Innovation in the UK Retail Sector - Nesta

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Innovation in the UK Retail Sector 2.18 Technology has played a complex role in relation to retail change. Retailers themselves have been generally reluctant adopters of technology (CEC, 1991). The majority of firms have tended to be adapters rather than innovators, using information technology to support existing operations. As a result, investment in ICT conferred little lasting competitive advantage even if it managed to raise rudimentary barriers to entry. Indeed, ‘successful’ retail ICT for many in the 1990s comprised projects that did not involve long term research & development, provided a visible financial benefit, came without extensive capital commitment and provided for low risk, staged implementation. Even today, ICT accounts for extremely low levels of capital spend in the sector. However, a number of leading firms have used technology to achieve significant gains in productivity (Johnson, 2002). In addition, disruptive innovations driven by technology, such as ecommerce, have resulted in significant challenges for the sector. 2 For example, the anticipated compound annual growth rate between 2007 and 2012 for retail online spending is 14%. The expectation is that online sales in the EU will overtake those in the USA by 2011. 2.19 One driver of domestic format innovation comes of course from continually growing international activity within the UK. Estimates made in 2005 suggested that over 500 non-UK retailers currently trade in the UK, numbers which have been rising over the past twenty years, with high proportions of operators in clothing, footwear and accessories, health & beauty, toys and games and department & variety store retailing (Retail Knowledge Bank, 2005). iv. Regulatory drivers 2.20 Regulation is often seen by retailers as an unnecessary cost to the business, but regulation can work to direct and focus innovation in unanticipated and otherwise unexplored ways, in seeking to attain specific social, economic and environmental goals. There is no central financial analysis of the administrative burden of regulation on UK business, although the estimate is of some £20-£40bn per annum across all firms (Better Regulation Task Force, 2005). The Task Force also estimated that small retailers were disproportionately affected over large: with small shopkeepers spending 3-5 days a month dealing with a range of government administration (Better Regulation Task Force, 2001). 2.21 There is some evidence that the burden of retail regulation on the sector has reduced (Figure 2.1). Recent work by OECD suggested that the UK fell from the 8 th to the 17 th most regulated market from 1998 to 2003, although the difference was not statistically significant (OECD, 2006). Regulation can affect retailers in two ways in relation to innovation. The overall economic viability of any retail business model might be adversely affected or constrained. Additionally, however, because of the nature of retail business, regulation also influences the possible locations available for a particular retail format and the costs of servicing those locations. 2 Christenson & Tedlow (1999) define disruptive technologies as innovations that change the economics of an industry (even if they may not be initially profitable innovations). Page 14
Innovation in the UK Retail Sector Figure 2.1: Anti-competitive regulations in retail distribution, 1998-2003 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Belgium Greece Spain Poland France Germany Norway Canada United States Finland Denmark Japan Source: OECD International Regulation Database, 2006. Note: Graph ranked by extent of regulation in 2003. Scale of regulation from 0.0 to 6.0, with 6.0 being the most restrictive. 2.22 The OECD study did not include these kinds of regulatory constraints in its analysis. In addition to planning and competition policy, such regulations might include: Italy • Modally-constrained access to town and city centres by consumers (such as bus lanes, greenways and park & ride schemes); • Delivery curfews (the British Retail Consortium suggested that some 32% of all retailers were adversely affected by a delivery curfew of some sort in 2005, at a cost of some £3.3mn), and the • Cost of parking (Parking revenues in London alone were an estimated £500mn in 2005.) Portugal United Kingdom Mexico Turkey Netherlands Korea Hungary Australia Ireland 1998 2003 Switzerland Sweden Page 15
Page 1 and 2: Report for NESTA December 2007 Inno
Page 3 and 4: Contents Innovation in the UK Retai
Page 5 and 6: Innovation in the UK Retail Sector
Page 9 and 10: 2. The nature and contribution of r
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Page 23 and 24: v. Retailers’ reverse innovation
Page 41 and 42: Vignette 5.3: Currys customer recyc
Page 43 and 44: 6. What are the barriers to retail
Page 47 and 48: 7. What are the measures of retail
Page 49 and 50: . Types of Measures Innovation in t
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. Promoting innovation in sustainab
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Innovation in the UK Retail Sector
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Conclusion/Next Steps: Innovation i
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Recommendation 4: Innovation in the
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Appendix 1 Research Methodology 350
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Innovation in the UK Retail Sector - Nesta

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