House of Fraser needs to do more than just "hammer" Amazon in a Shopper First Retailing world

Stuart Lauchlan Profile picture for user slauchlan August 13, 2018
House of Fraser's turnaround strategy could pick up some useful tips from a new Salesforce retail study.

house of fraser
Last week saw the collapse and almost immediate rescue of UK retail institution House of Fraser. It had been a long time coming. As the crisis finally came to a head, pundits inevitably trotted out the ‘victim of Amazon’ gospel, although as I argued back in June, Amazon really is far from being the store chain’s biggest problem.

Of course, Amazon - and the rise of online retail in general - is a factor. But the House of Fraser decline is indicative of the volatility of the UK retail sector. The collapse is the biggest high street failure since Woolworths, which went under with the loss of 27,000 jobs. The question is - what now?

New owner Mike Ashley, CEO of Sports Direct, says he wants to keep as many stores open as possible and to revamp House of Fraser into the “Harrods of the high street”, whatever that may mean beyond a good soundbite. He’s also obligingly made the right noises about “hammering” Amazon.

That’s a populist sentiment that will win favour in some powerful ears. As the House of Fraser rescue deal was being put into place, Chancellor of the Exchequer Philip Hammond was embarking on another ‘something must be done, this is something, let’s do this’ proclamations, this time centered on his own hammering of Amazon via more taxation.

It’s been widely noted that the rent on House of Fraser’s flagship store on London’s Oxford Street was more than double the amount of tax that Amazon paid in the UK last year. Hammond is playing a safe game rattling fiscal sabres in the direction of the online giant after it was announced that it only paid £4.6 million in tax, down from £7.4 million a year ago

But beyond some low-hanging headlines as the self-annointed saviour of the high street, what precisely is Hammond proposing to do? He says:

We want to make sure that the high street remains resilient and that we also make sure that taxation is fair between businesses doing business the traditional way and those doing business online.

OK, but that’s a broad - and simplistic - statement of direction. What is he actually planning to do? He says:

The European Union has been talking about a tax on online platform businesses based on the value generated. That’s certainly something we’d be prepared to consider.

Well, yes, OK - but with 7 months to go until Brexit and the reality that it could take years for the EU to reach agreement on such an alteration to the existing tax regimes, that’s not exactly looking like an immediate solution to a high street in rapid decline, especially when non-EU tax negotiations would have to be factored in as well. Hammond says:

If we can’t get international agreement to do this we may have to look at temporary tax measures to rebalance the playing field until we can get international agreements.

Hmmm...I’m struggling to imagine Jeff Bezos hitting the panic button just yet, particularly as a Brexit-focused UK government is pitching the country as a place for tech inward investment.

Hammering Amazon

If Ashley is to ‘hammer’ Amazon, then there’s going to need to be an upping of investment in tech and digital. Last year, when 20% of House of Fraser’s sales were made via online channels, the firm spent £25 million on digital upgrades to its e-commerce platform. In contrast, rival John Lewis spent £500 million.

But as we’ve noted time and again, splashing the cash at digital transformation is a waste of time and money if there isn’t a strategic understanding of what the outcome is that you wish to achieve.

With nice timing, today sees the launch of a new report from Salesforce - Shopper First Retailing - which makes some recommendations on critical success factors in modern retail. These are based on the views of half a billion shoppers worldwide, survey data from 6,000 people across six countries, and mystery shopping visits to more than 70 stores.

The findings include Shopper First Mandates and Retail Truths. The study notes:

Retailers have an opportunity to transform for the present age, in which shoppers are truly in control, by listening to what shoppers actually want: for retailers to make experiences fresh; meet them wherever they are, and give the relationship meaning. Putting the shopper first isn’t about testing tactics, but instead, about meeting customer expectations for relevance and convenience as they evolve.

Shopper First Mandates

Make it fresh - the 80/20 rule still stands. The top 20% of products drive 80% of sales which makes it essential for retailers to keep the inventory fresh. Some 69% of shoppers expect to see new merchandise at a site or store whenever they visit, and 75% of site search queries are new each month. The study notes:

Shoppers value freshness with their wallets, as 59% of the top 5% of products sold are new each month. This creates a sweeping product catalog churn of 32% month over month. Speed and freshness play an important role in generating long-term brand loyalty and driving repeat purchases — two areas where brands have lost ground to both traditional competitors and marketplaces.

Be where I am - The good news for the likes of House of Fraser is that the study finds that there is a clear role for the physical store in a digital commerce economy. Forty-six percent of shoppers prefer to make a purchase in a physical store, compared to 35% via laptops and 18% via smartphones. And those stats include younger demographics - 58% of Gen Z shoppers (aged 18-24) stated a preference for the physical store shopping experience. But mobile is a critical investment priority. The study finds that mobile is the top driver of both traffic and sales. More than 60% of customer journeys start on a mobile device, while mobile order share rose to nearly 40% between Q1 2014 and Q4 2017.

Give it meaning - it’s all about building relationships between brands and buyers. This is a particularly relevant concept for rebuilding House of Fraser. The retailer had one of the most recognisable brands on the high street, but its understanding of its own customers rapidly declined as its stores were populated by more and more third party concessions. It’s not alone in this. Some 64% of study respondents feel retailers “don’t truly know them”. That leads to a prioritisation of personalization. The study notes:

Personalization might take the form of personalized search results on an ecommerce site, predictive “you might also like” recommendations, or a store associate studying a shopper’s past purchases before offering up new items to try on in-store. Whatever the application, personalization makes the shopper’s context relevant and tells shoppers: we’re listening. And in an environment where 64% of consumers say they don’t feel retailers truly know them, that level of listening is important.

Retail Truths

Lead with mobile

To successfully lead with mobile, retailers must carefully review where mobile shoppers are encountering friction — from tiny search bars to lengthy checkout processes—both in store and online.

Empower the store

As customers’ in-store expectations continue to grow, brands must not only meet their immediate needs (in other words, sell products), but also build a long-term relationship.

Infuse intelligence

Most retailers understand that intelligence is important. But the opportunities to grow AI-powered efforts are massive, especially given the fact that AI becomes more useful in personalizing content and experiences with every click, tap, or search.

Connect experiences

Digital transformation puts the pressure on retailers to provide excellent experiences in every channel — which is no surprise. What’s surprising is how high customer expectations have risen for retailer interactions. The best way to meet growing shopper demands is to connect experiences across the journey. To do so, brands must organize around the customer, breaking down silos between departments, uniting disparate data systems and adopting a cohesive digital transformation strategy for the organization.

My take

There’s a lot of good advice in this report that Ashley and his turnaround team could benefit from factoring into House of Fraser’s omni-channel thinking. Certainly it contains a more sophisticated analysis than just “hammering” Amazon.


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