Latest Whitepaper Retail is Dead! Long live Retail

K E Y R E TA I L T R E N D S

Retail is dead. Long live Retail!

The last twenty years have been witness to seismic

economic, technological, social and political change.

Unsurprisingly, the way we buy has changed beyond

recognition. This is a revolution that has only just

got underway.

BWP’s three lead strategists examine the trends,

challenges and opportunities for retail businesses

and plot a course for successful retail strategy in an

increasingly complex and rapidly changing world.

T E A M B I O S

Meet the BWP team

Kieron has been working in marketing and advertising for over 15

years, during which time he has worked with brands such as Accor

Hotels, Bang & Olufsen, HMV, Waterstones and Esporta Health

Clubs. Kieron was prominent in the launch of new products to the

market across Europe for Mazda Motors and BMW MINI, where

he headed the team responsible for brand guardianship. After five

years at BWP Group, Kieron’s client experience has broadened

to include such brands as Telefonica O2, STIHL, Intu, IKEA and

British Gas where he leads the strategic direction.

Kieron Weedon D I R E C T O R O F S T R AT E G Y

Rob has over 15 years’ experience, designing and developing

campaigns for some of the world’s leading brands including

Nike, Adidas, Sony, Intel, Warner Brothers and more. He is highly

technical and has an unusually multi-disciplinary background

and in innate understanding of the fine details of digital delivery.

Rob has worked as a brand, UX and CX consultant to major

brands and is particularly interested in startups, technology,

software as a service business for whom their UI and CX are

every bit as important to their brand as their visual marques.

Rob McCardle I N N O VAT I O N D I R E C T O R

Jonathan has accrued client-side, agency-side and international

experience working for integrated, brand & advertising agencies,

including three years at BBH where his primary client was Audi.

His experience ranges from brand inception and implementation

through to naming, proposition and campaign development &

channel marketing. He began his career at Gartner before joining

the UK & Global Brand teams at Orange. Major projects included

rebranding France Telecoms businesses in the EU and brand

projects worldwide. In 2012, he was one of the core team that

launched the EE brand. He writes regularly for the marketing press.

Jonathan Staines P L A N N I N G D I R E C T O R

K I E R O N W E E D O N , D I R E C T O R O F S T R AT E GY

The changing value of ownership

The rise of the Sharing and Subscription Economies will continue to

disrupt standard business models. The most obvious disruption has been to

the sectors that have traditionally relied on very transactional models; the

car industry and ZipCar; the hotel industry and AirBnB; the music industry

and Spotify; the entertainment industry and Netflix.

We will see in 2017 how this trend will redefine how retailers engage with customers. We are

seeing an increasing direct impact on retail as new subscription services are being launched

across food (HelloFresh) fashion (Fabletics) and cosmetics (Birchbox). It’s worth highlighting

that these ‘new’ business models are less ‘new’ than we think. We’ve joined libraries, rented

houses and subscribed to newspapers for a very long time. What makes this trend so relevant

for retailers is the micro-trends it points to:

1. Customers are increasingly looking for flexibility, variety and personalisation

2. Relationship at the heart of revenue building

3. Data at the heart of building relationship

4. Customer experience continues far beyond end of transaction

Flexibility, variety and personalisation:

It’s not just innovative start-ups who have identified how they need to engage differently with

customers. Adidas have launched Avenue A (customers receive celebrity-curated apparel boxes)

so offering customers the ability to conveniently access a wide variety of products where they

have had some involvement in selecting preferences, but also with the element of serendipity to

reflect the excitement of the ‘discovery’ they experience in physical stores.

Relationship at the heart of revenue building:

Relationships are a two-way street. In 2011 Netflix lost 800,000 customers and its stock price

dropped eighty percent. They had split up their $10 all-in-one package into two $8-plans;

03 Retail is dead. Long live Retail!


effectively a 60 percent price increase on the customer base in the midst of recession. When

Netflix made a unilateral decision to change the relationship, without consulting the other side,

it damaged the brand and hit their bottom-line. Subscription based businesses are constantly

listening, assessing, improving, trying to figure out how to happily surprise their subscribers.

