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.

Are we teetering on the edge of a fashion brand crisis?

Brits don’t care about brands. That’s the latest declaration from Kantar Worldpanel, which this week revealed fewer UK shoppers are buying goods based on the label.

Fit, quality and price are now much more important purchasing factors – which is understandable, considering the memory of economic austerity still looms large for most shoppers. Indeed, purse pinching has led to a rising thrift shopping trend, meaning many consumers are likely to boast about a second-hand purchase rather than new designer threads.

There have already been casualties of falling brand sentiment; Kantar points to the decline of Ben Sherman, and the metamorphosis of other labels such as Diesel, which has begun producing cheaper ranges to supplement its flagship ranges.

However, this potential brand crisis isn’t solely the fault of cautious consumers. In reality, it’s growing increasingly difficult for brands to have a close relationship with their customers. The plethora of marketplaces through which they trade have obscured their view of shoppers, so not only are the transactions taking place within a third party portal, consumer data is being retained by that third party too.

Even on the High Street, brands often have to make compromises, particularly where they employ a concession strategy. They do not have the capacity or resources to merchandise the same way as in their own stores, and the personnel serving their customers aren’t always as clued-up on their products and values.

But this isn’t necessarily a death knell for the fashion brand as we know it – it’s just time to change approach. Many brands are exploring new routes to trade directly in online markets, while others are looking at technologies that can enhance bricks-and-mortar experiences.

Fashion retailers such as House of Fraser have already reshuffled their business infrastructure around the needs of the customer, and brands need to make sure they are doing the same.

More than that, they need to ensure this customer-centricity trickles right through their every presence – which may mean investing in point of sale technology to better ‘sell’ the brand to shoppers in-store, or a network that enables faster communications and transactions for greater convenience.

For mid-range brands currently struggling to make their mark, it’s worth looking at the techniques being employed by luxury goods designers. By focusing on customer experience, and building a store network that can support the digital devices needed to bring store bricks-and-mortar shopping to life, luxury shopping has weathered market difficulties and emerged relatively unscathed.

The more brands can turn their physical presence into a theatre, the greater chance they have of engaging shoppers. If the name itself can’t carry customers, they need to make sure their service can.

Amazon’s Prime Day highlights the gap between online and in-store promotions

You have to hand it to Amazon; never one to stand still, in the last couple of weeks alone, the e-tailer has announced a new one-hour fulfilment service in London for Prime customers, along with a one-day flash sale – Prime Day – held today (15th July).

Designed to mimic Black Friday, although it is unlikely to have the same furore initially, it’s a clever way to clear the decks of unwanted stock, stimulate demand in what is a traditionally quiet retail month, and get more customers signed up to its premium delivery service.

Many online rivals will feel a certain degree of tension about Prime Day; yet again, Amazon is using a loss-leading fulfilment strategy to create marketing headlines. However, it’s not just ecommerce that should be concerned.

The increasing frequency with which ecommerce providers are launching flash sales is widening the gap between what promotions look like online, and what they look like in-store.

Of course, the digital world is always going to move quicker than bricks-and-mortar – it’s a lot easier to roll out something virtually – but the faster shoppers have access to discounts or multi-buy deals on a website, the less value for money they feel they are getting in the store.

To combat this perception, retailers need to be drawing on technology to bring real-time capabilities to the store. For example, rather than building marketing campaigns around direct marketing and paper vouchers, they need to be running ‘on the spot’ promotions through shoppers’ mobile devices when they visit the store.

This way, rather than hitting them with special offers when they’re not ready to buy, they can dangle something real to their agenda at that point in time as they browse the aisles. Targeting consumers’ smartphones also enables them to tailor that offering based on their exact location, or their purchasing history, to make the proposition even more relevant.

Don’t forget – if bricks-and-mortar can get the offer right, it has the added advantage of giving shoppers the chance to touch and try a product before they buy. Online can’t do this, which ultimately limits the appeal of some products.

 

What are the big payments issues we’ll be talking about in 2015?

It seems only yesterday we were welcoming in the start of 2014, wondering which payment talking points would dominate the agenda during the months ahead. Yet now we’re starting to form our next batch of New Year’s resolutions – and putting a new set of payment predictions together – for 2015.

There are of course still two months remaining this year, and things can change quickly in the world of payments. However, we’ll be given an insight into some of 2015’s hot topics at the upcoming Cartes Secure Connexions event in France, which takes place between 4-6th November.

Digital dominates the programme at Cartes this year, which is no surprise considering the exponential rise of mobile usage within retail. Much of the discussions will be surrounding location technologies such as iBeacons and NFC; it will be interesting to hear the industry’s thoughts not just on how geo-based connectivity will transform consumer relationships, but how it will impact shoppers’ payment preferences.

