Guest Slot - Analysis Insider - Sarah Wilson

 It’s not too big a secret that for many retailers their best performing stores are based in travel locations – namely airports and train stations. It is no wonder therefore that spaces like the high-gothic St Pancras station and the glass palace that is Heathrow’s Terminal 5 are locations that retailers are taking more notice of than ever before.

St Pancras: premium retailer destination.

It certainly seems that businesses with stores in travel locations are getting a few things right. One factor is that they have to deal with limited space, which they must sweat. This means being very selective about the products what earns the right to that space. 

It is therefore critically important that these retailers know intimately the travel customer, both business and leisure – what they need on the move, the essentials for enhancing their travel experience and the nice-to-haves, which put people in the holiday mood.

All of this has to be managed with military precision – there is little storage space in travel locations and delivery times are restricted so the supply chain infrastructures have to be more responsive than for other stores. The typical travel retailer can replace a product on the shelf in 9-to-16 hours. This compares with the supermarkets who achieve between 12-24 hours.

Successful travel retailers often have a separate division within the group to manage the nuances of the travelling customer and do it very well – you could argue that the WH Smith travel division delivers results its high street equivalent would be very proud to replicate.  As an example of this flexibility you only have to look at their new concept store ‘The London News Company’ – the first of its kind is located at Gatwick airport. 

London News Company: news from WH Smith.

Given the results of this sort of laser-guided thinking I would argue all retail formats could learn from this approach – it’s not rocket science, it’s just good old-fashioned retail detail! Really getting under the skin of what the customer needs and wants, make every product earns its right to space, imagine the supply chain has to deal with the constraints of no space, and most of all create the experience which is right for the needs of the customer at the time they are shopping.

While it could be said that some of the success of travel retail is down to the increasing levels of footfall going through transport hubs – this is the case at both rail stations and airports. It is my belief that it is mainly down to a laser focus and bringing really targeted ranges and experiences to the travelling customer.

Maybe one of the drivers of success in these stores is the competition to gain leases – any failure to deliver strong revenues will likely see a retailer replaced as there is no shortage of merchants ready to replace poor performing incumbents.

And the beauty of gaining a unit in travel locations is that there will be little competition as there will only be one retailer in each category present. Once you are in the door then expect little direct competition from rivals. 

Another less obvious benefit is the potential to leverage travel retail into an overseas presence. If retailers start moving into overseas travel locations then it is a soft landing into a broader expansion within international markets.

Many retailers do not see this as an expansion opportunity, but they should. As an opening gambit into new markets it provides a great springboard for expanding into traditional retail locations.

Watermark: the French arrive at King's Cross station.

Maybe we are starting to see this happening in the UK at King’s Cross station for example the French book retailer Watermark (owned by LS Travel Retail) has opened its first outlet in this country.

If you fancy a foray into China and have a model for a travel retail proposition then it is a great opportunity. Consider that around 90 new airports are planned for the country (it’s the same story around the rest of Asia). And then the rest of the country is a retailers’ expansionary oyster.

So maybe some of UK retailers’ best performing stores won’t be limited to the likes of St Pancras station in London but will be found in Chinese airports in the near future.

Sponsored column by Sarah Wilson, retail specialist at consultancy Egremont Group

Is the fixed till on borrowed time?

Exactly how much longer have fixed till systems got as part of the retail landscape?

The till of the future?

The rise of the tablet device with payment functionality is beginning to some put pressure on the presence of the fixed Point-of-Sale (PoS). Consider the roll-out of iPads by the likes of Aurora Fashions. In its refitted stores the number of such devices is now outnumbering fixed till points.

It's not that hard to see on the horizon that we'll have a time when there will be little reason to bother with fixed tills in many categories within the retail industry. There are many merchants experimenting with tablets (mainly iPads at this point) including House of Fraser, Marks & Spencer, along with the mobile phone retailers and the likes of McDonald's.

