THE FUTURE

OF RETAIL

WELCOME

05

BECOMING
OMNICHANNEL

08

SAFETY IN
NUMBERS

10

GLOBAL
REACH

FOR FURTHER
INFORMATION
PLEASE CONTACT
Hilary Ross
Head of Retail, Food
and Hospitality, DWF
E: hilary.ross@dwf.law
T: +44 (0)3333 20 32 10

Alan Owens
Head of Technology and
Communications, DWF
E: alan.owens@dwf.law
T: +44 (0)20 7645 4139

In a rapidly changing market,

retailers are focusing on
delivering value and quality in
an omnichannel world, while
trying to navigate the complex
political landscape of the living
wage and a potential exit from
the European Union. The top
five growth areas identified
by the retailers in our survey
gives an insight into the longterm strategy for investment
in bridging the gap between
offline and digital channels.

1. Multichannel

OPEN

Omnichannel is still king.

Retailers need to make sure
that their propositions are
consistent across all channels.
Click and collect may seem an
old idea, but it is at the sharp
end of many omnichannel
experiences and continues
to grow as it drives increased
customer spending in-store.
E-commerce retailers are
looking to set up shop on
the high street. The majority
of retail sales are still taking
place offline and, although
the retailers that participated
in this survey predict this will
change to a 70/30 split in
favour of online in as little as
five years time, e-commerce
retailers are recognising
the need to set up physical
shops if they want to gain
significant market share.

security and customer fulfilment

are in their DNA. Mobile
will continue to grow until it
matches bricks-and-mortar.
Yet it will also be a key driver
in bricks-and-mortar sales, as
customers use their mobiles
in-store, and integrated digital
touchpoints will be critical
investments for many.

incident, retailers are on

a path of investment and
improvement in this area.

4. Big data

5. Warehouse efficiency

Making data work harder

is key. Bricks-and-mortar
retailers know they have a
lot of work to do if they are
to catch up with their online
competitors. Retailers are
examining how they can
better mine their data to get to
know their customers, while
optimising and personalising
the shopping experiences
across the omnichannel.
Finding better ways to
protect customers privacy
and data is also important.
Every month brings reports
of another retailer facing the
reputational nightmare of a
major data breach. Motivated
by customers expectations,
brand reputation,
shareholders and the costs
of dealing with a significant

3. International expansion
Overseas expansion
continues to drive
opportunities for growth
and increased profits. As
the UK market edges ever
closer to saturation, retailers
are looking to mature in
emerging economies, with
omnichannel and supply
chain technology as their
passport to successful
international expansion.
However, expansion is
not for the faint hearted,
with cultural differences,
mercurial regulatory regimes

Investment will improve

fulfilment. With online native
retailers setting the bar for speed
and convenience, traditional
retailers recognise the need to
invest in robust order fulfilment,
stock awareness and lightningspeed deliveries.
Then, now and in the future,
value and quality will remain
the bywords of any successful
retail proposition, but the
challenge will be how to align
these traditional values for a
modern age of retail, where
an integrated, accessible and
secure customer experience
is the norm rather than the
exception. That will take
clear strategic thinking
and balanced investments
that UK retailers are well
placed to make.

FIGURE 1 TOP 5 AREAS WHERE RETAILERS ARE FOCUSING

TO DRIVE GROWTH IN THE NEXT 3 YEARS
DATA SHOWS % OF RESPONDENTS WHO CONSIDERED FACTOR TO BE IN TOP 3
MULTICHANNEL

TECHNOLOGY
SYSTEMS

51%

51%

17%

PERSONALISATION OF ADVERTISING

17%

SOCIAL MEDIA AS A RETAIL PLATFORM

15%

SOURCING

15%

FULFILLMENT SOLUTIONS

WAREHOUSE
EFFICIENCY

13%

CORPORATE SOCIAL RESPONSIBILITY (CSR)

22%

9%
5%

LOGISTICS

4%

SUNDAY TRADING

3%

TRANSATLANTIC TRADE AND

INVESTMENT PARTNERSHIP

INTERNATIONAL
EXPANSION

43%

BIG DATA

35%

2. Technology systems

Traditional bricks-and-mortar
retailers will need to invest to
win against companies for
whom data optimisation, data

02

and differing customer

expectations all presenting
significant challenges.

03

LOCALISATION

FOR FURTHER
INFORMATION
PLEASE CONTACT
Hilary Ross
Head of Retail, Food
and Hospitality, DWF
E: hilary.ross@dwf.law
T: +44 (0)3333 20 32 10

Alan Owens
Head of Technology and
Communications, DWF
E: alan.owens@dwf.law
T: +44 (0)20 7645 4139

In a rapidly changing market,

retailers are focusing on
delivering value and quality in
an omnichannel world, while
trying to navigate the complex
political landscape of the living
wage and a potential exit from
the European Union. The top
five growth areas identified
by the retailers in our survey
gives an insight into the longterm strategy for investment
in bridging the gap between
offline and digital channels.

1. Multichannel

OPEN

Omnichannel is still king.

Retailers need to make sure
that their propositions are
consistent across all channels.
Click and collect may seem an
old idea, but it is at the sharp
end of many omnichannel
experiences and continues
to grow as it drives increased
customer spending in-store.
E-commerce retailers are
looking to set up shop on
the high street. The majority
of retail sales are still taking
place offline and, although
the retailers that participated
in this survey predict this will
change to a 70/30 split in
favour of online in as little as
five years time, e-commerce
retailers are recognising
the need to set up physical
shops if they want to gain
significant market share.

security and customer fulfilment

are in their DNA. Mobile
will continue to grow until it
matches bricks-and-mortar.
Yet it will also be a key driver
in bricks-and-mortar sales, as
customers use their mobiles
in-store, and integrated digital
touchpoints will be critical
investments for many.

incident, retailers are on

a path of investment and
improvement in this area.

4. Big data

5. Warehouse efficiency

Making data work harder

is key. Bricks-and-mortar
retailers know they have a
lot of work to do if they are
to catch up with their online
competitors. Retailers are
examining how they can
better mine their data to get to
know their customers, while
optimising and personalising
the shopping experiences
across the omnichannel.
Finding better ways to
protect customers privacy
and data is also important.
Every month brings reports
of another retailer facing the
reputational nightmare of a
major data breach. Motivated
by customers expectations,
brand reputation,
shareholders and the costs
of dealing with a significant

3. International expansion
Overseas expansion
continues to drive
opportunities for growth
and increased profits. As
the UK market edges ever
closer to saturation, retailers
are looking to mature in
emerging economies, with
omnichannel and supply
chain technology as their
passport to successful
international expansion.
However, expansion is
not for the faint hearted,
with cultural differences,
mercurial regulatory regimes

Investment will improve

fulfilment. With online native
retailers setting the bar for speed
and convenience, traditional
retailers recognise the need to
invest in robust order fulfilment,
stock awareness and lightningspeed deliveries.
Then, now and in the future,
value and quality will remain
the bywords of any successful
retail proposition, but the
challenge will be how to align
these traditional values for a
modern age of retail, where
an integrated, accessible and
secure customer experience
is the norm rather than the
exception. That will take
clear strategic thinking
and balanced investments
that UK retailers are well
placed to make.

