Stop blaming Amazon: lessons in survival for retailers

Marks & Spencer: latest high street victim
Marks & Spencer: latest high street victim

With Marks & Spencer's the latest retailer to shut stores, the easy option is to blame Amazon. But it's more complicated than that.

M&S’s new chairman Archie Norman has promised a radical shake up of the company after accusing it of "drifting" for the past 15 years. If M&S has been drifting in the retail doldroms, it has had plenty of company. But, while it’s tempting to blame the death of the high street on Amazon and on the failure of UK retail businesses to build a decent website or app, it’s not quite that simple.

Like Mothercare before it, M&S is now having to close stores, mostly, because the stores weren’t very good. They’re out-to-date and not nice places to shop. Toys R Us also failed because its stores weren’t great and because it had been loaded up with debt by VCs. Amazon is being used as a convenient scapegoat. People still like going shopping, but they want the shops to be nice. If the experience is going to be crappy then they may as well do it at home.

The existence of the internet does actually mean people need fewer stores. So shrinking your estate is probably a good plan. It’s unfortunate for jobs and communities, of course, but it’s probably inevitable. There are also three other areas retailers need to address to survive. 

Retail transformations fail from the top

In an interview about TSB’s IT disasters, its chief executive Lloyd Sheherd put it down to "techie issues". This kind of talk is no longer acceptable. ‘Digital’ is not a subset of marketing or IT. Digital is the business. The CEO has to understand it as deeply as they understand the finances or the fundamental business strategies. If UK businesses don’t have exemplary digital strategy and execution then it’s the CEO’s problem and it cannot be delegated or outsourced. Shipping in some ‘experts from IBM’ as TSB apparently did is another sign of failure. 

You have to experiment

Digital is still viewed by legacy retail businesses as a single big strategic problem that needs to be ‘fixed’ with one big push. Everyone’s looking for one Big Bang solution that can be implemented. That’s not how you compete with Amazon. Retailers tend to be incremental, tuning things slowly and carefully. They’re used to the physics of the real world retail where experiments are costly and difficult. Meanwhile, digital businesses have learned to experiment wildly and often. They grew up with very low cost experimentation and they understand its value, so they engineer systems that allow for it. Recently, I was talking to a large UK retailer recently about Amazon’s various grocery manifestations: Pantry, Fresh, Prime, Go etc. The retailer dismissed all these different packages and brands as a sign that Amazon were floundering and didn’t have a clear strategy. I would argue that it looks more like experimentation - like a predator circling and probing their prey and testing various different attack options. 

Fix the system

There are plenty of opportunities to transform businesses from the inside - the elements that manage and support people and resources, not just the customer facing bits. For example, through our work with Co-op Retail, we created ‘Shifts’, a shift management tool that for the first time allowed all 120,000 Co-op staff to take ownership of their rota. The tool also helped store managers to much more efficiently plan and cover gaps in staffing levels. 

The solution does not have to revolve around a major IT implementation or a billion-pound deal with Ocado. Retailers need to look at every opportunity for improvement right through their businesses. If M&S is to reverse its recent profits slump, realise its plans to to move sales online by 2022 and successfully reinvigorate its business, at the very least, some lateral thinking and experimentation should be embraced. 

Nicki Sprinz, is the managing director of ustwo London

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