Innovation in the UK Retail Sector - Nesta

4. How do retailers think about innovation?
Innovation in the UK Retail Sector
4.1 The retailers to whom we spoke as part of this research (Hristov, 2007) acknowledged
overwhelmingly the crucial role of innovation for the performance of any retail business.
Without innovation, they suggested, like-for-like growth and profit margins decline and
organisations run into life-cycle issues:
“You get about two years under the sun and then suddenly there is a new kid on the block … ever so
often you have to take a long hard look at yourself”
(CEO)
But our findings also indicated that there is a real range of meanings and interpretations
among retail practitioners as to what constitutes innovation in retailing, and this may
contribute to under-reporting in conventional surveys. It’s seen not just as:
• A necessary means to continued existence, but also as
• Change with positive, long-lasting effects,
• A cross-business process of generating and implementing commercially viable ideas
that deliver benefits to customers, and
• A process of implementation of new ideas which creates differentiation in the
marketplace.
4.2 Further, retailers acknowledged that defining and measuring retail innovation was difficult
since innovations were largely dispersed across the business: requiring the co-ordinated
effort of a wide constituency of people across functional areas and including suppliers
and customers. As a term, therefore, ‘innovation’ often did not appear immediately self
explanatory to retail practitioners. Or, as one senior consultant put it,
“Innovation, its too big a term. To communicate it, one has to break it into its component parts.”
4.3 With some notable exceptions most of the retailers in the sample pointed out that they
did not use the term in their everyday vocabulary. Yet they felt that their organisations
innovated all the time without having innovation directors or departments. Some referred
to ‘innovation’ as a composite term which in practice needed to be translated into more
concrete operational terminology such as: ‘new product development (NPD)’, ‘new
SKUs’, ‘new categories’, ‘refreshing the range’, ‘new formats’, ‘new markets’, or ‘new
applications of technology’.
“It is very hard to define innovation. We are a fashion retailer; therefore every time you design a
new product is that innovation? How different does it have to be, to be innovation? We innovate
in the product, in our designs, in our store environment, we are creative in the way we brand
ourselves and in the way we interact with our customers but there are many levers to pull, I think
the trick is to pull these at the right time and at the right level, rather than thinking next year
I'm going for my store refit, or next year I’m going to launch an all-new product offering, one has
to be entrepreneurial about that.”
(CEO Fashion Retailer).
4.4 Some retailers perceive the term ‘innovation’ as a much more radical departure from
‘business as usual’ rather than incremental change in operational practices and new
product development.
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