FIGURE 1 TOP 5 AREAS WHERE RETAILERS ARE FOCUSING

TO DRIVE GROWTH IN THE NEXT 3 YEARS
DATA SHOWS % OF RESPONDENTS WHO CONSIDERED FACTOR TO BE IN TOP 3
MULTICHANNEL

TECHNOLOGY
SYSTEMS

51%

51%

17%

PERSONALISATION OF ADVERTISING

17%

SOCIAL MEDIA AS A RETAIL PLATFORM

15%

SOURCING

15%

FULFILLMENT SOLUTIONS

WAREHOUSE
EFFICIENCY

13%

CORPORATE SOCIAL RESPONSIBILITY (CSR)

22%

9%
5%

LOGISTICS

4%

SUNDAY TRADING

3%

TRANSATLANTIC TRADE AND

INVESTMENT PARTNERSHIP

INTERNATIONAL
EXPANSION

43%

BIG DATA

35%

2. Technology systems

Traditional bricks-and-mortar
retailers will need to invest to
win against companies for
whom data optimisation, data

02

and differing customer

expectations all presenting
significant challenges.

03

LOCALISATION

DEMOGRAPHIC

BECOMING OMNICHANNEL

This report has been compiled through telephone interviews with

150 C-suite executives from leading retail organisations in the UK

Despite retailers seeing online channels as a growing sector,

few believe they have yet embraced a comprehensive strategy

GEOGRAPHICAL COVERAGE
REGIONAL

EUROPEAN

NATIONAL

23%
10%

GLOBAL

8%

59%
RETAIL SECTOR

RETAILER TARGET DEMOGRAPHIC

SIZE
EMPLOYEES

63%

63%

4% 7%

27%

81%

18-34

AB

35-54

C1

10%

1% 55-69

C2

8%

0% 70+

DE

18%
36%
22%

9%

DEPARTMENT STORES
DIY, HOME & GARDEN
ELECTRICALS & TECHNOLOGY
ENTERTAINMENT
FASHION
FOOD & BEVERAGES
GENERAL MERCHANDISE
HEALTH & BEAUTY
LUXURY
PERSONAL FINANCE &
BANKING
SPORTS & LEISURE

TURNOVER

29%

EMPLOYEES
TURNOVER

26%

67%

650-1,500
1,501-25,000
$50-100m
$250m-1bn

1,501-5,000
25,001+
$100-250m
1bn+

1%

AGE
SOCIO-ECONOMIC GROUP

JOB ROLE

5%
UTILITIES

All percentages rounded to nearest whole number

2%

39%

3%

7%

39%

9%

CEO

CFO

CIO

CRO

HEAD OF SUPPLY CHAIN

HEAD OF TREASURY

04

There is no escaping
omnichannel. It is at the
forefront of retailers minds as it
continues to drive the majority
of sales growth. Retailers
are predicting that 42 per
cent of sales will be through
e-commerce in five to ten
years. Critically, however, they
expect m-commerce sales to
grow substantially to 29 per
cent, equalling sales through
physical stores. This shows, for
the first time, a more balanced
omnichannel experience.
A major reason for an
omnichannel future are the
digital natives who have
grown up buying across
channels and will, over the
next five to ten years, move
into the 18 to 34-year-old
grouping when they will
develop greater buying power.
With mobile technology
now augmenting the physical
shopping experience, and
shopping destinations and
stores increasingly offering
complimentary wi-fi, it is
surprising that only 17 per
cent of retailers regard
omnichannel as a key
driver for customers. Most
retailers now believe that
this experience has already
ceased to be a differentiator,
at least as far as product
purchasing decisions are
concerned, as consumers
increasingly expect it as
standard.
By contrast, the proliferation
of price promotions and claims
of everyday low prices
underlines why 61 per cent of

FIGURE 2 CHANNEL MIX:

2015 COMPARED WITH 2020-25

44%

42%

29%

retailers believe that value will

remain a key demand from
shoppers in the future.
Retailers are fully embracing
the value and opportunities
presented by online channels,
with 49 per cent reporting that
they are planning to give it the
most investment over the next
three years retailers with
limited or no e-commerce
offering are now rare. Fashion
retailers (77 per cent) in
particular are showing signs of
embracing this wholeheartedly
and they already generate
65 per cent of their sales
online. Consumers no longer
feel they need to try before

65% of fashion
retailers sales
are already online

56%

29%

2015
ONLINE
M-COMMERCE

2020/25
E-COMMERCE
BRICKS & MORTAR

05

they buy as they can do it

in the comfort of their own
home following delivery. This
is due to retailers such as
ASOS and Marks & Spencer
making delivery quick
and inexpensive, with the
opportunity to return items
being equally simple.
Despite the widespread
recognition by retailers that
online and omnichannel
represent the future, 85
per cent admit that their
omnichannel strategy is only
at a basic or intermediate >

DEMOGRAPHIC

BECOMING OMNICHANNEL

This report has been compiled through telephone interviews with

150 C-suite executives from leading retail organisations in the UK

Despite retailers seeing online channels as a growing sector,

few believe they have yet embraced a comprehensive strategy

GEOGRAPHICAL COVERAGE
REGIONAL

EUROPEAN

NATIONAL

23%
10%

GLOBAL

8%

59%
RETAIL SECTOR

RETAILER TARGET DEMOGRAPHIC

SIZE
EMPLOYEES

63%

63%

4% 7%

27%

81%

18-34

AB

35-54

C1

10%

1% 55-69

C2

8%

0% 70+

DE

18%
36%
22%

9%

DEPARTMENT STORES
DIY, HOME & GARDEN
ELECTRICALS & TECHNOLOGY
ENTERTAINMENT
FASHION
FOOD & BEVERAGES
GENERAL MERCHANDISE
HEALTH & BEAUTY
LUXURY
PERSONAL FINANCE &
BANKING
SPORTS & LEISURE

TURNOVER

29%

EMPLOYEES
TURNOVER

26%

67%

650-1,500
1,501-25,000
$50-100m
$250m-1bn

1,501-5,000
25,001+
$100-250m
1bn+

1%

AGE
SOCIO-ECONOMIC GROUP

JOB ROLE

5%
UTILITIES

All percentages rounded to nearest whole number

2%

39%

3%

7%

39%

9%

CEO

CFO

CIO

CRO

HEAD OF SUPPLY CHAIN

HEAD OF TREASURY

04

There is no escaping
omnichannel. It is at the
forefront of retailers minds as it
continues to drive the majority
of sales growth. Retailers
are predicting that 42 per
cent of sales will be through
e-commerce in five to ten
years. Critically, however, they
expect m-commerce sales to
grow substantially to 29 per
cent, equalling sales through
physical stores. This shows, for
the first time, a more balanced
omnichannel experience.
A major reason for an
omnichannel future are the
digital natives who have
grown up buying across
channels and will, over the
next five to ten years, move
into the 18 to 34-year-old
grouping when they will
develop greater buying power.
With mobile technology
now augmenting the physical
shopping experience, and
shopping destinations and
stores increasingly offering
complimentary wi-fi, it is
surprising that only 17 per
cent of retailers regard
omnichannel as a key
driver for customers. Most
retailers now believe that
this experience has already
ceased to be a differentiator,
at least as far as product
purchasing decisions are
concerned, as consumers
increasingly expect it as
standard.
By contrast, the proliferation
of price promotions and claims
of everyday low prices
underlines why 61 per cent of

FIGURE 2 CHANNEL MIX:

2015 COMPARED WITH 2020-25

44%

42%

29%

retailers believe that value will

remain a key demand from
shoppers in the future.
Retailers are fully embracing
the value and opportunities
presented by online channels,
with 49 per cent reporting that
they are planning to give it the
most investment over the next
three years retailers with
limited or no e-commerce
offering are now rare. Fashion
retailers (77 per cent) in
particular are showing signs of
embracing this wholeheartedly
and they already generate
65 per cent of their sales
online. Consumers no longer
feel they need to try before

65% of fashion
retailers sales
are already online

56%

29%

2015
ONLINE
M-COMMERCE

2020/25
E-COMMERCE
BRICKS & MORTAR

05

they buy as they can do it

in the comfort of their own
home following delivery. This
is due to retailers such as
ASOS and Marks & Spencer
making delivery quick
and inexpensive, with the
opportunity to return items
being equally simple.
Despite the widespread
recognition by retailers that
online and omnichannel
represent the future, 85
per cent admit that their
omnichannel strategy is only
at a basic or intermediate >

FIGURE 3 WHICH STATEMENT BEST DESCRIBES YOUR COMPANYS PROGRESS IN

IMPLEMENTING/EXECUTING AN OMNICHANNEL STRATEGY?

