I have always been attracted to the challenge of setting prices for products and services. Why? Well mainly because it is probably the most neglected and misunderstood aspect of retail marketing strategy. However things are changing rapidly.

In recent months here in the UK the business and daily press have become obsessed with the concept of “surge pricing”. The term has been portrayed by commentators and journalists as the “latest “in-thing” or “whizz” that shoppers are about to become exposed to. I would like to de-bunk this argument and in this blog I express some observations that hopefully put the concept in perspective and context.

The term apparently describes the notion that retailers are likely to do away with the concept of “fixed pricing”, which has been the practice for many decades. Instead prices will rise and fall in an ever-bewildering number of changes during the day to reflect rises and falls in demand. The reason why it is gaining more traction is built around the confluence of big data and technology: a theme which is a recurring feature of my book and my previous blogs.

However, let’s get real here. Call it what you will – surge pricing, dynamic pricing, peak time pricing or whatever. It has been around for a long time, particularly in the services sector. Most of us have experienced such variations in pricing with airlines and hotels for quite a number of decades. It is particularly appropriate in services, where you cannot store or inventories services. Once the flight takes off (whether at capacity or half-capacity) the opportunity is gone to sell extra seats. We refer to this as one of the consequences of “perishability”.

Of course in traditional retailing, as shoppers, we are constantly exposed to promotional prices, discounts, special offers and so on. However a number of developments have increased the frequency of such strategies and in particular the practice of varying prices in a frequent or dynamic way to reflect demand or the lack thereof.

Companies such as Amazon have taken the practice of dynamic pricing to ever higher levels of sophistication. Again I take you back to the confluence of technology and data. By capturing a raft of information about the individual shopper and by making use of technology to developed detailed algorithms to project and forecast demand, companies can reflect this in the pries that they charge for their products.

This has been further helped by the use of e-pricing within the “bricks and mortar” stores. This has been going on for a number of years in European countries such as Germany and Scandinavia. This is visibly identified by the increasing use of Electronic shelf labels (EPL’s). This has recently entered the lexicon in UK retailing.

Let’s reflect on this development for a second or two.

Traditionally one of the biggest challenges facing retailers was to implement price changes. Paper-based shelf labels had to be changed manually by a vast number of people across the store portfolio. Imagine the length of time it can take to fully implement changes across five hundred store outlets for example? Also reflect on the potential for human error: again a large number of individual doing such a mundane task. There are bound to be errors. Also not every store will work to the same level of expected efficiency when it comes to making the changes. It could potentially take a few days before every store in the portfolio has addressed the changes.

Now reflect on how it is so easy for online retailers to make and implement price changes. What may take a few days in a “bricks and mortar” store can happens within an hour or two of a strategic decision to effect a change in price on a number of different items.

Now, through technological developments, prices can be altered with bewildering frequency across the traditional physical outlets.

Surge pricing, it is argued can lead to higher margins for retailers because it can allow them to reduce waste: in the form of excess stock at the end of each day. This is achieved by altering the price of items to reflect demand patterns and also lead to operational efficiencies by spreading the shopping more evenly during the day.

A good example of this was an experiment by Marks and Spencer in 2016. It reduced prices on its food items up until 11am each day and then increased them during the peak “lunch-time” period (when people call in to buy a sandwich or salad). Petrol stations in Scandinavia have used similar strategies to manage demand by increasing the price of fuel at peak times and reducing it at off-peak periods.

The notion of a “one piece fits all” approach is coming under increasing attack and is seen as being implausible – given the array of data and technology available to retailers.

What are the benefits to shoppers who might be faced with varying prices when visiting their local supermarket or fashion retailer? Well if you are prepared to shop during off-peak hours you would certainly benefit from lower prices. This might mean making a visit to the store at 11am on a Monday morning or 11pm at night.

If retailers go even further and link your personal data and shopping preferences and patterns to a personalised form of pricing, then you may also benefit from lower prices gain some reward through your continued loyalty.

In essence shoppers would have to readjust their shopping habits and this may take some time before they become conditioned to such “surge pricing” tactics. For instance in Scandinavia petrol stations are engaging in such practices by changing prices at different times during the day.

Retailers probably gain more from this exercise. The do so through more effective management of inventory and through achieving cost efficiencies by more effectively managing resources e.g. front-line staff.

It also makes it easier for retailers to make more effective price matching offers and get these changes up more quickly via electronic shelf labels.

In theory it addresses the ever-increasing need for price transparency.

The fact is that UK retailing is only in the nascent stages of implementing the technology when compared to countries such as France. In the latter case retailers there are in a position to changes prices over 90,000 per day if they so desire.

For bricks and mortar retailers it allows them to compete more effectively with pure play online retailers. They can effect price variations potentially as quickly as them, thus reducing the gap between them.

If you are getting cheesed off with the implications for shoppers there is good news, at least in the short term. Retailers, particularly supermarkets, faced with the bewildering range of items and the sheer size of the number of the stores which they operate, are only able to drive changes with such frequency on about 20 per cent of the changes that their computer systems and algorithms recommend.

It will also take time to combine personalised, individual pricing for each and every one of their shoppers.

Once again the combination of technology and data is driving change.

Remember this. The concept of surge pricing is not new. What is innovative is the potential that it offers to retailers. For shoppers, if we wish to benefit from it, we will need to become conditioned to it and adjust our shopping habits accordingly.

Haggling over prices has been around for centuries. To some extent this notion of surge pricing reinforces this practice: shoppers will become used to such variations. The idea of a standard fixed price may disappear. Let’s keep an eye on this development.

Interesting times ahead for Lidl – the German hard discount food retailer. Forty years after its “alter-ego” Aldi entered the US market, Lidl opened its first store in Virginia in the past couple of weeks. It plans to roll out another twenty or so by the end of the year and in the next twelve months plans to have one-hundred stores across Virginia and North and South Carolina. It has further plans for developments in Texas and other north-eastern states.

This is an interesting move because the US grocery market is highly competitive: long since dominated by giants such as Wal-Mart (which holds around 22% of the national market), Kroger and Target. It is also a sector which has experienced a downturn in demand and is dominated by a focus on ever-lower prices. Arguably the market is experiencing over-capacity in terms of the number of retailers operating in this space.

Retailers have anticipated this rumoured entry by Lidl. For instance Aldi has spent £5 billion on a major overhaul of its stores and has continued to open new outlets across the nation.

For me it is an interesting move for Lidl precisely because retailers in Europe and particularly the UK have constantly failed in the US market. As far back as the 1980’s Marks and Spencer experienced a major failure. More recently Tesco, with its “Fresh n Go” concept also encountered a sobering lesson. In the latter case it claimed to have done extensive research on the US food shopping patterns, preferences and so on, yet miscalculated the market and was forced to bow out in an embarrassing manner.

In addition Amazon has also made inroads via its Amazon Fresh concept and the ever-present growth of online retailing.

