I was lucky enough to attend last month’s excellent IGD conference, titled the ‘Big Debate 2015’. This event attracts the retail industry’s top brass and it lived up to its name with headline speakers from all four of the UK’s big grocery retailers: Asda, Morrisons, Sainsbury’s and Tesco. As well as the big four sharing their insights on the challenges and opportunities for retailers, Tesco CEO, Dave Lewis produced headline grabbing comments when he made a public apology for “the way we have behaved in the past” and revealed plans for simpler and fairer payment terms for suppliers.
Whilst this is welcome news for any current and would-be Tesco suppliers, it’s worth reminding ourselves of the root cause of Dave Lewis’s apology. As Mr Lewis explained, the situation developed as a result of Tesco completely losing sight of why Jack Cohen started the business in the first place, namely to sell products to customers. Instead, the senior team at the time (prior to Dave Lewis’s reign I stress) introduced a new KPI for all of its buyers of achieving a minimum of 5.2% net margin across all products. This meant they tied down suppliers with tougher terms to drive prices down, continually increased prices for customers and went in search of new products that satisfied the KPI, regardless of whether customers wanted them or not. The focus had shifted away from serving customers and helping them to fill their trollies with products that they need and want, towards satisfying shareholders and helping them to line their pockets.
Mr Lewis acknowledged the mistakes that his predecessor made by ignoring its customers, its suppliers, its colleagues and its brand values and what a damaging effect this has had. It has been well publicised that Tesco’s sales and profits have declined and by manipulating accounts, it has fundamentally damaged its brand reputation and the trust of its customers. Hence the commitment made at the IGD conference to change.
In her keynote speech at the Big Debate, CEO of IGD, Joanne Denney-Finch said that “whilst there is an urgent need for change in retail to serve shoppers in new ways and embrace innovation to address the ‘brave new world’ of technology, with online, mobile and connected shoppers, they must not lose site of the products and to ensure they deliver for customers.”
So Dave Lewis and his team, along with many other retail brands who are embarking on a re-engineering of their business, would do well to base the foundations for this transformation on putting their own-brand products at the centre of everything they do and to focus on the delivery of a great customer experience around these products.
Most retailers have a huge amount of information on customer feedback, but this is often silo-based, whether it be the contact centre or, say, returns. To achieve this business transformation, they need to concentrate their efforts on three key behaviours to deliver what we call a Unified Brand Experience (UBX):
- Listening – intently across all channels. Collate feedback from the web, social, email, in-store, call centre and product panels, to gain valuable insights and to form a unified view of the customer experience that the retailer’s products are delivering.
- Consolidating – analyse the gathered customer data and aggregate into a format where it is easily digestible and insights can be drawn and importantly, acted upon.
- Sharing – implement advanced engagement programs with suppliers and colleagues, sharing data and insights to develop a ‘One Team’ approach, enabling new products and innovations to be delivered.
In my view, despite the proliferation of technology, the principles of retail have not changed: if you source and develop the products that consumers want to buy, make them readily accessible and sell them for a fair price, then customers will come in droves to buy them. This is fundamentally what the discounters Aldi and Lidl have done and with it have stolen significant market share. They have changed the retail landscape, probably for ever. They have concentrated on developing their own focused range of private brand products that satisfy their customer needs.
With vast numbers of suppliers involved in producing private brand products, success of these products depends on good supplier engagement. Retailers and their suppliers need to act as ‘One Team’, working together to develop a high level of transparency, enabling a culture of collaboration and innovation to develop products for customers.
This transparency continues as products are launched. Data needs to be gathered, consolidated and shared with suppliers to form ‘One View’ of product performance, allowing suppliers to contribute to the adjustment to ranges, packaging and recipes, always making changes with the focus of innovating for customers.
At Solutions for Retail Brands, we believe in this approach and support our retail customers with the development and growth of their private brands. We do this through improved supplier engagement and by providing solutions to enable the delivery of a Unified Brand Experience (UBX) through providing ‘One View’ of product performance and the collaborative tools for supplier engagement that enable retail private brands and their chosen suppliers to work as ‘One Team’.