As stores continue to lose sales to ecommerce, Asda and Tesco are rethinking how they structure themselves from the boardroom to the shopfloor.

‘Building Tomorrow’s Tesco’ aims to bring Tesco up-to-date with a multichannel model.

When Asda revealed last month one of the biggest retail shake-ups in recent years, chief operating officer Mark Ibbotson bluntly told Retail Week the industry could expect more of the same. “We are about 18 months ahead of our competitors – they’re all going to have to do this at some point,” he said.

It was a bold statement that followed a bold but calculated decision. As well as slashing its overall wage bill the reforms will, Asda hopes, prepare the retailer for a new era. Staff in the newly created roles will be trained to think in multichannel terms.

Was Ibbotson right? Certainly, rival and market leader Tesco has heard the call – the retailer has almost completed its own restructure – and more have plans. But do all retailers need to rebuild their models around multichannel as Asda is doing, or are there more subtle ways to get up-to-date?

Omnichannel consistency

As part of its 2014 global Seamless Retail survey, consultancy Accenture asked 750 British shoppers what made them tick. Omnichannel has become critical to the majority of retailers – more than three quarters
of the respondents said that consistency of pricing between a retailer’s online and offline shops was crucial, and 60% said that all promotions and offers should be matched across all channels.

It sounds obvious, but in today’s fragmented business of retailing this level of consistency isn’t always easy. Retailers’ organic growth over the past decade has prompted ad hoc solutions to online retailing, brought in gradually as time has gone on.

Retailers now find themselves with different divisions doing multiple yet often overlapping roles, from the shopfloor right up to the boardroom. Which is where many are going wrong, according to PwC partner and head of retail insight David Oliver. He says: “When online sales were only 4% or 5% of their sales they got away with keeping their operating model and bolting on an online business, but that’s not the right model for modern retailing. Two separate businesses will not meet customer demand and you will replicate costs.”

As a price war heats up in grocery and margins come under pressure, the last thing anybody wants is to double up their costs.Oliver observes: “Particularly lower-margin businesses like grocers are having to react quicker because their ability to absorb inefficiency is lower. In the current environment they can’t pass costs on to the customers.”

But it isn’t just about saving money – shoppers have changed and James McGregor, director of consultancy firm Retail Remedy, believes retailers need to as well. McGregor says: “The customer has become more important and as such they’ve become more powerful. Retailers have been relatively slow to react. They have a massive challenge on their hands.”

So what will the operating model of the future look like? McGregor says that the Asda restructure is very telling, particularly for the grocers. He says the big store, big portfolio model that once dominated is being replaced by a new more centrally controlled structure with online business at the core. “Ten years ago everybody was looking to build the giant superstores,” he says. “But now they’re a white elephant. Moves like Asda’s are really about moving control away from stores and delivering centralised control so that staff in stores are not much more than implementers.”

Creating new roles

The fact of Asda’s restructure back up this analysis. The grocer is creating 5,000 new store roles to replace a whole tier of middle-management. Of these, 3,500 will be section leader roles with fewer responsibilities and lower pay than the current managers hold. Crucial to the whole plan is the creation of specialist ecommerce manager roles. These managers will be on hand to help customers navigate the various channels and, where they see fit, direct them away from the shopfloor and towards the online platform.

The right talent

Regardless of the sector, it isn’t just on the shopfloor that retail needs rethinking. In a business where almost everything has changed, the level of technological expertise at the very top has never been more important.

Specialist retail recruitment agency Court and Spark Consulting chairman Michael Hobbs says: “Traditional bricks-and-mortar retailers should have been developing their omnichannel strategies and structures over the last few years and recruiting the new skills necessary to support this approach, but research shows that multichannel retailers don’t always know what sort of talent to bring in as the right digital experience is often limited at board level.

“While the traditional skills of retail operations, buying and merchandising, HR, IT and logistics still apply today, applying them to the digital world has required an immense amount of new understanding.”

The key thing, says Oliver, is for retailers to stop thinking in terms of channels altogether and focus on, bringing the whole operation together seamlessly. He says: “New business models shouldn’t be built around channels that are treated differently. They need to be integrated. A modern business will need everything to be integrated – buying, sales and marketing teams, everything from information flows to infrastructure”.

Understanding consumers

Retailers need to think like shoppers if they are going to continue to succeed in the modern era. Modern consumers care far more about the products they are buying, and at what price, than how they have been bought. They have adapted faster than many ever imagined they would and perhaps faster than many were ready for.

But if any doubt was left about the power of ecommerce, the fact that it has led to radical overhauls at two of the UK’s four biggest grocery is proof how much has changed.

Asda: Out with the old

Asda isn’t known for doing things in small measures, and in May it disclosed it is totally shaking up its entire store management structure.

The grocer will be a different organisation once the changes have been made. An entire level of management will be removed, and it’s possible up to 2,600 staff will leave in the process. The new managerial structure will comprise 1,500 newly created section managers and 3,500 section leaders, each covering specific roles previously falling under fewer, more senior store managers.

Key to it all, Asda said, was the creation of new in-store ecommerce manager roles. The grocer has already laid out its stall in the multichannel market with 300 click-and-collect points now in operation, including a trial at Tube stations, and home delivery now a reality. To reflect this, managers and leaders will be retrained to think beyond the store to direct customers to the perfect channel.

Tesco: in with the new

The big news from Asda came just days after its biggest rival said it was close to wrapping up a similar if less wide-ranging set of reforms, also with multichannel in mind.

Tesco is undergoing big changes behind the scenes in key departments – commercial, marketing and IT – as well as putting staff to better use. While the precise details of the new business structure aren’t clear yet, Britain’s largest retailer has made no secret of its goals.

It’s all part of the ‘Building Tomorrow’s Tesco’ project to bring Tesco up-to-date with a multichannel model. Like Asda, Tesco is also moving things around at the top, bringing in fresh ‘digital talent’, such as multichannel director Robin Terrell, who will run its grocery home shopping and general merchandise categories.