Over the last 25 years Ian Shepherd has seen the digital revolution play out three times across three different industries.
First, during a decade in consumer roles at Sky, he was present when TV went multichannel. Then, while an executive at Vodafone, he witnessed the rise of the smartphone. But it was during his third run-in with digitisation that Shepherd truly felt the wrath of disruptive change.
Highstreet video game retailer Game Group was already beset by profit warnings and declining sales when he became CEO in 2010 with the brief of turning the business around.
His efforts were ultimately in vain, and in March 2012 the company went into administration and Shepherd resigned.
GAME was saved by investment firm OpCapita, rebranded as Game Digital and, after further struggles, became the next addition to Mike Ashley’s Sports Direct empire in June 2019 as part of a £52m deal.
Shepherd, meanwhile, would go on to experience the "other side" of digitisation as COO of international entertainment group ODEON and UCI Cinemas, where he oversaw a programme focused on increasing digital engagement and data, before stepping down in April 2017.
While he makes it clear that he is referring to his accumulated experiences advising retailers around the country, rather than in any individual firm, Shepherd spoke to Management Today about the challenges of maintaining morale in a struggling business, why so many retailers are slow to change and what the successful ones do.
In your experience, where do most retailers go wrong?
"The strategic position that GAME found itself in is very similar to what lots of retailers face, which is that it had invested too much of its resources over a long period in expanding the number of stores it operated and not enough into changing its relationship with customers or responding to what I call the ‘new normal’.
"Even today you’ll look at a retailer’s results presentation and they will often lead off with ‘We’ve had a great year, here’s how many stores we’re about to open…’. Now I look at those lines and wince.
"Once upon a time the role of the store was how you as a consumer found products, it was the distribution vehicle. Today if I want to buy a fridge I have access to all the different specs and price points, from all the retailers in the world on my phone.
"The challenge for retailers is not just that the technology is there, but it’s changed how people consume. Many retailers's first response was to directly answer the technology question by setting up an ecommerce site. But actually that’s not what the customer was asking you to do. They were asking you to make that website an integral part of your store experience."
It’s easy for an outside observer to say you should have seen this change coming. Is the situation on the ground always that easy?
"Think about the coalition that you need to gather in order to change your business. The shareholders, lenders, suppliers, customers, the staff in store and your management team - they all need to be aligned around what you’re trying to do and there are challenges in that for any business.
"Take middle management layers for example. In many retail businesses these are made up of people who have grown up in that industry, possibly within that individual business. They’re great at doing what the business needed to do five years ago, but many may regard themselves as being challenged by the ‘new world’ - so there’s a danger you get resistance.
"The conversation with people who have invested money can be difficult. Going to your shareholder and saying ‘You know those several hundred stores we’ve opened over the last decade? We probably didn’t need to do that’ or explaining that you need to significantly reduce your price points in order to survive - those are very difficult things to do.
"It’s a really brave call for a business to make. So from my own experience, but also more generally from the retailers that I know and talk to, it’s very easy to end up behind the curve and not having changed quite as much as your consumers have.
"Once you’re behind the curve it becomes proportionally more difficult to catch up."
What about from a leadership perspective?
"If the tone of the coverage around the business becomes negative there is a real danger that you can get sucked into a negative spiral once things get difficult.
"If you’re a public company your share price drops - that’s a very visible thing - which then spooks your lenders, which in turn might spook your suppliers and challenge your credit terms.
"That’s one of the reasons why retail reinvention has probably been more successful in privately owned businesses. There’s an additional pressure being a public company and having daily movements in your share price dissected.
"When this happens, you cannot communicate enough with your colleagues. As a business leader, particularly when you find yourself in a challenging situation, you will be surrounded by advisers who tell you not to say anything. But in my experience those who communicate frequently and most honestly get the best response.
"For a retail business, or any multi-site hospitality business, communication presents a real challenge because people are geographically spread out. Sometimes staff in stores won’t even have a company email account.
"You have to be creative. I’ve seen business use mobile technology to create videos that people can watch on their phones or sometimes just make sure that every branch has a daily meeting. When times are challenging you need to get messages out more quickly."
Are there common traits between the businesses that are thriving?
"To survive as a retailer in the new normal you have to do one of two things, ideally both. One of these is to create your channels in such a way that the consumer can shop how they want.
"No customer identifies themselves as either a retail or ecommerce customer, they all do both of those things. A surprising amount of traffic to a retailer’s website comes from their customers who are already in stores. One of the reasons why a company like Screwfix is a runaway winner in the DIY market is because it has a very integrated multi-channel offering.
"The other thing you have to do is retail brilliantly and have a really clear understanding of the purpose of your stores. So when I look at businesses like LUSH, Hotel Chocolat, Games Workshop and Primark, I see stores that are full of people, full of products and noisy. Experiential retail is a tired phrase but actually it’s a really good encapsulation of what good retailing looks like today."
Ian Shepherd is the author of Reinventing Retail: The new rules that drive sales and grow profits.
Image credit: Game Digital PLC