In our chapter on retail internationalisation I stressed the importance of learning by doing and learning to adapt, when retailers enter international markets. Cultures and shopping patterns can vary considerably. What might work well in Germany or Sweden may “bomb out” in Australia or Malaysia because of a fundamental lack of understanding of these existing differences. I was intrigued by this comment made by the CEO of Lidl US; Brendan Procter.

“It’s about what we have to do to adapt to the market” (quoted in Lidl opens first US stores as new era in food retail begins. Supermarket News (Jon Springer).  June 2017.

This view captures the essential challenge for any retailer contemplating entry to an international market – particularly one as complex and challenging as the USA.

Lidl is often portrayed as a secretive and intensely private operation. While Aldi has med the earl move into the USA many commentators put forward the view that Lidl displays more innovation and ingenuity in terms of its overall business model.

In the light of previous failures such as Tesco it might be beneficial to identify and assess the approach adopted by Lidl as it takes on the established and hardened retailers in this sector.

Firstly it has made adaptations to the size of its stores. Typically the US Lidl store centres around 36,000 square feet – of which 21,000 square feet represents the selling space. This means that it is around 35 per cent larger than its typical European store. This reflects the emphasis placed by US food retailers on selling space (much larger and carrying more items than Lidl).

It also has altered its exterior design. In the USA it has arching walls of floor to ceiling made up of glazed glass and extensive use of red brick in its construction. This is in sharp contrast to its European stores which are essentially made up of extensive use of aluminium panels. Research showed that this latter type of design conjured up an image of a typical car dealership in the minds of American shoppers.

Each store is designed around six aisles, with the first one containing the most popular items that are typically purchased by shoppers. Upon entering the store the shopper sees the bakery section in the corner. Lidl makes use of free samples to tempt and surprise shoppers and encourage them to make a purchase. At the end of each of the six aisles Lidl places its promotional offers. This is based on lower prices but emphasising the quality of the items. In this area they focus on using promotional pricing to attract and retain shoppers and educate them to how these offers work. For instance they make use of prominent signs with the slogan “While they last”. This focuses on the message that the items will not be available for very long at those prices. In similar fashion they rotate prices on selected non-food items such as clothing, again focusing on the short-term availability of items at promotional prices. They change the focus of the items each week or so thus focusing on the element of surprise.

“Fresh5” offers focus on 3 items in the Fresh veg and fruit and 2 items in the meat and seafood categories.

These promotional offers are typically around 12 per cent to 30 per cent lower than competitor’s prices.

Recognising cultural differences, Lidl includes a section carrying refrigerated craft beers – a popular and growing category in the USA.

Ninety per cent of items stocked are private labels. This represents a challenge as traditionally US shoppers have been suspicious of such brands – preferring the more recognisable national and international alternatives. However Lidl reckon that this perception is changing as shoppers become acclimatised to lower prices. Focusing on the quality of such items is also seen as a way of changing these views even further.

Lidl works closely with suppliers to ensure that they can meet the designated price-quality levels.

The smaller stores, linked to the smaller back-office requirements also can generate savings and efficiencies.

More importantly Lidl have picked up a trend where the average US shopper finds it increasingly irritating and time-consuming when attempting to navigate around larger stores that carry a wider ranges of items. The smaller and more focused approach in Lidl’s view makes for a more productive and efficient shopping visit.  This is based on the simple principle of “less is more”.

In order to capture the attention of the shoppers Lidl has signed up the German supermodel (with an American passport and high recognition in the US) Heidi Klum. She has designed an exclusive clothing range to tie in with the market entry.

As we might expect, the opposition are not sitting back. Aldi plans to open a further 900 stores by end 2018.

Wal-Mart continues to run price-comparison tests to close the gap with rivals such as Kroger, Publix and Albertson. They are also pushing suppliers to deliver on lower costs and lower prices.

Whole Foods is pushing its 365 chain of stores which focus on low costs and organic foods.

Lob in Amazon Fresh and you have a potent cocktail of aggressive competition.

We have to ask ourselves the following questions.

Will the focus on higher quality at a lower price work in the USA?

Have they picked the right states to launch this brand?

Have they acquired sufficient knowledge and understanding of the market to enable their adaptations to work and generate the business?

Have they established differentiation points that are meaningful and relevant to the US shopper?

Can Lidl ward off the anticipated moves of their main rivals in this market?

Let’s see what happen over the next eighteen months or so?

A key theme in the book is the ever-changing nature of retailing; in particular the relationship and interaction between the retailer and the shopper. This is manifested in the issue of personalisation.

We see this facet everywhere in every-day life. I am never ceased to be amazed by the obsession, not to say fetish that many young people have about their self-image. This is evidenced by the bewildering amount of times they change their profile on Facebook or their endless enthusiasm for taking “selfies” at every available opportunity.

I am not a psychiatrist but I guess an analysis of such behaviour would elicit the response that it is the desire to be unique and be able to differentiate the “self” from friends and colleagues.

This behaviour is also manifested in the quest for personalisation in retailing in general and in shopping behaviour in particular.

In the old paradigm retailers put together a set of offerings that were made available in physical stores for people to browse and make their purchases.

Amazon was in my view the trend-setter in moving away from this rather static and rigid formula. It offered items online but, making use of relevant technology, algorithms and data built on shopper’s initial purchases to get “deep down and personal” with them. They did this initially by providing extra help and guidance through the medium of reviews, shopper’s comments on their experiences of the product and so on. This inevitably led to more focused, personal and customised services, where messages and promptings 9mainly through emails) ensured that Amazon could almost shape, direct and “groom” shoppers towards items that reflected previous purchases. In short we witnessed the emergence of the era of personalisation.

Of course this raises issues as to whether such behaviour is unethical or invasive. We will briefly revisit this later in the blog.

In this initial phase such personalisation tended to occur almost exclusively within the context of online shopping. However in the past couple of years we have witnessed a raft of pure-play retailers and onmi-channel retailers also moving inexorably towards in-store personalisation.

This has occurred mainly through the confluence of technology and “big data”.

It can be strongly argued that this is the “holy grail” for retailers. What’s not to like about a situation where they can engage in predictive strategies based on personalised and focused data that can make shoppers more amenable to shopping with them? What’s not to like about designing and developing a promotional package of brands that are relevant to shoppers and where there is clear and unambiguous evidence that they like such items (based on past shopping behaviour)?

To this end we have seen the emergence of many data and technology firms that specialise in analysing “big data” about shopper’s behaviour and providing expert advice and guidance for retailers.

One such company is RichRelevance Technology. They carried out a detailed survey of 2,000 shoppers based in the UK and the USA in 2016. The focal point of the research was to assess whether shoppers found in-store technologies creepy or cool. The findings make interesting reading. For instance they found that in relation to the following technologies shoppers reacted thus.

Technology which scans products      62 per cent – cool

Open to receiving pop-up offers on devices when entering store – 52% – cool

Fingerprint technology to help with payment and automatic delivery – 47.5% – cool

Digital coupons – 43% – cool

Facial recognition software that targets customers in-store – 75% – creepy

Sales assistants greeting shoppers by name as they enter the store – 75% – creepy.

