Innovation in the UK Retail Sector - Nesta

Innovation in the UK Retail Sector
Figure 3.2. The extent of reported ‘wider innovation’ within retailing
Marketing
Organisational structure
Management
Corporate strategy
WIDER INNOVATOR
0 5 10 15 20 25 30 35 40 45
Source: Community Innovation Survey 2004 (CIS4), 2005.
per cent
Retail trade Engineering All sectors
3.8 Just over a fifth of retail enterprises reported having engaged in one or other form of
wider innovation during 2002-04. The most popular form was marketing-related; the least
connected with the introduction of advanced management techniques. However, levels of
wider innovation were below the national average for all firms and well below that
reported for engineering.
3.9 So if there is a widespread perception that the best of UK retailing is creative and
innovative, how might we explain such a discrepancy in terms of innovation performance
according to the CIS4 innovation survey? There may be several explanations. Perhaps we
are dazzled by the best practice of a few leading innovators in the sector, which serves to
conceal a lack of innovative activity elsewhere in retailing. Or, as we have suggested,
perhaps the environment for innovation in retailing is different and distinctive in some
way that masks or changes its nature. Or it may be that retailers think about innovation
differently, or conduct innovation of a somewhat different kind than that which is
conventionally used as an indicator by the statistics. We examine some of these possible
explanations below in identifying five distinguishing features of retail innovation and the
environment in which it occurs.
3.10 Discussions with retailers as part of this research suggested that a lot of retail innovation
is more about changes in ‘how’, ‘where’ and ‘when’. Continuous and non-linear,
innovation in retailing appears much closer to the entrepreneurial notion of innovation
according to which it is immaterial whether innovations involve an element of scientific
novelty or not. In this respect innovation is seen as an economic process of cause and
effect which essentially involves putting available resources to new uses. According to
Ogawa (1998), who explores supply chain innovations, retailers tend to develop
functionally novel supply chain innovations in contrast to manufacturers who tend to
develop innovations that improve on well-articulated needs. For instance in terms
inventory-management systems retailers tend to focus on new approaches to inventory
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