It's a similar story in the US where JC Penney (run by the former head of retail at Apple, Ron Johnson) has a plan to eliminate the traditional checkout by 2013. He is busy installing advanced wi-fi, mobile checkouts, and is switching over to tags that utilise radio frequency so there will no longer be a need to scan barcodes.

Such seismic change at the checkout comes at an interesting time because that other revolutionary aspect in the world of tills - self-service PoS - has been under a bit of pressure in some quarters. The argument for the use of self-service has been a combination of faster throughput of customers and its need for much less of a footprint in-store than that required by tills with checkout staff.

Ikea US: Taking out self-service 

Ikea is one of a number of retailers that are making a move against self-service tills. Its argument is that, in its US stores at least, they are proving slower to get customers through, and at busy times they tend to need a member of staff administering each one (which sort of negates their value).

Since the issue of shortage of space in-store does not come into play for Ikea then it has clearly asked itself - what is the value of self-service? And it is not alone as Kroger and Albertsons have also been removing them from their stores across the pond.

Admittedly there are numerous other retailers who find the technology beneficial but for those merchants where in-store space is very much at a premium then tablets might be a better answer as they need pretty much no footprint. It seems like it might be coming down to a toss-up between tablets and self-service tills.

But with customer service coming increasingly to the fore then it could be argued that tablet devices provide a much better in-store engagement experience for customers and have the capability for delivering the much-vaunted personalised multi-channel proposition.

At this point in the cycle with tablet releases aplenty, mobile payments, NFC as well as contact-less technologies all gaining traction then retailers' commitment to go with self-service tills could be coming under question for some operators - especially in a world where even the long-term existence of the fixed till itself is being put into doubt.

Innovative Retailers - made.com

Brought to you by Retailinsider.com and PCMS

The Name: made.com

The Place: Headquartered in London, but basically an online business

The Story: Founder of made.com Mr Ning Li was just about to buy a very designer sofa from a brand that shall remain nameless and pay lots and lots of money - £3,500 in fact. He didn’t mind though because it was a designer sofa and obviously you have to pay through the nose for that. He mentioned the purchase to a Chinese friend in the furniture industry who said ‘Whoa there Ning. We make those sofas and sell them for $300 to your retailer. Come and buy one direct from us instead.’ And unsurprisingly he did.

Ning Li: founder and CEO

Great. I love it when people save money. And then he thought: ‘But wait, surely other people might like the same access to this stuff without the crazy mark-up.’ And there you have it – a business is born, launched in 2010 with £2.5 million of funding from Brent Hoberman among others. Li was brought up in France and he started a French version first called Myfab.com but this is the original UK site.

OK, everyone has their special tag line these days – what’s theirs? They want to be ‘the Zara of furniture’. Well, we need one of course.

How does it work? They do without the multitude of middle men, traders, importers and retailers etcetera. Using the power of the internet they aggregate demand and pass this demand straight to the manufacturer. There are 50 manufacturers onboard around the world – mainly in China – and 20 designers. The majority of pieces are original to made.com and most are subject to exclusivity agreements too.

Can I get something made just for me? Nope, that’s not the model. The whole point is this group buying thing which forces down the cost. Made.com use 40 feet long shipping containers – and until that shipping container is filled it is going nowhere. So it can hold 500 lamps for example – that order will be fulfilled relatively quickly as lighting is a big seller. But if you are buying an armchair – the container holds 100 of those - you are going to have to wait longer till the contents are sold.

Sounds high risk for the retailer? Li admits that the retailer takes the risk here. Containers do leave foreign shores with the contents half sold but he is adamant that when his containers hit the UK the contents are sold in the vast majority of cases. You just need special customers ‘who will play the game’.

Ah yes. Errr, what game? Customers who get the idea, basically. They are paying a lot less than they would do from a traditional retailer who keeps all the unsold stuff in a shop. Li describes made.com as a pioneer in inventory which is usually such a headache. They operate such low margins that they cannot just lower the price en route from China to make sure everything is sold. They manage demand super carefully and the customer buys into the idea of a potentially long lead time.