FIGURE 4 WHAT ARE RETAILERS CUSTOMERS TOP 2 DEMANDS

DATA SHOWS % OF RESPONDENTS WHO
CONSIDERED DEMANDS TO BE IN TOP 2

OPPOSED: A decision has been made to pursue a multichannel strategy as opposed to omnichannel
UNDEVELOPED: We are scoping out our omnichannel options but are yet to set our long-term strategy
BASIC: We are defining our strategy and beginning to execute the plan
INTERMEDIATE: We have identified our strategy and are executing on it
ADVANCED: We have made greater progress than most of our peers and have executed most of our strategy

57%

69%

15%

8%

8%

77%

85%

85%

GREATER VALUE/
PRICING

31%

15%

61%

8%

31%

69%

8%

8%

31%

92%

92%

54%

32%
LOYALTY
PROGRAMMES

23%

69%

31%

22%
17%

38%

DEMONSTRABLE
CSR

IMPROVED
IN-STORE
EXPERIENCE

11%

OMNICHANNEL
OFFER

LOCALISED
PRODUCT MIX

17%
MORE
FLEXIBLE
FULFILMENT

9%
PRODUCT
PROVENANCE

38%
43%

31%

31%

23%

23%

15%

KEY LEGAL ACTION POINTS

8%

8%

8%

UTILITIES

SPORTS &
LEISURE

8%

PERSONAL
FINANCE &
BANKING

LUXURY

level. Just 8 per cent believe it

is advanced, which suggests
a competitive advantage can
be achieved by those retailers
that knit together a seamless
cross-channel experience for
their customers.
The value in pursuing
omnichannel strategies is

HEALTH &
BEAUTY

FOOD &
BEVERAGES

GENERAL
MERCHANDISE

64%

FASHION

ENTERTAINMENT

ELECTRICALS
& TECHNOLOGY

21%

TOTAL

06

DIY, HOME
& GARDEN

DEPARTMENT
STORES

6%

1%

The store within store

concept, linking major
brands, means that the way
those brands are marketed
will be diverse - co-branding
agreements and revenue sharing
will be central.
Increased reliance on mobile
marketing means that logistics
agreements and tie-ups will need
to be regularly reviewed.

KPIs and service-level credits

will be more important,
as recent case law on
penalties shows.
Selective distribution channels
are often in the competition
regulators line of sight. The
criteria for maintaining channels
needs to be rethought where
digital purchases become
the norm.

obvious, as the belief from

retailers is that growth will be
derived from across a variety of
channels. Retailers estimated
that in five to ten years time,
the split between e-commerce,
m-commerce and bricks-andmortar will will start to even
out (see figure 2).

61% of retailers believe that

value will remain a key demand
from shoppers in the future
07

FIGURE 3 WHICH STATEMENT BEST DESCRIBES YOUR COMPANYS PROGRESS IN

IMPLEMENTING/EXECUTING AN OMNICHANNEL STRATEGY?

FIGURE 4 WHAT ARE RETAILERS CUSTOMERS TOP 2 DEMANDS

DATA SHOWS % OF RESPONDENTS WHO
CONSIDERED DEMANDS TO BE IN TOP 2

OPPOSED: A decision has been made to pursue a multichannel strategy as opposed to omnichannel
UNDEVELOPED: We are scoping out our omnichannel options but are yet to set our long-term strategy
BASIC: We are defining our strategy and beginning to execute the plan
INTERMEDIATE: We have identified our strategy and are executing on it
ADVANCED: We have made greater progress than most of our peers and have executed most of our strategy

57%

69%

15%

8%

8%

77%

85%

85%

GREATER VALUE/
PRICING

31%

15%

61%

8%

31%

69%

8%

8%

31%

92%

92%

54%

32%
LOYALTY
PROGRAMMES

23%

69%

31%

22%
17%

38%

DEMONSTRABLE
CSR

IMPROVED
IN-STORE
EXPERIENCE

11%

OMNICHANNEL
OFFER

LOCALISED
PRODUCT MIX

17%
MORE
FLEXIBLE
FULFILMENT

9%
PRODUCT
PROVENANCE

38%
43%

31%

31%

23%

23%

15%

KEY LEGAL ACTION POINTS

8%

8%

8%

UTILITIES

SPORTS &
LEISURE

8%

PERSONAL
FINANCE &
BANKING

LUXURY

level. Just 8 per cent believe it

is advanced, which suggests
a competitive advantage can
be achieved by those retailers
that knit together a seamless
cross-channel experience for
their customers.
The value in pursuing
omnichannel strategies is

HEALTH &
BEAUTY

FOOD &
BEVERAGES

GENERAL
MERCHANDISE

64%

FASHION

ENTERTAINMENT

ELECTRICALS
& TECHNOLOGY

21%

TOTAL

06

DIY, HOME
& GARDEN

DEPARTMENT
STORES

6%

1%

The store within store

concept, linking major
brands, means that the way
those brands are marketed
will be diverse - co-branding
agreements and revenue sharing
will be central.
Increased reliance on mobile
marketing means that logistics
agreements and tie-ups will need
to be regularly reviewed.

KPIs and service-level credits

will be more important,
as recent case law on
penalties shows.
Selective distribution channels
are often in the competition
regulators line of sight. The
criteria for maintaining channels
needs to be rethought where
digital purchases become
the norm.

obvious, as the belief from

retailers is that growth will be
derived from across a variety of
channels. Retailers estimated
that in five to ten years time,
the split between e-commerce,
m-commerce and bricks-andmortar will will start to even
out (see figure 2).

