Simplify, split & sharpen; surviving the evolving retail landscape

Looking back at 2019, we realise that it wasn’t an easy year for retail and the outlook for 2020 isn’t much better. With Covid-19 engulfing the country, shoppers are being deterred from entering the high street, and it is likely there will be more holes in already shaky retail balance sheets.

Alongside this, a constant flurry of negative headlines dons our screens and the latest shock came from shopping centre giant Intu, who warned that it could go bust in 2020 unless it receives a cash injection, and fast. The decline was caused by its £2 bn loss in 2019, continued failure to raise funds, and accumulated debts of £5 bn.

But it’s not the only retailer struggling; John Lewis slashed bonuses earlier this month after losses, and overall the sector has cut 18,000 retail jobs and 1200 stores have closed their doors.

Based on our observations of working with clients in the retail space, we notice there are numerous areas for retail leaders to take into consideration, which will not only help them in their quest to avoid becoming the latest retail casualty, but crucially mean they are fit for purpose.

The external challenge

Rising business rates alongside declining consumer confidence, the economic and political instability triggered by Brexit, and shifts in consumer buying habits, have collided with a rise in popularity of online pure plays that ultimately wreak havoc on the high-street.

The consequences have been devastating: Arcadia (owner of TopShop), Debenhams and New Look have all announced large scale closures in the last 12 months, while the likes of Homebase and Carpetright have undergone restructuring.

Monsoon, Accessorize, and online fashion brand ASOS have also come unstuck by some of these challenges, and ASOS Chief Executive Nick Beigthon, spoke for many retail chiefs, when he said about the challenges being more “disruptive” than ASOS anticipated.

Self-inflicted woes

While some of retail’s current woes are due to factors beyond retailers’ control, some of the damage has undoubtedly been self-inflicted. Too many chains have been slow to adapt to mobile and online shopping, while retail chiefs have pondered how to ensure they are fit for purpose.

Instead of critiquing each other in these pressurised times, under-fire retail chiefs would be better advised to follow the three S template - simplify the strategy, split the focus and sharpen up the decision-making process - if they want to survive and prosper.

Simplify the strategy

Retailers should stop all non-critical activity, so that senior leaders can focus on the most critical initiatives.

Retailers should refocus efforts on their most profitable products, labels and sales channels. Non-core ventures like a TV campaign or an expensive IT upgrade should be put on hold until a new, strong, long-term business strategy is put in place.

They should follow the example of Tesco under CEO Dave Lewis, which has revived its fortunes by focusing on its core strategy: a simplified and better quality product range, improved standard of stores, lower prices versus its major competitors and improved relationships with suppliers.

Split the focus

Senior figures need to bring in transformation specialists to lead the change, leaving internal managers to focus on trading the business full-time; this is not a piecemeal transformation for already busy employees, you need their company knowledge but also require external capacity.

Many businesses fail by assigning internal operating managers for transformational activity. This can work at normal pace, but becomes a problem in pressurised retail environments.

The advantages of bringing in transformational specialists are indispensable: the introduction of fresh, independent eyes to resolve problems, the ability to find hidden revenue streams and new business models, and the energy and focus they bring to drive change.

Arguably, retail chiefs are more likely to be open to radical suggestions from a transformational expert with a proven track record than from elsewhere within the organisation.

Sharpen up the decision-making process

It is imperative that retail leaders sharpen up the decision-making process: reduce the number of decision-makers and tighten up reporting lines by focusing on controlling their remit and delegating where appropriate. A new outlook is needed around what they can personally control and change and, furthermore, set goals and timelines to adhere to.

Too many organisations are overly complex, with too many layers of management and decision-makers, meaning leaders struggle to delegate tasks clearly and cleanly.

Quick and fleet-of-foot organisations ensure the decision-making process is with the right person. Adopt an agile approach, become flatter organisations, ensuring that accountability and authority are entwined, encourage proactivity to ensure businesses are fit and ready to meet their demands head-on, and ultimately succeed.