Opinion: Retailers must wake up and smell the coffee on values

Financial value has long proved elusive for the department store group. That stems from a fundamental lack of value to shoppers in its proposition – a trait it shares with many retailers caught out by society’s shifting tides.

While poorly performing branches destined for closure, such as Binns in Middlesbrough, will leave holes in the high street, the sad truth is they will leave few holes in many shoppers’ hearts.

Otherwise House of Fraser would not have found itself in such dire straits in the first place.

“To resonate again, embattled retailers need to rediscover a distinct place in people’s lives”

Never simply just shopping spaces, department stores were meeting places, dining venues, stages upon which the new, exciting and engaging took the spotlight.

To deliver financial value, they created a form of social value.

To resonate again, embattled retailers need to rediscover a distinct place in people’s lives – and to extend their sense of social value not just as places people want to spend time and money, but as active participants in society.

This week the Government announced big changes to procurement policy in the wake of scandals such as the collapse of Carillion.

In future, the intention is to ensure “contracts are awarded on the basis of more than just value for money – but a company’s values too, so that their actions in society are rightly recognised and rewarded”.

Social value will be “explicitly” evaluated when contracts are awarded.

It doesn’t take much of a leap of imagination to envisage an emphasis on social value becoming a gauge of how companies, including retailers, are measured by interest groups ranging from consumers to the City as well as politicians.

Writing on the wall

The writing is on the wall, wherever you turn. Last week for instance, the Commons environmental audit committee revealed it will investigate “the social and environmental impact of disposable ‘fast fashion’ and the wider clothing industry”.

A few days ago, a veteran financial PR told me that over the last decade, what he does has changed radically. In the past, 90% of his work was traditional capital markets stuff.

“Any retailer that cannot demonstrate social value becomes less likely by the day to create financial value”

Today, that accounts for only about 30%. The rest takes in everything from brand to internal comms advice to corporate social responsibility messaging (we have to find a better term than yawn-inducing CSR, by the way)  – and the City and media are as likely to come to him on such matters as they are about financial performance.

This week, it was ethics again rather than old-fashioned metrics that were in the limelight as Sunday Times journalist Oliver Shah’s book about Sir Philip Green and the collapse of BHS made headlines.

Retail cannot afford to be characterised in that way or to be seen as a failing, outdated industry as epitomised by House of Fraser’s decline and fall.

Forward-thinking retailers can sense the winds of change.

Getting it right

For example, Iceland, a frequent pioneer of ‘doing the right thing’, said last week it has a “revived focus on sustainability”. That’s evident in its ground-breaking programme to eliminate plastics from own-label lines by 2023.

Iceland group managing director Tarsem Dhaliwal said: “Although our motivation is not primarily commercial, we believe that the positions we have taken can only enhance our appeal to consumers, and hence our sales, in the longer term.”

Iceland is not on its own. Retailers as diverse as Asos, B&Q, The Co-op, Marks & Spencer and Primark are all associated with ‘doing the right thing’ in all sorts of ways, while countless others have tie-ups with good causes, locally and nationwide.

At the time of writing, Retail Week understands that John Lewis is poised to rebrand as John Lewis & Partners, emphasising its unique ownership model and way of doing business – an approach that has never been more relevant.

Any retailer that cannot demonstrate social value becomes less likely by the day to create financial value – and risks being consigned to the dustbin of history.