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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1. Introduction<br />
<strong>Innovation</strong> <strong>in</strong> <strong>the</strong> <strong>UK</strong> <strong>Retail</strong> <strong>Sector</strong><br />
1.1 There is a broad consensus that <strong>in</strong>novation deals with <strong>the</strong> successful exploitation of ideas<br />
which leads to susta<strong>in</strong>able economic growth. However, <strong>the</strong> precise mean<strong>in</strong>gs, practices,<br />
measurements of and potential support for <strong>the</strong> <strong>in</strong>novative activities of firms largely<br />
depend on <strong>the</strong> context <strong>in</strong> which <strong>the</strong>y occur. The present <strong>Innovation</strong> <strong>in</strong> Services <strong>in</strong>itiative<br />
recognises that <strong>in</strong>novation <strong>in</strong> services may be different <strong>in</strong> its nature, <strong>in</strong>cidence and<br />
measurability than that <strong>in</strong> more tangible sectors of <strong>the</strong> economy, and that different<br />
actions and policies may be required of Government <strong>in</strong> support of service sector<br />
<strong>in</strong>novation. What, <strong>the</strong>n, of <strong>in</strong>novation <strong>in</strong> <strong>the</strong> retail sector, one of <strong>the</strong> largest <strong>in</strong> terms of<br />
value added and employment with<strong>in</strong> <strong>the</strong> <strong>UK</strong> service sector? <strong>Retail</strong><strong>in</strong>g is considered to be<br />
a service but is, of course, a hybrid economic activity perform<strong>in</strong>g a bridg<strong>in</strong>g role between<br />
production and consumption, <strong>in</strong> which firms br<strong>in</strong>g toge<strong>the</strong>r assortments of goods<br />
relevant to <strong>the</strong> needs of consumers. Yet <strong>the</strong> nature of <strong>in</strong>novation <strong>in</strong> this important sector<br />
is often poorly understood and <strong>in</strong>adequately measured.<br />
1.2 Over <strong>the</strong> last forty years, <strong>UK</strong> retailers have become much more active <strong>in</strong> <strong>the</strong>ir own right<br />
with<strong>in</strong> <strong>the</strong> value cha<strong>in</strong>. Indeed, large, professionalised, organizations now run most of <strong>the</strong><br />
retail<strong>in</strong>g <strong>in</strong> western economies and are now com<strong>in</strong>g to do so <strong>in</strong> emerg<strong>in</strong>g economies. In<br />
addition to be<strong>in</strong>g substantial commercial enterprises, such retailers have also become<br />
trusted brands with, <strong>in</strong> some cases, retailers’ own label brands be<strong>in</strong>g regarded as of similar<br />
or higher quality than those of branded manufacturers. Now retail<strong>in</strong>g is <strong>the</strong> legitimate<br />
focus of bus<strong>in</strong>ess strategy, market<strong>in</strong>g, operations management and o<strong>the</strong>r conventional<br />
bus<strong>in</strong>ess discipl<strong>in</strong>es. How do such companies <strong>in</strong>novate, and what k<strong>in</strong>d of <strong>in</strong>novation<br />
matters for such firms? How do small and medium-sized enterprises – firms which<br />
contribute to <strong>the</strong> vital entrepreneurial ‘froth’ of <strong>the</strong> sector - undertake <strong>in</strong>novation?<br />
1.3 This report has been commissioned by NESTA to exam<strong>in</strong>e <strong>in</strong>novation <strong>in</strong> <strong>the</strong> retail<br />
sector. It seeks to answer <strong>the</strong> follow<strong>in</strong>g questions, us<strong>in</strong>g a common format and structure:<br />
• What is <strong>the</strong> ‘<strong>in</strong>novation that matters’ <strong>in</strong> <strong>the</strong> sector?<br />
• What is driv<strong>in</strong>g this <strong>in</strong>novation?<br />
• What are <strong>the</strong> barriers to fur<strong>the</strong>r <strong>in</strong>novation?<br />
• How is this <strong>in</strong>novation evidenced with<strong>in</strong> <strong>the</strong> sector, and how might this <strong>in</strong>form <strong>the</strong><br />
development of new metrics and tools for benchmark<strong>in</strong>g <strong>in</strong>novation performance? It<br />
f<strong>in</strong>ally considers and makes recommendations for:<br />
• The role for Government <strong>in</strong> support<strong>in</strong>g <strong>the</strong>se particular forms and systems of<br />
<strong>in</strong>novation to create greater economic and social value<br />
1.4 The report comb<strong>in</strong>es f<strong>in</strong>d<strong>in</strong>gs from a variety of sources. It analyses for <strong>the</strong> first time <strong>the</strong><br />
retail-specific responses to <strong>the</strong> most recent Community <strong>Innovation</strong> Survey. It draws upon<br />
selected <strong>in</strong>sights from a series of <strong>in</strong>-depth <strong>in</strong>terviews and discussions conducted by one of<br />
<strong>the</strong> authors as part of his doctoral research with over 50 senior retail executives and o<strong>the</strong>r<br />
<strong>in</strong>dustry experts from over 30 retail bus<strong>in</strong>esses, consult<strong>in</strong>g firms and <strong>in</strong>dustry associations<br />
(with<strong>in</strong> <strong>the</strong> <strong>UK</strong> and elsewhere) on how <strong>the</strong>y def<strong>in</strong>e, encourage and manage <strong>in</strong>novation. It<br />
br<strong>in</strong>gs toge<strong>the</strong>r a wide range of secondary material deal<strong>in</strong>g with <strong>in</strong>novation (exam<strong>in</strong><strong>in</strong>g its<br />
relevance through a retail lens). It reviews exist<strong>in</strong>g Government activity <strong>in</strong> this area.<br />
F<strong>in</strong>ally, <strong>the</strong> report makes recommendations on <strong>the</strong> particular ways <strong>in</strong> which Government<br />
may improve <strong>the</strong> effectiveness of its stimulation and support of <strong>in</strong>novation with<strong>in</strong> <strong>the</strong><br />
sector.<br />
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