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© Henley Business School 2008 www.rref.net
Registered charity no. 1092627
Annual Debate Thursday 2 May 2013
The Future of Retail
Speakers:
Rob Templeman – Deputy Chairman, British Retail Consortium
Nicky Dulieu – Chief Executive, Hobbs
Peter Harris – Co-Founder, Hotel Chocolat
Chair:
Bryan Laxton - CEO UK, Cushman & Wakefield
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Reading Real Estate Foundation
Annual Debate
Rob Templeman 2nd May 2013
The Future of Retail
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My Life in Retail – Past and Present
Company Position
Harveys CEO Home-furnishing retailer
Homebase CEO DIY retailer
Halfords Chairman & CEO Car/bikes retailer
Debenhams CEO Department store
Past Positions
Current Positions
Company Position
Gala Coral Chairman Europe’s largest gaming group
RAC Chairman Motoring organisation
BRC Deputy Chairman British Retail Consortium
GFW Chairman Charity for helping students / graduates
Children with Cancer Trustee Charity 3
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“The Next Ten Years will Possibly be the Fastest
Changing Environment for Retailers in over 40 Years”
• The financial crisis and recession has had a major influence on how
retailers and consumers behave.
• Technology advances will radically change the way we shop
• Escalating cost base will continue to erode store contribution
• More stable economies and internal GDP growth in emerging markets
could signal much slower or falling growth in gross margins
• Consumer behaviour changes – “research, comparison, emotion”
4
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The Financial Crisis and
Past Recessions
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2000s: A Different Kind of Recession
Average annual retail inflation in recessions
1970s
recession
1980s
recession
1990s
recession
2000s
recession
16.3%
10.4%
5.4%
0.1%
6
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GDP and Retail Growth 1969 - 2011
-5
0
5
10
15
20
25
1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011
Retail expenditure growth GDP growth
7
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Personal Debt Levels
£562bn
£1,409bn £1,459bn
Consumer debt Savings ratio
1998 2008
7.0%
0.8%
1998 2010
9.2%
2010 2008
8
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Retailing and Property – 1980’s
9
£’s £’s £’s £’s
Harris Queensway
Early
Recession &
Inflation
0.4%
Retail
Conglomerates
M & A
Activity
Growth in
Out-of-Town
Retail Parks
Big Box
Supermarket
Expansion
Rent as %
of Sales
Lower
Good Times
for
Retailers
Retailers
also owned
property
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Retailing and Property – 1990’s
10
Early
Recession
Inflation
5.4%
Out of
Town Retail
Parks
Growth &
New
Entrants
Destination
Regional
Shopping
Centres
Large
Space
Formats
International
Retailers
Target UK
Rental Growth
& Property
Costs Rise
Faster than
Sales
More Efficient
Space
Utilisation
Trials
Space
Expansion
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Boom then Bust Decade – 2000 to 2009/10
11
Credit
Boom &
Low
Interest
Rates
Strong
Retail
Growth
New
Space
Grows
Faster
Than
Sales
Multi-
channel
Impacts
Bricks
and
Mortar
Gross Margin
Expansion
through IT/
Direct
Sourcing/
Currency
Property
Costs
High
Relative
to Sales
Credit
Crunch &
Recession
Low
inflation
0.1%
Vacancy
Rates
High
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The Future of Retail – “Bricks & Mortar” is not necessarily
the Preferred Route
12
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The Future of Retail – “No Change is not an Option"
13
Low inflation & lower
wage rises
Credit restraint &
liquidity
A long & slow recovery
from the financial crisis
Consumers Deleveraging
High un-employment in
under 25’s - “A ticking
bomb”
GDP growth in
emerging markets
could lead to inflation
Commodity prices to
rise?
Retailers and
Partners Need
to Adapt and
Change
Multichannel & new routes
to market cannibalise
store sales/profits
Faster sales growth rates
on-line/mobile
New technology advances
Gross margin growth of
the last 15 years will not be
achieved
Retailers focus on reducing
cost base
Consumers research &
price compare on line
Uniform business rates
punitive to retail
High operational gearing
means a small reduction in
sales could lead to a big
profit decline
Macro Issues Sector Issues
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The Future of Retail
• Technology and multi-channel areas will be the norm in shops
• 3D printing – “ A relatively unknown threat or opportunity”
• Consumers will demand ease, convenience, value and experience
• Customer advocacy and personalised marketing will be key
• Branded suppliers could develop direct relationships with consumers
• Strong brands will target international growth faster than UK growth
• Supermarkets will devote more space to “experience” areas
• Retailers will continue to downsize or close outlets
• Property costs will need to reduce as a % of sales
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The Future of Retail…Property Landlords/Developers
Need to Change
• Consumers like the experience of shopping/belonging, but developers
will need to help create a more flexible/dynamic destination
• The traditional high street with investment and creativity, alongside a
viable economic model, has a role but consumers’ and retailers’ needs
have to be fulfilled
• Large supermarkets can provide a real threat to the traditional high
street
• Retailers need an economic model that works
15
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Reading Real Estate Foundation
Annual Debate
Rob Templeman 2nd May 2013
The Future of Retail
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∙ Premium British ladieswear fashion brand with 3 complementary labels
HOBBS LONDON – WHO ARE WE?
