Five minutes with… Simon Hathaway, global head of Retail at Cheil

What are the latest trends within the retail industry globally?

Omni-channel is the certainly the biggest buzzword and retailers are all working hard to bring together their channels to deliver to a customer that expects retail to be everywhere, instant and personal.

That is challenging the legacy retailers and forcing them to re-think their estate and the role of the physical store. Traditional views in retailing and from brand owners about the point of purchase are being challenged, because everybody with a smartphone has a point of transaction in their hand.

The smart retailers are addressing this and putting in place the organisational foundations to deliver. That means changing roles, budget and KPI programmes.

But I think the most important word in retail today is convenience. This is not just about location and store format, but all of the other experiences and services we now expect from retailers; including click and collect, mobile payments and apps that enable us to pre-order and manage our loyalty programmes.

How has technology disrupted retail?

Technology has always disrupted retail. The impact of the first self-service store, the shopping trolley and hypermarket – all had transformative impact. What is different today is the speed of technological change and the impact it is having on shopping behaviours.

Shopping behaviours are not fundamentally changing, but technology is making it easier and more convenient. My grandmother was a shopkeeper in Manchester and she always told that ‘people like to shop around’. Today I can do that at home or in-store with a mobile device.

Like many other industries digital technologies, particularly mobility solutions, are providing solutions for greater operational efficiency and cost reduction and enabling new ways of connecting with customers. For some retailers that has been disruptive and is a challenge to their traditional ways of doing business.

It is a particular problem for those companies built around execution with operational silos and annual budgets that are cut and paste each year. The companies that are thriving have a learning culture and create organisational agility to respond. They see new tech as an opportunity and they try, fail or scale.

Many of the retailers and brand owners we work with are in marketing, where advertising and promotion are being transformed by technology. Our advice is to run a 70:20:10 approach to annual budgeting, with 10 per cent spent on ‘new’, 20 per cent to prove scalability of ‘new’ that worked, and the 70 per cent being the spent on what is proven to work. This systemises innovation and we can see real change within three years.

What are the main challenges that retailers face?

Amazon. I guess that’s a little simplistic, but they do epitomise most of the challenges I hear from retailers who find themselves in a highly competitive market place.

However I think the biggest challenge for retailers is staying connected with the customer and meeting or exceeding their expectations. Their customers are real people and they do not care about online, brick and mortar or m-commerce; they want to move seamlessly between environments, platforms and devices to fulfill their shopping missions. Those same people also don’t care if something is advertising or design, shopper-marketing or promotion, social or CRM, they simply want the best experience.

Dave Lewis , the chief executive officer of Tesco, put this very well when he said “we can’t advertise our way out of a problem we behaved our way into”.

But never losing sight of that truth is challenging for retailers, when operations must run 24/7 and every sale contributes to a financial performance that is scrutinised every quarter by the investment community. But there are retailers who are now looking at their organisational behaviours to ensure they stay connected with their customers.

Is the industry set to see more consolidation going forward?

I am sure that we will see more high profile retailers disappear as they fail to reinvent in the face of new competition.

Given the maturity of most retail sectors I suspect there will be very few big mergers or acquisitions and more deals being done between new and innovative entrants and traditional retailers that need to drive transformation in their own businesses.

The needs of omni-channel retailers for a pipeline of technology across platforms, devices, logistics and media will also see continued investment in start-ups and an important role for retail tech incubators like Eccomplished.

This will continue to push the big question for the retail, the looming crisis of global over-capacity of retail space.

Lastly, where do you see retail headed in light of the current economic slowdown worldwide?

The economic slowdown will only accelerate the current trends in retail. It should also have retailers thinking long and hard about their customers and how to keep them coming back to shop in their stores. Typically they think about the money their customer has, but miss the point that shoppers have three budgets; time, money and frustration.

We’ve all walked into a store expecting to buy and have left with nothing after being frustrated by the experience. There are many reasons why that experience might not have been good. But often it is the basic expectations that are not met. The challenge for retailers is that new technology is continually re-setting the expectation of retail experience and that is making the frustration budget very important.

Most shopping missions have a fixed time budget, though the decision journey is different by product category. Retailers have to understand their customer time budgets, making stores easy to shop and ensuring the customer has the information they actually need, when they need it and not what a brand wants to tell them. Time and convenience go hand in hand.

Money. The retail calendar is packed with promotional events, Black Friday, Singles Day, Diwali and Ramadan, then there are the pre-season, mid-season and end of season sales and we have not even started talking about brand-led promotion. All of this is training shoppers to never buy at full price and that is removing value from business and brands.

The economic slowdown is a time for retailers to invest in their customers and if they are going to win in time, money and frustration, they will have to start delivering a retail experience that is everywhere, instant and personal.