What must BHS do to survive its CVA revival?

BHS’ owners breathed a sigh of relief this week when creditors voted in favour of a Company Voluntary Arrangement (CVA) that will see rents cut on many of its stores, but this is just one small victory on the road to recovery.

The department store chain’s past has been somewhat chequered in recent history. Loss making for 7 years, BHS was bought by invesment group Retail Acquisitions for just £1 in March 2015, when retail Tycoon Sir Philip Green failed to revive its fortunes.

BHS’ chief executive, Darren Topp, has placed the blame for its latest poor performance squarely at the door of retail property prices, claiming the retailer’s problems are down to cost rather than sales.

The CVA will certainly ease some of this pressure, as 47 stores will have rents slashed by either 50% or 75%, while negotiations will take place to reduce rental on the remaining 40 stores (excluding those held separately by BHS Properties Limited) by 25%.

What’s more important, though, is that Retail Acquisitions use this lifeline to raise the capital needed to reinvigorate the BHS brand, as its lacklustre results are down to much more than rising costs. “The shops are tatty and the clothing lines dowdy,” remarked the Financial Times’ Jonathan Guthrie in his analysis of the situation.

However, Guthrie’s conclusion that “department stores have themselves fallen from fashion with shoppers” couldn’t be further from the truth. BHS has to look no further than John Lewis and House of Fraser – both of which pre-date the 88-year-old chain – to see two examples of similar businesses that have evolved much more successfully.

So, where did BHS go wrong – and what does it need to do in order to put it right? Certainly within omnichannel retail, the business has been caught napping. John Lewis and House of Fraser have put significant investment into their digital strategies, both in terms of online offering and promoting technology-led engagement in the store. House of Fraser has gone mobile-first with its website, while John Lewis’ retail app was recently voted third best in the UK. Both companies have invested heavily in click-and-collect.

In contrast, BHS has been driving down its margins even further with seemingly permanent discount promotions, and trying to diversify into new areas such as foods rather than reinventing its core clothing and homeware range.

Recently, though, there has been light at the end of the tunnel. The convenience food initiative is still in play, but BHS seems to have turned a corner with regards to prioritising what needs to change. 23 stores have already undergone a rebrand, and Topp has vowed to streamline its product range and focus on the brands which resonate with its customers. It’s also implementing an aggressive ecommerce strategy, to increase online shopping’s share of sales from 12% to 20%.

Interestingly, BHS has hired ex-House of Fraser brand marketing director, Tony Holdway, as marketing and creative director. He has already vowed to overturn the company’s lack of brand appeal and investment.

The fact that Holdway has jumped ship from House of Fraser is almost a bigger coup for BHS than the CVA. Having someone who knows how to run department store marketing, 2016 style, will help the retailer to shake off its outdated image and start embracing the omnichannel, multi-touchpoint journey to purchase that hallmarks modern retail.

One thing is for sure; if BHS doesn’t aspire to the relevance and agility of John Lewis and House of Fraser, it’s going to find itself back in the danger zone pretty quickly. And it would be a huge shame to lose one of the High Street’s most recognisable heritage brands.

The secret to successful store expansion

Online retail is no stranger to positive headlines. In fact, it sometimes seems that all we hear about in the industry is the strength of ecommerce.

And it’s these types of stories that have put stores in the spotlight for the wrong reasons. Although 90% of all sales still happen in physical shops, there seems to be far more of a focus on the aspects of bricks-and-mortar that aren’t doing quite so well. For example, in the last few weeks alone, BHS, Greggs and Dixons Carphone have been making headlines regarding store closures.

One of the key reasons that stores close is because they don’t resonate with shoppers; in the interactive, instant world of digital commerce, store layouts and processes can appear outdated. However, this is something that can be amended – and there’s a huge appetite amongst retailers for getting the store right and growing its presence. New research by CBRE has revealed that retail estate expansion still remains high on the agenda, with 83% of retailers adamant that store growth will not be influenced by the rise of ecommerce this year. After all, there is no online substitute for seeing, touching and trying items before purchase.

The benefits of bricks-and-mortar haven’t gone unnoticed by e-tailers. Already this year, we’ve seen their eyes move towards the high streets, with the likes of Missguided announcing its first offline stores. Yes, the business is doing very well trading as it is, but if they want to grow even further, it makes sense to offer a physical experience as an alternative too.

