The Evolution of Retail – how retailers have adapted since the millennium

Over the last two decades successful retailers have had to be flexible, resilient, and eager to embrace new ways of working and new technologies, none more so than witnessed in the last 18 months. Customer acquisition is a strategy not to be undertaken by the faint hearted and first past the post to embrace new technologies is often a deciding factor.

There are three significant “ages” of retail since the millennium which I would like to discuss: Channel Age, Multichannel Age, and Digital Age.?

I was 21 this year - as a retailer. Prior to that I qualified as an accountant at Price Waterhouse Coopers and moved into marketing via brands such as Foster’s and John Smith’s.?

My lucky break into the world of retail was a chance meeting between my wife and Chrissie Rucker, founder of The White Company.?Both were juggling work with motherhood and Chrissie said she needed a managing director - my wife said, "take my husband".

I feel very lucky to been able to make this transition, from big corporations to the world of SME retail, and this is where I have spent the last 21 years, which gives me some perspective on the stages of retail in recent years.

CHANNEL AGE

When I joined The White Company in June 2000, it was a few months after the dot com crash; and we started working on our first website with the US computer Goliath, Computer Associates.?It was a painful process but was the first step for us to move from the channel stage towards multichannel. We were early adopters and I still remember the first conversations about investing in a new form of advertising, called Google Ads.

But stepping back, where we were coming from was “The Age of Channel”,??where retailers owned and operated within a single channel - high street or catalogue - and in very few cases these channels mixed. Next,?with stores and a catalogue (and remember you paid for the privilege), was the exception and the forerunner of UK multichannel; and their bold commitment to both formats yielded years of success.

It was not, however, usual to mix the channels, operators usually staying within their silo.??

The White Company, with, it has to be said, some useful?insights from Chrissie’s husband, Nick Wheeler at Charles Tyrwhitt, had followed the pioneers at Boden, adopting learnings from the US, to bring the mail order channel to a more up market audience; but these?brands still came from a single channel background.?

MULTICHANNEL AGE

Having been in the channel era and the precise measurability of direct mail catalogues; I am?lucky enough to be steeped in all the core principles of customer metrics and evaluation; response rates, average order value (AOV) and lifetime value of the customer – all recorded on minutely printed spreadsheets - which were the life blood and key drivers of success of this channel. These metrics, none more important than “Return on Investment from Advertising” (ROAS) are as relevant now as they were in the Channel Age -??they just happened to be harder to get to back then.

And because I understood these key customer metrics I quickly learnt that I had a problem - I couldn’t meet my targets for growing The White Company by a compound 40% a year, while still driving profitability.?

Faced with this problem, I was lucky to attend an early conference with a speaker from the US retailer, Williams Sonoma.?This brand had stores, a website and catalogue.

The speaker told us this key fact - that they had evidence that a customer who just shopped in one channel spent $180 a year, in two channels $240, and in 3 channels, a massive $360 dollars per year.?

Now for a man confronting an issue in recruiting customers to a brand profitably, this was manna from heaven.?Instead of continuing to flog direct mail cold lists (with an ever-decreasing marginal return), I could open the door to a few stores and the same customers and new ones would come and spend more.

With this insight and an entrepreneurial spirit, we kicked off with a small store at the back door of our biggest competitors, John Lewis.??We were launched fully into the third channel –??Multichannel Age; store, direct mail, and website.

The White Company hasn’t looked back; in 5 years, we grew sales from ￡6m to ￡50m…and the platform for the brand’s success was born. This success was underpinned by 3 key learnings, which gave us the edge.

Channel businesses faced with the challenges of a multichannel world spent their time worrying about channel cannibalisation. Endless conferences filled hours of time on this topic, while we just carried on, saying that as long as we believed our friend from Williams Sonoma, then customers spent more, we recruited more and overall, we were more profitable.

Secondly, again influenced by leaders in the US such as Pottery Barn, we adopted the core high street store skill and catalogue discipline, of making a store look beautiful for its customers - the art of visual merchandising. We used to make annual pilgrimages to the US to admire and learn how beautiful and enticing a store could be.

Thirdly, with the customer having more opportunities to interact with the brand, there was the continued need for newness - which was difficult to sustain in The White Company’s core areas of sheets and towels. So, aligning with our need for visual stimulation and the lifestyles of our customers, we entered new categories, gift (candles and cashmere),??kids (The Little White Company) and crucially clothing that aligned with our core areas of bed and bath. Nothing revolutionary, we were imitators not innovators, but we offered affordably priced luxury and gave our customers more opportunities to buy.

With this model established early in the 2000s, multichannel became the stock model for any aspiring retailer and a favourite of private equity investors, who could see a model for roll out.

DIGITAL AGE

Now, even before the pandemic, the multichannel model was beginning to breakdown.

Digital innovation has begun to chip away at the high street and landlords failed to spot those ever-increasing rents just weren’t sustainable. For most, unless stores closed, digital and home delivery was just an additional cost of serving the same customers.?

It was a broken model and that is before overlaying the crucial dynamic of Amazon, to which I will return later.

Covid has been an accelerator into the digital age beyond any other factor. Retailers had been talking “digital first” for a while, but it hadn’t been given the strategic priority beyond lip service by most brands.?However, necessity is a great driver and coupled with the ease of adoption offered to SMEs by platforms such as Shopify, and its plethora of helpful apps, the digital age has been truly born.

But for retail, in general, it has not been without cost. Channel operators with no digital footprint have floundered,?high streets have been decimated and even multichannel operators who have been over exposed to the high street have come crashing down.

From within the pain, there have also been phoenix like rises as businesses have had to adopt direct to consumer models,?which as retail reaches its new normal, whatever that is, offers new opportunities.?The Digital Age is alive and well.

But underneath all of these ages has been the growth of Amazon.?Initially a channel for the few and now with a competitive advantage like no other channel - owning customer insight, advertising revenues and logistics.?With their power and having been allowed to grow for years without the restraints of a conventional business model demanding returns to shareholders, they are now in a position, with other players such as Alibaba further afield, to dominate and change the digital age to a future forth age - the dominant Global Marketplaces.

So, looking back 21 years; and facing to the future, I am excited by the Digital Age, as it offers so many opportunities associated with understanding the old core metrics of customer behaviour, but I am terrified by the power of the dominant online marketplaces and advertisers that I am sure will be the fourth age.

But for now, let’s keep pushing on in the Digital Age and please do get in touch with us @Sweet if we can help you maximise this exciting Age.

Oliver Spark

Oliver Spark is an experienced marketing-led multi-channel retailer, who grew The White Company from ￡6m to ￡50m. He now has developed a?Customer Analytics Marketing Platform, Sweet Analytics, to provide marketing professionals with the information he always wished he had when he was working in retail.

https://www.dhirubhai.net/in/oliver-spark/

Sweet Analytics

Sweet Analytics is a Customer Data Platform designed to help marketers make sense of all their online and offline sales channels. Sweet’s dashboard provides a Single View of the Customer, enabling reconciliation of multi-touch attribution, customer behaviour analysis and effective targeting.?

Drawing data from external platforms including Shopify, Klaviyo, Woo Commerce, Google Analytics, Magento and all the main socials channels, data is brought together under one roof, making it easy to see which channels (and combination of channels) are working the hardest for your business.??

It is a marketing tool every ecommerce business needs to make better marketing decisions and in turn promoting growth and success.?

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