61% of retailers believe that

value will remain a key demand
from shoppers in the future
07

SAFETY IN NUMBERS
The savvy retailer will use customer data to their
advantage, but businesses are increasingly
wary of the dangers of data breaches

Data is now the lifeblood of

retail. Online marketplaces
have created mountains
of information, which have
provided significant insights into
customer behaviour. This data
has also created opportunities
for vast improvements in the
management of stock with
a level of precision never
previously possible.
One third (32 per cent)
of retailers identified loyalty
programmes as a key
development that customers
will demand in the future.
Despite the value of Tescos
Clubcard being questioned
recently, it appears there
may be a renaissance in

such tools, with Lidl trialling a

scheme and Morrisons having
launched its Match & More
loyalty card in 2014.
An electrical retailer
summarises the value of
these schemes, indicating it
planned to collect customer
data and customise offers to
meet their needs through data
and analytics investments.
Could this collation of
customer data lead to a
heightened fear of data
breaches? Certainly a
sizeable 32 per cent of
retailers cite cyber/data
breaches as one of the
biggest threats to their
businesses over the next

three years. Data security is

undoubtedly a serious matter
as a massive 99 per cent of
retailers agree it is imperative
for their brand reputations
that they do not suffer such
online security failures.
Despite the potential risks,
the use of data to personalise
services for customers is
a major way for retailers to
differentiate in a market where
as many as 61 per cent of
companies regard value/
pricing as a key demand from
customers. One area where
this use of data appears is
through tailored marketing
and advertising, with 17 per
cent of merchants believing it

FIGURE 5 TOP 10 FACTORS THAT WILL THREATEN

GROWTH IN THE NEXT THREE YEARS
DATA SHOWS % OF RESPONDENTS WHO CONSIDERED FACTOR TO BE IN TOP 3

99%
of retailers agree
that data security
is imperative to
brand reputation

40%
38%
32%
27%
25%
21%
17%
17%
15%
15%

REGULATION FROM THE UK/EU

IT SYSTEMS
CYBER/DATA BREACHES
NATIONAL LIVING WAGE
CURRENCY FLUCTUATIONS
BREXIT
BUSINESS RATES
NEW PAYMENT SYSTEMS
LACK OF MARGIN
SUPPLY CHAIN SECURITY

08

FIGURE 6 ESTIMATED INVESTMENT LEVEL IN DATA ANALYTICS BY BUSINESS AREA

LOW

MEDIUM

HIGH

9%
19%

14%
23%
33%

37%

46%
65%

45%

51%

49%
25%

29%

40%

STRATEGIC PLANNING

SUPPLY CHAIN MANAGEMENT

LOGISTICS

will drive future growth.

One luxury goods
retailer says: Customer
engagement and continuous
communication can help in
identifying the need to add,
change or improve product
lines, offers and prices.
Mobile devices are
increasingly involved, and
retailers like House of
Fraser and John Lewis are
investigating using instore beacons to identify
shoppers when they enter
a store and then deliver
personalised offers to their
phones, as well as indicating
when any click-and-collect
items are ready for collection.
Despite the potential for the
use of data analytics and the
growing amount of trials taking
place, the consensus among

56%

15%

33%
INVENTORY MANAGEMENT

MARKETING/SALES

11%
CUSTOMER EXPERIENCE

KEY LEGAL ACTION POINTS

Tighter Europe-wide regulation of data
security is coming in 2016.

consent is clearly obtained,

particularly from children and teens.

Best practice and mitigation of problems

caused by cyber breaches dictates
clear-headed decisions about when not
to collect data, move to anonymous
aggregation and when to delete data.

The collection of data also

demands ongoing investments
in security, regular review of
retention policies and crisisresponse plans. Legal teams
need to play a central role in
incident responses to maintain
privilege in crisis communications.

Use of beacons and other technologies

means retailers need to ensure

retailers is that the effectiveness

of their investments in this area
is very poor. Few retailers score
themselves above two out of
five, which is a concern as the

09

value of data will become

evermore important
to them in developing
successful multichannel
models.

SAFETY IN NUMBERS
The savvy retailer will use customer data to their
advantage, but businesses are increasingly
wary of the dangers of data breaches

Data is now the lifeblood of

retail. Online marketplaces
have created mountains
of information, which have
provided significant insights into
customer behaviour. This data
has also created opportunities
for vast improvements in the
management of stock with
a level of precision never
previously possible.
One third (32 per cent)
of retailers identified loyalty
programmes as a key
development that customers
will demand in the future.
Despite the value of Tescos
Clubcard being questioned
recently, it appears there
may be a renaissance in

such tools, with Lidl trialling a

scheme and Morrisons having
launched its Match & More
loyalty card in 2014.
An electrical retailer
summarises the value of
these schemes, indicating it
planned to collect customer
data and customise offers to
meet their needs through data
and analytics investments.
Could this collation of
customer data lead to a
heightened fear of data
breaches? Certainly a
sizeable 32 per cent of
retailers cite cyber/data
breaches as one of the
biggest threats to their
businesses over the next

three years. Data security is

undoubtedly a serious matter
as a massive 99 per cent of
retailers agree it is imperative
for their brand reputations
that they do not suffer such
online security failures.
Despite the potential risks,
the use of data to personalise
services for customers is
a major way for retailers to
differentiate in a market where
as many as 61 per cent of
companies regard value/
pricing as a key demand from
customers. One area where
this use of data appears is
through tailored marketing
and advertising, with 17 per
cent of merchants believing it

FIGURE 5 TOP 10 FACTORS THAT WILL THREATEN

GROWTH IN THE NEXT THREE YEARS
DATA SHOWS % OF RESPONDENTS WHO CONSIDERED FACTOR TO BE IN TOP 3

99%
of retailers agree
that data security
is imperative to
brand reputation

40%
38%
32%
27%
25%
21%
17%
17%
15%
15%

REGULATION FROM THE UK/EU

IT SYSTEMS
CYBER/DATA BREACHES
NATIONAL LIVING WAGE
CURRENCY FLUCTUATIONS
BREXIT
BUSINESS RATES
NEW PAYMENT SYSTEMS
LACK OF MARGIN
SUPPLY CHAIN SECURITY

08

FIGURE 6 ESTIMATED INVESTMENT LEVEL IN DATA ANALYTICS BY BUSINESS AREA

LOW

MEDIUM

HIGH

9%
19%

14%
23%
33%

37%

46%
65%

45%

51%

49%
25%

29%

40%

STRATEGIC PLANNING

SUPPLY CHAIN MANAGEMENT

LOGISTICS

will drive future growth.

One luxury goods
retailer says: Customer
engagement and continuous
communication can help in
identifying the need to add,
change or improve product
lines, offers and prices.
Mobile devices are
increasingly involved, and
retailers like House of
Fraser and John Lewis are
investigating using instore beacons to identify
shoppers when they enter
a store and then deliver
personalised offers to their
phones, as well as indicating
when any click-and-collect
items are ready for collection.
Despite the potential for the
use of data analytics and the
growing amount of trials taking
place, the consensus among

56%

15%

33%
INVENTORY MANAGEMENT

MARKETING/SALES

11%
CUSTOMER EXPERIENCE

KEY LEGAL ACTION POINTS

Tighter Europe-wide regulation of data
security is coming in 2016.

consent is clearly obtained,

particularly from children and teens.

Best practice and mitigation of problems

caused by cyber breaches dictates
clear-headed decisions about when not
to collect data, move to anonymous
aggregation and when to delete data.

The collection of data also

demands ongoing investments
in security, regular review of
retention policies and crisisresponse plans. Legal teams
need to play a central role in
incident responses to maintain
privilege in crisis communications.

Use of beacons and other technologies

means retailers need to ensure

retailers is that the effectiveness

of their investments in this area
is very poor. Few retailers score
themselves above two out of
five, which is a concern as the

09

value of data will become

evermore important
to them in developing
successful multichannel
models.

