The new bosses at Argos and Mothercare have etail backgrounds. Will this become a common theme across the sector, asks Rebecca Thomson.
Some of retail’s best-known leaders have started out on the bottom rung of the industry’s career ladder. Whether that’s the shopfloor (Sir Terry Leahy, Malcolm Walker) or on graduate traineeships (Sir Stuart Rose, Mark Price), a steady rise up the management ranks has been the accepted route to the top for years.
But is this about to change? Some of retail’s most recent high-profile appointments – Argos managing director John Walden and Mothercare chief executive Simon Calver – aren’t cut from the same cloth as many more traditional retail chiefs. Both have online experience – Walden starting at US online grocer Peapod in the 1990s before moving to Best Buy, and Calver comes from film rental service Lovefilm.
Is this a sign of things to come? For years, chief executives have needed an established set of skills, with strong leadership, creative vision and the ability to manage a complex store environment being some of the main requirements. But while those are still important qualities, retail is evolving and so must its leaders. The vision that a business relies on its leader to produce will need to change in line with the retail industry.
“Virtually every retail business is going to need or want to develop its online presence,” says Fran Minogue, managing partner of executive recruitment firm Clarity. “I can’t think of a retailer where they’re saying they won’t.” As online and multichannel increasingly feature at the heart of many retailers’ plans for growth, it’s more likely that bosses will need a comprehensive knowledge of such elements of retail. Not only that, but online and multichannel will form a central part of many retailers’ visions and plans for the future. So bosses will need to know enough about how multichannel retailing works to be able to envisage the role it will play and the way it will shape the sector. “The vast majority of retail brands have or need to have online capability and you want your chief executive to have exposure to that channel,” says Minogue.
New tricks
Change management is another core requirement for many senior retailers, along with the ability to communicate the need for change effectively. What’s new, however, is the pace of change retailers now face. “Most businesses are changing, perhaps more rapidly than is comfortable,” says Minogue. “Leaders have always needed to respond to change – what’s important now is to be open to new ideas.”
Online and multichannel retailing are likely to touch every retail sector, but the extent to which multichannel skills matter still varies in particular businesses. Mothercare’s stores in the UK have been trading poorly – sales at the core UK business fell 4.3% in the period to October 8 last year, and it is set to concentrate more on online and franchising. Longer term, the main focus of its business will be to run fewer stores while pursuing online growth. With this in mind, bringing in an online expert is likely to work well.
Argos, meanwhile, is focusing on a multichannel model that relies heavily on click-and-collect. Around a third of sales were online in 2011, two thirds of which were collected in-store, so the stores network still fulfils 80% of sales.
Parent company Home Retail will no doubt expect Argos’ new managing director to formulate ways to build on this and overcome the retailer’s recent troubles. Argos’ operating profit plummeted 94% to £3.4m in the 26 weeks to August 27 last year.
So both retailers’ strategies are likely to suit someone with a multichannel perspective. Plus, both have been struggling, with business models changing and online competitors such as Kiddicare snapping at their heels. Both need people who are likely to shake them up and bring a fresh take on things.
Completing the team
So a new breed of boss suits Mothercare’s strategy, but it is not alone in reducing store estates and developing newer sales channels. Plenty of UK retailers are keen to consolidate their property portfolios and rely on online sales more heavily to reach every household. As Sally Elliott, head of retail at executive recruitment firm Korn/Ferry Whitehead Mann, says: “The appointments at Mothercare and Argos point to both a dearth of online and multichannel skills in the retail sector, and the strategic importance of multichannel to the future of retail.”
She observes that retail chairmen are increasingly looking for non-executive directors with online experience to bring these skills to the board – Sainsbury’s was one of the first to do that after Google UK managing director Matt Brittin joined the board last year.
Even if a retailer’s strategy doesn’t centre around multichannel shopping, there’s still a need for those kinds of skills. A retailer that isn’t yet proficient in it may not have identified its way through the multichannel landscape, meaning finding someone who can do so is necessary. Some customers may take longer to adapt to new technologies as well – but whatever is causing the delay and however dependent a retailer is on stores at the moment, the likelihood is that this won’t last forever.
