Retail technology view from the top: JDA Software's Lee Gill

As new systems and digital capability continue to evolve the way retailers run their businesses, Essential Retail is gauging the views of the sector's main figureheads, via a series of exclusive interviews. This week it's the turn of JDA Software's EMEA VP for retail strategy, Lee Gill.

Retail's successful players in the coming years will be the ones that master the art of speedy delivery to their customers, establishing supply chains that ensure goods ordered online can reach shoppers within an hour either at their homes or at another pick-up point.

That is the view of Lee Gill, EMEA VP for retail strategy at supply chain management solutions provider JDA Software, who argues that a key challenge for his retail customers continues to be building new fulfilment options into their operations while dealing with an "increase in complexity" in terms of consumer demand.

"The winners will be the guys who can crack home delivery in one hour," he explained to Essential Retail at last month's JDA Software's Focus Connect event in Barcelona.

"Customers may have to pay a premium, but they may be willing to do that if it is for medicine or a DIY job and you've run out of nails, or if you're hosting a dinner party and you're missing an ingredient. I think it's a service that retailers need to think about – it might not represent a huge amount of their business but it will be significant for PR."

Gill predicts that click & collect in 30 minutes will be the future norm for retail, and there are some businesses operating in the industry – such as DIY retailer Wickes – that already allow customers to pick up an online purchase in-store just a few hours after they have made the order.

As online retail has found its footing over the last decade consumers have come to expect free delivery, but various industry commentators are starting to suggest that free delivery may not be as prominent a part of the sector's future as retailers begin to start addressing some of the more margin-erosive elements of running an eCommerce operation.

JDA's Gill suggests that there will be a willingness to spend on delivery, if it brings consumers real value.

"I look at both the home delivery window and click & collect window shrinking and diversifying – and I think to myself the winners are going to be the retailers who can make that promise to a customer against that sort of service level."

A survey of 8,177 consumers was published by JDA this week, showing that 37% of European shoppers said they would pay a premium for the immediacy and convenience of a same-day (i.e. within a couple of hours) delivery spot. Consumers in Germany (42%) and Sweden (40%) were most prepared to pay a premium, while these shoppers – as well as those in the UK – were most willing to pay a premium for grocery products in particular.

In France, meanwhile, electricals and entertainment (33%) was the product category shoppers were most willing to consider spending a premium on.

The research also found that an increasing number of consumers are turning towards click & collect or drive-thru services as an alternative to home delivery, but it indicated that 67% of European consumers believe online retail in its various formats will be their predominant method of shopping in five years' time.

As many retailer trading statements have made only too clear over the last decade, the multichannel evolution is not a simple journey to undertake and it does not have any quick-fix solutions. And Gill acknowledges there have been some "eye-popping numbers" related to supply chain and e-fulfilment investment in recent times, as businesses have had to transform their operations to serve the different ways customers now want to shop.

The grocery market, in particular, is being challenged perhaps more than ever before. With such huge store estates in their portfolios, the shift to a more agile, tech-led way of serving the customer has brought significant challenges – and with some businesses, Gill admitted, "the intent to address this is much bigger than the reality of dealing with it".

At the same time, the traditional UK supermarkets serving the middle market must deal with the rapid growth of the German discounters, Aldi and Lidl. Morrisons then Tesco, and now Sainsbury's, have all shifted their offerings this year in moves seemingly undertaken to fight the European pair on price.

"Whether you like it or not the bottom tier is disrupting the middle ground territory, and the premium players are disrupting the top tier of your middle range – it's going on," explained Gill, who described the middle ground as "a horrible place to be".

"I have a serious problem in terms of what retailers in the middle ground are doing with sharpening their prices. You can never ever compete with Aldi and Lidl. Their business model is fundamentally built around private label, almost exclusively, where you get the best margins. It is also based around a tight catalogue so there are no additional costs."

Gill argued that the recent recession in the UK allowed the hard discounters to really show their teeth, invest in their business and bring themselves to the limelight.

With customers seemingly demanding new fulfilment options and research showing there is a willingness to pay a premium for next- and same-day delivery, perhaps this is the investment UK supermarkets need to make to fight back their lost market share and provide a point of difference in a competitive market.

"The weekly shop is not dead, it's how the weekly shop is done that is changing," said Gill.

"It is gravitating towards home delivery, click & collect and convenience. It is evidenced by out of town food stores are in decline. People don't want to spend two hours in-store doing a £200 shop any more."

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