time.
“People do need that social contact,” he says, and this is one area in which town centres – and individual retailers – can win. He adds: “Having people and places added to digital is working in lots of ways to make the proposition better, even down to people using their own phone in a physical shop to place an order online when it’s busy.”
He thinks that the more you can use the flexibility of internet retailing along with personal service and the social experience of being in a physical shop the better. “It gives people the best of both worlds. I think it will go more that way,” he says.
Sir John also highlights the importance of personal service: “The more internet shopping that’s done, the more self-service and checkout-less supermarkets, the more there will be a premium on personal service.”
The results of retail’s move to a mix of omnichannel retailing and personal service are starting to produce results for retailers which led with online and omnichannel, showing how mixing offline retailing and digital can work well.
The John Lewis Partnership, for example, which is one of the high street retailers reporting strong Christmas figures, has been at the forefront of omnichannel retailing. It has always said that its Partners are what makes the difference to the company but since the middle of 2018 it has been reporting on its strategy of differentiation. It is focusing on offering increasingly unique and exclusive products and services to customers and enhancing the role that Partners play in driving those differences and competitiveness.
As Sir Charlie Mayfield, Chairman of the John Lewis Partnership, said in the retailer’s Christmas trading statement, despite the two main factors of oversupply of physical space and relatively weak consumer demand affecting the retail sector, “we had a positive Christmas trading period thanks to the extraordinary efforts of Partners in our business, delivering differentiated products and service to customers”.
Along with an overall growth in gross sales at John Lewis & Partners and Waitrose & Partners, Waitrose saw online sales over the Christmas period increase by 12.8%, while Black Friday contributed to the biggest sales week in John Lewis & Partners’ history.
Other town centre retailers showing their strength over the Christmas period include Ted Baker, Joules and Dunelm. Ted Baker reported a 12.2% uplift in Christmas sales while Joules saw sales grow by 11.7%, which although lower than the 17.6% it reported for H1 is still impressive in the current climate.
Dunelm is seeing improved performance from its back-to-core strategy, with 9% overall like-for-like sales growth for the second quarter (which included Christmas), more than twice the 4.2% increase recorded in the first. Paul Hickman, Analyst, Edison Investment Research, comments: “Notable online sales growth of 37.9%, combined with the fact that multichannel revenue, including click and collect and tablet-based selling in-store, is up from 12% to a meaningful 16.5% of total sales: this is a business embracing online as part of its core offering, and which is seeing share growth as a result.”
The majority of high street retailers did not do so well during what the BRC has hailed as the worst Christmas for ten years, reporting decreased footfall and lower sales offline. Online, though, was a different story.
Boohoo Group reported strong revenue growth of 44% for the four months to 31 December with gross margin of 54.2%, up 170bps. Overall revenue growth for the financial year to 28 February 2019 is expected to be 43% – 45%, ahead of the fashion retailer’s previous guidance of 38% – 43%.
Shop Direct, which operates multi-category digital retailers Very and Littlewoods, increased group revenue by 3.7% year-on-year for the seven weeks up to and including 28 December 2018. Its largest and fastest growing retail brand, Very.co.uk, posted year-on-year growth of 8.8%.
The company reported that site visits were up 8% to 107.3 million. Some 79% of online sales now come from mobile devices, up from 74% during the same time in 2017, resulting in mobile sales accounting for 12.7% more sales than last year.
Henry Birch, Group CEO at Shop Direct, is delighted that the company had delivered a record Christmas period in terms of revenue against a “challenging retail backdrop”. Retail margin was in line with last year, too. He says: “Throughout our peak trading period we focused on delivering a great customer experience and curating the right deals for our customers and our business during our extended Black Friday event. We put more emphasis on December than ever before and saw encouraging growth in key departments like sportswear and toys.”
Some of the improvements in customer experience at Very have led on from the integration of IBM Watson’s artificial intelligence technology with the chatbot Very Assistant. This enables customers using the Very mobile app to ask account-related questions in their own words and receive answers from the Assistant.
Shop Direct also developed a Facebook Messenger chatbot in-house to support the Christmas brand campaign for Very. This helped customers choose Christmas presents for children, drove social media engagement and has been highlighted as ‘best in class’ by Facebook for its in-house execution.
As an exemplar of online and remaining at the leading edge of customer experience development, Shop Direct still expects 2019 to be a challenging year for retailers. Birch says: “We’ll focus on continuing to play an important role in the lives of our customers – those who value our unique combination of leading brands and the flexibility to spread the cost of purchases. Given the potential impact of the political backdrop on consumer spending, we expect the year will be challenging for retailers. However, our peak trading performance gives us reason for cautious optimism.”
So, what is ahead for 2019? Brexit: something that is changing so fast that anything I write now will be out of date by the time you read it. Challenges: yes, it will be another tough year with changes ahead. HMV was the last retailer of 2018 to go into administration, while Debenhams has announced that it is to close 50 stores with another 40 reportedly listed for possible closure.
Things are not looking good for Debenhams with investors ousting both Chairman Sir Ian Cheshire and CEO Sergio Bucher from the board. Prior to the coup, Bucher – who remains as CEO – said that the performance of the retailer’s Redesign stores over the peak trading period and continued outperformance in digital, “reinforced our view that we are taking the right steps to protect the future of the business”.
The investors disagreed.