GLOBAL REACH

FIGURE 8 WHICH GEOGRAPHICAL AREAS WILL YOUR COMPANY LOOK TO TARGET FOR EXPANSION?
40-50%
30-39%
20-29%
10-19%
0-9%

International expansion is central to many retailers

futures, with a focus on a low-cost,
low-risk e-commerce strategy

Tesco might be retreating

from its international
operations as recently
demonstrated by the sale
of its South Korea business
- but overseas expansion
remains a major area of
growth for UK retailers. As
many as 43 per cent regard it
as one of the top three areas
they intend to focus on over
the next three years.
Many retailers, including the
likes of N Brown, Superdry
and Marks & Spencer,
have used the unlimited

geographical boundaries
of the internet to test
international strategies in a
quick, cheap and often
lower-risk way.
It is therefore not surprising
that 49 per cent of retailers
say e-commerce is the
format that will receive the
most focus for investment.
While international
expansion offers great
opportunities for growth,
especially online, it is also
where the biggest competition
comes from, with 47 per cent
of retailers saying global online
represents the most significant
threat to their future growth.
It is clear that international,
and in particular the use of
online across borders, are key
battlegrounds.
Expansion plans are
predominantly focused on
the EU and Asia, with 47 per
cent of retailers looking
at Europe, while 32 per cent
are targeting Asia.
Department stores and
general merchandise retailers
have a particularly strong
bias to EU expansion, with
77 per cent of companies
prioritising this region.
In contrast, only 2 per
cent are focusing on North
America, which may explain
why some retailers are less
interested in the potential
impact of the Transatlantic
Trade and Investment
Partnership negotiations. It

FIGURE 7 WHICH RETAIL FORMAT WILL RECEIVE

THE MOST FOCUS AND INVESTMENT OVER THE
NEXT THREE YEARS?

17%

2%

7%
5%
7%

4%

9%

E-COMMERCE
FACTORY OUTLETS
FRANCHISE
VENDING
BOUTIQUE
CLICK & COLLECT
CONCESSIONS
DISCOUNTER

0%
POP-UP
CONVENIENCE

49%
10

43%
see
international
expansion as
a top three
factor that
will drive
growth in
the next
three years

HOW WILL GROWTH BE ACHIEVED?

5%

21%

M&A

DIRECT
INVESTMENT

8%
JOINT
VENTURES

26%

18%

16%

1%

6%

STRATEGIC
ALLIANCES

FRANCHISE/
LICENCE

DIRECT
EXPORT

INDIRECT
EXPORT

OFFICE
LOCATION

FIGURE 9 WHERE IS YOUR GREATEST COMPETITION

GOING TO COME FROM OVER THE NEXT THREE YEARS?

KEY LEGAL ACTION POINTS

DISCOUNTERS

Thinking about relationships

across borders is crucial. Too
often, arrangements are entered
into without thought as to
the legal consequences in the
partners country of origin.
Be aware of key differences,
such as negotiations, that
may become binding before

signature, overriding good

faith requirements, and the
inability to summarily terminate
distribution or supplier
contracts. Think also about
commercial agents rights
to compensation upon lawful
termination still catching out
companies a decade after the EU
regulations became effective.

GLOBAL OFFLINE

GLOBAL ONLINE

UK OFFLINE

43%

UK ONLINE

57%

UTILITIES

SPORTS &
LEISURE

31%

38%

31%

92%
is a similar story with Africa,
where virtually no interest is
being shown in expansion
into the territory.
There are many models
available to launch
internationally, from using
third parties under licence
or as commercial agents
or franchise, through to the
business taking the plunge
itself, or benefiting from the
local experience of a joint

venture. What is clear is that

retailers are less keen on local
market M&A, as just 5 per
cent saw this as the route to
market entry, clearly favouring
the increased control the other
routes provide.
This focus on international
development perhaps
explains why 31 per cent
of retailers regard BREXIT
(Britain leaving the EU) as a
serious threat to their future

8%

FASHION

growth and the 60 per cent

who viewed EU regulation as
a key challenge. Inevitably,
even in times of increasingly
harmonised EU laws, the
local interpretations and
practical difficulties arising
out of dealing in many
languages across the EU
gives rise to many practical
challenges that retailers
typically use technology
to overcome.

ENTERTAINMENT

DEPARTMENT
STORES

TOTAL

11

31%

46%
17% 9%

38%

23%
47%

31%

31%
9% 18%

GLOBAL REACH

FIGURE 8 WHICH GEOGRAPHICAL AREAS WILL YOUR COMPANY LOOK TO TARGET FOR EXPANSION?
40-50%
30-39%
20-29%
10-19%
0-9%

International expansion is central to many retailers

futures, with a focus on a low-cost,
low-risk e-commerce strategy

Tesco might be retreating

from its international
operations as recently
demonstrated by the sale
of its South Korea business
- but overseas expansion
remains a major area of
growth for UK retailers. As
many as 43 per cent regard it
as one of the top three areas
they intend to focus on over
the next three years.
Many retailers, including the
likes of N Brown, Superdry
and Marks & Spencer,
have used the unlimited

geographical boundaries
of the internet to test
international strategies in a
quick, cheap and often
lower-risk way.
It is therefore not surprising
that 49 per cent of retailers
say e-commerce is the
format that will receive the
most focus for investment.
While international
expansion offers great
opportunities for growth,
especially online, it is also
where the biggest competition
comes from, with 47 per cent
of retailers saying global online
represents the most significant
threat to their future growth.
It is clear that international,
and in particular the use of
online across borders, are key
battlegrounds.
Expansion plans are
predominantly focused on
the EU and Asia, with 47 per
cent of retailers looking
at Europe, while 32 per cent
are targeting Asia.
Department stores and
general merchandise retailers
have a particularly strong
bias to EU expansion, with
77 per cent of companies
prioritising this region.
In contrast, only 2 per
cent are focusing on North
America, which may explain
why some retailers are less
interested in the potential
impact of the Transatlantic
Trade and Investment
Partnership negotiations. It

FIGURE 7 WHICH RETAIL FORMAT WILL RECEIVE

THE MOST FOCUS AND INVESTMENT OVER THE
NEXT THREE YEARS?

17%

2%

7%
5%
7%

4%

9%

E-COMMERCE
FACTORY OUTLETS
FRANCHISE
VENDING
BOUTIQUE
CLICK & COLLECT
CONCESSIONS
DISCOUNTER

0%
POP-UP
CONVENIENCE

49%
10

43%
see
international
expansion as
a top three
factor that
will drive
growth in
the next
three years

HOW WILL GROWTH BE ACHIEVED?

5%

21%

M&A

DIRECT
INVESTMENT

8%
JOINT
VENTURES

26%

18%

16%

1%

6%

STRATEGIC
ALLIANCES

FRANCHISE/
LICENCE

DIRECT
EXPORT

INDIRECT
EXPORT

OFFICE
LOCATION

FIGURE 9 WHERE IS YOUR GREATEST COMPETITION

GOING TO COME FROM OVER THE NEXT THREE YEARS?

KEY LEGAL ACTION POINTS

DISCOUNTERS

Thinking about relationships

across borders is crucial. Too
often, arrangements are entered
into without thought as to
the legal consequences in the
partners country of origin.
Be aware of key differences,
such as negotiations, that
may become binding before

signature, overriding good

faith requirements, and the
inability to summarily terminate
distribution or supplier
contracts. Think also about
commercial agents rights
to compensation upon lawful
termination still catching out
companies a decade after the EU
regulations became effective.

