Retailers fail to innovate

13 March 2012

LONDON: Most major retailers are failing to innovate at a sufficient rate to keep pace with the changing demands of the market, a report has suggested.

Korn/Ferry Whitehead Mann, the executive recruitment firm, interviewed 30 chief executives from leading retailers and FMCG manufacturers to gauge their attitudes concerning the development of new products and services.

Overall, it reported that the retailers featured in the analysis were typically far better at generating ideas than they were at implementing them in practice.

"Although retail has many impressive examples of ingenuity – especially in customer services and multi-channel sales – our findings suggest a lack of focus that may be hampering progress at the pace required to thrive in today's economic climate," Korn/Ferry Whitehead Mann's study suggested.

More specifically, the CEOs from these companies awarded the organisation they represented some 7.8 points from a possible ten when discussing the formulation of strategies to drive growth.

However, totals on this measure declined to just 6.6 points with regard to then translating these concepts into on-the-ground programmes.

According to John Browett, now head of retail for Apple, the electronics giant, and previously chief executive of Dixons Retail, a British chain in the same sector, this is a widespread problem.

"In the UK we have an ideas culture. However, the grinding part of innovation is taking an idea and making it work," he said. "The value is most often found in the execution, and not in the idea itself."

More broadly, Korn/Ferry Whitehead Mann reported that 70% of retailers did not have a dedicated R&D budget, and 80% had no specific business unit or senior manager covering this area.

Just one organisation, in the form of Kingfisher, the home improvement group, had a director leading its innovation activities.

Elsewhere, a surprisingly modest 50% of retailers were currently hiring staff and enhancing in-house skills in this area. By contrast, all of the FMCG firms polled were following this strategy, suggesting retailers are failing to keep pace with their suppliers.

"Developing products you cannot buy anywhere else has never been more important," Charlie Mayfield, chairman of the John Lewis Partnership, the retail conglomerate, said last week.

"We're on a different trajectory in terms of levels of consumption and technology is fundamentally changing the way we shop."

Data sourced from Financial Times/Retail Week; additional content by Warc staff