Retailers need leaders who have the vision and ability to take the company into new ways of doing business but, at the moment, the market is short of people with the right skills. “There are simply not enough retail executives who combine technical understanding with the level of leadership experience required,” says Elliott.
But others say it’s possible to bring such skills into the company even if a leader doesn’t necessarily have them himself. “It’s not necessary to choose actual etailers,” says Minogue. “What you need is someone who understands every part of the business. Some businesses may choose someone with a good appreciation of ecommerce but who hasn’t actually run it.”
The right background
It may be possible to simply bring in the skills needed onto the board, ensuring that every aspect of the business is covered. “If someone doesn’t have a particular skill they’ll bring in people who are brilliant at the things they’re not brilliant at,” says Lynette Deutsch, chief executive at recruitment company Endaba. “Marc Bolland, for instance, doesn’t have an ecommerce background. It depends on the business and the nature of the chief executive.”
Bolland, of course, hit the headlines last year when he poached multichannel expert Laura Wade-Gery, former chief executive of Tesco.com. But tellingly, Wade-Gery is expected to be a front-runner as Bolland’s eventual successor – the overall trend, Deutsch says, will be for more leaders to come from this type of background. “This is the new generation of chief executives,” she says. “They will need to have cross-border skills.”
Does this mean there’s a current generation of retail directors who will miss out? A year or two behind the current generation of Marc Bolland and Philip Clarke are another set of directors whose background is just as traditional, and who in many ways are perfectly poised to be considered for the top job – as long as the Nick Robertsons of the world don’t get there first.
The current generation of etail upstarts have crept up on traditional retailers and stolen sales and market share for the past decade, and next it looks like they could start stealing jobs.
But the advice from the headhunters is not to worry too much. “If someone has been down the retail operations route you can still learn these skills,” says Deutsch. “Sir Stuart Rose didn’t have an etail background and he hasn’t stopped Marks & Spencer from having a website or being quite good at multichannel.” What matters is having the right attitude, being flexible enough to change with the times and be aware of where the skills gaps are on the board.
The right attitude is a good start, but ultimately retail leaders will soon need to be able to show they are capable of understanding and operating within a multichannel environment and of leading a business through it successfully.
The usual gamut of leadership skills won’t be any less important, but multichannel and online knowledge is no longer something that can be tacked onto the side of the business. For the retail industry to operate in a fully cross-channel manner, it will need leaders who think in a way that brings multichannel retailing into the central core of the business.
“We need to be more open-minded and broader in our thinking in retail,” says Deutsch. “If someone isn’t a purely traditional retailer, I don’t think it matters anymore – what matters is that they are consumer-focused.”
Everyone’s aware of the fact that multichannel retailing is changing the landscape, what’s needed now is a new generation of leaders capable of adapting businesses to the new environment. Finding and developing the right people to do that has never been more critical.
How retail leadership is changing
- The retail leadership landscape is changing. Mothercare recently poached online rental company Lovefilm’s chief executive Simon Calver to be its new chief executive and Home Retail Group meanwhile announced John Walden, whose background is also in etail, will be its new managing director. Both retailers appear keen to develop and emphasise their online and multichannel strengths
- Headhunters working for retailers say the requirements for chief executives are starting to shift. Demand for multichannel skills is on the up – Sally Elliott, head of retail at executive recruitment firm Korn/Ferry Whitehead Mann, says: “Multichannel experience is becoming increasingly critical in our view. We are seeing greater mobility in this candidate pool than any other in retail.”
- But while demand is on the rise, supply is somewhat limited. There is a shortage of people with the required leadership skills and long-term experience who also know enough about multichannel retailing. Multichannel is strategically important for the future of many retailers, but bosses capable of overseeing this change are in short supply.
- Directors and aspiring retail leaders may need to take proactive steps to get the skills they need. It’s possible to get the skills required, but retail boards and chairmen are becoming more demanding in terms of working with people with actual multichannel experience, so it’s likely to become more important to know it inside out.
- The role the different channels will play in each business depends on a retailer’s particular business model, but what’s clear is that leaders will need to be able to envisage this role. With ecommerce operations often having grown up quite separately from the operations of the main retail business, many bosses don’t have enough knowledge of all aspects of the business. As retail evolves, chief executives will need to bridge the gaps between the channels and ensure the business operates as a single entity.
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