Data at the heart of building relationship:

Data is orientated around the subscriber. Everything starts with the subscriber ID and the

associated data. How many is there? What’s their average value, both now and over the course of

their lifetime? Do any of them represent upsell opportunities? We can see with Apple that their

model has shifted from how many iPhones they ship, to how many Apple ID’s they can gather,

and how much revenue they can generate per ID. That’s why they rolled out their new “Upgrade

Program,” which is basically just an iPhone subscription.

Customer experience continues far beyond end of transaction:

Customer experience does not take place in a static moment in time; it’s fluid and organic.

Subscribers are looking to personalise product, to make it theirs, for example the way they

set up our own Spotify accounts. They are also looking for it to improve itself over time; Tesla

owners are always discovering new product enhancements on their vehicles. The relationship

moves from a transactional model to a partnership; subscription businesses proactively evolve

and subscribers provide the data to help them to that.

The things you own end up owning you - C H U C K PA L A H N I U K , F I G H T C L U B

“

J O N AT H A N S TA I N E S , P L A N N I N G D I R E C T O R

Rediscovering ‘discovery’: can charity shops save the British high street?

It’s been a very tough few years for British retail. The metonym so often

used to denote the UK’s retail fortunes, the ‘High Street’ has evidently

suffered. According to IPSOS, national retail footfall was down 0.9% in the

first quarter of 2016, compared with the same period in 2015*.

The same IPSOS retail traffic index revealed that Newcastle Upon Tyne was the worst-

performing location, with the number of shoppers down by 9.95%, closely followed by Stoke-on-

Trent at 8.1%.

Even in the traditionally buoyant M25 bubble, retail locations such as Ashford, Crawley and

Epsom, growth has been sluggish and five of the top seven best-performing shopping centres

were up less than 1% year on year.

There have been a number of high-profile casualties, including BHS and Austin Reed. Even the

traditional heroes of high street such as Next and Marks & Spencer have reported downbeat

trading. At the beginning of the year, Primark revealed its first drop in UK underlying sales for

12 years.

As 2016 has progressed, retailers have faced further economic volatility resulting from Brexit

and the rise in the price of UK imports, thanks to a weak pound. The implementation of the

national ‘living wage’ has also meant higher labour costs for retailers.

Macro-economic factors such as China’s slowdown, rising interest rates in the US and the

uncertainty surrounding Trump’s election victory are helping to create a ‘perfect storm’ of

national and local uncertainty.

This only serves to compound the effects of the relentless rise of ecommerce and mobile

commerce – both of which are driving down margins and arguably drawing shoppers away

from physical stores.


In 2012, the coalition government tasked itself rejuvenating British high streets and engaged

Mary ‘Queen of Shops’ Portas to help. Her report led to 27 towns across the UK being offered

government funding to upgrade facilities and attract new shoppers.

The so-called Portas Pilots, achieved some success – notably with in Ashford, Kent, which saw a

1.6% uplift in visitor’s year-on-year thanks to the subsequent raft of retail initiatives, including

the local council’s decision to open pop-up stores in the underperforming Park Mall. Here was

an excellent example of stakeholders collaborating to dramatically improve both the town and

the centre’s fortunes.

All of this leads us to ask – is there a ‘magic formula’ for UK retail success and, if so, what is it?

Portas famously has a wealth of retail sagacity, learnt on the shop floors and in the board rooms

of some of the UK’s most respected retailers. She runs her own brand marketing consultancy

and, in partnership with Save The Children, started a chain of boutique charity shops across

London and the South East in 2009.

A 2013 study by the think-tank Demos, scotched the claim that charity shops are contributing

to the decline of Britain’s high streets, and instead indicated that they might be the solution,

not the problem. “The growth and continued presence of charity shops may have maintained

footfall to high streets, which are suffering from the downturn”.

Indeed, the conventional response to the proliferation of charity shops on a British high street

is that they are a symbol of failure and economic depression. However, a case can be made

that charity shops represent some key principles for effective retail – from which commercial

retailers can learn.