GLOBAL OFFLINE

GLOBAL ONLINE

UK OFFLINE

43%

UK ONLINE

57%

UTILITIES

SPORTS &
LEISURE

31%

38%

31%

92%
is a similar story with Africa,
where virtually no interest is
being shown in expansion
into the territory.
There are many models
available to launch
internationally, from using
third parties under licence
or as commercial agents
or franchise, through to the
business taking the plunge
itself, or benefiting from the
local experience of a joint

venture. What is clear is that

retailers are less keen on local
market M&A, as just 5 per
cent saw this as the route to
market entry, clearly favouring
the increased control the other
routes provide.
This focus on international
development perhaps
explains why 31 per cent
of retailers regard BREXIT
(Britain leaving the EU) as a
serious threat to their future

8%

FASHION

growth and the 60 per cent

who viewed EU regulation as
a key challenge. Inevitably,
even in times of increasingly
harmonised EU laws, the
local interpretations and
practical difficulties arising
out of dealing in many
languages across the EU
gives rise to many practical
challenges that retailers
typically use technology
to overcome.

ENTERTAINMENT

DEPARTMENT
STORES

TOTAL

11

31%

46%
17% 9%

38%

23%
47%

31%

31%
9% 18%

DELIVERING THE GOODS

BEACONS
OF HOPE

Maintaining a cost-effective delivery and returns

service is a challenge facing all retailers
battling to win consumer loyalty

Many high street retailers are looking to invest in in-store

technology to improve their customers experience
FIGURE 10 WHICH ORDER-FULFILMENT
STRATEGIES ARE YOU CONSIDERING?

Competition from online rivals

is regarded as a major threat
to traditional retailers futures;
the omnichannel revolution
gives them an opportunity to
compete, but a robust and
flexible online order-fulfilment
proposition covering both
web and mobile sales is now
critical to success.
Amazon and Argos are
among the retailers fighting it
out to offer quicker delivery
times in tighter delivery-slot
windows 57 per cent of
retailers are considering
free delivery, 54 per cent
click and collect, and 47 per
cent looking to offer precise
delivery times as part of their
fulfilment strategy.
In contrast, while there has
been considerable hype, it
appears in reality there is little
interest in same-day delivery
or drones not withstanding
that Amazon announced it
was trialling both.
Free delivery is most relevant
to the food and beverage
category, with 85 per cent
considering such a strategy,
which definitely puts margins
under pressure. Further
stress on the major grocers
is coming from AmazonFresh
and PrimeNow, with a further
convergence of the big online
retailers expected into more
traditional markets.

DATA SHOWS % OF RESPONDENTS WHO

CONSIDERED STRATEGY TO BE IN TOP 2

9%

SAME-DAY
DELIVERY

PRECISE
DELIVERY
TIMES

47%
11%
12%

ON-THE-GO
RETAIL
NON-TRADITIONAL
DELIVERY
MECHANISMS

57%
11%

FREE
DELIVERY

CLICK AND COLLECT

(REMOTE LOCATIONS/
LOCKERS)

54%

CLICK AND
COLLECT
(IN-STORE)

FIGURE 11 WHICH RETURNS SOLUTIONS WILL

YOUR COMPANY FOCUS ON?
DATA SHOWS % OF RESPONDENTS WHO
CONSIDERED STRATEGY TO BE IN TOP 2

75%
FREE RETURNS
DROP OFF
7%

65%

53%
PRECISE PICK-UP TIMES

IN-STORE RETURNS
DRONES
0%

12

The emergence of new

delivery models from
technology-led newcomers,
such as Uber, are also
shaking up the market.
Denmark-based Dansk
Supermarked has admitted
finding it tough to make food
delivery profitable and is
therefore considering using
new logistics solutions from
the likes of Uber.
In our Supply Chain
Report last year, we
saw how it is no longer
acceptable to only focus
on getting goods to
consumers. Another
fulfilment pressure point for
retailers is returns. Dealing
with unwanted goods is a
costly and time-consuming
activity that again eats into
online margins. But a failure
to offer a comprehensive
returns policy would be
detrimental to any retailer.
Charging customers for any
part of the in-store deliveryand-returns element of online
ordering had been avoided by
all retailers, until John Lewis
recently began charging 2
for click and collect orders
valued at less than 30. Early
evidence is that the lost sales
have been offset by some
shoppers bulking up their
orders to cross the minimumspend threshold.

FIGURE 12 EXCLUDING CUSTOMER SERVICE, WHAT IS YOUR KEY

MESSAGE/RETAIL NARRATIVE TO CONSUMERS?
EASE OF DELIVERY/RETURNS PROCESS
HERITAGE
HIGH-QUALITY PRODUCT
LOCALISATION OF STORES
PRODUCT PROVENANCE
REWARDING LOYALTY
SUSTAINABLE/ETHICAL PRACTICES
VALUE FOR MONEY

41%

5% 3%
21%
9%
41%

OF INVESTMENT WILL
BE SPENT ON BRICKSAND-MORTAR

Technology is rapidly changing

the in-store retail experience
- channels are converging
and shoppers are becoming
increasingly demanding.
One department store
retailer predicts the march
towards convergence gaining
pace, recognising the huge
value to be gained from this
experience for both retailer
and consumer: E-commerce,
mobile applications and virtual
fitting rooms will be used to

11%
3%

8%

KEY LEGAL ACTION POINTS

Convergence and sophisticated
omnichannel technology-led
experiences are everything a
retailer might want. However,
many struggle with legacy systems
and IT foundations inadequate for
current demands.

As transformational IT investments
are required to meet customer
demand, retailers need to budget for
building in privacy by design, phasing
projects in manageable portions
and dealing with the inevitability of
change as the project runs.

13

offer exactly what the customer

wants, and the data that is
gathered will then be used
for targeted advertising
and marketing.
Similar change is forecast
by one electricals retailer,
who suggests: Smart
displays, wi-fi networks,
new payment systems,
beacons and sensor
technologies, which offer
the business provider more
comfort in making products
appealing, will revolutionise
stores and retail.
To satisfy this demand,
retailers are committing 41 per
cent of their budgets to bricksand-mortar, with the rest going
towards online developments.
The major investments over the
next three years are going on
new stores (39 per cent), in-store
digital marketing and point-ofsale technologies (23 per cent).
Arcadia, House of Fraser,
Burberry and Argos are among
the many high street retailers
that equip their employees with
tablets which often incorporate
payment solutions and online
ordering functionality.
Despite this focus and
investment on fulfilment, it
doesnt appear that retailers
are focusing on this as a selling
point to their consumers with
just 5 per cent saying promoting
the ease of this process
was to be a key message to
consumers, suggesting this is
an assumed service and not
viewed as adding value.
But despite the budgets
committed by retailers
to transforming their instore infrastructures and
fulfilment processes, the key
messages they are conveying
to consumers are very
traditional. As many as 41
per cent of retailers are aiming
to deliver a key message
around the offering of highquality products, while 21 per
cent are focused on delivering
a value-for-money narrative.

DELIVERING THE GOODS

BEACONS
OF HOPE

Maintaining a cost-effective delivery and returns

service is a challenge facing all retailers
battling to win consumer loyalty

Many high street retailers are looking to invest in in-store

technology to improve their customers experience
FIGURE 10 WHICH ORDER-FULFILMENT
STRATEGIES ARE YOU CONSIDERING?