While shoppers are largely willing to provide basic information on age, gender and so on, they are more cautious about parting with details about income levels, spending habits and so on.

As always I inject a note of caution about such research: it is only a snapshot of one particular point in time and as we know, things move and change rapidly in the context of retailing.

However the results suggest that shoppers express some reservations about technologies such as facial recognition to a large extent. The reality is that retailers are using and may make more extensive use of such technology. An example of potentially invidious use of such technology can be found in the following example. What if a retailer, by using facial recognition, can automatically identify very important customers when they enter a retail outlet?

This category could be described as shoppers who spend a lot in the store, who are attracted by new product lines from luxury branders and who demand a high level of personal interaction and attention from store sales assistants. What’s not to like about a retailer using technology that immediately identifies such a shopper on a store assistant’s tablet and automatically brings up that person’s shopping history, brand preferences and attitudes to special promotional offers?

The shop assistant can immediately drop into a sales pattern where the individual is personally welcomed and greeted and is presented with new offers and lines that the retailer can be sure is relevant and will appeal to that shopper. Is this an invasion of privacy or the maximisation of the shopper’s and sales assistant’s time and efficiency? Ponder on that for a moment. The retailer is more likely to generate a sale and also use the opportunity to cross-sell or up-sell. The shopper (who is already in potential buying mode) is likely to feel wanted and loved by the personalised nature of the interaction with the retailer (via the sales assistant).

Less intrusive examples include interactive outlet maps which pop up on the shopper’s smart phone and which identify those areas within the store that contain items that the shopper has purchased before. This saves the shopper needless effort in trying to identify where these items are located and introduces a degree of personalisation that is potentially welcome and non-intrusive.

What about a situation where a male shopper is standing next to the shirts section in a menswear shop and suddenly on a digital screen the following pops up. “Hi Sean, here is our new line of pink shirts from Ben Sherman that has just arrived” After this pops up the person is exposed to a range of such shirts – with prices and special offers, appearing on a personalised digital screen. This is triggered and generated again from data that the retailer holds on your previous purchases of shirts in that store. Is this invasion or innovation? Is it intrusive? An irritant? Or is it a great way of personalising and deepening the relationship between the retailer and shopper?

My view for what it’s worth is that it can be either intrusive or helpful – depending on the relationship between the perceived benefits and costs to the individual shopper.

Potential benefits can revolve around time savings, potential discounts, extra loyalty points and potentially getting an early opportunity to purchase new lines ahead of regular customers. “Costs” include intrusion, the feeling of “big brother” endlessly influencing your behaviour and so on.

We need to get used to this type of personalisation. It is not going to go away and the “kids” of today are embedded already in this type of technology.

For “oldies” like me we need to get used to it.

As someone who has a big interest in all things to do with supply chain management I quickly realised that decisions made in this space have a major and long-term impact on the customer. By extension I see major overlap between supply chain management and marketing management.

Nowhere in my view is this more prevalent than in the case of the retail sector.

Let’s reflect for a moment.

If you make a perusal of retail articles and coverage in the business and academic press over the past few years you cannot fail to notice that retail strategy, particularly in the case of the large retailers has shifted its focus to what we call “the last mile”. This refers to the gap between when shoppers make a purchase and when they receive the item.

Traditionally of course shoppers made a purchase in a store and picked it up from a shop assistant. We have moved on a long way from that type of purchase situation. Online shopping delivery originally revolved almost fully around postal delivery – largely reliant on the national postal service. That has been superseded by a range of delivery options which have been driven by changing patterns of consumer behaviour when it comes to shopping.

As we have noted in the book, many shoppers are “time-poor”; they no longer have the time or enthusiasm to visit retail outlets. This has extended to their expectations about when and where they should pick up or receive the items purchased either online or if they deign to visit a store to make a purchase.

In the last couple of years shoppers are now exposed to a bewildering array of delivery models and options that have been developed by retailers in response to the changing needs and expectations.

We have discussed the concept of omni-channels in some detail in the book and I do not intend to revisit the general trends in this area within this blog. However I make the strong point that the “last mile” is very much part of the shopper experience and has great importance for the successful implementation of the omni-channel strategy.

A study referred to in this link (http://www.netdespatch.com/news/its-do-or-die) gives us an indication of the responses of retailers to the issue of delivery. Among its findings it reveals that 42 per cent of retailers surveyed would be happy to work with partners to meet the expectations of the shoppers (120 retailers surveyed). It also identified the fact seven in ten retailers do not make use of locker services as a pick-up option for shoppers.

The survey identified three barriers in the following order of importance.

1. Cost.
2. Technology
3. Collaboration issues.

The last barrier interests me (the first two are obvious). This suggests that fundamental problems such as an unwillingness to share information can scupper any plans to drive efficiencies in the “final mile” management.

Another survey also highlights some interesting findings (http://www.retailtimes.co.uk/gap-between-retailers-delivery-models-and-customer-demand-widens-temando-survey-reveals/).

This study focused on responses from around 200 UK retailers of different sizes and considered both their strategies in the area of delivery frameworks and the expectations of shoppers.

From a shopper’s perspective around 86 per cent have or indicated that they would use a time-slot delivery option. However only 38 per cent of the surveyed retailers offer this particular option. Around 78 per cent stated that they would like same day deliveries and 47 per cent of them indicated that they would pay a premium for this service. 80 per cent favoured in-store collection and a quarter would be prepared to pay a premium. However only 55 per cent of retailers offer this particular option.

The issue of cost is an interesting one. While the study (see the above paragraph) suggests that a feasible number of shoppers see no problem in paying for specific services, 60 per cent indicated that they have abandoned a purchase because of a lack of transparency or confusion with respect to the details about specific charges that are associated with the delivery option.

85% of retailers acknowledge that by offering multiple shipping options they are in a stronger position to meet the needs and expectations of their target market.

The main obstacle to improving delivery options in this survey was highlighted as a lack of back-office and channel automation.

What are we to make of these evidence-based surveys?

Firstly it reinforces the importance for retailers of addressing the post-sales aspects of the shopper experience. It is not sufficient to provide an omni-channel strategy which provides a consistent and seamless shopping experience in terms of the pre-sales and sales areas. Lack of transparency with regard to the costs associated with delivery, a lack of multi-shipping options and collection points will undoubtedly weaken the retail strategy and encourage would-be shoppers to migrate to competitors.

There is also a perception which can be gleaned from the above surveys that some retailers see the challenge of developing delivery models as being a major cost centre as opposed to an area for potential advantage and as a point of differentiation. Despite evidence to suggest that increasingly complex options are the way forward some retailers still have not moved “last mile management” higher up on the strategic agenda.

We have discussed the potential use of drones in earlier blogs and I do not wish to revisit the topic here except to say that they are still being tested and their use in retail delivery is still some way off.

More interesting developments include crowdsourcing as a means of building up a delivery model. The Uber concept which shook up the taxi business world-wide has spread to retail delivery models. Uber Rush supplies suitably qualified drivers to take part in the delivery process. Other companies such as Instacart have also emerged and are largely based on crowdsourcing principles.