Neither Marks & Spencer nor Mothercare had a good Christmas, although online performed well at M&S mitigating a drop in footfall to stores. Its transformation plans remain on track, according to Chief Executive Steve Rowe.
Online sales performance for the Clothing & Home categories at M&S was strong, with UK revenue up 14%. This was put down to “an increased focus on digital marketing together with improvements to our delivery proposition and our operations at Castle Donington. Womenswear online growth significantly outperformed driven by areas including dresses and knitwear reflecting our ‘Must-Haves’ and social media campaigns.”
Online, therefore, continues to bolster the high street, and efficiencies in back-end processes, warehousing, supply chain and IT are showing that omnichannel is still the direction of travel. As Sir John believes, and John Lewis & Partners is bearing out, personal service is going to be key. But staff have to be freed up to help customers, which is why David Nicholls, Fujitsu UK’s Chief Technology Officer for retail, believes that in 2019, “investments in digitalisation will become more of a focus to improve business process, the store environment and store operations, as well as drive a better and deeper customer experience and entice people to come into store”.
He adds: “With the increase in digitisation, comes greater mobilisation for store colleagues. Retailers will accelerate investments to empower store colleagues with access to product information and store systems in the aisle and warehouse to support customer journeys and optimise operations. Up until now, employees have had to carry clip boards or go to certain desk points in the front and back end of the store to help with queries and tasks, which has been an unproductive use of their time. However, we expect to see retailers’ roll out smaller form factor colleague devices and wearable technology, and use actionable real-time data and insight generated to assign tasks dynamically to colleagues and mobilise them to the benefit of customers and the overall operations of the store.”
Julian Fisher, Chief Executive of local deals specialist jisp agrees: “High street retailers must bring convenience to the shopper in 2019 in a variety of ways. This can include in-store product information delivered directly to their mobiles, faster and simpler payment options which again, should include mobiles and elsewhere, working with local councils, ensure easier access to shops via public transport and/or better parking.
“Other ways of introducing convenience should include ways to help shoppers with their purchases such as by offering click-and-collect and even click to deliver – taking the battle against online resellers head on. Retailers should also be looking to better understand the customer by using AI to collect data on the customer’s needs, wants and interests. This can then lend itself to giving the customer a better and more personalised shopping experience, such as specific offers on a customer’s favourite products in their preferred location,” he says.
Personal service is not solely a feature of physical stores, though. It is being delivered by pureplays, too, through assistants online, connecting via video, in app and through home services.
Much has been written about AI and machines but Peter Thomas, Chief Technology Officer at shopping experience specialist attraqt, believes that it’s time for retailers to get smarter with these technologies. In a merchandising context, he says: “Embedding context, creativity and rationale in shopper experiences is where retailers will win in ecommerce. Retailers will need to identify their specific strengths and weaknesses to implement AI in a way that engages with shoppers and makes commercial sense.
“The technology will also force greater cross-team collaboration in efforts to eke out true value from its investment. With shared data, CMOs, IT heads and ecommerce teams will need to join forces to set joint strategies and deliver real value and insight for the business.”
AI and chatbots will continue to enhance the customer experience, and voice will start the move from smart devices to retailer sites. Comscore predicts that 50% of all searches across all devices will be conducted by voice by 2020.
As Ben Nimmo, Chief Technology Officer and Co-founder of online customer experience specialist Orlo, explains: “With technologies like AI and chatbots transforming customer experience, the perceived risk is that they may isolate consumers who require a human interaction. However, not everything that can be automated, should be automated. At the heart of every great consumer experience is a perfect synergy between human empathy and digital engagement.”
And trust must be placed at the centre of this mix of digital and human. Whether that’s through the correct use of the customer’s data, through GDPR, accuracy of personalisation online, or matching or exceeding expectations through the product, service, delivery or behaviour of the board.
The same precepts apply to businesses whichever channels they operate across.
So, where should retailers be looking for the next big thing, the 2019 trends? “With smaller-format, mixed-use stores providing the best experiences, retailers will be looking at ways to entice customers in and showcase their wares,” says Andrew Westbrook, Head of Retail at audit, tax and consultancy business RSM.
“With many mixing products and experiences already (Rapha has stores with coffee shops and Sweaty Betty offers yoga classes) the shift will continue with retailers moving away from large stores packed full of products. For example, mattress disruptor Casper is offering customers 45 minute naps in The Dreamery as a way to refresh when shopping. This blends both the product and the experience authentically. Showcasing the product and offering a relevant but different experience will be key to standing out.”
You can look to China and Alibaba’s New Retail concept and its Hema supermarkets for ideas on how human and digital can be brought together to enhance online and offline. A single lobster can be ordered in different ways, delivered live or cooked or ordered online, cooked and eaten in the store. It’s using a mix of technology and service to offer the customer many choices – and that’s just for one product.
Take a look at Starbucks in China or Domino’s Pizza around the world for inspiration and a quick reaction to delivering a customer’s customisable product. You can look to changes in society to understand how the shift is affecting customers and town centres. Also examine your own organisation because that is where the understanding of individual customers, the brand, your strengths and your weaknesses lie.
Shopping habits are ever changing but we’re currently experiencing a seismic shift in behaviours. As Sir John says: “We are coming to terms with but have not yet comprehended the unintended consequences of a digital age and this is part of it.”
Once thing’s certain: shopping will never be the same again.