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∙ Premium British ladieswear fashion brand
∙ Discerning customer from 25 to 55
∙ Clothing, shoes and accessories
∙ Design led
∙ Italian shoe factory
∙ 140 stores and concessions in UK and Ireland
∙ Wholesale and franchise outlets
∙ Multichannel offer
∙ 3i / Management owned
HOBBS LONDON – WHO ARE WE?
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NICKY DULIEU – WHO AM I?
∙ Joined M&S at 18 as a ‘Trainee Accounts Clerk’
∙ Qualified ACCA
∙ Over 23 years at M&S worked in Finance; Tax;
Investment Appraisal; Property; HR; Retail Operations;
International; Food Group
∙ Joined Hobbs in 2006 as Finance Director
∙ Promoted to Chief Executive in 2008
∙ If I wasn’t in Fashion / Finance – I would love to be a
garden designer
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CHALLENGES FACING RETAIL
∙ Changing consumer behaviour
∙ Radically changing cost base
∙ No such thing as ‘normal’
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CHANGING CONSUMER BEHAVIOUR
∙ When they shop
∙ How they shop
∙ What they are prepared to pay
∙ What they want from their purchase
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RADICALLY CHANGING COST BASE
∙ Fixed costs of ‘bricks’ estate
∙ Variable costs of online selling
∙ Continual development of multi-channel experience
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NO SUCH THING AS NORMAL…
2012: Wettest Summer
2013: Coldest Spring
… what is normal?
‘Triple Dip Recession’
Eurozone turmoil
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WHO CAN WIN IN THIS ENVIRONMENT?
∙ Really know your customer
∙ Know your Brand/DNA
∙ Know your USP and guard it jealously
∙ Provide maximum flexibility of service and product
∙ Reward loyalty
∙ Diversify you RISK
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WHAT YOU PERSONALLY NEED TO SURVIVE IN RETAIL
∙ PASSION – Being passionate about the industry you work in
and loving the product
∙ EMPATHY – Understanding what your customer wants from
the business
∙ FORESIGHT – Thinking ahead, anticipating your customers
needs and keeping one step ahead of the competition
∙ ADAPTABILITY – Reacting to changing market conditions,
taking tactical decisions which don’t derail the longer term
strategy
∙ COMMON SENSE – Not overcomplicating issues and
keeping your eye on the end goal
∙ RESILIENCE – Coping with the knocks, because there are
plenty along the way
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The Future of Retail
Peter Harris - Co-Founder
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What do we do ?
– Cocoa Grower
– Chocolatier
– Retailer
– Hotelier
– Restaurateur
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Background
• Listening to our customers
• Delivered chocolate gifts 1993 - 2003
• Internet and Catalogue
• Chocolate Tasting Club 1998
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THE BRAND SOUL OF
HOTEL CHOCOLAT Originality
Authenticity
Ethics
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Retail Development
• First store opened October 2004
• Second store opened July 2005 • London, Cambridge, Norwich, Milton Keynes, Solihull,
St Albans, Watford, Birmingham, Nottingham, Bluewater, Plymouth, Reading, Newcastle, Canterbury, Manchester, York, Windsor, Oxford, Leeds, Southampton, Brighton, Exeter...
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Facts & figures
• Hotel Chocolat multi-channel
• 100,000 Chocolate Tasting Club
Members
• £65m turnover
• 900 employees
• Factory in Huntingdon
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Investment
• People
• £7m investment in
chocolate making in
the UK
• Shops in the UK and
overseas
• NPD and innovation
• Cocoa growing
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Rabot Estate, St Lucia
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THE REAL HOTEL CHOCOLAT
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Fast Track 100 Winner
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Why did it happen ?
• Listening to our customers
• Ambition and passion to develop the
business
• Incubating new ideas
• Reinvesting our profits in the business
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Hotel Chocolat - the future
• Roast + Conch
• International expansion
• Keeping the culture and fun in the
business
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Are we listening ?
• Bain Survey – most advocated brands
in the UK
• The Chocolate Bond
• Our customers and our culture
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The Future of Retail
Peter Harris - Co-Founder
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© Henley Business School 2008 www.rref.net
Registered charity no. 1092627
Annual Debate Thursday 2 May 2013
The Future of Retail
Speakers:
Rob Templeman – Deputy Chairman, British Retail Consortium
Nicky Dulieu – Chief Executive, Hobbs
Peter Harris – Co-Founder, Hotel Chocolat
Chair:
Bryan Laxton - CEO UK, Cushman & Wakefield