Time for some high-street innovation

ESSAY: Britain’s retail sector needs to stop worrying about the greens and learn to love new technology.

Various Authors

Topics Science & Tech

Read the business pages of any newspaper and you’ll know about the economic crisis of British retailing. Recent research suggests that, after all the bloodletting of recent years, 5,000 shops will still close over the next five years. In desperation, the high-profile marketing consultant, Mary Portas, has urged councils to make parking in town centres free and chic, so as to Save Britain’s High Streets. The reversals met by Tesco at home and abroad, and the slipping down of Marks & Spencer, are further symptoms of the crisis.

Despite its decline, however, the retail sector remains the UK’s largest private-sector provider of jobs (1). Interestingly enough, it combines this status with some notoriety: it pays its workers low wages (2). Yet it is not the crisis of retailing that preoccupies opinion-formers in Britain so much as the stigma they wish to visit on mass retailers.

One of the many conceits of those who cavil at Big Retail and its suppliers is that a cardinal sin is at issue here. Many believe that retailers are failing to charge the masses enough for what they buy. One Financial Times blogger inveighs against what he terms the ‘perils of supermarket cost-cutting machines’, and calls for an inflation in the price of food. And clothing? Among 16 developed nations, the market researchers Ipsos have found that 69 per cent of adults say they would be prepared to pay extra in the shops to improve working conditions in suppliers’ factories.

Our dissatisfaction with the retail sector is very different from the shallow critiques pioneered by Canada’s Naomi Klein in her anti-shop bestseller of 2000, No Logo: Taking Aim at the Brand Bullies or by Britain’s leading anti-consumerist, Andrew Simms, in his 2007 book Tescopoly: How One Shop Came Out On Top and Why It Matters. Like many other sectors in the West (3), retailing is afflicted by weak technological innovation. That rule applies even to British retailing, which is highly concentrated, and which is aided by a lot of back-office IT, supply-chain IT and advanced warehouses. We add that so long as retailers remain unwilling seriously to fund research and development (R&D) on new retail technologies, they, and town-centre high streets, will remain prone to further decline, and further ravages at the hands of Internet retailing, restaurants, nail bars, charity shops and betting shops. By contrast, better technology, including but going beyond better IT, could depress mass retailers’ prices still further, yet at the same time extend their product ranges and increase in-store appeal. The big retail houses need to wake up, in a world where even fashion retail guru Johnnie Boden, a darling of the middle classes, may secretly shop at the discount grocer Aldi.

Against the stigmatisation of mass retailing

The litany of complaints against contemporary mass retailers, or ‘multiples’, is all too familiar. Critics attack the uniformity of look and product choice among monopolistic, big-box brands, their desire to ‘subjugate’ local residents, and their ‘surgical’ removal of local shopkeepers and of local, differentiated produce. They dislike the cars that supermarkets attract, and the ‘food miles’ that their long supply chains incur. After beef in Europe was found to be contaminated with horsemeat, retailers were charged with negligence in health and safety matters; after the death of more than 1,000 Bangladeshi garment workers in an unlicensed tower block in Dhaka, Primark and other major retail brands were felt to have blood on their hands.

These unethical practices, the litany continues, are necessary because Big Retail doesn’t want to price in the cost of all the environmental damage it makes – any more than it wants to price in higher labour rates among Asian suppliers. No, for liberal critics of Big Retail, Western shoppers encounter retailer prices so low they are unreal, and suffer retailer executive bonuses that only recently have begun to reflect performance. The answer, in this framework, is to cut the pretensions of Big Retail down to size, and check, for instance, that each item bought is clearly labeled, sustainably packaged and used without waste.

There are two more ways in which retailing is stigmatised. First, what began with the 1980s neologisms ‘shopaholic’ and ‘retail therapy’ has now grown into a whole industry of diagnosing and treating quack ailments. These ailments, known as ‘compulsive buying disorder’ and ‘overshopping’, consist of a putative addiction to shopping with the attending problems of consumer debt and obesity (4).

Second, and this is the most ludicrous accusation made against modern retailing: its wares are not expensive enough. Since a landmark cover story in Time magazine in 2009, elite writers have urged us to get real about the high price of cheap food. ‘Cheap food’, one commentator has more recently lamented, ‘is regarded as a human right these days’. Worse, supermarkets have succeeded in teaching the public ‘to value price above everything’; but in fact anyone who’s happy to pay £2 for a cup of coffee in Caffè Nero or Starbucks, the same writer continues, ‘shouldn’t think twice about paying a fair price for essentials, whether it’s a chicken or a pint of milk’.

