Innovation in the UK Retail Sector - Nesta

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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
Vignette 5.3: Currys customer recycling proposition Context: Using regulation to improve customer service Innovation in the UK Retail Sector Example: In July 2007 the UK Government introduced the Waste Electrical and Electronic Equipment (WEEE) Directive. Many retailers elected to join the Government’s own take-back scheme, where consumers take goods to designated recycling facilities. Others retailers charged for collection. Currys, whose parent company DSGi had the experience of implementing the Directive in 12 countries, instead offered a different customer alternative to the Directive: the UK’s first and only free in-store and home collection recycling service. Customers are able to return their old products to any store, even if the original item was not bought at Currys. Home delivery customers can have appliances collected at the same time. In addition to investing in the scheme infrastructure, Currys has invested in promoting free in-store and home collection of recyclable goods through its latest TV advertising campaign. This has the dual benefit of raising awareness in recycling and shows Currys as willing to go the extra mile for customers. The scheme is providing Currys with the opportunity to deliver (and communicate) better customer service, and customer feedback has been overwhelming. Customers are delighted to have the opportunity to recycle without the inconvenience of transporting old equipment themselves. Since the scheme was launched in store on 1 July, the number of products collected has been almost double Currys’ expectations. Approximately 85% of all appliances are recycled and many products are reused some for charity. Currys is delighted that its innovative solution to a piece of legislation has been so successful. In addition, the transportation of the equipment has not added any additional miles to the supply chain as Currys’ existing delivery lorries – that would otherwise return to the Newark national delivery centre empty are being used for collections (DSGi, 2007) Vignette 5.4: Marks & Spencer and RFID Context: Applications of new technologies Example: Following a successful trial in 42 stores in May 2007 Marks & Spencer has completed installation of RFID infrastructure in its 120 largest stores which allows for better supply chain visibility, more accurate and efficient stock taking and improved availability of products in their stores. The company is also finalising training some of its staff on the BT RFID technology (Friedlos 2007). Vignette 5.5: Tesco in a Box Context: Applications of new technologies Example: ‘Tesco in a Box’ is Tesco’s solution to the need for consistency of execution when entering a new market. It comprises a centralised web-based management information system which measures stores against key business performance indicators. Tesco in a Box went live in the first store in Turkey in March 2005 and has been rolled out to the company's Japanese and Chinese businesses. A later version incorporates supply chain and merchandise management software. “Business intelligence can be reproduced in other countries at minimal cost” (Company). Page 41
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 39: Innovation in the UK Retail Sector
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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