Retailers must reasses the structure of their businesses to meet the unstoppable rise of digital commerce without destroying profitability.
As we digest the last of the Christmas updates, the numbers tell the story of a lacklustre festive season for retail, characterised by flat like-for-likes and a UK consumer whose behaviours are still shaped by the economic turbulence of the past eight years.
“The sector faces a year of unprecedented change as it grapples to get fit for a world where traditional business models are finding it increasingly hard to keep up”
But while the raw figures failed to sparkle, retail’s reaction to what they signal has not.
And the indication is that the sector faces a year of unprecedented change as it grapples to get fit for a world where traditional business models are finding it increasingly hard to keep up.
A run of boardroom reshuffles, corporate manoeuvres, sales and restructures have lit up the news pages in January.
That form continued this week with news that Boots is to cut up to 350 assistant store manager roles as part of an ongoing “simplification” drive, while Sainsbury’s has tabled a £1.3bn offer for Argos owner Home Retail Group.
Retail media and analysts alike will be sifting through the evidence of the first five weeks of the year seeking the themes that will come to define the remaining 11 months of 2016.
We will undoubtedly hear more about the customer journey and reorganising around the customer – both products of a post-mobile age, which recognises that the consumer does not see channels in the way retail businesses still do.
The productivity problem
However, one topic far less glamorous than any digital buzzword is quickly coming to define the new year, and that is productivity.
From the margin-eroding nature of online commerce to business rates and the living wage, the escalating financial pressures of doing business on retailers are set against a backdrop of flatlining growth.
Moreover, the sector is operating a cost base that has been pruned and honed over eights years of economic downturn and now finds itself with nowhere else to go.
As our regular columnist OC&C’s Michael Jary pointed out last week, it should be a huge concern that the coming of age of digital technologies has coincided with a stagnation in retail productivity.
What was interesting about the Boots revelation was not the desire to find new cost savings, but the redirection of investment into training up to 200 extra staff to deliver a new “multi-skilled advisor model” in its shops, as the business seeks to ensure that every pound spent is targeted on delivering value to the customer.
Meanwhile, the logic of Sainsbury’s desire to acquire Argos has at its heart the belief that the combined resources of the two groups – in particular the physical assets of the stores and supply chain – will help both businesses overcome the quandary of our time: how do retailers meet the unstoppable rise of digital commerce without destroying profitability?
Quite simply, retailers need to find ways of getting more from what they have got.
As the philosopher Henry David Thoreau said: “It is not enough to be busy. The question is: What are we busy about?”