RRP £1,499, yours for £499 from made.com 

And how would we describe these special people? Very internet-savvy, high-end, urban, London-centric, too busy to shop, and in the high-income bracket. They are used to having their deliveries within 24 hours but made.com would usually specify 7-10 days to collect orders, pass orders to the factory and co-ordinate shipping and delivery.

I think it’s time to mention the IKEA word. Go right ahead, Li has another line for you. Made.com is the Conran shop for IKEA prices. Li says made.com is more aspirational, but he sees the competition as being from IKEA to Conran and everything in between.

But the Swedish model is similar right? Yup. They are both vertically integrated businesses. Unlike other online retailers who buy stock from other brands and sell them on, they both manufacture themselves and sell their own products. Where made.com is really unique is the group buying mechanism. It’s the bulk demand which lets them cut out all the middlemen and buy direct.

How is the business doing? No comment on figures. But a growth rate of 450% from 2011 to 2012 and from starting out with three staff in 2010 Li now employs 80 people. Sixty are in London and 20 in Shanghai. They also picked up a clutch of awards at the Online Retail Awards last year.

So no clouds on the made.com horizon then? Well, there were some negative comments on social media about the customer service side of things, especially that there was no phone number. But now there is a number and things seem to have quietened down again. Li thinks that mistakes are the best way to learn, as long as you don’t make the same one twice obviously.

And they absolutely will have the shipping container sold out by the time it gets to the UK? Well, I’m whispering now… they operate a loading platform with a third-party which gives them 24-hours breathing space when the container is opened. And if any contents are unsold there is some leeway for storage for a short while but truly it hardly ever happens.

Great, I get it. Game on. Now, how many sofas fit into a container

Bathstore's future in Endless' hands

The high street is not a pretty place right now, with retailers continuing to take a bath, including some long established names that will be sorely missed within their local areas by people who remember them in happier, much more buoyant times.

Please go in

130-year-old furniture retailer Clement Joscelyne (which also owns two Ligne Roset stores) is one such casualty that recently went into administration casting doubt on the future of its six stores – stretching from Brighton to Norwich – and its 90-plus employees.

However, amid the carnage there are some positive stories, including Bathstore, whose new owners will be hoping more people take a bath over the next few years. These new owners are Leeds-based Endless who specialise in turnaround situations.

They have a decent track record and according to its managing partner Garry Wilson they are often the only bidder for distressed up-for-sale businesses. One of its big successes is The Works that sells books and stationery and has been turned from an operation in administration and losing £6 million annually three years ago to one that is due to make ebitda of £11 million in its current financial year.

As in the case of The Works, Endless typically pays little or nothing for a business, with its investment boiling down to covering the ongoing losses an operation is making. Without disclosing the actual purchase price of buying Bathstore it did reveal that it is paying former owners Wolseley a sum of £15 million over five years of which £11 million is new capital that’s to be invested in the business. 

This should ensure that Bathstore has the financial capacity to stick around for the next few years because although Wilson says Endless plans to hold on to the business for four or five years he does not expect to see much improvement in the fortunes of the high street any time soon.

In fact, he paints a very bleak picture of its immediate future. Speaking with Wilson earlier in the year at his very impressive London office he ran me through his thinking on the doom-laden high street.

Bathstore: Has it a hot future?

For starters, he reckons there is a need for a resetting of landlords’ expectations on rental levels. He details an impending Doomsday scenario whereby interest rates moving upwards and rentals moving southwards will severely hit the UK’s many heavily indebted landlords.

He also believes the UK high street is dull and boring with shopping a disappointing experience and that over the next five to 10 years there will be some fresh ideas injected into the high street model.

Underpinning the Endless purchase of Bathstore is the belief by Wilson that the high street is set to disappear at the hands of online retail. Instead he is of the view that people shop as a form of hobby, but he says there has to be a model developed whereby the physical store does not simply become a showroom for subsequent purchases made online – potentially with rival businesses.