Competition from online rivals

is regarded as a major threat
to traditional retailers futures;
the omnichannel revolution
gives them an opportunity to
compete, but a robust and
flexible online order-fulfilment
proposition covering both
web and mobile sales is now
critical to success.
Amazon and Argos are
among the retailers fighting it
out to offer quicker delivery
times in tighter delivery-slot
windows 57 per cent of
retailers are considering
free delivery, 54 per cent
click and collect, and 47 per
cent looking to offer precise
delivery times as part of their
fulfilment strategy.
In contrast, while there has
been considerable hype, it
appears in reality there is little
interest in same-day delivery
or drones not withstanding
that Amazon announced it
was trialling both.
Free delivery is most relevant
to the food and beverage
category, with 85 per cent
considering such a strategy,
which definitely puts margins
under pressure. Further
stress on the major grocers
is coming from AmazonFresh
and PrimeNow, with a further
convergence of the big online
retailers expected into more
traditional markets.

DATA SHOWS % OF RESPONDENTS WHO

CONSIDERED STRATEGY TO BE IN TOP 2

9%

SAME-DAY
DELIVERY

PRECISE
DELIVERY
TIMES

47%
11%
12%

ON-THE-GO
RETAIL
NON-TRADITIONAL
DELIVERY
MECHANISMS

57%
11%

FREE
DELIVERY

CLICK AND COLLECT

(REMOTE LOCATIONS/
LOCKERS)

54%

CLICK AND
COLLECT
(IN-STORE)

FIGURE 11 WHICH RETURNS SOLUTIONS WILL

YOUR COMPANY FOCUS ON?
DATA SHOWS % OF RESPONDENTS WHO
CONSIDERED STRATEGY TO BE IN TOP 2

75%
FREE RETURNS
DROP OFF
7%

65%

53%
PRECISE PICK-UP TIMES

IN-STORE RETURNS
DRONES
0%

12

The emergence of new

delivery models from
technology-led newcomers,
such as Uber, are also
shaking up the market.
Denmark-based Dansk
Supermarked has admitted
finding it tough to make food
delivery profitable and is
therefore considering using
new logistics solutions from
the likes of Uber.
In our Supply Chain
Report last year, we
saw how it is no longer
acceptable to only focus
on getting goods to
consumers. Another
fulfilment pressure point for
retailers is returns. Dealing
with unwanted goods is a
costly and time-consuming
activity that again eats into
online margins. But a failure
to offer a comprehensive
returns policy would be
detrimental to any retailer.
Charging customers for any
part of the in-store deliveryand-returns element of online
ordering had been avoided by
all retailers, until John Lewis
recently began charging 2
for click and collect orders
valued at less than 30. Early
evidence is that the lost sales
have been offset by some
shoppers bulking up their
orders to cross the minimumspend threshold.

FIGURE 12 EXCLUDING CUSTOMER SERVICE, WHAT IS YOUR KEY

MESSAGE/RETAIL NARRATIVE TO CONSUMERS?
EASE OF DELIVERY/RETURNS PROCESS
HERITAGE
HIGH-QUALITY PRODUCT
LOCALISATION OF STORES
PRODUCT PROVENANCE
REWARDING LOYALTY
SUSTAINABLE/ETHICAL PRACTICES
VALUE FOR MONEY

41%

5% 3%
21%
9%
41%

OF INVESTMENT WILL
BE SPENT ON BRICKSAND-MORTAR

Technology is rapidly changing

the in-store retail experience
- channels are converging
and shoppers are becoming
increasingly demanding.
One department store
retailer predicts the march
towards convergence gaining
pace, recognising the huge
value to be gained from this
experience for both retailer
and consumer: E-commerce,
mobile applications and virtual
fitting rooms will be used to

11%
3%

8%

KEY LEGAL ACTION POINTS

Convergence and sophisticated
omnichannel technology-led
experiences are everything a
retailer might want. However,
many struggle with legacy systems
and IT foundations inadequate for
current demands.

As transformational IT investments
are required to meet customer
demand, retailers need to budget for
building in privacy by design, phasing
projects in manageable portions
and dealing with the inevitability of
change as the project runs.

13

offer exactly what the customer

wants, and the data that is
gathered will then be used
for targeted advertising
and marketing.
Similar change is forecast
by one electricals retailer,
who suggests: Smart
displays, wi-fi networks,
new payment systems,
beacons and sensor
technologies, which offer
the business provider more
comfort in making products
appealing, will revolutionise
stores and retail.
To satisfy this demand,
retailers are committing 41 per
cent of their budgets to bricksand-mortar, with the rest going
towards online developments.
The major investments over the
next three years are going on
new stores (39 per cent), in-store
digital marketing and point-ofsale technologies (23 per cent).
Arcadia, House of Fraser,
Burberry and Argos are among
the many high street retailers
that equip their employees with
tablets which often incorporate
payment solutions and online
ordering functionality.
Despite this focus and
investment on fulfilment, it
doesnt appear that retailers
are focusing on this as a selling
point to their consumers with
just 5 per cent saying promoting
the ease of this process
was to be a key message to
consumers, suggesting this is
an assumed service and not
viewed as adding value.
But despite the budgets
committed by retailers
to transforming their instore infrastructures and
fulfilment processes, the key
messages they are conveying
to consumers are very
traditional. As many as 41
per cent of retailers are aiming
to deliver a key message
around the offering of highquality products, while 21 per
cent are focused on delivering
a value-for-money narrative.

EARNING POTENTIAL

CONCLUSION

The introduction of the living wage is forcing

retailers to rethink their staffing structures, training
programmes and premium payments policies

The old adage goes that

retail is detail and people
do detail. It has never
been a more competitive
market for ensuring retailers
have the right people to
power their business, with
the living wage the latest
employment-related issue to
dominate the agenda.
While often portrayed in a
negative light and as a cost
to business, only 27 per cent
of retailers saw it as a key
threat to growth over the next
three years, viewing areas
such as regulatory change,
and IT and data security as
bigger issues.
The ability to retain and
motivate the best staff is key.
Wages are clearly crucial and
therefore it is fundamental
retailers buy into improved
remuneration.
Only 36 per cent of those
we asked thought they would

not be affected by introducing

the living wage. Those who
thought there would be an
impact on their business
sought to offset this by passing
on the cost to consumers (23
per cent) and suppliers (18 per
cent), with very few expecting
to reduce staff numbers (3 per
cent) see figure 13.

Larger companies feel better

able to handle the living wage,
with almost half believing it will
be immaterial to how they run
their organisation, while smaller
firms think there is a greater
likelihood of passing on costs
to the customer.
Many employers are
reviewing their pay structures

KEY LEGAL ACTION POINTS

Review pay structures to assess
fairness, and ability to stay in
line with proposed changes to
national minimum wage, living
wage, equal pay or pensions.

of-date premium, and make an

assessment of the financial
risks and challenges to the
organisation. It is important
to consult early on with staff/
unions on the changes proposed
and consider the job roles and
changes required as part of
the pay restructure.

Use the opportunity to

revise structures with
historical unfairness or out-

and the roles employees

undertake. A fairer pay
system will encourage and
reward employees, and
ensure greater engagement.
Staff engagement is also
maximised by investment
in skills and employees
understanding of the business.
Training on products and everchanging technology is
of paramount importance.
Investment in training
and higher wages are not,
however, dampening retailers
enthusiasm for growing
their workforces with many
employing an increasing
number of people from
outside the European Union.
As many as 79 per cent of
retailers expect to increase
recruitment of such workers
over the next three years.
No company expects a
decrease in numbers among
their non-EU workforce.

