UK Retailers Have an Innovation Problem – Here’s What They Can Do About It

London Innovation.png

The Reputational View from the High Streets of London

Reputation Institute’s London office overlooks Europe’s busiest shopping street, Oxford Street.

John Lewis, a high-end chain of British department stores, is currently refurbishing their flagship branch on Oxford Street and, while they do so, the building is wrapped in temporary hoardings declaring it is “Always Here, Never Standing Still.” It’s a five-word slogan that reveals much about the strengths – and challenges – of the UK’s retailers.

2018 has been a difficult year for British high street retailers. Electronics retailer Maplin and Toys R Us have both collapsed. Department store Marks & Spencer, fashion chain New Look, mobile phone retailer Carphone Warehouse, and parent-and-baby specialist Mothercare have all announced store closures.

Limited growth in UK household incomes, inflation above the Bank of England’s 2% target, and the long-term shift to online shopping are all challenges for bricks and mortar retailers.

Retailers’ difficulties are not those of overall reputation. The RepTrak® Pulse scores (our central measurement of reputation, that looks at emotional factors like admiration and trust) for the UK’s retailers are generally strong, with an average reputation score across the sector of 71.8. The best performing retailers, like John Lewis, enjoy excellent reputations, and only two UK retailers fall below moderate classification.

fig1

Archie Norman, chairman of Marks & Spencer, was right to comment about his troubled retailer that “This is a business that customers all want to win. There is an emotional force that wants M&S to be the business they sort of remember but in a modern incarnation.” This is the same sentiment the John Lewis tagline is expressing: “Always Here.” High levels of familiarity, long histories, and the chance to physically interact with brands tends to drive positive emotional connections with most retailers.

Retailers’ difficulties become clearer when examined at the dimension-level (our more detailed measurements of reputation across seven key areas). Most retailers, for example, perform well for the actual products and services they sell, with performance on this metric normally stronger than overall reputation.

Instead, the UK’s retailers have an Innovation shortfall.

It is in the Innovation dimension where the greatest shortfall emerges between retailers’ overall reputation, and the public’s more detailed perception that these are dynamic businesses, always adding to their offer and with something different to tempt customers. Put simply, many consumers don’t see high street retailers as bringing anything new or exciting to their offer.

fig2

There is a clear link between poorer performance on Innovation and wider business problems.

Marks & Spencer has the biggest Innovation shortfall, of -24.4, with Chairman Archie Norman acknowledging “this business has been drifting” and admitting that despite already investing millions, Marks & Spencer’s online shopping experience needed to be improved still further.

Many other retailers with large Innovation shortfalls are also challenged. WH Smith was recently named by consumer group Which? as the UK’s worst shop, department stores Debenhams and House of Fraser are both closing stores, and DIY chain Homebase was recently sold for the peppercorn sum of £1 following a failed attempt to integrate with Australian DIY brand Bunnings.

John Lewis, too, has a substantial Innovation shortfall and this explains the second part of its refurbishment slogan “Never Standing Still,” an attempt to persuade shoppers that the department store is innovating.

Little surprise the public are increasingly spending online. Amazon, for example, has a stronger reputation for Innovation than it does overall.

Even Tesco, the UK’s biggest retailer, struggles with Innovation. It tried to expand from its successful food and grocery business to offering a much wider range of products – furniture, technology, clothing, toys – through its Tesco Direct brand. Despite significant marketing investment and distribution through more than 3,000 stores, Tesco has recently declared its attempt to create a rival to Amazon a failure and have announced the closure of the service this summer.

For high street retailers looking to improve their reputations, but wary of attempting to rollout innovations across hundreds of stores and manage the logistical challenges that come with scale, our Dimensions data offers an alternative approach.

Citizenship and Governance matter to consumers and stakeholders a great deal when they form their view of a company. It’s also an area where online retailers – including Amazon, ASOS, and eBay – all struggle, with performance on Corporate Social Responsibility (CSR) lagging behind overall reputation. Scrutiny of online retailers and businesses is increasing, with James Bloodworth’s behind-the-scenes account of work at an Amazon warehouse ‘Hired’ currently a best seller (including, slightly awkwardly, on Amazon). For high street retailers, with a physical presence and a compelling story to tell about the contribution they make to the UK’s economy and society, CSR could offer an opportunity for differentiation and to drive improved reputation.

Questions/Comments

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s

%d bloggers like this: