Karl McKeever Column May 2017

Where should the smart money go?

Transforming stores, both in physical form and how they are perceived, remains one of the biggest challenges in the retail industry. The role and relevance of ‘the store’ is being constantly re-evaluated as shopping habits and retail channels evolve. At the recent World Retail Congress in Dubai, Debenhams chairman Sir Ian Cheshire told delegates that it is no longer enough to simply sell ‘stuff’, but rather offer great experiences. He echoed the words of the brand’s chief executive Sergio Bucher, who has just announced plans for a growth strategy based on becoming ‘a destination, digital and different’.

The likes of Debenhams and House of Fraser have largely diverted focus to online retailing in the last decade. But, now they, and many others, are starting to realise that while online operations may have gone from strength to strength, the physical iteration of the brand has become exposed — lacking relevance, purpose and, most importantly, investment.

You don’t have to look too far to find other examples. Stores such as Dorothy Perkins and Burton, which enjoyed significant cash boosts during the 1980s, are also starting to show their age, offering little to wow customers when they walk through the doors. Today, it is almost impossible to hide from underinvestment in store environments.

Another brand that currently has its eye on transformation is WH Smith, which in January reported a three per cent drop in like-for-like high street sales. The retailer has become much maligned — there is even a Twitter account with more than 10,000 followers lamenting, among other things, the dismal state of its carpets. A stalwart of the high street, however, it has so far managed to weather the storms of change in the retail landscape, even if it has taken a hit (It has suffered significantly due to the challenge of supermarkets and online stores selling similar products, usually at a lower price).

While its high street stores have suffered, overall sales were up two per cent thanks to its thriving portfolio of travel stores, which have become the shining star of the group and a blueprint for the others to follow.

This will come as little surprise to anyone who has visited WH Smith. Compared to the tired-looking high street stores, the branches found at train stations and airports feel clean and modern. Offering a streamlined choice of products, they provide exactly what shoppers want at the time they need it. This division is also small and nimble enough to respond to changes in the market with innovation and experimentation. The retailer is no doubt hoping to now transfer some of these principles to the high street with new formats, like the one recently rolled out in Holborn.

Steve Clarke, chief executive of WH Smith, has got it right in trialling the Holborn format on a small scale. The secret is to ensure that any changes made are quantifiable so that it is possible to see what impact VM, team training and changes to store layout and environment have on commercial return. For retailers, being able to accurately define and deliver the change that is required to achieve visible and often immediate results is vital to prove the business case for future rounds of store investment and, ultimately, for survival and growth.

But, regardless of how positive the impact of change in trial stores is, for well-established retailers like WH Smith or Debenhams, achieving meaningful improvement in store performance can prove particularly difficult due to their vast retail estates.

When delivering large-scale transformation, senior management teams frequently look for short-term fixes to get people through the doors and turn sales figures around. Simply jumping on the latest trend or harnessing technology without considering the business’ objectives is rarely successful, especially if the store environment and service remains poor. Instead, they should think long-term, working to embed best practice and ensuring they have buy-in from all key stakeholders in a transformation project.

It is telling that, according to a recent industry report, just 24 per cent of retailers do not know what transformation looks like on a day-to-day basis. This is a mistake: they need to work quickly to identify the changes needed to push the brand forward and then trial them to deliver real results. Only then can they make decisions with authority and be confident that the path they are on to retail transformation is the right one.

Identifying what does and doesn’t work is key to implementing effective change, and there are some on the high street who need to find new ways of doing this, and quickly. This will not only address pressures from within the business, and from investors, but also enable senior teams to make decisions with real authority. Only then can they be confident that the path they are on to retail transformation is the right one — something that is vital if they are to deliver meaningful change, before shoppers lose faith and move onto something new elsewhere.

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Michelle Kyle
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