Innovation in the UK Retail Sector - Nesta
Innovation in the UK Retail Sector - Nesta
Innovation in the UK Retail Sector - Nesta
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<strong>Innovation</strong> <strong>in</strong> <strong>the</strong> <strong>UK</strong> <strong>Retail</strong> <strong>Sector</strong><br />
on product), ROI from new retail formats, ROI from new projects, ROS targets after<br />
product launch, discounted cash flow, etc. (See Figure 7.2).<br />
“It’s always return on <strong>in</strong>vestment (ROI) - at <strong>the</strong> end of <strong>the</strong> day we are here to make a profit. But<br />
because of new brand considerations, we are also now start<strong>in</strong>g from <strong>the</strong>ir perspective to look at th<strong>in</strong>gs like<br />
web page impressions…”<br />
(E-commerce Manager).<br />
“We have a realistic F<strong>in</strong>ance Director who is aware of <strong>the</strong> value of market<strong>in</strong>g but is encourag<strong>in</strong>g us to<br />
qualify everyth<strong>in</strong>g on an ROI basis”<br />
(Market<strong>in</strong>g Director, Grocery <strong>Retail</strong>er).<br />
• Profit marg<strong>in</strong>s: 37% of practitioners considered profit marg<strong>in</strong>s as an essential<br />
measure for track<strong>in</strong>g <strong>the</strong> success or failure of new products and as a contribut<strong>in</strong>g<br />
factor (among o<strong>the</strong>rs) <strong>in</strong> cont<strong>in</strong>u<strong>in</strong>g or discont<strong>in</strong>u<strong>in</strong>g a new product or a category.<br />
“I th<strong>in</strong>k we measure its performance us<strong>in</strong>g all <strong>the</strong> standard f<strong>in</strong>ancial matrixes that we use for <strong>the</strong><br />
ma<strong>in</strong>stream bus<strong>in</strong>ess, but you have to have a more of a relaxed <strong>in</strong>vestment targets for it. I th<strong>in</strong>k if<br />
you expect <strong>the</strong> same rate of payback or <strong>the</strong> same rate of return you get from <strong>in</strong>vestment <strong>in</strong> your core<br />
bus<strong>in</strong>ess, you’ll never support a new start-up bus<strong>in</strong>ess”<br />
(CEO).<br />
Figure 7.2. Key f<strong>in</strong>ancial measures of <strong>in</strong>novation<br />
100%<br />
90%<br />
80%<br />
70%<br />
60%<br />
50%<br />
40%<br />
30%<br />
20%<br />
10%<br />
84%<br />
0%<br />
Overal f<strong>in</strong>ancial<br />
measures<br />
Source: Hristov, 2007<br />
78%<br />
ii. Non-f<strong>in</strong>ancial measures of <strong>in</strong>novation<br />
7.9 Non-f<strong>in</strong>ancial measures of <strong>in</strong>novation have been relatively recently applied <strong>in</strong> retail<strong>in</strong>g.<br />
They are designed to track <strong>the</strong> share of new activities <strong>in</strong> <strong>the</strong> broader context of <strong>the</strong><br />
bus<strong>in</strong>ess, over a longer period of time, or to measure on a regular basis some of <strong>the</strong> soft<br />
benefits of <strong>in</strong>novation such as customer perceptions about <strong>the</strong> retailer and its brand (i.e.,<br />
levels of satisfaction, awareness, loyalty, perceived quality, image or position<strong>in</strong>g vis-à-vis<br />
competition, etc.). These are of three types: (1) number of (or % of) new products, (2)<br />
consumer <strong>in</strong>sights and (3) time-related measures (see Figure 7.3).<br />
65%<br />
Sales and market share Rate of return measures<br />
(ROI, ROIC, ROS, etc.)<br />
37%<br />
Profit marg<strong>in</strong>s<br />
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