Innovation in the UK Retail Sector - Nesta
Innovation in the UK Retail Sector - Nesta
Innovation in the UK Retail Sector - Nesta
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
<strong>Innovation</strong> <strong>in</strong> <strong>the</strong> <strong>UK</strong> <strong>Retail</strong> <strong>Sector</strong><br />
• Number of (or %) new products: 59% of <strong>the</strong> senior managers <strong>in</strong>terviewed gave<br />
example of at least one of <strong>the</strong>se: for <strong>in</strong>stance overall number of new products, SKU,<br />
categories, or <strong>in</strong>troductions of modified products versus entirely new products. Some<br />
referred to <strong>the</strong>se as ‘semi-<strong>in</strong>novation’ versus ‘true <strong>in</strong>novation’, o<strong>the</strong>rs as ‘straight<br />
swaps <strong>in</strong> <strong>the</strong> range’ substitut<strong>in</strong>g old products with new ones, or <strong>the</strong> percentage of<br />
sales com<strong>in</strong>g from new products. One large DIY retailer, for example, tracks <strong>the</strong><br />
percentage of product purchas<strong>in</strong>g versus <strong>the</strong> percentage of project purchas<strong>in</strong>g (i.e., a<br />
kitchen unit versus a whole new kitchen).<br />
Some NPD departments track <strong>the</strong>ir performance as percentage of sales of all own<br />
brand products <strong>in</strong>troduced <strong>in</strong> <strong>the</strong> range for one year period. Some managers see <strong>the</strong>se<br />
measures as a fairly crude <strong>in</strong>dication of <strong>in</strong>novativeness, emphasis<strong>in</strong>g <strong>the</strong> importance<br />
of quality over quantity of launches. O<strong>the</strong>r practitioners believed that <strong>the</strong>se measures,<br />
when tracked longitud<strong>in</strong>ally, served to highlight <strong>the</strong> overall rate of <strong>in</strong>novation.<br />
“Percentage of sales of new products is someth<strong>in</strong>g I measure but we don’t th<strong>in</strong>k that big is always<br />
good any more. It’s a measure but it’s not a measure that is <strong>in</strong> proportion to how [successful we are].<br />
We don’t want to see more necessarily <strong>in</strong> fact we want to see fewer but more successful new products<br />
launched … ra<strong>the</strong>r than more”<br />
(NPID Director).<br />
• Consumer <strong>in</strong>sights: 34% of managers believed that customer <strong>in</strong>sights were essential<br />
non-f<strong>in</strong>ancial <strong>in</strong>dicator for levels of successful <strong>in</strong>novation <strong>in</strong> <strong>the</strong> bus<strong>in</strong>ess. Markets<br />
change, consumer needs change and retailers need to cont<strong>in</strong>uously <strong>in</strong>novate <strong>in</strong><br />
anticipation of <strong>the</strong>se changes.<br />
“Our customers are chang<strong>in</strong>g and so are <strong>the</strong>ir needs, <strong>in</strong>novation keeps us relevant…without <strong>in</strong>novation<br />
our like-for-like growth will not succeed, you get <strong>in</strong>to product life cycle issues, you’ll degrade your marg<strong>in</strong>s<br />
and profitability, and will end up commoditis<strong>in</strong>g your offer”<br />
(Commercial Director).<br />
Here retailer KPIs <strong>in</strong>clude chang<strong>in</strong>g levels of consumer acquisition and retention, lifetime<br />
value, measures of loyalty such as ‘net promoter scores’, satisfaction, usage rates,<br />
conversion rates, frequency of purchase and repeat purchase.<br />
• Time-related measures: Time span (pre- or post-launch) will depend on <strong>the</strong> overall<br />
strategic value of <strong>the</strong> opportunity. These are often referred to as milestones for<br />
track<strong>in</strong>g market penetration levels (for example, <strong>the</strong> first milestone might be 6<br />
months, <strong>the</strong>n 8 months or 6 weeks from launch). O<strong>the</strong>r measures might <strong>in</strong>clude time<br />
to market or speed to market.<br />
7.10 59% of respondents gave examples of comb<strong>in</strong><strong>in</strong>g f<strong>in</strong>ancial with non-f<strong>in</strong>ancial measures<br />
of <strong>in</strong>novation (see Figure 7.1).<br />
Page 51