By ‘fair price’ here is meant higher price. Yet nowadays, in the minds of those who want to preserve nature, land, agriculture and labour against the forces of modernisation, dearer food, dearer cotton goods and dearer items made of steel are all desirable. The costs to the external environment – the ‘negative externalities’ – which rapacious retailers and their suppliers incur must be factored in to prices at the till. Only in this way can the world’s ‘natural capital’ not simply be depleted. Only in this way can we hope to see wages in supplier factories rise.

As the means by which consumers are alleged to play the major part they do in using natural resources and polluting the environment, the retail sector is indicted for duping the Western masses into buying products they do not need, at commoditised prices that the Earth cannot afford, backed by wage rates that are inhuman. But there is an alternative view.

What really characterises retailing the world over is not just the low employee pay we have already noted, but also long hours, an employment profile that is heavily skewed toward small firms, and tiny expenditures on R&D. For all the particular innovations in retailing since the Second World War, the sector is not known for rapid technological innovation. In this sense, retailing in Britain is part of a broader, but equally backward physical, transport and IT infrastructure – an infrastructure that’s more relevant to the 1960s or the 1980s than it is to a new century. And to the extent that retailing has failed fully to modernise itself, then the prices it offers will reflect that inefficiency, and be buoyant.

The backwardness of retail is something tangible and of real concern for those still bothered with the one ethic which counts: that of progress. In Britain, consumer price inflation, which does not include housing costs, moved up to 2.7 per cent in May. Shops play their part in that kind of figure; yet, aided by new technologies, they could do much more to keep prices down.

As for retailers’ suppliers in the developing world, it is no surprise that Western power wreaks social and environmental degradation there. But would higher prices in the shops really be passed on as a cleaned-up act in places such as Bangladesh? Among 16 developed nations, the market researchers Ipsos have found that 61 per cent of adults don’t believe that – and rightly so.

Social and environmental conditions among retailers’ suppliers are for those suppliers’ workers to deal with, without the well-meaning help of Western shoppers. In Britain, effort would be best spent not on boycotts of Primark, but on demanding better working conditions, higher pay, lower prices and faster all-round innovation from retailers in the UK. As spiked‘s Rob Lyons has noted, historically the supermarket, ‘in combination with refrigeration and the motor car, not only made shopping more convenient, it also greatly increased the range of foods we could obtain’ (5). Now is the moment to look for further moves in this direction, beginning with lower prices.

For low prices

It’s time to get real on price. In Britain the squeeze on consumer incomes of the past few years has been coupled with a clear inflation in household bills for energy (including petrol), food, drink and cigarettes, and other more-or-less basic goods. As a result most people are looking to save money. Even the middle classes buy their steak and champagne at Aldi. Similarly, cheap-as-chips Poundland has announced big profits, and has boldly stated an ambition to go from 400 to 1,000 high-street outlets. That would make it one of Britain’s biggest retailers.

The presumption of those who call for higher prices in the shops is so great, they ignore how even their relatively well-heeled compatriots are nowadays perfectly happy to go down-market, should the occasion arise – and in today’s British economy, it often does. No doubt relatively affluent consumers are particularly prepared to go on record that they are prepared to pay more for purchases that are more or less moral in stature. But what such people do when they are actually confronted with a range of prices on the aisles is another matter. One need only behold the ferocious scrums that surround Britain’s post-Christmas sales each year to know that price cuts remain enormously popular.

Neither the budgets nor even the whims of the wealthy always favour high prices. That is why Pricewaterhouse Coopers (PwC), one of Britain’s top accountancy firms, wrote, in 2012, of ‘the polarised value-centric, premium-seeking shopper’. About the wealthier classes, PwC proclaimed that the ‘premium shopper’ was ‘becoming increasingly frugal in certain instances’, while at the same time still being prepared to pay premium prices for products and categories he or she cares deeply about (for example, among youth, ‘tech-enabled’ products).

There is still space for luxury products and luxurious retailing in the world: the success of retailers such as Selfridges and Harvey Nichols in incorporating the work of artists in their window displays speaks to this (see photographs). Yet in a recession the price of basics matters for nearly everyone. After all, between 2006 and 2011, the proportion of consumer expenditure going on food rose from 12.6 to 13 per cent in America, and from 10.2 to 11.3 per cent in the UK (6).

Recently, JC Penney, a dinosaur mass retailer headquartered in Texas, learned the hard way that shoppers are actually very keen on low prices. Having recruited as chief executive Ron Johnson, a retail specialist who had led the ascent of the fashion chain Target and of Apple’s stores, Penney has had to fire him and abandon the $80million–a–month marketing campaign – fair and square pricing – he designed specifically to dispense with discounts, coupons and endless ‘sales’. Why? Because price cuts, or at least the sensation of price cuts, is what JC Penney shoppers want. The proof: the chain’s sales were down a whopping 16 per cent in the first quarter of this year, before Johnson was removed.

