Retail Innovation Reframed

How to Transform Operations and Achieve Purpose-led Growth and Resilience

Gareth Jude, Andrew Smith

• Publisher: Kogan Page
• Year: 2021
• ISBN:
  9781398600935
• Edition: 1
• Topic: Business
• Subtopic: Retail Industry
• Index: Business

Retail is defined by disruption; companies either adapt or are replaced by those that will. More so than ever learning how to reframe your business, apply change and stay innovative is key to continued success and survival. Innovation is hard for any organization, even more so for retailers where executing retail basics can often be seen as enough. But the difference between success and failure is increasingly becoming the ability to reframe your approach to innovation and use it to win the competitive edge, as Retail Innovation Reframed explains. Changing your business operations to solve customers' biggest challenges is how established household names and emerging businesses now thrive.Featuring case studies including Walmart, Warby Parker, Starbucks and Amazon, Retail Innovation Reframed demonstrates how to weave innovation into the operating fabric your company to remain ahead of the curve. Start your journey to innovation and learn how to use change to succeed. Online resources include templates for testing and analyzing new innovations.

Part One

Why the retail industry needs to reframe

In Part One we show why the retail industry is highly sensitive to change in the external environment. Failure to adapt to change can have disastrous consequences, but established retailers do not have a good record of being able to innovate.

We then discuss the reasons why retailers find it hard to innovate, which lie partly in the way their businesses operate. The nature of the retail trade means operators value execution over strategy, short-term thinking over long-term planning, and are driven by process. These characteristics can stifle innovation but we argue that they can be turned into an advantage if innovation is conceived as a process. The core proposition of this book is that retail innovation is not attributable to moments of inspiration or superhuman leadership but to observable and repeatable processes.

We then provide an overview of our ReFRAME process of retail innovation.

01

Why retail needs to be reframed

(GARETH)

Introduction

Throughout history, the retail industry has been defined by disruption and crises in the external environment. Whenever the external environment changes, it presents opportunities for the adaptable and threats for those who cannot or will not change. When the industrial revolution created an urban middle class, it created the opportunity for the department store format and began the long-term decline of urban markets. When post Second World War prosperity allowed families to buy automobiles, it created the opportunity for the supermarket and shopping mall formats and began the long-term decline of strip shopping. When the 2003 SARS epidemic meant many Chinese consumers were forced to try online shopping for the first time, it created the impetus for the growth of Alibaba and JD.com and the transformation of shopping in China forever.¹

As we enter the 2020s, the retail industry is arguably more disrupted than at any time in its history. Globalization has meant more of the world’s best retailers are trading in geographies remote from their home base. Technology has created new ways for customers to shop and for retailers to serve their customers. The COVID-19 pandemic has created a shock to economic and social systems whose long-term effects are only beginning to play out. But the underlying problem facing the industry is not the disruption created by new technology, globalization, new forms of competition or the COVID-19 pandemic. The underlying problem for retailers is developing the organizational capability to innovate and reframe so that, whatever the disruption, it can be approached as an opportunity and not an existential threat.

The retail industry needs to be constantly reframed to be more relevant to its customers. Just like a favourite old family photograph comes alive when it’s surrounded by a new, contemporary picture frame, so too the retail industry comes alive when it surrounds itself with what really matters to customers. Retailers who develop the capacity to innovate and reframe will thrive, while those that don’t will die. In head-to-head contests, like Walmart vs Sears, Domino’s vs Pizza Hut (Australia), Netflix vs Blockbuster or Mecca vs Napoleon Perdis, it will be the retailer who has the ability to innovate and reframe who wins.

In this chapter we will explain why retail is defined by disruption and crisis, why we think reframe is a better word than transformation to describe what the industry needs, why there is a difference between knowing what’s going on and understanding how to change and why gaining the organizational ability to innovate is the biggest challenge facing the industry in 2021. Finally, we explain why, far from being risky, innovation is actually retail’s new safe place.

Retail is defined by disruption and crisis: Adapt or die

Clayton Christensen in his classic book The Innovator’s Dilemma² distinguishes between different types of disruption. He says that successful companies are generally good at dealing with evolutionary change in the environment (‘sustaining innovation’) but not at dealing with revolutionary change (‘disruptive innovation’). In retail, every disruption in the external environment has the potential to pose an existential threat. The more fundamental the disruption, the more radical the reaction required.

Large disruptions in the external environment create an obvious threat to retailers who do not adapt. Failing retailers often cite economic crises as the reason for poor results, but in reality, these events are rare. Between 1995–2020, until the COVID-19 pandemic, there was only one recession in the USA (2008–9³) and some countries like Australia and China avoided recession altogether. When a genuine economic crisis hits it can be very hard to survive, but most of the disruption retailers face comes from factors other than economic crises. Even relatively small changes in the external environment can create an existential threat to retailers if they are unable or chose not to adapt.

Self-service supermarkets first emerged in the USA in the 1930s. By the late 1940s they had reached Britain, and by the 1950s they were seen throughout the western world.⁴ The first self-service supermarkets were not the 4,000 square metre, automobile friendly formats that became mainstream in the 1970s, but much smaller 150 to 250 square metre stores which were often re-purposed grocery spaces. The main innovation in early supermarkets was having customers serve themselves rather than be served by a grocer. This made self-service supermarkets much more cost efficient than a traditional grocer and that cost advantage was translated into lower prices.

As a young boy I remember shopping with my mother at a surviving grocer in my hometown. Cheese was cut, weighed and wrapped. Each tin or packet on my mother’s list was picked from the shelf by the grocer and eventually packed in her bag and money exchanged. The shopping experience was similar to what you might expect today in a gourmet deli. When self-service came to my town the grocer didn’t last long. Even though he was a very experienced operator and offer...