This approach actually addresses the cost issue and means that retailers can outsource this part of the process. The downside of course is retaining control over such a disparate range of drivers and third-party operators. This could lead to inconsistencies in delivery promises and ultimately rebound on the retailer.

Put simply retailers are looking at all avenues to explore in their quest to provide a customised, differentiated and diverse range of “last mile” delivery frameworks.

A recent example can be found in a collaboration between Ocado, the online retailer and Marks and Spencer. The latter retailer has been notably slow in becoming involved in online food delivery but appears to have woken up to the inexorable trend. M&S has also been dubious of the cost effectiveness of online delivery methods. This is not surprising given that some commentators estimate the cost per customer to be around £12 in the UK.

However their views are shifting as the food area increasingly is the key aspect of their business operations: they continue to experience difficulties in the clothing area.

They are not alone. Morrisons has been involved in collaborations with Amazon Fresh and Ocado. Interestingly Ocado has specified in its contract with Morrisons that it cannot work with other supermarket groups. Of course this does not preclude any collaboration with retailers such as M&S.

Such collaborative arrangements are the way forward in my view, as long as there is no potential for a conflict of interest. It addresses to thorny issue of cost and can generate efficiencies for both parties.

The “hard yards” are only likely to get harder. Let’s watch this space.

My recent blogs have been somewhat depressing in that I have focused on retailers that to a greater or lesser (mostly greater) extent have failed as business proposition. I thought it might be opportune to revisit a retailer that we examined almost exactly this time last year in a blog (Yahoo Boohoo).

This retailer was one of the success stories of the past couple of years. I suggested it might be one to follow.

Let us briefly recap its background.

It is a Manchester-based company founded by two entrepreneurs: Mahmud Kamani and Carol Kane

It is a pure-play fashion retailer (online only) and targets the 16-24 teenage market (mostly female but more recently it has opened an online channel for males).

Its value proposition is based around the following features.

It launches on average, one hundred new styles daily. It has created a range fulfilment options such as a midnight cut-off point for next day delivery. It has also introduced petit and plus size ranges to cater for a broader range of sixteen to twenty-four year old males and females.

The vast majority of its suppliers are based in the United Kingdom. This endorses the concept of “proximity-based” sourcing in theory allows for greater flexibility in the management of its supply chain operations – something which is essential in the context of a retailer launching thousands of new merchandise over the course of any given year.

Following a profit warning in 2014 it subsequently invested heavily in digital marketing activities to re-boost its potential. This was of the order of around fifteen per cent of its turnover.

It appears to have worked.

At the end of April 2017 it boasted of a fifty-one per cent increase in sales and an almost doubling of pre-tax profits on its year-on-year performance. During this year it made major investments in warehousing space and in general infrastructure. It plans to generate further improvements in its website design and in terms of increased customer service in terms of response times and overall flexibility. It also experienced major growth in its international sales: such as an increase of £40 million in the USA and fifty per cent growth across the European market.

This evidence indicates that Boohoo does not appear to be a flash in the pan. It has laid down long-term investment to ensure future growth.

Any evaluation of a pure-play retailer such as Boohoo reopens the debate about the need for physical retail space. This argument has been going on for a few years now. Many commentators argue that retailers still need a presence on the high street in order to allow shoppers to engage physically with the items of merchandise. In the case of fashion retailers this revolves around the perception that such items need to appeal to the senses. How for instance can a shopper touch and feel and item of clothing? If they can’t then surely it is difficult to assess the material, its quality and so on.

It is counter-argued that a retail store portfolio adds significantly to the overall cost structure of a retailer. In the case of the United Kingdom business rates are increasing and are projected to have a major effect on many retailers (albeit some may actually benefit). The cost of renting or leasing properties decreased somewhat in secondary locations, but prime locations still show no signs of such a decline.

The evidence shows that shoppers, particularly the younger segments are increasingly relying on the online shopping experience. Without claiming to be a guru or prophet, it does not take a genius to predict that this trend is only going to increase further. If you look at very young children you can see how comfortable they are with the various forms of what “oldies” like me call “new technology”. Project forwards to when they are active and vibrant teenagers, particularly with respect to shopping activities. In such a scenario and assuming even more developments in technology and so on, it could be argued that the concept of space: physical and virtual will be even further refined to reflect a different type of shopping activity and experience.

Supporters of the concept of pure-play online retailing also argue that it leaves such operators in a more flexible agile position that “bricks and mortar” operators: less reliance on fixed assets such as premises, and easier to change direction with regard to merchandise and designs.

One of Boohoo’s competitors; Asos has also experiences growth and success, again mainly through international expansion.

Another competitor; Missguided, has been the exception, while still returning relatively successful sales, its profits have decreased. This has been attributed to its expansion into “bricks and mortar” retailing.

Boohoo has generated its success in my view by investing strategically in digital marketing activities. It has worked conscientiously on developing its customer base through the “old reliables” of the social media. It generates average postings on Facebook alone of between 15 million to 20 million on a weekly basis.

It cultivates its shoppers with an array of support initiatives such as fashion tips, style videos and blogger articles. While this is not particularly unique to Boohoo, it reinforces the need to provide enough material to warrant shoppers visiting and more importantly revisiting the social media channels.

It has worked hard on its supply operations. This is reflected in the introduction of Boohoo Premier – an unlimited next-day-delivery service for an annual fee. It also offers collect+ returns in the UK.

Interestingly, and arguably very cleverly in a sector such as fashion and with a very young target market, it has fully embraced the concept of celebrity. This is reflected in paying celebrities to promote its merchandise on Instagram.

We should take cognisance of the role of celebrities in digital marketing.

Perhaps the most successful of Boohoo’s celebrities is the model Jordyn Woods. She resonates strongly with the target market and generates a lot of “wow” across the social media channels. Others include Bella Thorne and Kendall Jenner. Some get paid for such endorsements, others benefit from free clothing.

More recently Boohoo has bought into PrtetyLittleThing, an operation set up by two sons of Mahmud Kamani. This move fits in well with the retailer’s overall youthful image. This spreads right through to its management team.

Further investment in its mobile apps by creating country-specific ones for the USA and Australia also reinforces its focus on digital marketing.

While none of these initiatives are particularly unique or highly innovative, I would argue that when combined, they represent a strategic and focused approach and its success is reflected in the increases in sales and profitability.

One year one from my last blog on Boohoo it continues to enjoy success and remains as one of the stars of the volatile fashion sector. Let us salute them for now and keep an eye on them over the next year or so.

I spend a lot of time in bars and pubs. However that is not the focal point of this blog. I took the title of this blog from an old Australian ditty which bemoans the lack of beer in a pub in the great outback and the sad consequences for the dreary traveller upon arriving at its doorstep.

Following on from my two previous blogs on retail failures I continue in the same maudlin vein by reviewing the position of BHS, a year on from its entry into administration.