So how can retailers optimise their stores for profit growth – and potential expansion if they get their formula right? For starters, today’s connected consumer is all about convenience and, as we well know, that doesn’t necessarily mean choosing between online or offline retail. Instead, shoppers want to switch between the two at different stages of their journey, and they need to know that retailers will allow them to be flexible in this respect.

Achieving this level of agility means incorporating some of the elements that shoppers love about digital platforms into the store experience. Some retailers are already way ahead of the game, launching concepts that aim to convey the ‘store of the future.’

House of Fraser, for example, recently experimented with shoppable windows, whilst Tommy Hilfiger has brought the runway to the store using virtual reality headsets. These are pretty ambitious of course; the store must focus on perfecting the basics before taking this kind of leap. Investing in more mainstream technology such as mobile POS is one good example of connecting the bricks-and-mortar experience through online functionality.

Another key consideration is the interaction between ecommerce and store activity through click-and-collect. Even though many retailers already offer the service, there are still elements of the process that frustrate customers. Perfecting the ‘collect’ part should now be a major focus for stores, making it a pleasant experience for those finalising their purchase. Enabling speedy payments technology, such as contactless, will be handy here, as well as ensuring the right amount of staff are there to keep the queues running smoothly. Streamlining the click-and-collect element will increase the opportunity to encourage further impulse purchases.

Of course, not all online browsing will take place at home. In an era of smartphone addicts, it’s now habit for consumers to rely on their devices whilst in a store too. Vodat International recently commissioned some research that revealed 54% of shoppers use their smartphones to compare prices in the aisles, 46% look up product information and 44% for personal reasons, such as checking social media. The bottom line is that consumers expect to be able to connect to the web whenever suits them – and that includes within the bricks-and-mortar shopping journey.

It may seem obvious, but there are still retailers that do not invest properly in strong WiFi to encourage this behaviour in controlled circumstances. In fact, 3 in 10 shoppers don’t find the current standard of WiFi unreliable. Retailers with sub-par WiFi are not only at risk of frustrating their customers, they are also losing a valuable opportunity to understand (and react to) their behaviour patterns. Provided they select the right provider, retailers will be able to interact with, influence and capture insight on consumers when they log on to the network.

It’s great to hear that retailers are feeling optimistic about the potential of stores, especially at a time when ecommerce is threatening share of sales channel. Gone is the time where stores and online were two separate things; the future of the store is very much intertwined with digital interaction. If they go about it in the right way, retailers can now harness the power of ecommerce in the physical environment, and use it to boost profitability.

Stay tuned for our new report – Battle of the bandwidths: why customers are won and lost on the strength of retail networks – which will provide even more insights into the connected consumer.

15 stories that defined retail in 2015

It hardly seems like five minutes since the January sales were underway, yet already we’ve reached the end of the year – and what a year it’s been!

Following on from our 6 stories that redefined retail in the first six months of 2015, here are 15 unpredictable tales that have shaken the industry across the entire year.

In no particular order…

  1. House of Fraser undergoes a customer-centric restructure

It’s already been predicted that 2016 will be the year in which omnichannel evolution results in infrastructural change, and House of Fraser is leading the way. In July, the department store chain announced a customer-centric revamp of its business model, in which its CRM, product and multichannel functions work together around shopper needs.

  1. Amazon goes Prime-tastic in the UK

If Black Friday and Cyber Monday weren’t enough, Amazon launched its own flash sale – Prime Day – in the summer. The inaugural event was hailed a global success, generating a 93% increase in Year-on-Year sales.

Read our blog: Amazon’s Prime Day highlights the gap between online and in-store promotions

  1. Argos ups its delivery game

Fulfilment has been a hotly contest battleground throughout 2015, and Argos put its stake in the ground during October with the launch of a UK same day delivery service, 7 days a week.

This went hand-in-hand with a reinvigorated click-and-collect offering, promising in store collection in less than 60 seconds.

  1. Marks & Spencer puts the Spark back into its loyalty scheme

It’s been a turbulent couple of years for Marks & Spencer, but its revamped loyalty scheme – released in October – may engender greater customer advocacy, by incentivising shoppers for non-transactional activities.

Read our blog: Has Marks & Spencer sparked a smarter way to increase loyalty?

  1. Littlewoods waves goodbye to its catalogue

For many consumers, the Littlewoods catalogue has been a retail institution throughout their lives. However, after 80 years – and earlier promises that it would remain a trading channel – the retailer decided to scrap its catalogue and focus on its online offering.

