Analysis: What keeps retail leaders awake at night?

Leaders across retail in the UK have had to deal with a harsh environment over the past four years, with the recession forcing many not only to trim their businesses to cope with financial pressures, but also to revise their leadership style and approach.

Striking the right balance between short-term needs and long-term growth opportunities has become one of the key challenges today’s leaders are facing, according to a major survey by management consultancy Boxwood and retail analyst Planet Retail.

The survey found that retail leaders universally felt an increased pressure to perform, with one remarking: “Being a chief executive right now is like when you are skiing and you have climbed to the top of a mountain and you see only moguls. You don’t do blue or green runs these days, you only do black runs, every day – you need to get used to that.”

With core markets shrinking, the pressure on businesses to find new ways of achieving short-term revenue and profit targets has increased. On the other hand, top retailers are aware of the need to invest in the future.

“It is a really fine balancing act,” says Boxwood director of consumer Matt Clark. “Everyone is flat out dealing with the day-to-day but at the same time you have great social and technological change that is driving opportunities for the future.

“How do you ensure you deliver the core proposition through the core channel while providing sufficient attention to grasp the opportunities that are out there?

“That balance and how you address it in terms of allocating resource, and how you stay plugged into consumer trends, strikes at the heart of what the chief executives we spoke to were worrying about.”

The talent tree

The survey also supported the notion that transformation is all about people. Striving for the best talent is at the top of leaders’ priorities, according to the research – 41% of respondents stated that aligning the senior team to take action was the most important challenge that they faced. 31% mentioned senior management succes­sion, and 28% mentioned attracting and retaining talent as their most pressing issue.

“You are competing on a global stage now with extraordinarily capable people,” said Alliance Boots health and beauty chief executive Alex Gourlay, who contributed to the research. “It’s not just about winning the Premiership, you are competing in the Champions League, playing against the AC Milans and Real Madrids of the world – you must be one fantastic team playing total football.”

However, effective management of that talent is key, and retail leaders need to help their people focus not on the economic gloom or what competitors are doing, but on what they can do, individually and as a team, to improve the bottom line.

“My challenge is getting people to understand that success comes from what they do, not what I do; to help them stop worrying about the big issues and focus on the important issues,” New Look executive chairman Alistair McGeorge said in the survey.

Finding ways to engage employees with the business, when many are weary from a long period of fighting for survival in the economic climate, is an acute challenge. However, top retailers’ style of leadership has also come into focus over the past few years. The businesses that prosper in a downturn are those that can most effectively transform themselves, and leadership can be a key differentiator. As one survey respondent stated: “When you are in trouble, leadership needs to take personal responsibility and not let it fall on those below.”

According to the research, the most effective leadership approaches were ‘vision’, ‘empowerment’, ‘engagement and ownership’ and ‘authenticity’ – all approaches focused on getting the best out of people.

Expansion strategies

When it comes to business strategies, a number of key approaches emerged, with the most common focusing on extending reach and expanding on the current business proposition.

According to Planet Retail figures, 35% of the top 20 global retailers entered one or more new international markets over the past two years. At least 60% opened a new store concept, with the majority being small formats targeting urban consumers, and at least half entered into a merger or acquisition agreement as a way to increase capabilities or scale, or enter a new market.

Developing multichannel operations was another area of focus. Many agreed on the need to invest in an effective multichannel strategy – although not necessarily for a return on investment but because customers were demanding it. Moving towards a multichannel model isn’t so much a technical challenge, but rather about changing organisational structures and implementing different ways of thinking.

George and Asda chief merchandising officer Andrew Moore said: “Multichannel is a massive threat and opportunity. We must invest, not just in web technology but in turning the whole business into a truly multi­channel operation across all functions. It may not offer superior ROI, but it’s a ‘must do or die’ situation.”

Of those who responded to the survey, 58% identified streamlining or simplifying operations as a key strategy, with a focus on enabling speed and agility in the core value chain in order to respond to changing customer needs and sentiment. In addition, the ability to respond rapidly is now outweighing traditional advantages of size and scale.

One of the strongest themes to emerge from the research was the need to focus on the areas that drive the business and not get lost in peripheral issues, Clark points out. Many leaders highlighted the danger of losing focus while trying to implement too many new ideas, rather than focusing on core activities.

As Gourlay puts it: “Be clear about the strategy, what you are doing and what you are not doing. Be clear about where you can lead the market and where you can add value to the customer. Don’t do too much, you will lose focus.”