The history of this failure is discussed widely on the internet and I urge you to read the background to its demise. What seemed to be the natural demise of a failing brand was accentuated in the press by the dreadful way in which its last owner but one: Sir Phillip Green, sold it on to an individual of dubious merit. The failure to adequately protect the pension rights of its workers also drew the ire of the business press and academic community. We will not revisit that aspect of the case in this blog: but focus on the essential issue of the relevance of a brand that has failed so badly and the logic of trying to resurrect it from the dead.

Let’s investigate its demise more fully.

Prior to going into administration in April 2016 it is a fact that it had been performing badly for the past seven years: this was not a sudden death to borrow a cliché. At the time it went into administration it had incurred debts of nearly £1.5 billion.

Founded in 1928 it carved out a position over the decades as a vibrant department store focusing on homeware, lighting and clothing. It built up a solid reputation for offering affordable items, at a competitive price and at an acceptable level of quality.

This worked well up until the 1990’s. Since then it has succumbed to the prevailing long-term trends and developments in retailing – such as the internet revolution and the resulting surge to online retail channels and the increasingly more effective and efficient management of retail supply chains.

Operators such as Primark and Next encroached increasingly into the BHS space by offering similar items at lower prices. Even supermarket groups such as Asda moved into the pace by offering a range of clothing and accessories. Quite simply BHS became almost an irrelevance. For a more detailed appraisal of its death I encourage you to read an article published in the magazine called The Drum. (http://www.thedrum.com/opinion/2016/04/27/fall-bhs-brand-without-purpose)

How did BHS respond? Well like many companies it panicked and tried a number of initiatives, most of which appeared to have little rationale or forethought behind them. For instance it introduced a food range in some (but not all of its stores) and entered into a collaboration with a retailer called Claire’s Accessories in an attempt to attract a more youthful, teenage footfall through its stores.

Inevitably none of these introductions had any meaningful impact. At the title of the article in The Drum suggests, it became a brand with no purpose or to use my analogy, a pub with no beer. After all what is the purpose of a brand if it occupies no meaningful position in the minds of its target markets? It is the equivalent of throwing money on top of a burning fire.

One would expect therefore to see it slip off into the deep blue yonder.

Not a bit of it!!

The Al Mara Group, a Qatari conglomerate, prior to the demise of BHS had acquired the international and online divisions of the business operations. In September 2016 it reappeared on the scene as BHS.com.

As the name suggests its reincarnation revolved exclusively around its website and online operations in the UK. Initially it focused on a much smaller range and depth of items addressing the homeware, bedding and lighting sections only. This was based on the rationale that these categories, particularly lighting, had been the strongest feature of its previous value proposition. A couple of months after its re-launch it subsequently introduced a range of fashionwear items for males and females. It employs eighty-four people (a lot less than the original eleven thousand individuals in its previous existence.

After about six months into the venture its Managing Director Kevan Mallender expressed satisfaction with its performance, claiming sales of over £3 million and arguing that as it was effectively start-up business these figures represented success.

Let’s try to assess how well (or how badly) it has performed since September 2016.

At this stage in the blog I am going to introduce a challenge to you. Before reading any more of the content, I would like you to visit the website page: www.bhs.com and carry out an assessment of the site addressing all of the typical criteria that we use. Suggested areas include: layout of the site and ease of navigation, content, engagement, updates, quality of information on the items, payment procedures, customer service and so on.

After this please come back and read on!!

When we reflect on a brand and its relevance and value the gurus suggest that successful brands must be built around a relevant and live value proposition that registers in the mind of the target markets. Clearly BHS failed on most of the measures and prerequisites to meet such standards.

The new website has been assessed by experts and the general view is that as a value proposition via its online offerings, BHS remains a reasonably competitive position. It offers shoppers free delivery on items purchased over the value of £50. If it is under this figure the shopper pays £3.50 for delivery. That leaves it in a similar position to retailers such as Marks and Spencer. However it does not offer a “click and collect” option and does not make use of third party services such as Doodle and Collect+.

There is little content on the website apart from basic information on critical issues such as price and size options. Crucially it make no use of video content to capture the attention of the visitor to the site. This it can be argued would encourage interaction.

It has no user-generated content such as postings of experiences or customer reviews. It has no live chat feature.

It’s sign-up and register feature dominates the page and surprisingly it provides no incentive for shoppers to actually sign up. The search bar also has limitations (try it out)

In essence I would argue that the website at best resembles one that would have been common about five to eight years ago: information-led, no interactive dimensions and little attempt to sign up members.

I come back to my original point. What is the purpose of this brand? By that I mean the revised online version. Why is it revisiting the fashion space when it has been hammered by many more flexible and agile operators?

Possibly if it uses data from its previous customers it might be able to generate some degree of re-energised loyalty. However I doubt it. Shoppers have moved on: it is very difficult to lure them back unless you offer them something new and exciting. I do not see this on its current website.

In early 2017 the BHD Managing Director placed his faith in using the concept of a referral channel to build visitors to the site and subsequent sales. In this respect it entered into a collaboration with referral provider Mention Me. This concept is based on the simple idea of rewarding existing customers who encourage friends, relations and colleagues to sign up.

While this has certain merits it is difficult to believe that it will become a “game-changer”.

In summary I am very pessimistic and cynical about this “new” venture. What do you think?

We tend to become obsessed with the concept of the brand. Nowhere is this more clearly exemplified than in the retail sector. We delight in hyping up successful brands and in the context of teaching courses on retailing we feature them prominently in our discussion and analysis.

As can be seen from some of my previous blogs I obsess about once-successful brands that have fallen on hard times or have disappeared from the high street (you can read my previous blog on FCUK for evidence of this obsession).

Another such brand popped up on the business pages in the last couple of weeks: I refer to that bastion of Britishness: Jaeger. It has been around since the latter part of the nineteenth century (founded in 1884) and its origins came from the writings of a German Professor of Zoology; Gustav Jaeger. He believed that it was healthier for people to wear clothing that was made from material such as wool, animal hair and fleece. It firmly established itself in retail folklore in 1919 when it introduced a range of camel-hair coats to the market.

Arguably its key period of success was in the 1950’s and 1960’s where famous actresses such as Audrey Hepburn, Marilyn Monroe and Jean Shrimpton wore their fashion items. Since then it has undergone a number of transformations both in terms of ownership and approach to design. It has vacillated from the classic design to a more modern approach with a focus on casualwear and then back again to the classic design. Its financial fortunes have swayed backwards and forwards as well. Sadly over the past fifteen years or so it has suffered more than most of the retailers on the high street and has recorded a steady and unremitting series of losses.

Moe recently in 2012 it was acquired by Better Capital for around £20 million and since then has also made losses: it is estimated that it has recorded losses of around £63 million. In January Better Capital sought offers and set an asking price of £30 million. It was rumoured to have sold off its debt of £7 million to Edinburgh Woollen Mill, whose owner is well-known for acquiring and turning around retailer brands such as Peacocks.

In April it went into administration having failed to generate interest from buyers, although it is expected that Edinburgh Woollen Mill will eventually acquire it.