We do not yet know what is planned for Bathstore as Wilson and his team will only just be getting their heads around the operation. But one thing that can be assured is that the management will be in for an overhaul. With The Works, Wilson says only one of the original seven board members remains with the business today.

Despite their successes with retailers, Wilson is more than willing to acknowledge that they are not magicians at Endless and that things sometimes do not turn out as planned. He cites the acquisition of discount retailer TJ Hughes as one failure. Having given it his best shot he suggests it was simply too far gone and that Endless simply can’t turn everything around.

It has to be assumed that Bathstore is in much better condition than TJ Hughes was at the point of hand-over and that it is headed for a bright future. But even Endless wouldn’t bet the house on any single deal – that’s not the nature of turnarounds and certainly not retail in these extremely tough times.

This column was originally published in Kbbreview.

Movers & Shakers Q&A with Jo Molineux of Republic

Brought to you by Retailinsider.com and K3 Retail

Jo Molineux, head of multi-channel at Republic

1. What is the greatest opportunity for your business?

Republic is a brand about fashion and music and therefore strategically we aim to be the most relevant and interesting youth brand to 15-25 year olds. The biggest opportunity is to understand what is useful and what is ‘now’, from a multi channel perspective, for this ever changing customer. Whilst we have started this, we still have a long way to go. What we know is this opportunity involves mobile, staying connected 24/7, and finding a single view of this customer to delight them in tough times. In addition, we are trading every single day at a time when customers are spending less and the competition is fierce.

2. What is the biggest challenge to your business?

Optimising the opportunity across all sales channels in this fast paced and growing business. We are starting with redefining our brand proposition and customer understanding but from the technology perspective, ensuring our experience and innovation is ahead of everyone else for our ever changing customer. There is so much we would like to do NOW.

3. With the benefit of hindsight what would you have done differently so far?

I tend not to look backwards, however, in leading the ATG/Oracle platform migration I would have taken longer to define requirements which were not simply like-for-like and delivered much more as part of phase 1. The world of online retail has moved dramatically in the past 12 months and we could have gained more benefits had we been bolder.

4. What is the future of the physical store?

Given Republic is about music and fashion, for us our high street stores will become more like venues which give customers inspiration and also allow them to stay connected to what’s relevant to them. Localisation and free wifi in every store could be two examples of delivering this. We are really excited about our flagship Leeds store launch before the end of the year and our multi-channel experience. The store/web experience, hardware and software are completely tailored to the environment and the brand execution of being connected will underpin this.

5. What will the high street look like in a decade?

There will always be a place for high street stores, but in order to survive and remain innovative, they will have to become personalised experiences and more like venues which are always connected, both from a product and stock visibility perspective as well as brand. They will be places of inspiration and we will see many more pop-up shops from pure-plays.

6. Will mobile devices be the primary sales channel in the future?

For the right customer yes and ours is the right customer. This isn’t too far into the future either; Google is already predicting that over 50% of searches at the peak this year will be via a mobile device. Although our current growth is exceptional, we have restructured and are growing our e-commerce team to rise to the challenge.

7. What other retail business do you admire?

John Lewis from a brand perspective and through every element of its multi-channel execution.

Wiggle for their impressive international expansion and clarity of execution.

Net-a-Porter for their fantastic content. And Schuh because they have been delivering multi-channel for nearly a decade, but describe it as simply getting the product to the customer as quickly as possible, which is brilliant.

8. If you hadn't been a retailer what would you have liked to do?

Probably something related to consumer testing/usability. I’m fascinated by behaviour, why people do things and making sure we are in prime position to react to this.

9. What marks out of 10 do you give yourself so far for achievement?

Not more than 5 – although we’ve added some great services to date and now have the right platform, the next 12 months are critical. Our priorities are brand development and CRM and we need to innovative quickly and re-establish ourselves. 