The future of currency will also be under debate, focusing on cryptocurrencies and mobile wallets. Bitcoin is sure to provoke strong reactions – PayPal founder Peter Thiel recently proclaimed his scepticism towards it – while Apple’s announcement of its first mobile wallet has reignited concerns surrounding ‘tap to pay’ security.

On the subject of protecting customers’ payment information, recent breaches for major US retailers such as Home Depot and Kmart have put the issue of data security as a whole under the spotlight. It’s interesting, though, to note that most of the Cartes sessions focus on rebuilding and maintaining customer relationships, rather than how to minimise the risk of information compromise. This is a subject we have discussed at length in our online community, The Payments Network.

Though we’ll have to wait a few more weeks to see exactly what unfolds for the industry in 2015, the Cartes programme has highlighted one interesting issue regarding the future of payments: we might be reaching new levels of sophistication and digital interactivity, but at the same time we’re still trying to address age-old concerns.

The store isn’t just a shop anymore – it’s a theatre of dreams

From digital advertising screens to fitting rooms that superimpose outfits onto your silhouette, the modern retail store is moving further away from its traditional format. Progressive brands including Burberry, Lacoste, Topshop, Ikea and Argos are among those already using technology to reimagine the shop floor, turning local High Street outlets into interactive theatres of dreams.

But where should retailers yet to embrace the digital revolution, begin transforming their store? A recent Retail Technology article pointed out that shoppers are no longer ‘wowed’ by tablets – they expect stores to take payments, check stock availability and carry out other helpful tasks in a flexible manner. Therefore businesses should look to their advertising strategy to engage store visitors in new ways.

For example, rather than putting posters up, many retailers are now opting for digital screens that rotate key campaign messages. The real-time capacities of this channel also enables them to react to industry events and update promotions in line with online activities.

While this is a sensible starting point, some of the larger retail brands feel display technology alone isn’t enough; customers need to be drawn into a digital conversation. For this, a new level of investment is needed.

One example is Superdrug, which has drawn inspiration from the popularity of the ‘selfie’, giving customers the opportunity to take and share photos of themselves wearing the latest available makeup ranges. Alternatively, both Converse and Lacoste have taken interaction even further, devising an app that superimposes their footwear onto customers’ feet so that they can try out a product without even having to remove their own shoes.

Although uniting digital and physical in-store is a powerful way to revolutionise the act of shopping, it’s important that retailers only view cutting-edge technology as the icing on the cake. With so many possibilities available, it’s easy to get lost in the vision of being different and miss the point of reinventing the store: to improve the customer’s purchasing experience.

After all, retailers can have the most alluring digital set-up on the High Street, but excitement alone won’t convert browsers into buyers. Every retail theatre must perform to rigorous consumer standards – and that means having the right items in stock, offering helpful customer service and providing an efficient payments process.

5 in-store challenges that didn’t exist 10 years ago

Whether it’s customer service, product ranging or managing profit margins, there are some challenges that have been on retailers’ radars for decades. However, the rising ecommerce challenge and rapid technology advancements over the past 10 years have impacted retail businesses in ways they could never have predicted.

Here are five challenges that the digital era has presented to retailers:

1. Click and collect

Although it was being trialled in the early 2000s, click and collect has increased exponentially over the past few years. It does create great up-selling opportunities – research by Deloitte has revealed multichannel consumers spend 82% more per transaction than those who only shop in store – but it also creates several logistical headaches, such as accommodating a new channel of distribution and return, along with adding another function to retail associates’ workloads.

2. Showrooming

One of the biggest changes in the way consumers now shop is their use of mobile in high street stores. Many retailers lose sleep over how to tackle shoppers browsing in-store but buying online, perhaps from a competitor. And these worries are not without reason; according to Microsoft, 42% of UK consumers admit to showrooming.

3. Webrooming

Thankfully, improvements in internet connectivity over the past decade have also facilitated physical retail, as those that don’t fall into the showrooming category often choose to webroom – research online before buying in-store. However, this places greater strain on customer service expectations, as consumers tend to be armed with knowledge and require detailed answers to complex questions before deciding to make their purchase.

4. Staggered technology

Retailers are working harder than ever to make the store environment more compelling by introducing features such as mCommerce, digital advertising and personalised mobile marketing via iBeacons. This creates a huge IT headache though, as retailers have to find a means of seamlessly integrating new technologies with legacy systems.

5. Great expectations

Ultimately, the more digitally dependent consumers become, the more they expect – and quickly. Ecommerce introduced the idea of a wide range of products being available at your fingertips, and improvements in mobile have extended this connectivity on the go. This is putting more pressure than ever on the store to deliver the same levels of satisfaction as online, despite core activities such as price updates, payment options, inventory tracking and product displays being much harder to implement outside of the virtual arena.