  1. HMV rises from the ashes

If you’d been asked two years ago to predict which retailer would be the biggest physical retailer of music in the UK in 2015, the administration-bound HMV would have been a rank outsider.

However, a renewed customer-focus strategy, better processes for dealing with peak trading promotions than its rivals, and a resurgence in the appeal of vinyl have all contributed to HMV’s fortunes flourishing once more.

  1. Lush inhales the sweet smell of success

Cosmetics brand Lush deposed insurance firm First Direct as the UK’s best brand for customer experience in 2015, according to KPMG Nunwood rankings. KMPG remarked that the brand’s imparting of product knowledge has been essential to its success, with several other top 10 retailers combining content and commerce to enhance the customer experience.

  1. Wet weather dampens summer sales

The UK experienced its worst retail sales since November 2008 in August this year, with unseasonably damp weather contributing to poor performance on the high street. Online sales did increase during the summer, but at some of the slowest rates on record.

  1. John Lewis starts charging for click-and-collect

Given that most of the retail industry is incentivising customers to collect in store with a free despatch service, an eyebrow or two was raised when John Lewis decided to start charging for click-and-collect orders under £30.

The retailer reasoned that fewer than 1 in 5 shoppers currently make click-and-collect purchases under £30, and it needs a more sustainable model for managing store-based fulfilment costs.

  1. River Island lets customers click and not collect

Continuing the click-and-collect theme, River Island evolved its offering in a different direction during November, pioneering a ‘click and don’t collect’ theme in partnership with Shutl.

The service uses Shutl’s on demand delivery platform to re-route in-store collection orders for home delivery, in order to give customers greater control over their last mile experience.

  1. John Lewis breaks the internet…but Sainsbury’s wins the Christmas ad war

When John Lewis released its Man on the Moon festive advert in November it was viewed so many times that YouTube’s counter froze for several hours. However, the department store chain was trumped by Sainsbury’s, which was voted best Christmas ad by Opinium Research for its tale of Mog the Cat.

  1. Black Friday falls flat on the High Street

The scrums in the aisles that were synonymous with Black Friday 2014 were not repeated this year, as the post-thanksgiving promotion was heavily weighted online. Retail footfall in stores and shopping centres was down 4.05% on Black Friday itself, while ecommerce saw a huge spike in activity that continued right through to Cyber Monday.

  1. The Kurt Geiger shoe fits another foot

They say a change is as good as rest, but when Kurt Geiger was acquired by private equity group Cinven in December, it marked the shoe designer’s third owner in just four years.

Cinven acquired Kurt Geiger for £245million. The company is known for longer-term investments – five years or more – so this could be the start of a new, consistent chapter for the brand.

  1. Customers get cross about connectivity

Poor in-store communications were revealed as a significant cost to customer relationships in a Vodat study published in August. Our survey found that a third of consumers have abandoned a purchase because they couldn’t get the information they needed prior to purchase, while 4 in 10 have left a store and sought the item elsewhere.

Download our report: why retailers and customers are becoming disconnected by the store network

  1. Despite tribulations, retailers end 2015 cautiously confident

It’s not been an easy journey for the retail industry over the past 12 months, but many are hopeful of a strong showing in 2016.

Improving economic sentiment and steady Christmas sales point to positive growth in the New Year, with major cultural events such as the Rio Olympic Games and European Football Championships set to keep shoppers happy – and spending – into the summer months.

 

5 ecommerce websites to watch on Black Friday

Retailers with a transactional website are about to face their biggest test of the year: Black Friday, which takes place on November 27th. Spending is predicted to reach £1.9 billion – a 17% increase on last year – in the UK, with a third of sales taking place online, according to Visa Europe.

Already we’ve seen one casualty of a surge in online trading, as Argos’ website tripped over when it launched its ’12 days of Black Friday’ promotion. However, the good news for the brand is that it has a few days to learn lessons and put contingency plans in place before ecommerce activity peaks.

For other businesses, though, the litmus test is yet to come – so what should we expect from the digital retail community on the big day?

It’s definitely worth keeping an eye on Amazon, ASOS, Debenhams, Marks & Spencer and Next this Black Friday. A recent study by Aimia crowned these retailers the best five UK ecommerce sites for customer experience.

The survey identified personalisation as pivotal to the online journey, as although these sites are rising to the challenge, more than half of consumers feel they are still being targeted with irrelevant product suggestions.

However, tailoring promotions based on previous buying behaviour is the tip of the ecommerce iceberg – some retailers are still struggling to get their basic offering right, particularly under pressure.

