The three-day World Retail Congress 2018 was a forum for retailers from around the globe to discuss and shape their future. Here are just some of the need-to-know nuggets for UK retailers.
Look to the East for innovation and growth
For many years, China has been seen as an inscrutable market for UK retailers and has led many to look to the West for inspiration.
However, the rise and rise of Chinese retail giants such as Alibaba and JD.com, both of which were out in force at the World Retail Congress (WRC), means the innovation – and growth potential – coming from the East can no longer be ignored.
“I am more fascinated and impressed by what’s going on in China with Alibaba and JD.com than what is being done by Amazon”
Guillaume Bacuvier, Dunnhumby
Dunnhumby chief executive Guillaume Bacuvier says: “I am more fascinated and impressed by what’s going on in China with Alibaba and JD.com than what is being done by Amazon.
“How they use technology is quite bold, including the way they are taking up minority stakes in a number of offline retailers and moving much faster in that space than Amazon are.”
The trends that have established themselves as retail’s current battlegrounds – mobile commerce, lightning-fast fulfilment and a tech-driven bricks-and-mortar estate – are all being rolled out at rapid pace by both Alibaba and JD.com.
This has two major implications for UK retailers. The first is that collaborating with these Chinese giants today could give traditional retail operators, regardless of sector, a better understanding of customers tomorrow.
Two Western retailers with a laser focus on innovation and distinctly different propositions – luxury etailer Farfetch and grocery titan Walmart – have teamed up with JD.com in recent months to develop their respective technology and retail offers.
For any traditional retailer looking to innovate and fast, this is a worthwhile avenue to explore.
Furthermore, it is likely that at least one of these Chinese etailers will be competing for UK market share in the not-too-distant future.
Speaking exclusively to Retail Week, JD.com founder and chairman Richard Liu says: “I want JD.com to bring [Chinese] products to the UK.
“In the future we will build a fulfilment centre in the UK and bring China’s local brands to the UK so you can enjoy our fast delivery service.”
As a new generation of Chinese etailers without the burden of legacy systems forges ahead of the pack, it could be a case of joining them or risk being beaten by them on UK soil.
Who is moving faster in retail the east or the west? Ans: the east but the west has the glamour, the marketing magic #wrc2018— Barbara Kahn (@barbarakahn) April 17, 2018
Write an obituary for your business
Tommy Hilfiger’s chief brand officer Avery Baker delivered some harsh truths for retailers at WRC.
The premium brand has spearheaded an impressive turnaround over the past three years that has seen it re-establish its relevance with younger shoppers through a tie-up with model of the moment Gigi Hadid and the launch of a ‘see now, buy now’ catwalk show.
The runway initiative tripled traffic to the fashion brand’s website during and immediately after its show, and 75% of visits are made by newer, younger customers.
However, Baker says this transformation was driven by a long, hard look at Tommy Hilfiger’s business, including writing an obituary for the brand to establish who would miss it and, thereby, who it was for.
“If you’re operating by the old rules, it’s probably killing you”
Avery Baker, Tommy Hilfiger
“We were driven by aesthetics and that worked for us for a long time, but today’s younger generation need more than that,” says Baker, adding that brands today need to have demonstrable values in order to win the interest and loyalty of younger shoppers.
“If you’re operating by the old rules, it’s probably killing you,” she says.
This idea of winning customer loyalty by clearly communicating your brand values was echoed by global retailers. Indian grocery etailer Big Basket, which Alibaba recently secured a minority stake in, puts its money where its mouth is when delivering on its delivery promise.
Co-founder Vipul Parekh says it automatically refunds customers 10% of the value of their online order if it does not arrive during their selected delivery slot, and gives a 50% refund on a purchase if the exact item they ordered was not provided.
And boss of Spanish grocery etailer Ulabox Jaume Gomà says it has sent motorbike couriers to deliver new avocados to shoppers that have complained that the ones they had been delivered are under-ripe.
Gomà says that the immediate cost associated with delivery is “completely justified” by the NPS score and lifetime value of these shoppers.
Retailers that have a clear set of values that resonate with their shoppers and are communicated consistently through their marketing, shopping experience and customer service will win loyalty.
CEO Tim Mason @WorldRetail “I think loyalty is even more important in sectors with infrequent purchasing. If you can get them to come a third time each year, that’s 50% uplift. The key is how you get them to identify themselves to you in the first place.” #WRC2018 #InnovateToWin pic.twitter.com/WL5OyIyWXX— eagle eye (@WeAreEagleEye) April 17, 2018
Humanity will prevail
After JD.com’s Liu claimed retail would be run by robots in the next decade, arguments in favour of a human workforce came in thick and fast, with the majority of retailers — particularly those from the West — settling on a middle ground: a symbiosis between technology and humans.
Outgoing John Lewis group development director Tom Athron admitted that it will begin to give jobs to computers that humans used to do.
“If you don’t start to do that, you’ll become less efficient and therefore less competitive,” he says.
“Humans and machines together will always be better than humans or machines on their own”
Tom Athron, John Lewis
“But, you walk away from the power of the human at your peril,” he adds. “Humans and machines together will always be better than humans or machines on their own.”
Kingfisher chief executive Véronique Laury says “the only benefit of having stores in the future” would be to have staff who can deliver services and create experiences shoppers can’t find online.
Others argue that, in response to the influx of tech, customers will increasingly crave human interaction in physical retail spaces.