So what went wrong? Why has this quintessentially British brand ceased to become relevant?

We can point to a number of actors for its demise.

Firstly it clearly lost its way – mainly through the bewildering array of owners and their approaches to keep it meaningful.

In terms of positioning it was perceived originally as a brand that appealed to the older and more discerning shopper seeking quality with aspirational values associated with the brand. Its main competitor was arguably Burberry, although the latter retailer underwent significant trauma about ten years ago when counterfeiters made it popular with the so-called “chav” element of society. It eventually recovered its tracks to regain its position in the market.

By contrast Jaeger has not made any inroads on its losses. So what initiatives did Better Capital implement in the period between 2012 and now?

One of the problems that we should acknowledge at the outset is the readiness of an investor such as Better Capital to make the long-term investment in order to turnaround such a retailer. Typically such investors are not prepared to take a long-term view of such a brand. It has clearly fallen off the radar to such an extent that only major investment would provide it with an opportunity to survive. Although it spent some money on it is was nowhere near enough to make inroads on the brand image and its overall brand equity.

If we refer to the challenges of positioning that we discussed in the text-book, Jaeger arguably made some fatal mistakes. By constantly changing its approach – classic to casual to classic and all over again it fell between a number of stools in the minds of both its core market (older and affluent women and men). In effect it found itself between a rock and a hard place to use a cliché. It came between a premium brand such as Burberry and slightly cheaper brands such as the US retailer J. Crew. This reinforces my view that such a position is a meaningless one. It makes it difficult (I would say virtually impossible) to carve out a clear, meaningful, relevant and substantive value proposition which can easily be perceived and assessed by shoppers. It is in effect a “non-position”.

This noon-position was compounded by the practice of the new owners to consistently introduce discounting and markdowns. This is exemplified by the following practices.

For instance it introduced a policy of twenty-five per cent off all items on Cyber Monday and fifty per cent off everything on the Black Friday weekend in 2015.

Suits officially priced at £400 sold for as little as £100.

In 2015 it operated its pricing for only two out of the fifty-two weeks without resorting to discounting. In 2016 this improved (relatively speaking) to eight weeks. This in my view is the “kiss of death” for a brand which claims to be a premium product.

While everyone accepts that discounting and markdowns are inevitable for all retailers, to systematically introduce a policy of discounting to such an extent is reckless. Effectively a retailer is conditioning and educating its core customers to expect such promotions and discounts. If repeated on such as regular basis it also changes the perception of shoppers about the position of the brand. How can you claim to be a premium brand if you are constantly feeding the shoppers with such discounts?

The owners also closed the main flagship store in Regent Street, London in early 2016. This was part of a necessary overhaul of the property portfolio and can be assessed from a number of perspectives. Arguably it was the correct one as the cost of renting such as prime location probably could not be justified, given its financial performance. It opened a smaller store (2,000 square feet) on Marylebone High Street. While it is a good location it simply is too small to act as an overall flagship store. Prior to administration it operated forty-six stores: a mixture of outlets and concessions.

Notably Jaeger was slow to embrace the inexorable move towards online retailing, relying instead on its supposed strength as a “heritage” brand and maintaining its physical store portfolio. This handed the initiative to other retailers and they succeeded in encouraging shoppers to visit their websites.

It tried to lure a younger shopper to its designs and partially succeeded (but not sufficiently) regular new designs such as Jaeger Boutique and Jaeger London collections. While the latter received critical approval, this was not reflected in sales sufficient to generate the required profit to offset continuing losses.

Undoubtedly in the past year rising labour costs and uncertainties over Brexit and the declining value of sterling has not helped Jaeger or indeed many retailers on the high street.

By trying to become trend-led (creative designs) it has compromised on its classic appeal and again falls between two stools: losing many of its older shoppers and not being price-competitive to attract a younger audience.

In summary it is a mess and this is reflected in its move into administration.

What will happen?

A prospective buyer such as Edinburgh Woollen Mill can perhaps keep the brand alive by incorporating it into its brand portfolio and it may retain a few concessions. The physical stores will close and EWM may sustain it through its online retail operations.

Lessons to be learned?

Heritage brands have to remain relevant if they are to survive. To do this they need to be proactive in their strategy development and implementation. This did not occur with Jaeger – probably due to the frequent changes of ownership and personnel that were brought in to rejuvenate it. A failure to embrace online retailing in time also led to its demise.

Do not confuse your target market. Consistent discounting does not square up with a claim of being a premium brand.

Maybe we should accept that every brand has a lifespan.

RIP Jaeger!

I was covering a topic with my retail marketing class recently on retail brand development and positioning. Coincidently I was reading an article about a retailer whose brand equity was extremely high in the 2990’s and has slipped off my radar in recent years. That self-same retailer was French Connection.

A brief history.

It was established in 1972 by its founder; Stephen Marks. Its name derived from a very popular film starring Gene Hackman (The French Connection) which was released during that year. He originally started off with an import business shipping hot pants (the fashion of the 1970’s) to the UK from Paris. He then established his own brand – Stephen Marks, London where he designed jackets and suits. When visiting Hong Kong he was one of the first entrepreneurs to spot the benefits that could be achieved by sourcing products from cheap suppliers. This culminated in the launch of French Connection.

Always one for independence, Marks build up the brand, doubling the sales of the brand year-on-year for eight consecutive periods.

He then listed the company on the stock exchange but ran into problems when investors began to (in his view) interfere with the direction of the business. This led to a slowing down of sales.

He got rid of these investors and hired a marketing expert: Trevor Beattie, to provide leadership and a change in direction for the brand.

It was he who came up with one of the most iconic images of the 1990’s. They launched a range of tee shirts with the ubiquitous title of “FCUK” stamped on their fronts. They sold in their millions for around £20 and were aggressively promoted with risqué slogans such as “FCUK LIKE A BUNNY”.

Many marketing felt that the message behind the brand captured the brashness, greed and individualism of the 1990’s Britain. In essence it became a symbol for the so-called “rebellious shoppers of that period.

Inevitably as with most “hot” brands it probably became a victim of over-exposure. Over the past decade or so it suffered from that plus counterfeit products being sold under its name. It also faced major competition from fast-fashion retailers such as Zara, H&M and more recently online retailers selling similar product.

Quite simply such retailers as those listed above were able to offer fashionable clothing at prices well below what French Connection was charging in its stores and online. French Connection was in danger of becoming an irrelevance on the high street.

The problem was exacerbated the reluctance, some would say stubbornness of the founder Stephen Marks. He has consistently refused to stand down amid much pressure from investors (he retains 42 per cent control of the business).

Its overall response in recent years is to continue to close stores and also using up much of its cash reserves to prop up the business: its cash pile has dropped from £15 million to £7 million in recent years. Sales have dropped to around £155 million.

More recently in early 2017 it is rumoured to have negotiated a reduction in its rental of its Oxford Street flagship store.

