Innovation in the UK Retail Sector - Nesta
Innovation in the UK Retail Sector - Nesta
Innovation in the UK Retail Sector - Nesta
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
<strong>Innovation</strong> <strong>in</strong> <strong>the</strong> <strong>UK</strong> <strong>Retail</strong> <strong>Sector</strong><br />
2.18 Technology has played a complex role <strong>in</strong> relation to retail change. <strong>Retail</strong>ers <strong>the</strong>mselves<br />
have been generally reluctant adopters of technology (CEC, 1991). The majority of firms<br />
have tended to be adapters ra<strong>the</strong>r than <strong>in</strong>novators, us<strong>in</strong>g <strong>in</strong>formation technology to<br />
support exist<strong>in</strong>g operations. As a result, <strong>in</strong>vestment <strong>in</strong> ICT conferred little last<strong>in</strong>g<br />
competitive advantage even if it managed to raise rudimentary barriers to entry. Indeed,<br />
‘successful’ retail ICT for many <strong>in</strong> <strong>the</strong> 1990s comprised projects that did not <strong>in</strong>volve long<br />
term research & development, provided a visible f<strong>in</strong>ancial benefit, came without<br />
extensive capital commitment and provided for low risk, staged implementation. Even<br />
today, ICT accounts for extremely low levels of capital spend <strong>in</strong> <strong>the</strong> sector. However, a<br />
number of lead<strong>in</strong>g firms have used technology to achieve significant ga<strong>in</strong>s <strong>in</strong> productivity<br />
(Johnson, 2002). In addition, disruptive <strong>in</strong>novations driven by technology, such as ecommerce,<br />
have resulted <strong>in</strong> significant challenges for <strong>the</strong> sector. 2 For example, <strong>the</strong><br />
anticipated compound annual growth rate between 2007 and 2012 for retail onl<strong>in</strong>e<br />
spend<strong>in</strong>g is 14%. The expectation is that onl<strong>in</strong>e sales <strong>in</strong> <strong>the</strong> EU will overtake those <strong>in</strong> <strong>the</strong><br />
USA by 2011.<br />
2.19 One driver of domestic format <strong>in</strong>novation comes of course from cont<strong>in</strong>ually grow<strong>in</strong>g<br />
<strong>in</strong>ternational activity with<strong>in</strong> <strong>the</strong> <strong>UK</strong>. Estimates made <strong>in</strong> 2005 suggested that over 500<br />
non-<strong>UK</strong> retailers currently trade <strong>in</strong> <strong>the</strong> <strong>UK</strong>, numbers which have been ris<strong>in</strong>g over <strong>the</strong><br />
past twenty years, with high proportions of operators <strong>in</strong> cloth<strong>in</strong>g, footwear and<br />
accessories, health & beauty, toys and games and department & variety store retail<strong>in</strong>g<br />
(<strong>Retail</strong> Knowledge Bank, 2005).<br />
iv. Regulatory drivers<br />
2.20 Regulation is often seen by retailers as an unnecessary cost to <strong>the</strong> bus<strong>in</strong>ess, but regulation<br />
can work to direct and focus <strong>in</strong>novation <strong>in</strong> unanticipated and o<strong>the</strong>rwise unexplored ways,<br />
<strong>in</strong> seek<strong>in</strong>g to atta<strong>in</strong> specific social, economic and environmental goals. There is no central<br />
f<strong>in</strong>ancial analysis of <strong>the</strong> adm<strong>in</strong>istrative burden of regulation on <strong>UK</strong> bus<strong>in</strong>ess, although <strong>the</strong><br />
estimate is of some £20-£40bn per annum across all firms (Better Regulation Task Force,<br />
2005). The Task Force also estimated that small retailers were disproportionately affected<br />
over large: with small shopkeepers spend<strong>in</strong>g 3-5 days a month deal<strong>in</strong>g with a range of<br />
government adm<strong>in</strong>istration (Better Regulation Task Force, 2001).<br />
2.21 There is some evidence that <strong>the</strong> burden of retail regulation on <strong>the</strong> sector has reduced<br />
(Figure 2.1). Recent work by OECD suggested that <strong>the</strong> <strong>UK</strong> fell from <strong>the</strong> 8 th to <strong>the</strong> 17 th<br />
most regulated market from 1998 to 2003, although <strong>the</strong> difference was not statistically<br />
significant (OECD, 2006). Regulation can affect retailers <strong>in</strong> two ways <strong>in</strong> relation to<br />
<strong>in</strong>novation. The overall economic viability of any retail bus<strong>in</strong>ess model might be adversely<br />
affected or constra<strong>in</strong>ed. Additionally, however, because of <strong>the</strong> nature of retail bus<strong>in</strong>ess,<br />
regulation also <strong>in</strong>fluences <strong>the</strong> possible locations available for a particular retail format and<br />
<strong>the</strong> costs of servic<strong>in</strong>g those locations.<br />
2 Christenson & Tedlow (1999) def<strong>in</strong>e disruptive technologies as <strong>in</strong>novations that change <strong>the</strong> economics of an <strong>in</strong>dustry (even if <strong>the</strong>y may not be<br />
<strong>in</strong>itially profitable <strong>in</strong>novations).<br />
Page 14