During peak trading events like Black Friday, the number one priority is being present and capable of delivering on customer expectations, and the resources needed to achieve this should not be underestimated. As Schuh’s head of ecommerce, Sean McKee, remarked in a recent Black Friday video interview, “be available for the customer, because the customer is absolutely wanting to buy products from you”.

Too many retailers experienced issues with their website last Black Friday, resulting in slow loading times, long waits and costly periods of downtime. In order to avoid this in 2015, concerned businesses need to ask themselves the following questions:

  • Is your hosting environment flexible enough to accommodate surges in demand?
  • Do you need to increase your server capacity to cope with Black Friday traffic?
  • Does your hosting company know it is Black Friday, and what the impact could be on digital activity?
  • Have you got the infrastructure in place to monitor Black Friday traffic in real-time, and respond to emerging issues?

At the end of the day, come Black Friday, price trumps everything else. So while personalisation might be the long game, on 27th November ecommerce retailers need to focus on availability and efficiency to maximise market share.

House of Fraser & John Lewis show customer-centric change isn’t just customer-facing

There’s an interesting shift occurring in the UK retail industry at the moment, and it’s deep rooted within leading organisations. A few weeks ago, we saw House of Fraser restructure its senior personnel, and now John Lewis is doing the same.

Of course, changing roles is nothing new – there is always movement at the top of the tree – however, what these two retailers are doing is more significant. John Lewis has created a brand new role – group productivity director – for its retail director Andrew Murphy, and added ‘omnichannel customer journey’ to the job spec of its operations director, Dino Rocos.

House of Fraser has taken this even further, creating a unified customer insight team encompassing its brand, product, CRM and multichannel functions. Moreover, this team will sit at the centre of its business decisions.

While to the consumer’s eye, not much has changed with these reappointments, they mark a potential seismic shift in the retailer/shopper relationship. Though customer-centricity has been a core objective of the industry for some time, many businesses have tried to nurture this from the customer backwards; think iBeacons, self-service kiosks, mobile apps and queue busting technology.

Many of these tools have been incredibly successful, however they only change engagement at a superficial level. Underneath the bells and whistles, there are still fundamental improvements needed within the networks and logistics that power the customer experience.

True change starts from within, and that’s exactly why the likes of John Lewis and House of Fraser are going back to the drawing board and redesigning their infrastructure from the customer OUTwards, rather than backwards.

And they’re not the only ones. The number one reason retailers come to Vodat to upgrade their store communications or managed data network is customer experience; they just can’t match the speed and complexity of today’s consumer interactions and it’s having a detrimental impact on their revenue.

By reinvigorating the people and processes powering their organisations, retailers are laying the foundations for a new form of customer-centric experience. One that supports the ability to wow shoppers at the front-end with the capacity to physically deliver on their promises. This is the magical combination that will increase customer satisfaction, and engender long-term loyalty.

The secret to offering a superb customer experience

The consumer is driving the future of retail, but how do you work out what matters to them most, in order to deliver greater profitability through outstanding customer experience? That’s the quandary that many of today’s omni-channel retailers are facing.

In a recent article, international analyst Forrester noted the growing trend of Customer Experience rooms – interactive spaces designed to give retail workers greater understanding of the services their customers receive by replicating their journey within the store, over the phone or when visiting their website. The reality of what shoppers experience can often be painful for retail personnel, but many companies see this as essential for creating consumer empathy, which in turn delivers greater standards of service.

While putting yourself in the shoes of the customer is an incredibly valuable exercise, retailers shouldn’t rush to set up a Customer Experience room without taking a step back and looking at the bigger picture, though. Statistics released by Accenture this week revealed that 76% of businesses admit to wasting up to half their customer experience budget, investing in activities that fail to generate ROI.

What many retailers forget is that customer service doesn’t always mean wowing shoppers with impressive merchandising displays or sleek sales pitches; these ‘icings on the cake’ are irrelevant if consumers can’t access the products or information they require.

Unifying communications and processes behind the scenes is the most important thing retailers can do to ensure they deliver a seamless customer experience. Being able to monitor all contact with customers, and draw on that information during future encounters to tailor promotional messages or personalise conversations can make or break shopper relationships and loyalty.

Visible data and operational clarity are just as important as empathy. Running a seamless, focussed operation behind the scenes will give customer-facing staff the ability to deal with consumer enquiries without getting stuck for basic information or being failed by back-end systems. This confidence is what makes the difference between a poor, good and great customer experience.