FIGURE 13 WHAT WILL BE THE BIGGEST EFFECT OF THE INTRODUCTION OF THE NATIONAL
LIVING WAGE ON YOUR BUSINESS?

Capital structure:
With only 15 per
cent of retailers
looking to deleverage, 85 per
cent of retailers favour private
equity as their main source of
financing. The stock market
is reluctant to invest capital
in retailers, with many leading
names reporting falling sales
and margins. The optimal
business and assets mix
also remains unresolved,
with concerns lingering over
portfolio size, format and
location. This is, in part,
being driven by a challenge
to traditional assumptions
about freeholds underpinning
value and supporting debt.
A further challenge to
existing models is industry
consolidation, exemplified
by the Carphone Warehouse
and Dixons merger, and
prospect of Sainsburys
acquisition of Argos.
Private equity remains
interested in seizing
opportunity, but caution
over leveraging debt and
restricted exit routes are
inhibiting investment.

Ominichannel: This
creates significant
opportunities, but
these can become challenges
if they arent supported by
a strong legal platform. The
need to ensure that data
is managed effectively and
consumer information robustly
protected is paramount to
any retailers reputation. Do
not wait for a crisis to unfold
to test your systems a crisis
simulation event is essential to
understanding what needs to
be done to protect your brand.
Mobile: Increased
reliance on mobile
marketing means
that logistics agreements
and tie-ups will need to be
regularly reviewed to
ensure they remain fit for
purpose for the flexible
world of mobile.
CSR: This is
firmly on retailers
agendas, not
least as a way to increase
brand development. There
are an increasing number of

legal challenges to convert

the moral responsibilities
associated with CSR into legal
liabilities. For many retailers
this is the cost of doing
business; for others that seek
to de-risk their business these
legal developments need to
be closely analysed.
Taxes: Staff
reductions,
pensions, directors
remuneration, international
expansion, and the increasing
onus of compliance, risk and
CSR all bring significant tax
considerations. From April
2017, HMRC will be collecting
the apprenticeship levy at 0.5
per cent of payroll cost over
3 million. For large retailers
that will be a significant amount
of additional tax (around
10 million for the large
supermarkets).The consultation
outcome suggests that some, if
not all the cash may be able to
be recycled to meet some
training needs. Careful
consideration needs to be
given to the combination of
tax and education.

CLOSED
DECREASED STAFF NUMBERS
COSTS PASSED DOWN TO SUPPLIERS
LESS INVESTMENT IN NEWS STORES
INCREASED COSTS FOR CONSUMERS
INCREASED RECRUITMENT FROM ABROAD
NO EFFECT

3%

18%

15%

14

23%

4%

36%

15

EARNING POTENTIAL

CONCLUSION

The introduction of the living wage is forcing

retailers to rethink their staffing structures, training
programmes and premium payments policies

The old adage goes that

retail is detail and people
do detail. It has never
been a more competitive
market for ensuring retailers
have the right people to
power their business, with
the living wage the latest
employment-related issue to
dominate the agenda.
While often portrayed in a
negative light and as a cost
to business, only 27 per cent
of retailers saw it as a key
threat to growth over the next
three years, viewing areas
such as regulatory change,
and IT and data security as
bigger issues.
The ability to retain and
motivate the best staff is key.
Wages are clearly crucial and
therefore it is fundamental
retailers buy into improved
remuneration.
Only 36 per cent of those
we asked thought they would

not be affected by introducing

the living wage. Those who
thought there would be an
impact on their business
sought to offset this by passing
on the cost to consumers (23
per cent) and suppliers (18 per
cent), with very few expecting
to reduce staff numbers (3 per
cent) see figure 13.

Larger companies feel better

able to handle the living wage,
with almost half believing it will
be immaterial to how they run
their organisation, while smaller
firms think there is a greater
likelihood of passing on costs
to the customer.
Many employers are
reviewing their pay structures

KEY LEGAL ACTION POINTS

Review pay structures to assess
fairness, and ability to stay in
line with proposed changes to
national minimum wage, living
wage, equal pay or pensions.

of-date premium, and make an

assessment of the financial
risks and challenges to the
organisation. It is important
to consult early on with staff/
unions on the changes proposed
and consider the job roles and
changes required as part of
the pay restructure.

Use the opportunity to

revise structures with
historical unfairness or out-

and the roles employees

undertake. A fairer pay
system will encourage and
reward employees, and
ensure greater engagement.
Staff engagement is also
maximised by investment
in skills and employees
understanding of the business.
Training on products and everchanging technology is
of paramount importance.
Investment in training
and higher wages are not,
however, dampening retailers
enthusiasm for growing
their workforces with many
employing an increasing
number of people from
outside the European Union.
As many as 79 per cent of
retailers expect to increase
recruitment of such workers
over the next three years.
No company expects a
decrease in numbers among
their non-EU workforce.

FIGURE 13 WHAT WILL BE THE BIGGEST EFFECT OF THE INTRODUCTION OF THE NATIONAL
LIVING WAGE ON YOUR BUSINESS?

Capital structure:
With only 15 per
cent of retailers
looking to deleverage, 85 per
cent of retailers favour private
equity as their main source of
financing. The stock market
is reluctant to invest capital
in retailers, with many leading
names reporting falling sales
and margins. The optimal
business and assets mix
also remains unresolved,
with concerns lingering over
portfolio size, format and
location. This is, in part,
being driven by a challenge
to traditional assumptions
about freeholds underpinning
value and supporting debt.
A further challenge to
existing models is industry
consolidation, exemplified
by the Carphone Warehouse
and Dixons merger, and
prospect of Sainsburys
acquisition of Argos.
Private equity remains
interested in seizing
opportunity, but caution
over leveraging debt and
restricted exit routes are
inhibiting investment.

Ominichannel: This
creates significant
opportunities, but
these can become challenges
if they arent supported by
a strong legal platform. The
need to ensure that data
is managed effectively and
consumer information robustly
protected is paramount to
any retailers reputation. Do
not wait for a crisis to unfold
to test your systems a crisis
simulation event is essential to
understanding what needs to
be done to protect your brand.
Mobile: Increased
reliance on mobile
marketing means
that logistics agreements
and tie-ups will need to be
regularly reviewed to
ensure they remain fit for
purpose for the flexible
world of mobile.
CSR: This is
firmly on retailers
agendas, not
least as a way to increase
brand development. There
are an increasing number of

legal challenges to convert

the moral responsibilities
associated with CSR into legal
liabilities. For many retailers
this is the cost of doing
business; for others that seek
to de-risk their business these
legal developments need to
be closely analysed.
Taxes: Staff
reductions,
pensions, directors
remuneration, international
expansion, and the increasing
onus of compliance, risk and
CSR all bring significant tax
considerations. From April
2017, HMRC will be collecting
the apprenticeship levy at 0.5
per cent of payroll cost over
3 million. For large retailers
that will be a significant amount
of additional tax (around
10 million for the large
supermarkets).The consultation
outcome suggests that some, if
not all the cash may be able to
be recycled to meet some
training needs. Careful
consideration needs to be
given to the combination of
tax and education.

CLOSED
DECREASED STAFF NUMBERS
COSTS PASSED DOWN TO SUPPLIERS
LESS INVESTMENT IN NEWS STORES
INCREASED COSTS FOR CONSUMERS
INCREASED RECRUITMENT FROM ABROAD
NO EFFECT

3%

18%

15%

14

23%

4%

36%

15

16