UK retailers should not expect an improvement in the economic environment any time soon, and should focus on omnichannel fulfilment and their brand equity in order to succeed, departing Aurora Fashions president Stewart Binnie told the Retail Week Supply Chain Summit today.
Binnie cited recent the UK’s return to recession, rising unemployment and a “savage reduction in real living standards as wages fail to keep up with inflation” as likely to have an effect.
In such circumstances, he said: “Whatever we need to do to succeed has to be something that’s game changing and which allows us to circumnavigate [the perils].”
Key challenges facing retailers also included the emergence of “Generation Y”, who expect to access content and product immediately, across multiple platforms, and who also influence older consumers’ behaviour .
Binnie said international expansion and online provide an opportunity for retailers. The Karen Millen brand achieves about 70% of its sales overseas and aims to increase that to 80% in the near future.
He believes that forecasts that at least a fifth of all transactions will come directly via the internet by the end of a decade underestimate the pace of development. Store sales are likely to fall “between 15% and 20%, with stores accounting for about a third of sales on a retail pure basis”, he predicted.
The increasing commoditisation of products, particularly spurred on by internet giants such as Amazon, means that an “omnichannel” approach had become imperative, added Binnie. “It gives the customer whatever configuration of channels to market that they require.”
In the last quarter of 2011, Aurora introduced a universal system that allowed delivery from any location, whether distribution centre or stores across the country, of stock ordered on any channel.
The supply chain’s job was to successfully deliver this omni-channel approach, he said. “We have all contrived to be global and promised the customer they can everything they want wherever they want it and that is only possible if the supply chain works like a clock,” he said.
However, the main defence against commoditisation is brand equity, Binnie maintained. Retailers with successful brands, such as Burberry, “ensure everything they do in their business is consistent in their brand”, he said. “It means the brand has to sit at the heart of corporate strategy and leaders have to be ruthless in pursuit of making their brand consistent.”
“Brand equity is the single most important determinant of where and how they shop. We have to homogenise our brands, so they mean the same thing on the high street as they mean on the web - we have to make them special and attribute values to them, which cannot be commoditised.”