As Retail Week’s Discovery 100 searches for the top global tech start-ups of 2020, industry expert Ian Shepherd discusses how, and why, retailers should maximise the benefits and new ideas offered by the start-up community.
With rising costs and falling consumer confidence, the economics of retailing today are tough.
Combined with the pace of change in technology and consumer browsing and shopping behaviours, retailers are under immense pressure to keep pace.
Alongside external factors, though, the recent flurry of retail CVAs and administrations highlights how difficult it is to change the direction of a big business.
At some level, the strategic response for retailers to the changing world we live in is obvious.
“There are many barriers to changing a big retail organisation. A surprising number of those barriers, however, are at some level psychological”
Retailers need to embrace new channels, technologies and ways of driving efficiency and effectiveness through their organisations.
Most fundamentally, retailers must deliver a shopping experience that customers love and choose to come back to.
So why is it that so few retailers manage to execute this transformation strategy?
Well, there are many barriers to changing a big retail organisation, including technological and financial obstacles. A surprising number of those barriers, however, are at some level psychological.
Leadership teams can struggle with new technologies and buzzwords, and the risk of looking stupid or out of date can result in passive resistance to change.
How start-ups can reinvent retail
And that is never more obvious than when looking at how retailers interact with start-ups.
On the face of it, the start-up community represents a lifeline for retailers, precisely the change you need in your business: new ways of connecting to customers, the next level of operational efficiency, the clever use of buzzword technologies such as AI. All of these are being developed, trialled and tested by terrific start-ups right now.
If you’re a retailer focused on a turnaround programme, then it makes sense to build strong relationships with the start-up community.
By doing so, you put yourself in a position to get first sight of new ideas, to pick and choose which innovators you work with, and you get to deliver a new future-proofed version of your store or key business processes ahead of competitors.
“The start-up community represents a lifeline for retailers”
But it doesn’t work out like that often, does it?
Indeed, the start-ups I talk to report a wide range of objections, barriers and general layers of bureaucracy that make it harder for them to work with retailers and prevent those same retailers from getting much of the benefit that new ideas can bring.
Retailers are missing a trick
Karthik Veluswamy, chief commercial officer of AI-based start-up Greendeck, says he’s seen “first-hand that our competition-monitoring platform can add tremendous value to retailers”.
“But retail is a fast-moving industry, and one challenge we face is that they are often too busy with their daily operations, so conversations sometimes can get prolonged,” he adds.
That may describe your retail business, too. You may have made the right noises, launched an innovation lab, talked positively about start-ups at conferences and yet still feel that somehow you aren’t really getting much bang for your buck.
“I worked with one global giant, where the most honest advice we could give to start-ups that approached us was to go elsewhere”
But consider the following (entirely real) scenarios experienced by start-ups and ask yourself if any of them might be true of your retail business, even unintentionally:
- Your IT team are so concerned about the fragility of your core systems that they simply won’t let anyone else plug into them.
- You’ve implemented GDPR policies with such ferocity that any attempt to integrate with a start-up generates so much paperwork about customer data that everyone gets fed up and moves on.
- Your project finance process won’t allocate capital for a small test project because “it is too small and doesn’t move the needle”, with the result that only big projects get funded.
- Your legal team won’t sign a contract with a start-up that has no credit history report, regardless of its financing.
- Someone in the approval process for a new project points out that if the test works then the start-up will be hugely successful and complains that we are just funding their growth.
- Someone else in the process demands that the start-up work with you exclusively, and not with any of your competitors, despite the fact that you have only approved a small trial.
And on top of all these scenarios is the one I hear most often – that every stage in the process of a large retailer working with a start-up just takes a painfully long time.
I worked with one global giant (ironically in the tech space), where the most honest advice we could give to start-ups that approached us was to go elsewhere. Our two- or three-year process of negotiating a memorandum of understanding and gearing up a trial would last far beyond the point where their funding and patience had run out.
If any of the above sounds familiar, you might be missing out on potentially life-saving innovation.
How to create start-up synergies
Take a moment to consider how you might work differently with the start-up community. This could involve the following:
- Creating a fast-track, light-touch process for forming contractual relationships with small businesses.
- Bypassing some of the usual big company legal concerns.
- Being prepared to take some risks with what you regard as your intellectual property.
- Pre-allocating some funding that can be used for trials, without layers of additional governance.
- Being ready to celebrate failed experiments for the learning points that they are, and to grab hold of successes and make them business as usual.
- Treating your start-up partners as friends and advisers, and in turn being a friend and adviser to them.
Then, when you’re ready, take a browse of the list of amazing businesses soon to be showcased by Retail Week’s Discovery 100.
They will be snapped up fast, and one of them just might save your bacon.
Ian Shepherd is a former retail and hospitality chief marketing officer and chief executive, now writing, speaking and advising retail and technology businesses and investors
Over the past 25 years, Shepherd has served as chief operating officer of Odeon (Europe’s largest cinema business) and chief executive of Game Group (a pan-European retailer with more than 1,300 stores), and has held senior commercial and retail leadership roles for world-leading brands, including Vodafone and Sky TV.
With a particular focus on customer data, insight and commercial strategy, he has seen the seismic shift from analogue to digital in multiple industries, along with the changes in consumer behaviour that followed.
Now writing, consulting and advising a range of businesses, including retailers, investors and innovative start-ups, Shepherd is also the author of Reinventing Retail, published this year.