Altogether, the cry that shops should ‘face up to their responsibilities’ and charge higher prices is the height of irresponsibility. It can only work so as to confuse and impoverish people.

How real retail innovation could lower prices and bring other benefits

In Britain R&D is weak. In services worldwide, R&D is weak. But in British retailing, there is basically very little R&D going on at all. An online department store such as Amazon, or an online second-hand shop such as eBay, can follow the habits of mainstream IT firms and boast high ‘research intensities’ – high proportions of their sales revenues devoted to analysing customer purchasing patterns and developing new products or software. But among Britain’s high-street giants, R&D expenditures and R&D intensities are laughable:

Sales, R&D expenditures and R&D intensities of selected major retailers, 2009/10

If we look at the main innovations that have occurred in retailing since 1945, a broad-brush classification might run as follows (the lists are not fully comprehensive):

Formats – including shopping centres, retail parks, cash-and-carry, speciality, convenience stores, shops-in-shops, travel retailing (for example, at airports), pop-up shops, flagship stores (usually of manufacturers), hypermarkets, factory outlets, ‘value’ shops (discounters), kiosks (both electronic and non-electronic), visitor attractions (shops at Disney leisure parks, Victoria & Albert Museum), small inner-city shops (for example, Tesco Metro)
Served markets – for example Tesco events, hairdressing and beauty; Co-op legal services
Channels – Internet and mobile retailing, catalogues, TV shopping, ‘off the page’ advertising, Tupperware parties
Interior and architectural design
Technologies – ATMs, CCTV, security tags, barcode scanners, radio frequency identification tags, belted checkouts, electronic point of sale, signage at PoS, near-field communications at PoS, mobile payment, self checkout, body scanning/smart mirrors, temperature control (at doors, in gondolas), Light-Emitting Diode (LED) lighting, scenting, Muzak, lockable trolleys, supply-chain/warehouse/logistics IT.

At first glance, the portfolio of post-war retail technologies might seem impressive. Yet anyone with experience of a recent innovation such as self checkout at supermarkets will know how modest – and often, how annoying – technological innovation in retailing has been. There is much to recommend Internet and mobile shopping; but many of the goods that the big chains sell through these means used to change hands by conventional means, so that a fair proportion of Internet purchases amounts to a ‘cannibalisation’ of existing in-store sales. Obviously, too, there is a strong and growing dialectic between buying electronically and buying in-store (browse first, then purchase in the flesh; as you stand in front of the goods in one retailer, use your mobile to compare prices with others). But has there been a genuine and discernible technological revolution in retail? Not really.

In fact, in contemporary retailing it is innovations in the shopping experience that have for years been the main event. Since the 1980s, the halcyon decade of postwar retailing, and especially since the work of the US management gurus B Joseph Pine II and James Gilmore in the 1990s (7), competitive advantage in retailing, as elsewhere, is mainly thought to come not from higher productivity, greater automation, lower prices and an extended range of higher-quality produce, but by appealing to shoppers’ senses. There is nothing wrong with this, and designers have made a reasonable living out of it. Yet all the design changes in the world have not yet freed us of queues, wasted time and products that are sold out.

In retailing, acquisitions, share buybacks and formulaic international ‘roll-outs’ are as prevalent as in other sectors. There are technological innovations, but accruing all these does not really make for a whole new kind of shop. After decades, the checkout scanner that can read all the items in your trolley without you unloading them is about as distant as, say, flying cars for the masses. Even now, shelf-edge displays seem to have a lot of difficulty going electronic, in a way that would allow prices to be changed with ease. And as Jonathan Reynolds and others have written about retail’s fondness for innovations in store formats, ‘what retailers refer to as “strategic innovations” are often continuous in nature rather than necessarily focused around a conventional step-change model of innovation’. Retail innovations of all kinds, the authors add, tend to have relatively short cycles and are easy to imitate.

By contrast, in the late nineteenth century, when the forward movement of society and visions of progress were strong in a way they are not today, the US department store managed to link up technologies in a way that made them mutually interlocking, and in a way which ensured that the whole amounted to more than the sum of its parts. Here are just 15 of the breakthroughs that Montgomery Ward, Marshall Field and Sears, Roebuck took advantage of to make them titanic innovators in their day:

Telegraph, railroad, refrigerated railroad car and refrigeration generally, electric lighting, steel-framed skyscraper, safety lift, plate glass, mail order catalogue, US Postal Service, Ladies Home Journal, branded and packaged dry goods, NCR cash register, Remington typewriter, pneumatic tube to carry cash, Barnum and Bailey circus, displayed prices (no haggling).

