It’s a tough world for retailers, are scale-ups the answer?
Written by Charlie Robinson, Scale Programme Manager at PwC
If you’ve seen the Christmas trading results for 2017, you’ll know it makes tough reading for large retailers. Tighter shopping budgets caused by wage stagnation and rising prices have left many retailers in a precarious position; some of the UK’s most notable companies suffered disappointing trade in the festive period.
The large retailers are not alone in feeling the pinch, 45,000 UK retailers suffered some form of financial distress following the Christmas trading period. Increasingly savvy consumers and declining footfall has led to many prospective buyers turning to online giants such as Amazon, Ebay and Asos for their key purchases.
However, it’s not all doom and gloom for traditional retailers and the likes of Aldi who experienced record trading results and Boohoo doubling their Christmas sales has proven that shoppers still have money to spend. Asda have also experienced a bumper Christmas, claiming to be the only one of the ‘big four’ supermarkets to maintain their market share year on year. Additionally, Amazon’s 2017 purchase of Whole Foods can give confidence to brick and mortar retailers that traditional retail is not dead. So why are these retailers outperforming the market and how can others replicate their success?
Innovation, innovation, innovation…..
You’re probably thinking ‘Well thanks, I know we need innovation and that’s not particularly illuminating…”, however, unless you’re part of the growing minority, you’re probably not doing it right.
Large organisations are notoriously slow moving and are often culturally ingrained not to take significant risks or a radical new approach to traditional sales models and customer interaction. Some of the large tech giants have managed to buck this trend but typically not for prolonged periods of time. Changing company culture and trying to move your organisation into a progressive way of thinking is still a valiant and important goal, however, in a market where the industry can change radically within a six month period, you will probably have lost significant market share by the time you’ve finished the planning stage of your transformation project!
The logical thought progression for some is to therefore say, ‘I don’t need to change company culture urgently, I just need a new tool, technology or platform which allows me to keep pace with or move ahead of the competition. Surely I can put a crack team together to build this and we’ll crush the competition!’ The problem with this approach is threefold:
- Finding the right people who are truly entrepreneurial but want to work for you is super tough! If you do find them, odds are you won’t keep them more than a year!
- Working within a framework of your existing company will stifle these people to produce truly innovative ‘out of the box’ thinking.
- It will cost you a lot of money and the final product will have not been tested or proven in any other business context.
Cue the scale-ups…
Instead of looking within, look to the community of creative, enterprising, late stage startups (which we call scale-ups) who are developing some of the most exciting technology in the market. In each of the last 3 years, well over half a million companies were created. Many of these were tech based companies focused on retail solutions. With such a plethora of innovation and creativity, why wouldn’t you trial a handful of solutions within your business?
Working with scale-ups allows you to piggyback on truly brilliant people who are building some of the most exciting technology, with relatively low risk. It’s a no-brainer, if you don’t currently have people within your company who are responsible for working with scale-ups and external innovation, then you’re well behind the trend.
Let me give you an example of this from the most recent PwC Scale | Commerce programme. ThirdEye Labs are transforming the way that brick and mortar retailers engage with their customers. In the past only online stores would have access to detailed metrics on customer interaction, purchase rates and time spent viewing products. However, using your existing CCTV infrastructure, ThirdEye can analyse all of these interactions and provide amazingly powerful data for you to improve your instore experience. This is enabling some of the largest retailers in the UK to completely change the way they think about analysing customer behaviour and allows retailers to better understand their customers.
Engaging with scale-ups, accelerators and incubators is now a necessity to any retailer looking to retain market share. Some, such as John Lewis and Waitrose, are looking to create this kind of programme internally and others are working with programmes like PwC’s Scale. Whether it’s in-store motion tracking or supply chain sustainability analysis, if you want to make sure you’re keeping up with your competitors, look to the scale-ups!
If you want to see the kind of exciting tech that these scaleups have to offer, take a look at our most recent cohort in the Commerce space here:
About Charlie Robinson