Indeed, a number of journalists, commentators and other retail experts suggest that they play

an important role in maintaining the vibrancy of town and its retail life. A 2013 article in The

Independent revealed:


Our real discoveries come from chaos, from going to the place that looks wrong

and stupid and foolish.” - C H U C K PA L A H N I U K , I N V I S I B L E M O N S T E R S

“

“Charity shops, which started life as Salvation Army “salvage stores” more than a century ago,

have become a big industry, with more than 10,000 across the UK. They raise £289m a year,

employ more than 17,000 people and have a volunteer workforce of more than 213,000. The

British Heart Foundation – Britain’s biggest charity retailer – has more outlets than WH Smith”.

In the same piece, Tom Ironside, The British Retail Consortium’s Business and Regulation

Director commented: charity shops have “a significant role to play within communities”, “The

most important factor in ensuring the long-term health of our high streets is having a good

retail mix”.

What’s more, when charity shops are well-implemented and run, they exemplify retail best

practice that is all too often lost in the automated, highly-rationalised ecommerce experience –

notably the all-important ‘surprise and delight’ factor: the prospect of finding something quirky,

interesting, unexpected and unique.

To summarise, what can retailers learn from retail’s traditional underdogs?

1. Discovery and spontaneity matter. Over-formatting and unimaginative buying practices are

anathema to the joy of visiting a physical retail store – are you selling ‘the same old same old’

from season to season?

2. The power of merchandising and sensuality. One person’s ‘secondhand tat’ is another’s

‘vintage gem’.

3. Great employees recognise great products – and know how to sell them.

4. Shoppers appreciate and value responsible business – Marks & Spencer (Shwopping),

H & M, and others have incorporated a CSR / ‘bring in your unwanted clothing’ mechanic

that in turn helps drive footfall and cross-sell.


R O B M C C A R D L E , I N N O VAT I O N D I R E C T O R

How digital destroyed physical retail in order to create it

The story of the last twenty years in retail is predominantly that of

established businesses with incumbent physical footprints, relentlessly

adding digital channels to augment their existing business model to become

omnichannel enabling customers to browse & shop fluidly.

The past and future of bricks, clicks and books

Against this landscape, purely digital retail businesses (e.g. Amazon, Jet, Boohoo) made

significant inroads in a parallel, value driven model where the physical store was deemed an

unnecessary expense on the bottom line.

Current events such as the phenomenon of Apples retail stores, Amazon installing Amazon

Lockers in physical pickup centres and now launching a physical book store are bringing

retail back into the physical domain.

There is an old trope where underdog hero bookshops are subsumed by the leviathan which

even got the Hollywood treatment back in 1998’s in “You’ve Got Mail” with Tom Hanks & Meg

Ryan. From the perspective of a bibliophile mourning the closure of their physical book & coffee

store, one could say “Amazon destroyed culture in order to create it”. While we prefer to see

wider dissemination of books as a benefit to culture; the point is that omnichannel is leading

previously digital companies to explore the physical realm and previously physical businesses

to adapt to a new digital universe.

While innovation and technology are giving us ever more opportunities to augment real world

experiences, we believe the forces at work behind the reinvention of retail are driven by a

fundamental human interest in the physical space which will never go away and will always be

of value to business.


Enter the brave new world

In parallel with all this, a new wave of industrial revolution has led to the strange circumstances

whereby “The world’s largest taxi firm, Uber, owns no cars. The world’s most popular media

company, Facebook, creates no content. The world’s most valuable retailer, Alibaba, carries no

stock. And the world’s largest accommodation provider, Airbnb, owns no property.”

Considering the future of retail brands and physical destinations against this backdrop, a useful

thought experiment to ask custodians of those brands is:

How you answer this will shape your brand destiny. You need to examine what the function of

physical retail stores will be to know whether you will still need one in the future because the

role of the shop in the customer experience flow is changing dramatically.

We see trends around using retail space for non-retail functions already very prevalent in

the market, for example:

• Apple Stores using retail spaces as a learning environment where you book an appointment

to see a “genius” and a brand experience rather than simply a transactional store.

• Sweaty Betty use their stores as a gym for busy posh mums. Yoga, Pilates and training

classes are a critical component of the brand experience.

• Lulu Lemon organise events in a similar vein and market to a comparable audience

and premium price point.

