Innovation in the UK Retail Sector - Nesta

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Vignette 3.2: The Local Epicurean/Budgens Context: Innovation in a small retailer Innovation in the UK Retail Sector Example: The Local Epicurean was founded in 2006 by Andrew Thornton, a retail consultant who acquired his first food store from Budgens and joined the Musgrave-Budgens-Londis (MBL) franchise. Less than two years later his company The Local Epicurean operates two Budgens branded stores, the first one of 9,000 sq ft in London’s Crouch End and the second of 7,000 sq ft, located in Belsize Park. The company employs altogether 170 people and has an annual turnover of about £17 million. Budgens as a retail brand is owned by MBL - Ireland’s largest food and grocery distributor. The business model is based on independent retail operators who buy products from the company and to whom MBL provides sales, marketing, IT and logistical expertise. In the process the independent franchisees have a fair amount of freedom in terms of how they construct their ranges in view of local needs. According to Thornton: “Consumer needs can be very different from one place to another therefore the benefit of such entrepreneurial model is that individuals who own their stores will do what is absolutely right for the local community. There some guidelines you have got to follow in terms of brand entity, but within that, how you work with the local community is up to you.” Therefore while Thornton has to buy a substantial amount of his goods through the MBL system he does not have to buy all of them from there. “So you can buy from Musgrave your corn flakes at competitive prices but you can also buy your bread from the local baker who is just 50 yards across the street.” Thornton’s two stores serve over 22,000 local customers seven days a week. Competition in the area is intense. Just within a walking distance from of his Crouch End store there are one Tesco Express and a Marks & Spencer Simply Food - both formidable competitors. Therefore as a retail entrepreneur, he sees his role in keeping the business fresh and attractive to customers: innovation is not a matter of choice but a matter of survival. “We must innovate continuously and in a customer focused way to sustain and grow the business and my job is all about innovation really, business development, changing things making thins better. That’s how I would define innovation – basically ‘change in a business’ in line with what customers want.” New ideas are implemented through a team of managers whose concern is the smooth day-to-day running of the business. The innovation effort of the company is channelled in three broad directions: (1) local sourcing, (2) environmental initiatives and (3) retailing tailored for the local community. 1. A distinctive store, localised product range and friendly services are seen as absolutely essential in establishing the two stores as local destinations. Since the acquisition, the Crouch End store has been refurbished to reflect Thornton’s vision of innovative food retailer. The revamp included the introduction of zones for delicatessen, beers, wines and spirits and the introduction of new lines with emphasis on local foods. Additionally a ‘food to go’ counter was installed replacing a chiller cabinet for pre-packed sandwiches. The new unit features juice and coffee bars for freshly made fruit juices, smoothies and Lavazza coffee and also offers freshly baked bread and made to order sandwiches. The store has an Epicurean Deli with fresh salads and meats all sourced locally. “There are a many good food producers around London which we want to bring in our stores. In fact we are organising a meeting in January with about 15 of them and will be working with them to introduce their products into our stores.” Both stores already offer a sizable range of ‘direct from the producer’ SKUs, sourced within 100 miles and free from artificial colours and preservatives. There is also the ‘product of the week’ initiative with regular supplier tasting in-store, shelf-edge labels clearly indicating the food miles of each of the local products. The stores offer fresh bread from Dunn’s - a local bakery, a range of food products from Suffolk and cheeses from Whitfield. 2. In terms of the environment, the company innovates through a range of initiatives. ‘Pennies for plastic’ is one of them. “We want to encourage people to re-use their bags, therefore for every bag not used in our stores we are donating 1 penny to a local charity.” The campaign has helped raise money for building a new stage at the local school - Weston Park Primary. The message has been clearly publicised both in-store and through the media. The initiative has gradually gained momentum, the end result being that Budgens Crouch End has managed cut in 5 months their carrier bag usage by 55%. According to Thornton this is the first step towards altogether substituting the disposable plastic bags for the more environmental reusable and Jute bags. “In March next year we are planning to give away 15,000 reusable and Juke bags and then we shall stop altogether offering disposable plastic bags in our stores.” Other environmental initiatives include food composting, making sure that food products refuse is composted rather than to put in landfills and hoisting the heat emitted from the store chillers back into heating up the stores, thus reducing energy consumption. These initiatives are carried out in co-operation with environmental organisations, one of them - The Carbon Trust. 3. The third direction for innovation according to Andrew Thornton is local community retailing. This includes a range of initiatives the aim of which is to make local independent retailers the preferred destination for shoppers. “There are many good independent retailers locally, but we have to market ourselves more effectively. The idea is make independent retailing in Crouch End more attractive and to encourage local shoppers to stop using their cars, travelling all that way to out of town shopping centres and instead just walking Page 24
Innovation in the UK Retail Sector down to their local high street to for their shopping.” Thornton refers to this set of initiatives as ‘The Crouch End Project’. The idea was initially developed with the head of the parents association at the local school where the Local Epicurean has built a new stage. 26 independent retailers have joined forces the project sponsoring the local fun run, school carol concerts, music, wine and cheese evenings. “We have even designed our very own Crouch End cotton shopping bag and we are experimenting with a Crouch End wedding list, that sort of innovations we develop with shoppers and retailers together. They are relatively inexpensive and easy to reverse if they don’t work. We keep innovating since that’s important both for us and our customers” (Hristov, 2007 - Company interview). Vignette 3.3: Marks & Spencer Context: Innovation in sustainable development, co-innovation; retailers’ reverse innovation cycle Example: In October 2007 Marks and Spencer unveiled its first eco-store in Bournemouth. The completely refurbished 51,000 sq ft store incorporates a whole host of new eco-technologies. It is completely powered by renewable energy and is 25% more energy efficient. Its innovative footprint has been developed in line with the M&S’ Plan A in which the retailer has pledged £200 m over 5 years on innovating on sustainable and ethical projects. For instance by year 2012, M&S aims to: − become carbon neutral, − send no waste to landfill, − extend sustainable sourcing, − set new standards in ethical trading, and − help customers and employees live a healthier lifestyle. The above is expected to be achieved in tandem with organisations such as WWF in the area of new sustainable store concepts, WRAP in area of eco-friendly packaging, and with their commercial suppliers on issues of reducing carbon emissions, and the development on new eco-products and healthier foods. The Bournemouth store which is the first of four planned in the next few years has its own green travel plan and bike racks to encourage customers and staff to cycle to the outlet. (www.marksandspencer.com, 23.10.2007) Page 25
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
Page 23: 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
Page 65 and 66: . Promoting innovation in sustainab
Page 69 and 70: Conclusion/Next Steps: Innovation i
Page 73 and 74: Recommendation 4: Innovation in the
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Innovation in the UK Retail Sector
Page 77 and 78:
Appendix 1 Research Methodology 350
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