Retail Insider held its latest Breakfast Event this week with Sir Ian Cheshire, group CEO of Kingfisher, who suggested the retail industry is on the cusp of a major acceleration in the use of digital channels by consumers who are increasingly utilising mobiles and enhanced internet connections.
Senior executives from Tesco, Marks & Spencer, TM Lewin, Monsoon Accessorize and John Lewis were among those who heard the story of how Cheshire was first exposed to the digital revolution back in 2000 when he headed up e-Kingfisher.
“I had two years of experience that gave me complete conviction that there would be a new form of retail – but at the time the technology was not up to it. I remember we wrote a WAP app for a Nokia brick,” he told those gathered at The Delaunay in central London.
But today with new technologies to hand things have changed and he expected a ramping-up of online sales that will take it to more than the present 5/6% of Kingfisher group sales. This change is noticeable at Screwfix where builders are now ordering via their mobiles for collection from its growing number of stores.
Cheshire did the M&A work on the purchase of Screwfix and has seen it develop from sales of £80 million to a current £800 million and he forecasts it will hit £2 billion following its launch in Germany.
He recognised its longer-term potential immediately after he took over as Kingfisher CEO in 2008 when he received seven offers from private equity firms for parts of the group and six of these were for Screwfix.
Even though Cheshire had foreseen the digital transformation happening and the impact on real estate, he admits that it still presents a challenge in how the company deals with its large store base. The restrictive nature of long leases has made it tough for him to pull off his strategy of offloading certain stores and sub-letting others to retailers like Asda and Maplin even though he has been plugging away since 2005. He acknowledges that he currently has “70 stores out of a total of 360 that need treating”.
It has also been a challenge in France where he admits Darty has been wedded to a successful stores model at the expense of developing its e-commerce channel. But he says it clearly will happen and the online experience in the UK will benefit the inevitable change in the French market – that accounts for over 50% of group profits – and he reveals his “new generation [of managers in France] are all over e-commerce”.
Germany is also a big opportunity as it is again not yet as advanced as the UK with its multi-channel model and Kingfisher was recently the first company in the country to offer free next day delivery. “We underestimate the value of being in the UK as we are more advanced [with digital] than even the States,” he says.
He also highlighted the high level of experimentation taking at the company that encompasses introducing innovative new – increasingly own-brand – products such as LED lighting, sharing of power tools through rental-type initiatives, electronic shelf-edge labels for yield management, and investigating things like Street Club that connects local services to local communities.
Retail Insider would very much like to thank Sir Ian Cheshire and to the sponsors Bond Dickinson, Webloyalty and GS1. Without their much appreciated support this event would not have been possible.