Change or fail – the choice isn’t yours

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Innovation is now the business survival issue retailers can’t afford to ignore, explains Gary Whittemore, Co-Chair of the KPMG/RetailNext Retail Think Tank (RTT) and Head of Sales, EMEA & APAC for RetailNext.

At our most recent KPMG/RetailNext Retail Think Tank (RTT) meeting in London in October, we wanted to talk about innovation and how it might be one of the most important levers for helping retail confront what have become a unique set of challenges, many of which may well confront them for years to come.

What set us off were the words of RTT member, Natalie Berg, Retail Analyst and Founder of NBK Retail, who said: “If you’re not innovating, you’re standing still and that is the most dangerous place to be in retail.  Perpetual disruption requires perpetual innovation.  The most successful today are those that reject the status quo.”

It is a call that is familiar but this time we wanted to make sure that the word innovation was liberated from the shackles of technology.  This is not to say that technology is not important, in fact, the RTT again called for omnichannel retailers to spend between 4-8% of their revenue on technology per annum, where the current figure is 1.5-3%.  

However, innovation is more than a wish or a good intention, it is a state of mind that should be infused in organisational culture from the very top.  However, there are plenty of retailers that talk about the need for innovation but then fail to see it through to actual implementation. The reasons are manifold – politics, siloed thinking and management, and a lack of investment in people and tech.  So tech is key, but it is a part of larger puzzle.

And so is money, as RTT member and retail consultant, Maureen Hinton, said: “Culture alone is not enough without the funds to invest and test.”

What we also concluded is that innovators build for the future - many retailers are slow to adapt let alone look ahead, as we have seen from a variety of recent business failures.  As my RTT co-chair, Paul Martin, UK Head of Retail at KPMG, added: “Those businesses that are around now have a runway for the next 3-5years, but if they stand still and fail to innovate, they won’t have a runway past 3-5years.”

These smart retailers are daily obsessed with who is actually in the store, how they behave and what they might want, as the route to serving them better and improving on shelf availability.  They want to monitor, gather and analyse data relating to footfall, but also traffic movements, dwell times, behaviour and shrink patterns.  And they then match these insights to stock levels and supply chain and general operational performance.

The complexity that arises from managing these data volumes and the granularity required to analyse continues to be a headache, hence the excitement over AI to simulate, forecast and predict pricing, promotions, shopping journeys, fulfilment and returns and so on; and now Generative AI (Gen AI) to automate the create of insight from this analysis, surfacing it as actionable intelligence.

Innovation needs to be deeply embedded in the culture before it can manifest as practical deployments.  RTT member, Jonathan De Mello, Founder & CEO, JDM Retail, explains: “ultimately successful innovation is about pivoting to address a latent consumer ‘need’ – and doing so ahead of current or future competition. For more established retail businesses, successful innovation is about focus.  Focus on the key areas that made the business a success in the first place, but with an eye on the future to ensure new trends and consumer behaviours are fully embraced and accounted for in the product or service offering.”

And it is everyone’s responsibility – but this responsibility must come a willingness to change. As Lord Simon Wolfson, the CEO of Next has said: “change is everyone’s job… Change and transformation are part of all of our work; we all take on new projects; there is no ‘business as usual’ because our business constantly changes.”

The RTT agreed that the challenges to becoming innovative are significant; how can retailers adjust to a world that will not return to what it was for two or more years and longer term the chance that there will less disposable income?  There is, as once predicted, no new normal.  The consumer markets remain in flux; once predictable behaviours are now in play and fragmenting in ways to defy traditional demographics.

It is clear therefore that retailers will have to not simply adapt to what is in front of them but re-invent themselves for the long term as the way consumers live, work, shop and consume continue to change.  An innovative state of mind and a readiness to act will both be essential qualities to meet these challenges.

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