10. Who would you place in the Top 20 Multi-channel/e-commerce Movers & Shakers?

Laura Wade-Gery, Jeff Bezos and Michael Ross.

Innovative Retailers - Notonthehighstreet.com

Brought to you by Retailinsider.com and PCMS

The Name: Notonthehighstreet.com (NOTHS)

The Place: Headquartered in Richmond

The Story: Venture capital firms line up to throw money at this business because buying hand made artisan crafts and gifts is so now. And that is exactly what Notonthehighstreet.com does. The stuff is unique, British,  often ethically produced, and like all good business ideas was set up because its two founders, Holly Tucker and Sophie Cornish, wanted a shop just like that. Now with 3,000 partners (suppliers) on its books and a fourth round of  funding of £10 million recently announced they can kick back and take over the world one gift at a time.

Sophie Cornish and Holly Tucker.

I see. There’s money in presents then: The last round of funding valued NOTHS at a not insignificant £100 million, so yes. But it’s not all packs of 10 cards for a fiver you know. This site takes personalised to a new level – how about a ring made with the impression of your partner’s finger inside it so you can always hold hands.

Bless: Yours for £595. The founders say that personalisation is hugely popular and from Christmas sacks with your kiddies names on at £20 and personalised tax disc, cufflinks, to the iconic bus blind poster where you insert the important destination points of your life on to a routemaster-style font NOTHS has someone who can make it.

Just how many products are there? 50,000. That’s from a start in 2006 of 100 small businesses who incidentally all invested in the business at the outset. Almost all of them are still selling on the site today which bodes well. Nowadays every new supplier pays a one-off joining fee and then 25% commission ever after.

And how much bang for your buck? A dedicated homepage and then all the benefits of a much bigger companies’ marketing support and press coverage, customer back up etcetera. It’s reported they get up to 80 applications a day from interested suppliers but as the founders say they are a ‘curated marketplace’ and are very selective about what goes on.

Are they gift makers themselves? Not at all. They are ‘passionate’ about beautiful products but they get their buzz from watching a little cottage industry becoming rather more than that.

And how often does that happen? Examples are cited of partners taking £1,000 in the first year and £1 million three years later.

Crikey! I’m going to set up a business right now: Well, it’s a growing market - 10% of NOTHS sales  now come from the US despite it only recently allowing multi-currency shopping on the site. The latest funding money, its reported, will go towards NOTHS offices opening up in the big overseas markets.

What about NOTHS shops? Nope. Part of the appeal, the founders think, is that people can browse and shop whenever and wherever they want. Besides, they'd probably have to change the name don’t you think?

True. So when I eventually have my amazing product idea can I only sell it on this site? No, suppliers are not locked into exclusive agreements but the marketing activities do ‘tend to focus on products that can’t be found elsewhere’. Interestingly NOTHS has a merchandising department which can help develop a seller’s range to the target market.

Tell me about the founders: Marketing and media in a word. Sophie Cornish, who has said she always knew she would achieve one big thing in her life, started out in women’s magazines and moved on to branding and marketing while working for briefs as varied as George at Asda, Boots No.7 and L’Oreal. Holly Tucker met Sophie Cornish when they both worked in an advertising agency and then Tucker started something called Your Local Fair which took the sort of companies selling on their site now to posh bits of London. But it was lots of graft and so the two of them decided there must be a 21^st century solution to this. And there was.

The rest is history? The rest is actually in a book that they have just written called Build A Business From Your Kitchen Table. And we have five copies of it to give to readers who are interested (see below). With this as inspiration I had an amazing product idea - a stool that looks like a champagne cork. Unfortunately, it's already on there. Yours for £110.

Retailinsider.com has five copies to give-away of the recently published book by Sophie Cornish and Holly Tucker - 'Build a Business from your Kitchen Table'. If you would like a copy then please email glynn@busicomm.co.uk and subscribe to Retailinsider.com (it's free). The first five people to respond will receive a copy.

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