• The make-up brand Sephora uses their spaces for classes and events.

• Hollister and Abercrombie & Fitch are in essence nightclubs for tweens. To young

audiences devoid of a parentally sanctioned place to see and be seen by their peers, their

stores fulfil a cultural function masquerading as a clothes shop.


What would you do if your online/digital business was so successful that your

physical store wasn’t a necessity?

“

From a technology angle, we’ve seen users buying online using their mobile anyway despite

physically being in store to circumnavigate inventory shortages, poor staff or to take advantages

of ‘online’ promotions and convenience. Tools like SquareUp leverage mobile to allow small

retailers to remove the IT overhead of POS (Point of Sale) meaning that digital is the only

transactional mechanic anyway. Waitrose have opened a cashless shop recently also which

complements this thinking.

In another example of cross-pollination and redefinition of retail space; gyms are becoming

retailers. The gym at exclusive members club Stoke Park in Buckinghamshire stocks clothing

by brands such as PlayBrave & UnderArmour as well as regular pop up shops and own brand

products sold in the foyer. Why not take the store to the audience? When will this stop? Will

bars sell clothes? Will any physical location that generates footfall become a retail opportunity?

e.g. doctors surgeries, post offices, places of worship, high street banks etc. if the products/

services are complementary?

Coming back to the question of “what would you do if your online/digital business was so

successful that your physical store wasn’t a necessity?” — for your brand; would shutting your

physical stores save you more money than you would make by repurposing your physical retail

space as an art gallery or a meeting place for friends for example?

Your approach here can be guided by exploring these apparent dichotomies:

• Rational vs Emotive

• Value vs Premium

• Logic vs Magic

This is not to oversimplify matters; it is entirely possible to fit into both camps as one could

argue John Lewis in the UK do but as with the Agile Manifesto, the objective is to consider this

thought experiment “while there is value in the items on the right, we value the items on the left

more.” as a way of codifying priorities.

Plot the results on a Venn diagram like the one below — if your brand fits in the rational

category it might perhaps be best to shut your stores and keep the money to either profit or

reinvestment in tactical digital sales activity:


However, if you are or aspire to be driven by emotion and human experience (and this isn’t

incongruous with your business model and objectives), perhaps you should consider turning

your physical retail space into an experience venue:

Beyond being a physical transaction machine - what does your physical retail environment mean for your brand?

Brand is an abstract concept and a word all too often used as shorthand for the logo or collateral

a company uses to advertise itself which is erroneous.

BWP consider brand as the aggregate sum of customer experiences. We see it as a living

thing that may be influenced and shepherded. The BWP proposition ‘Shaping Brand Destiny’

carefully acknowledges that ‘Brand’ is both malleable and transcends visual identity and tone

of voice. We believe it extends to every touch point of human experience and have more than

20 years’ experience shaping the destiny of retail brands. We want to hear from progressive

retailers. When you’re ready to change, we can help guide you through the critical steps to

transform your business.


Brand EmotionalRationalLogic Magic

Is your brand here?

Brand EmotionalRationalLogic Magic

Or are you here yet?

Overall Conclusions

1 Retailers need to review and improve their collection and use of data to improve not just their

marketing but to open up new commercial models and opportunities.

2. The ‘rules’ of retail are changing rapidly and dramatically. Charity shops demonstrate

a number of retail ‘best practices’ from which retailers can learn and benefit. What’s more,

the presence of charity shops on British high streets improves footfall, prevents empty units

remaining empty and delivers community, social and environmental benefits and locally,

nationally and internationally.

3. A retail space can transcend transaction. The physical store plays a role beyond purchase –

by building brand awareness, enriching the customer experience, driving NPS and

complementing digital experiences and revenues.


To find out more about how you can open successful, attractive and engaging destinations, or to book an initial workshop, get in touch with us:

BWP Group Jubilee House, Third Avenue, Globe Park, Marlow, Buckinghamshire SL7 1EY +44 (0)1628 625 900

Rebecca Myers Head of Business [email protected]

+44 (0)7572 425142

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Latest Whitepaper Retail is Dead! Long live Retail