So I think its safe to say on day 3 of the WRC, the rumours of the brick and mortar demise are “greatly over exaggerated”...we just need to upgrade the experience and embrace the changing landscape. Great talk by @SaundersHoward #wrc2018 #thefutureofretail pic.twitter.com/AGFBbSer5J— aldis firman (@aldisfirman) April 19, 2018
John Vincent, co-founder of fast-food chain Leon, says businesses need to get the balance right, as focusing solely on cost and instant gratification is “a dangerous path to go down”.
“There’s a lot retailers can learn from the hospitality industry in terms of how to make humans smile when they want to smile.”
Spot on Daniel Lopez from #Mango by saying that they dont see @Mango stores having robots in the stores replacing the great shopping experience that their store associates deliver #RetailExperience @worldretail #WRC2018 #futureofretail pic.twitter.com/VUHbcX5UaK— Martin Urrutia (@ur_martin) April 17, 2018
You’re not moving fast enough
The pace of change is relentless and even those at the front of the pack are moving too slowly, the Congress heard.
Chairman of UEA property development firm Emaar, H E Mohamed Ali Rashed Alabbar, says retailers should be changing every time there’s a new phone update.
“I recently realised that my way of doing business is obsolete – young, digital ecommerce people will take over the world – trust me. They are so fast it’s unbelievable.
“They are so bright. They have beds in the office. So good luck to us.”
For El Corte Inglés chairman Dimas Gimeno Alvarez, the solution to the break-neck speed is collaboration.
“Bricks-and-mortar retailers, we need to find what we have in common and put that together,” he urges.
Laury says retailers are accustomed to change but, when it comes to digital, they have not moved fast enough. She says just eight years ago, boardrooms said Amazon “wouldn’t go anywhere” because it was losing money.
But pace at any cost is not always an option for established firms, Laury adds, because it takes longer to transform company culture, which often involves changing or axing people’s existing roles.
“It would not be right to get rid of those people and it’s not the sort of chief executive I want to be. But it can slow us down. You need to make people understand that either you change or you die,” she says.
Shops are fighting back
There is good news and bad news for retailers grappling with what to do with their bricks-and-mortar store estate.
The good news: the death of the shop and high street seems to have been well overblown.
The bosses of retailers including Brazilian grocery giant Magazine Luiza, DIY giant Kingfisher and upstart fragrance retailer Floral Street praised the power of the store.
The bad news is that the shop in its current iteration is unlikely to survive.
He said "stores need to be reinvented" and retailers need to go back to the roots of humanity as customers crave human connections. pic.twitter.com/oy3upwpFa4— Emily Hardy (@Emily_L_Hardy) April 17, 2018
As chief executive of Russian electricals chain M.Video, Enrique Fernandez, says: “The role of the store is more important than ever, but the strategy is driven by online and the store is an extension of online – that has been the biggest transformation.
“We have an online-driven business model now, more than a stores-driven one.”
This sentiment was echoed throughout WRC as there was debate around every aspect of the traditional store estate.
Lego head of retail Martin Urrutia says the primary purpose of shops today is as “another media channel” to entertain and delight shoppers, rather than a transactional environment.
Pottery Barn parent company Williams-Sonoma’s chief executive, Laura Alber, says: “I think the flagship store is just another word for losing money.
“I believe in local stores – our bigger stores seemed almost intimidating. I like the activity of less fancy stores.”
Williams-Sonoma's Laura Alber @WorldRetail: "I think flagship is just another word for losing money. I believe in local stores -- We’re premium but not luxury. We want to be approachable. Our bigger stores seemed almost intimidating.— Emily Hardy (@Emily_L_Hardy) April 19, 2018
I like the activity of less fancy stores."
Baker echoes this sentiment and says the future of Tommy Hilfiger’s store estate is smaller locations in smaller cities.
The message for UK retailers is a mixed one – a handful of carefully curated and tech-savvy stores is essential, but those with swollen store estates are in trouble.
Laury says: “For 50 years, retail has been location, location, location. The race was to get the best store in the best location, and if there is a cost associated with that – fine.
“Technology has changed all that, but I think a lot of retailers have underestimated the cost of digital and not realised if you simply add that cost to your existing economic model, it doesn’t work.”
If this sentiment is anything to go by, the spate of store closures sweeping across the UK in recent years is unlikely to slow down.
It’s time to stop talking about millennials
If your aim is to target young people, it’s time to stop talking about millennials, or so went the discussion at WRC.
Millennials aren’t teenagers any more; by some definitions, they are almost 40. Many will be homeowners or parents.
The group that retailers are trying to get their heads around now is Generation Z, who are seemingly hard to distinguish. Here are just some of the ways ‘Gen Z’ identify themselves, according to trend forecaster WGSN managing director Carla Buzasi:
For many retailers, identifying, understanding and connecting with this group is the key to future-proofing their businesses.
Speaking on a panel, L’Occitane’s retail, property and wholesale director Jamie Taylor says: “Our demographic is getting older and older and if we’re not careful it’s going to be dead in 10 years’ time.
“It’s fascinating what Gen Y and Z are looking at – they are interested in establishing relationships with brands, and the sustainability story.”
Although tight-lipped on the specifics, Taylor says the beauty brand has a plan up its sleeve to attract “the younger customer”.
Whether it was inspiration from the other side of the globe, or reassurance from a local counterpart, WRC helped retailers from far and wide get their priorities straight for the year of transformation ahead.