Are there any good news items for this retailer? Well it operates a wholesale division which is performing respectably as well as its online retail operations (also performing well). Indeed some commentators recommend that it should split its retail and wholesale divisions, close down its retail stores and focus on the online element of its retail operations.

It also operates a concessions business which has grown from 43 in 2011 to 53 in 2016. If it were to become a concessions business only, it could be argued that it would be in a stronger position financially due to being able to eliminate the high rental costs of its store portfolio.

The reasonably healthy performance of concessions and the wholesale division would suggest that there is perhaps a strong argument to divest completely out of retailing.

The fundamental problem in my view rests with its current relevance (or irrelevance) to its target market.

Its core market traditionally has been the 20-30 female and more recently male market.

However it does not take an expert in retailing to work out that it has a major problem in connecting with this market in today’s competitive and economic conditions.

The deep recession in recent years has arguably educated shoppers to be more value conscious and to seek out retailers that can provide quality / trendy clothing at a reasonable price. For the average person in the target market French Connection does not provide this level of value. While it comes up with nice designs that are fashionable and of sound quality, it is left behind when it comes to the price points. Many shoppers rule out French Connection because they see its product offerings as being too expensive relative to the likes of Zara, H&M and Mango.

Women in this age bracket who seek trendy and fashionable items will make purchases at these competitors. However when one looks at the price points in French Connection they see items priced at the levels seen in retailers such as Karen Millen and Whistles. These latter retailers tend to focus on well-designed, lifestyle brands which can be justified by their price points. Commentators feel that French Connection cannot justify charging similar prices as the clothing portfolio for women does not justify such a strategy.

Interestingly the menswear section is more realistic in its pricing and is in line with its competitors. French Connection in this segment focuses on smart, fun designs (for example its tie range), perhaps not as successfully as Ted Baker, but the price points reflect this and performance in terms of sales is more impressive than in the case with the womenswear division.

Brand evaluation surveys also do not offer encouragement either.

It rates bottom when compared to its main competitors in the issue of value for money. The likes of Zara and H&M score far higher on this measure. French Connection scores better on quality (which you might expect).

From a brand positioning perspective French Connection appears to be going nowhere. The fashion retail market in the UK is very competitive and as we mentioned earlier, retailers such as Zara and H&M have effectively moved into the space that was once held by French Connection. Only they are doing so with lower prices while offering at the same time affordable value for money – particularly in the areas of trendiness and design.

Where next for French Connection?

As we mentioned earlier it would appear as though it will have to speed up the closures of its stores, eventually perhaps pulling out completely and focusing instead on its concession businesses and wholesale division.

The role of the founder will have to change. Due to his stubbornness he has failed to make the necessary changes and will probably need to recruit another marketing expert in the fashion business to once again transform it. The way forward may be through its online business.

Quite simply it cannot live on the past glories of the 1990’s. Otherwise it may go to FCUK!

The strategies that retailers use to design and implement pricing strategies has always fascinated me. Likewise I am also interested in how shoppers perceive and react to prices within the store and on online retail sites.

The last decade in particular has witnessed an inexorable rise in the number of special deals, price promotions and offers as retailers respond to an increasingly challenging business environment. Many of them see price as a visible and direct way in which to attract shoppers and the reality is that upwards of forty per cent of all items currently on display in a supermarket form the basis of some sort of price-related deal or promotion. The exceptions are the discount retailers (who it can be argued offer low prices anyway) who have about ten per cent of their merchandise on a price offer.

Despite all of the sophistication that we associate with retailing, special deals, sales and price discounting feature prominently. The traditional January sales period has been extended to many months of the year. Concepts such as “Black Friday” have further driven the concept of discounts and special deals to such an extent that shoppers now expect special deals and offers. Some would argue that this has raised questions about what is the real price of a product anymore. The price label attached to the item in many cases does not reflect the reality of what people might actually pay for it.

Price comparison sites have also empowered shoppers to the extent that they are far more familiar with competitive offerings and that this leaves them is a stronger negotiation position when it comes to purchasing a product.

However I would also argue that there are many shoppers (and I include myself in this) who are either too lazy or time-poor to properly check out competitive prices and in essence do their homework before making a purchase.

Conversely there is still evidence that retailers engage in a “smoke and mirrors” exercise with a bewildering array of deals and price promotions that only serve to confuse and potentially mislead shoppers.

In 2015 the Competition and Markets Authority (CMA) in the UK carried out a three month investigation of retail pricing practices following on from a complaint made by Which, the consumer magazine about retailers misleading shoppers.

Of the 150,000 products investigated they found that 800 items were subject to potentially misleading pricing. This approximates to 0.05 per cent in total. They also found that generally food retailers were serious about attempting to implement fair and transparent pricing policies and strategies.

What are we to take from this survey?

Firstly we can take some comfort from the fact that in general, retailers are not setting out to systematically mislead us and take advantage of shoppers.

Secondly there is evidence that in some cases retailers can be accused of sharp practice in this area. This often can be seen in the areas of “multi-buy” offers, “was/now” prices and shrinking package sizes.

Let’s consider these issues in more detail.

Multi-buy deals refer to situations where the retailer offers the shopper a price deal for buying a number of the same items. But all may not be what it seems. Take this example.

A Nestle Munch Bunch Yoghourt is priced a £1.

The Multi-buy offer is “2 for £2. This latter offer looks “the real deal”. However less astute shoppers may have failed to pick up on the individual price for the particular item in question. Put simply, there is no special offer or bargain here.

The “was/now” deal on the face of it can look appealing and signal that there is potentially an attractive saving on offer if the shopper moves on it.

The problem occurs however with the issue of what was the original price. If the promotion states that the price was £10 and is now £6, a shopper can reasonably expect that this represents a significant saving. However in reality the original price may never have been offered at £10 or if it was it may have appeared on the shelves for a little as one day. The original price may have been closer to £7 or £6.50.

Legislation is weak in this area. Guidelines exist but are not enforceable and legally it can be a minefield in a court of law to prove that deliberate deception has taken place. Generally the quoted “was” price should reflect the price of an item at which it is usually sold at.

In May 2016, Asda, one of the “Big Four” retailers was found guilty of misleading advertising over a particular price promotion that it ran. This involved a multi-buy offer of three boxes of Choco Squares for £3: where a single box was advertised as selling at £1.38. In fact the actual price of one box was 97p. This was deemed to be misleading by the Advertising Standards Authority (ASA). Their statement concluded that “we considered the promotion was likely to encourage consumers to purchase multiple packs of Choco Squares when previously they might have purchased only one, based on the ad’s suggestion that a genuine saving was available.”

Clearly the tendency of retailers to use such tactics increases with the pressures to discount and reduce prices.

Even in the fashion retail sector it is estimated that the percentage of markdown (reduced prices) stock in UK footwear, clothing and accessories increased from forty-six per cent in 2015 to forty-eight per cent in 2016. Clearly January represents the peak period for markdowns (55%) but the practice is omnipresent all-year round.

We are all familiar with the need for price transparency. The opportunity to “play smoke and mirrors” in the field of retail pricing is one that is difficult to ignore. It is also very tempting for retailers.

