Innovation in the UK Retail Sector - Nesta

Innovation in the UK Retail Sector
New ideas can easily get suppressed and eliminated simply in the quest for earnings, growth and
performance” (CEO).
“There are some markets that you may want to go into, because of the opportunities they provide, but this
may involve a period of sustained investment, which could mean that you have to go down before you go
up. It is a balancing equation of how much you can loose before you gain. This could be a challenge to
innovation. You have to make a commercial decision which ideas you are going to exploit and which not.
Some ideas have to get parked for a while” (HR Director).
Vignette 5.1: IKEA, Coventry
Context: The regulatory environment as a driver for innovation
Example: IKEA’s need to develop its business in the UK coincided with the opportunity to experiment with its first multi-level
(more than 2 storey) store in the context of the Town Centres First policy. The 23,850 m2 gross development (on four levels,
with three levels of car parking), proposed for the city centre of Coventry, follows a five-year site search in and around the city.
The company’s trading concept - its retail format - is well-established and has hitherto varied little in the 34 countries in which the
firm trades. The concept is based on self service (with the requirement for a self-serve warehouse), a Market Hall for home
furnishing accessories, and a Showroom.
IKEA has made several significant compromises in the development of the Coventry concept. In the Coventry design, customers
will park on one of the three lowest levels, or will arrive by bus or on foot, and will start their shopping in the showroom on the
topmost, sixth level. The market hall is on the floor below, and the self serve warehouse split between levels four and three.
Home delivery and bistro facilities are on the ground floor. Up to 15 HGVs a day will provide a regular supply of goods inward.
Car parking provision is well below the current Government maximum. Further adaptation had been resisted, however.
Disaggregation of the IKEA concept into separate units had been acknowledged by the Secretary of State to be inappropriate.
IKEA stresses that doing this would have led to higher prices.
Vignette 5.2: Drivers of innovation
Context: The regulatory environment
Examples: Retailers’ strategies and the attractiveness of particular technologies are influenced and directed by the regulatory
environment within which retailers operate. For instance:
− An unanticipated consequence of a more restrictive planning policy towards out- and edge-of-town retail development,
combined with adoption of congestion charging or road pricing may be to reinforce the attractiveness of e-commerce
technologies amongst consumers and retailers. Already, e-commerce market shares in the UK are running broadly twice as
high as in the US. UK total online sales for 2006 reached £30.2bn, exceeding the forecasted £30bn.
− Another significant emerging driver is that around future environmental regulation. Firms with extensive property portfolios,
such as retailers, are substantial energy users. Further, increased responsibilities for recycling will add complexity to the
logistics function. Technologies – such as design simulation and modelling applications – are likely to be important in
producing more energy efficient stores. Similarly, improved materials handling and vehicle utilisation systems will materially
assist retailers seeking to meet their recycling responsibilities cost effectively. For instance Boots are aiming to reduce reliance
on landfill by reusing and recycling over 17 different types of material which otherwise would be disposed of to landfill.
Many grocery retailers use backhauling of waste to increase fleet utilisation through minimising empty running or trailers back
from stores.
(Reynolds 2005; www.imrg.org; www.bitc.org.uk, 18.10.2007)
Page 40