Innovation in the UK Retail Sector - Nesta

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Innovation in the UK Retail Sector software system, developed in-house. Given the determinedly local scale of the operation, Somerset Local Food Direct offers a remarkable range of goods, amounting to well over a 1,000 SKUs including fresh locally produced meats, vegetables, dairy produce, eggs, breads, preserves and snacks. Such a range caters for a large proportion of the weekly requirements of customers which in tunrn generates additional customer loyalty. As a result, the average order value is healthy, with some customers ordering up to £80 worth of food at a time. This is important to the economics of the operation, as, even with a delivery charge of £3, small orders are unlikely to be economic to fulfil. This coupled with recommendations from satisfied customers has helped the delivery model of the retailer, which now operates on the basis of ‘delivery clusters’, where several drops are close together and thus make the delivery operation more efficient (www.localfooddirect.co.uk). Vignette 4.8: Smiley’s Delicatessen, Farm Shop and Café Context: Offer-related innovation in a small rural retailer Example: Smiley’s is not a standard village shop but a hybrid retail concept balancing the range of lines stocked and the different needs of teashop/café and the retail side. The shop’s range is tailored to the modern reality that most people buy their cans and packets at the large supermarkets and the role of local shops is to provide short life products bought between the weekly or fortnightly visits to large food stores. The shop has a large serve-over dairy and delicatessen section, with fresh produce, much of it local, a limited range of groceries (for the “I forgot to buy it at the supermarket” customer) together with a wide range of confectionery including loose sweets in jars for the nostalgic. Fresh produce is displayed with some flair in wicker baskets and in artistic piles. Friendly customer service is a key part of the offer together with a willingness to listen to customers’ requests for items not already stocked. However, the most interesting aspect of the shop is the mix of retail and café. The café section is totally integrated with the shop but delineated by a pillar and a change in floor tile colour. This has a French theme and feel. With 26 covers, the café provides informal eating with the possibility of evening service as well at weekends or other times. Lunch has proved very popular, in particular on Sundays. The challenge is to produce a menu that is interesting whilst being not too difficult to produce without a dedicated chef on the premises, that is “homemade” without eliciting the response, “Well, I could do it just as well at home”. Catering provides much higher gross profit margins than retail but there are higher costs as well, in terms of time required to prepare and serve the food, wastage, space, etc. Hence managing the balance between the two halves of a business like this is crucial - being able to cope with the inevitable peaks in customer demands. Theories of retailing might suggest that the demand from the village itself is too small to sustain the shop or cafe on its own. However, there is also significant passing trade on the A road that passes through Sandford, the shop having a large forecourt for parking (The Rural Shops Alliance 2007). Vignette 4.9: Boots and Tesco: customer-centric supply chain innovation Context: Supply chain innovation Examples: In 2005 Boots launched the first phase of its Store-Friendly Supply Chain (SFSC) programme taking a more customer-centric perspective to the way it organise its supply chain. The aim is to improve stock availability and free up staff time in store to serve customers instead of unpacking and sorting merchandise. Boots claims that as a result of SFSC, over 80% of items are arriving at stores ready to go straight onto shelves, a huge saving in time and energy for busy store managers and their teams. (Boots Annual Report 2006) Tesco is improving the efficiency of its in-store operations and on-shelf availability by innovating in what the industry experts refer to the ‘last 50 yards’. In shelf-replenishment terms this means increased use of new design merchandising units, easier to refill freezer units with drop down fronts, shelf-ready packaging (SRP) and trials of in-store applications of RFID. Vignette 4.10: The Mid Counties Co-op: payment systems innovation Context: Retail applications of biometric technology Example: The Mid Counties Co-op has introduced a finger-touch payment system, enabling customers to pay for their shopping by scanning their fingerprint at the checkout. The biometric payment system developed by a consortium of a technology firm in San Francisco, Fujitsu and Pay By Touch has been tested by the Mid Counties Co-op in three of its stores in the Oxfordshire area. Customers using the ‘Pay By Touch’ can set up an account at the store or over the internet. Once their fingerprint has been identified at the checkout the customer's bank account is automatically debited. The retailer’s own research suggests that ‘Pay by Touch’ has the capacity to be up to 20% than using ‘chip and PIN’. Page 32
Innovation in the UK Retail Sector According to the retailer the initial customer response to this innovation has been very encouraging. From a sample of 1000 Coop shoppers in the areas where the system is in operation half has already signed up to the scheme or planning to do so in the near future. The Co-op is the first retailer in the UK to launch this new technology which offers a secure and convenient way of payment. (www.software.silicon.com; www.imrg.org, 23.10.2007) Vignette 4.11: ASDA Context: Innovating in sustainable development Examples: − Fair trade: ASDA claims to be the largest seller of Fairtrade fruit and vegetables in the UK, and is extending its Fairtrade lines across the range. − Organics: ASDA has reported that it will increase its organic ranges from the current 300 SKUs to 1,000 SKUs by the end of 2007. − Transport/logistics: The retailer has entered planning applications to install wind turbines at six of its UK distribution centres (www.planetretail.net, 03.08.2007). − Eco stores footprint: The company is planning to open its first sustainable timber frame with view of lowering its carbon footprint. This will eradicate the use 500 tonnes of steel and is expected to save 450 tonnes of carbon emissions while improving the energy efficiency of the stores by 20%. − The company aims to achieve zero waste going to landfill by 2010. (www.asda-press.co.uk, 18.10.2007) Vignette 4.12: The Co-op Context: Innovating in sustainable development Examples: The Co-operative Group strives to evolve its business model in a sustainable manner by undertaking a number of commitments and environmental initiatives such as: − 98% of outlets to be powered by green electricity − The initiation of wind farm projects − Solar power and micro-wind installations on two Head Offices − Commitment to reduce energy consumption by 25% by 2012 − The entire own-brand household paper range sourced from responsibly managed forests and recycling facilities certified by the Forest Stewardship Council. (Presentation by Martin Beaumont, CEO, at the BRC conference (2007) “The secrets of retail success”) Page 33
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 and 24: v. Retailers’ reverse innovation
Page 31: Innovation in the UK Retail Sector
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
Page 77 and 78: Appendix 1 Research Methodology 350

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