One retail expert has put forward the view that we need a new executive position at board level in the retail sector: namely that of a Chief Pricing Officer. The argument in favour of this is based on the belief that traditionally pricing decisions reside with a combination of marketing, finance and sales. Thus it can be argued that “everyone and no-one” is responsible – leading to inaccurate or confusing decisions.

The article argues that three elements need to be in place before it could work in practice.

1. The individual would need to work closely but independently of the departments that have traditionally made the decisions. This would reduce the dangers of vested interests swaying any potential decision.
2. It would also need commitment from the CEO and the CFO (Chief Finance Officer) of the retailer concerned.
3. There is also a need to invest in the pricing capabilities of the retailer. (Browne, 30 July 2015. “Comment: It’s time for Chief Pricing Officers to join retail boards”. Retail Week).

This view might be interpreted as being idealistic and fanciful. However it has the merit of recognising the need to “professionalise” the role and task of pricing decision-making” in retailing. In my view this would mirror what has happened to the profession of procurement. This function has progressed over the past couple of decades from being a clerical function to one which is seen as a strategic element of long-term planning and development in the organisation.

It might appear as though I have drifted “off-topic” with this injection of the concept of a Chief Pricing Officer. However the challenges associated with setting and implementing retail pricing strategies continue to mount. The advent of electronic shelf labels also as some significance as well. However that is for another day (and blog).

No, this is not a self-assessment form that you need to return to your psychiatrist. Nor is it a philosophical debate about your personality. The title of this blog refers to a recent strategic initiative introduced by Waterstones: the UK-based bookshop retailer.

Recent articles in the UK national newspapers allude to the fact that in recent months, Waterstones has opened three new bookshops in various towns in the UK: Rye, Southwold and Harpenden. The interesting observation here is that they are not named as “Waterstones Bookshop”. Instead they adopt names such as “Rye Bookshop, Harpenden Bookshop and Southwold Bookshop”.

Apart from a hand-written note which is posted in the bottom of the front window (which acknowledges that the bookshop is part of the Waterstones Group, there is no other attempt to link the shop to this retailer.

What are we to make of this development? Is it a case of selective memory loss? A deliberate attempt to dissociate the shops from the original brand? An attempt to mislead the general public? The newspaper articles explicitly accuse the retailer of the latter: one of deception. The tone of the respective articles makes it clear that there is something “shifty” going on here and that shoppers are being misled.

Let’s explore this view in more detail.

Those of you of course who have read chapter six of the text will realise that Waterstones is expanding its brand portfolio and is making use of separate names in the process. It already has a portfolio of physical retail stores trading under the name of Waterstones. Some of these outlets vary in terms of both size and content. For instance in later 2015 the retailer opened a store in central London which is larger than many of its outlets and contains two coffee shops, one cocktail bar, a “pop-up” cinema and space for holding small conferences or meetings.

In many of its smaller outlets it has employed a “back-to-basics” strategy, eliminating coffee shops and stopping the sale of e-books.

It has also expanded its online offering over the past two years.

What can we observe from the developments with the three new shops?

The shop in Southwold operates from a Grade II listed building and presents it’s offering very much in the manner of a small independent bookseller. It is small in size and is operated by friendly and local staff: thus reinforcing the sense of a small retailer operating in a local community.

What’s not to like about this approach? For many of us, the typical high street conveys an impression of a blandness and sameness. We find the “usual suspects” in the shape of charity shops, mobile phone shops, betting shops, Boots, and so on. Many of us bemoan the loss of the small independent retailer offering something different and original such as craft shops, specialty cheese retailers and so on.

Put simply the small independent retailer gets a bad deal in the UK. They are faced with expensive rents in prominent areas of the high street.

They are also crippled with a business rates tax which tends to favour the larger retailers. The amount that they pay is based on the rateable valuation of the property. It does not make any reference to sales or profit which is generated by the retailer. Out-of-town sites have clearly less value in terms of property prices and favours the chain retailers such as IKEA.

On the face of it, Waterstones would appear to be masquerading as a small retailer (hence the criticism from the newspaper articles). However does this warrant such negative comment or indeed is it fair?

A traditional bookshop (while not appealing to everyone) provides an attractive option when shopping on the high street. It blends in with the community and as stated earlier moves us away from the unrelenting gloom of blandness. Each shop in the case of Waterstones, has its own identify – through its name and the personalised nature of the value proposition.

Yes, Waterstones is in a stronger position to develop the concept of “the small independent bookseller” than say an entrepreneur or business owner trying to compete with the chain operators and the “Amazons” of this world.

For one thing Waterstones has much greater resources and scale of operation to sustain a number of such “non-branded” stores. It is in a financially stronger position to deal with rents and business rates.

They can also offer competitive pricing within a small independent retailing format. This is significant but in a negative sense threatens any other small independent retailer currently operating on that high street. It can be argued that the latter is not in a position to survive in the longer-term.

The approach allows Waterstones to widen its portfolio of formats in a way which is aesthetically pleasing on the eye.

How has the general public reacted? The feedback from the three stores suggests a positive view with sales being above targets.

One of the articles posted comments submitted by readers on the topic. Bear in mind that the paper concerned: the Daily Mail, is not necessarily representative of the population at large but probably attracts many middle-income readers who tend to shop on the high street and would be potentially receptive to the format introduced by Waterstones.

A perusal of the comments posted underneath the article (Waterstones is accused of sneakily opening new stores and disguising them as independent local bookshops. Read more: http://www.dailymail.co.uk/news/article-4260340/Waterstones-accused-disguising-stores-independents.html#ixzz4ZtaBepFY.) raises some interesting perspectives.

This reveals that the readers are broadly positive and supportive of the initiative. They see the move as a welcome addition to the high street and a change from the “charity shops” syndrome.

Small independent retailers adjacent to the three “unbranded” stores in the three towns voice the view that it is precisely large chain retailers such as Waterstones who have forced up rents and business rates.

While they might be accused of bias and prejudice, there is no doubt that the scale of operations of the big retailers gives them a significant advantage.

Personally I like the approach adopted by Waterstones. Firstly it widens the variety and depth of its retail format portfolio.

It provides a distinct move away from the “big retailer” format that we associate with chain retailers in general and Waterstone’s typical format.

It plays on the “retro” or “nostalgia” dimension: something that is liked by many people who constantly hark back to the days when small independent retailers were predominant on the high street as opposed to the present – where they are conspicuous by their absence.

The strategy is less likely to antagonise the general public as retailers such as Tesco and McDonalds have done, due to their ubiquitous presence in every town and city centre high street.

The strategy is still likely to damage the prospects of the traditional small independent retail bookseller however. By “traditional” in this case, I mean that the shop is owner-managed and consists of a sole bookstore.

Critics perhaps have some justification in accusing Waterstones of deceiving and ultimately misleading shoppers with such a practice. Judging by the comments of the readers posted to the article mentioned above however this is weakened by the generally positive response.

What do you think?