Not all of these innovations were technological. Nevertheless, the department store of the 1890s was more of a wonder to behold than an Apple Store is now, had a wider range of goods, and had keener prices too.

What we need today is to take the ambition that characterised the nineteenth-century retailer and develop it again with a novel fusion of current technologies, and more besides. Retailers need to spend real money on researching and applying technologies such as robots (including the sort that assist shop assistants), 3D printing, holography, intelligent signage, and organic LED displays. Retail IT needs to provide benefits not just to the supply chain, but also, and more clearly than it does today, to the shopper. There need to be more opportunities for comparison of goods and prices, for a revival of haggling over prices. And, for both Mums and Dads, there need to be free childcare facilities and better facilities, too, in which staff can dress, eat and relax.

Window dressing: luxury retailers such as Harvey Nichols, Knightsbridge, London, have a clientele rich enough to support innovative experiments in display and visual merchandising. But for the rest of us, retail needs a more thoroughgoing, technology-led overhaul – beginning with and resulting in lower prices. Photo: Dido Powell.

A more capital-intensive, less labour-intensive regime in shops would be especially valuable among small retailers. Levels of freshness and hygiene could improve, and the amount of goods wasted reduced; a more effective use could be made of cramped space; the delivery, unloading and shelf-stacking of goods could be made less strenuous and noisy, and the disposal or recycling of secondary packaging, less of a chore. That way, small shopkeepers, too, could lower costs and so sharpen prices.

For many experts who should know better, innovation in retailing means something very different to what we have outlined. As in other sectors, ‘innovation’ in retailing amounts to little more than some design tweaks, a new mobile app and our old friends, energy efficiency and energy saving. There is plenty of enthusiasm for floors that can use the scraps of energy bound up in shopper footsteps, or for turning the lights off at night. But such tactical devices will not be enough to rescue retail.

Given the inroads made by e-tailing on conventional retailing, the high street itself needs much more than another makeover. It needs to offer the kind of attractions that work best in person: fine art and design in the making and in display; theatre, education, cooking, poetry, debate and entertainment; fitness, sport, healthcare. Another logo, water feature, banner, kind of toothpaste or special offer won’t suffice if we are serious about regenerating Britain’s town centres.

It is true that large retailers have made British high streets look samey. But much worse is the homogenous thinking of retail practitioners, local authority planners and critics alike, obsessed as they are, in different ways, with floorspace, ‘anchor’ tenants, recycling the evil plastic bag and, in general, fighting the last war rather than the next one.


Around the 1890s, mail order catalogues sent out by the department store Montgomery Ward offered 56 different carriage clocks and 131 different pocket knives – including 17 ‘for ladies’ (8). Wares were segmented to a large degree, and were varied in construction and finish. In America, Britain and Germany, the Pulitzer Prize-winning historian Alfred Chandler records, the number of days taken by a department store to perform a stock ‘turn’ shortened dramatically, as retailing proved a full partner in the technological and managerial transformation of industry and services (9).

Has retailing moved forward from this? Not much. Hopes in the future, long-term plans, the kind of morale that allows firms to take on risks – these do not compare with the situation of a century ago. Retailers remain willing to pile it high, but are not too capable of selling it cheap.

One final point. Retailing can never, by itself, revive a national economy. Because it merely realises the value in products made elsewhere, retailing has always been based on labour that is unproductive of value or surplus-value. Unlike some other services (for example, transport), retailing adds little, beyond ambience, to products that are made elsewhere. Thus, retailing forms a deduction from the surplus value, or profit, accumulated in sectors based on productive labour – chiefly, manufacturing, brewing and agriculture. That is why retailers so often spar with suppliers, and why their tendency to keep wages low is quite endemic. Therefore it can be predicted that any really qualitative shift in retailing will have to be based, in part at least, on a similar shift in supplier products and processes.

Rather than getting sentimental about local shops or rubbing hands over exclusive niches, retailing must Think Big. It must help pioneer new technologies – radically new technologies, ones that have yet fully to be envisaged. Faced with the mobile phone, retail must also dramatically reconfigure its social role. If it does these things, then finally that top-up with Asda or the local corner shop might, just might, become less of a drag, and more of a genuinely pleasurable diversion.

Margot Loudon is founder and director of retail consultants Think Do. James Woudhuysen is professor of forecasting and innovation at De Montfort University, Leicester, and editor of Big Potatoes: the London manifesto for innovation.

To enquire about republishing spiked’s content, a right to reply or to request a correction, please contact the managing editor, Viv Regan.

Topics Science & Tech


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