269: Retail Review Of The Year 2023

18 Dec 2023 | Oliver Only Solo Shows, Podcast

269: Retail Review Of The Year 2023 - The Retail Transformation Show with Oliver Banks

Publish Date

18 December 2023

Your Host

Oliver Banks

The retail industry continues to evolve, and in this episode, join Oliver Banks and look back at stand-out news stories from the past 12 months. We’ve seen drone deliveries take off whilst other companies invest in retail media networks. Discover the most transformative and strategic moves as well as exploring crucial retail trends that have played out over 2023.

Listen to this podcast to hear:

  • The key insights and innovations from the past year, with the added benefit of hindsight.
  • What the two Chinese mega-retailers have got in common.
  • Which company is set up to grow through profitable acquisitions and how.

 

Key stories from the year that was 2023

January: Autonomous delivery trials taking off

Asda and Ocado are reported to be testing self-driving vans in undisclosed locations across London. This is an interesting development to the online grocery space. Whilst these delivery vans have a safety driver at present, I’m sure we can see where this is going. The next step is to ensure customers are able to unload their orders from the van (or more likely have their shopping automatically presented to them) before the delivery can be completely automated.

Also, Walmart launched their drone delivery service to customers in four cities and surrounding areas, with deliveries dispatching from 22 different stores. Drone deliveries have failed to take off for some time, but with companies like Walmart, Amazon, and Wing (owned by Google’s parent company, Alphabet), we’re in an experimental phase where customers get the chance to test and learn alongside the retailers. It’s also positive to see governments be more open to understand and give relevant aviation permissions for the industry to move forward and test this new operating model. Through the course of 2023, this trial has expanded to more locations and stores. Additionally, other companies have scaled up drone deliveries or aspirations.

Find out more about autonomous deliveries in episode 248: The Rise Of Robotics In Last Mile Deliveries. You may also enjoy exploring more about robotic deliveries which was also explored in the preceding podcast, episode 247: The Rise Of Robotics In Transport.

Other notable stories this month saw Amazon start tightening the belt as they announced they would be making 18,000 people redundant. Also, Meta started stepping back from social commerce as Instagram removed the ‘Shop’ tab.

February: Hi-tech Amazon stores opt for lo-tech checkouts

Amazon’s latest Fresh stores in London feature their usual Just Walk Out technology alongside traditional checkouts. This is an interesting move by Amazon, who have historically required customers to scan in with their account. This latest development offers customers the choice of how they shop.

Jumbo slow checkout lane in the Netherlands, with customers chatting to the cashier

Similarly, in the Netherlands, Jumbo supermarkets opened a special slow checkout lane, offering customers the chance for a more relaxing and chatty checkout line.

Later in the year, Booths would decide to remove self-checkout options from their stores. Read more in this LinkedIn Article: Removal of self-checkout: 93%.

The self-checkout conundrum

Also this month, Meta again pulled back on social commerce as Instagram announced they will remove livestream commerce options.

March: Walmart experimenting in the metaverse

Walmart Universe Of Play

Walmart closed a metaverse space on Roblox called Universe of Play, less than a year after opening. There had been claims of positioning unwanted ads to children. Many brands and retailers have been experimenting with the metaverse. The exact use case isn’t entirely clear just yet, so a test-and-learn approach would definitely be best. Part of this is recognising when something isn’t working or if there is nothing new to learn. Whilst Walmart hadn’t declared the exact reasons for this, it’s likely privacy concerns coupled with a lack of target market relevance resulted in this change of direction.

Also this month, Frasers Group installed face-scanning cameras in 27 stores to scan customers for known or suspected shoplifters. Also, Chinese mega-retailers Alibaba and JD.com both announced plans to restructure and split their respective businesses. Alibaba announced plans to divide into 6 different and independent companies whilst JD split into 3 divisions.

April: Retailers redefining loyalty schemes

Morrisons, Sainsbury’s, Boots and Co-op are all following Tesco’s lead in offering discounted prices to loyalty card holders. The classic loyalty proposition of earning points seems increasingly irrelevant for consumers compared to accessing everyday low(er) prices. But for retailers, the value of shopping data and customer behaviour, plus accessing marketing opportunities, remains highly attractive. We should expect to see more loyalty schemes swapping over to this model, despite companies like Pandora announcing a new points scheme. I’m also wondering what will happen for Amazon Prime subscribers. The delivery proposition remains strong and relevant, but will the company that “strives to be Earth’s most customer-centric company” mimic these price discounts and the customer expectations set by others in order to help protect against member churn?

Also in April, Zalando started a pilot trial for virtual fitting rooms so customers could see clothing on a personalised avatar. Meanwhile, John Lewis aanounced plans to reduce the size of their London head office size by half and Asda officially announced their partnership with self-driving car company Wayve – following on from January’s story.

May: Shop the look from Amazon’s TV series, Citadel

Amazon added a shop-the-look store for their new Prime Video release, Citadel. Customers can choose a character and episode to see clothing, jewellery and make-up options. Some of these include exclusive products as well as similar items and the store is rounded off with branded merchandise too. Viewers have a link to the store easily accessible when viewing episodes but it feels like a future opportunity to more closely integrate the relevant looks based on the episode and outfit for a quick shopping experience. As Amazon continues to invest in TV and movie production for their Prime customers, this shoppable entertainment route feels like a solid option to be able to serve relevant products to their most loyal and valuable customers.

Shop the look from Citadel, on Amazon. Features a selection of products from Episode 6.

After pulling back on social commerce earlier in the year, Meta introduced a new suite of advertising tools using generative AI to quickly produce images and copy. Meanwhile, M&S were focused on improving and growing their app which they highlighted as their “most valuable channel.”

And finally, Asda purchased EG Group’s petrol station operations in a £2.3bn deal. Both companies are closely aligned through ownership with the Issa brothers and private equity house, TDR Capital, and this move indicated the intention to kick start scaling up Asda’s convenience offering.

June: Shoplifting sprees encourage drastic actions

Shoplifting continued to challenge retailers too and many are taking drastic action to minimise risk. M&S had been reported to be replenishing less meat onto shelf whilst companies like Iceland, Aldi and Tesco resorted to increasing the volume of security cases and tags used, on regular products like milk and cheese. Co-op placed dummy products including jars of instant coffee onto shelves. But it’s not limited to groceries. Office are rumoured to only be letting customers try on one shoe at a time to help minimise theft risks. These examples may be one-off local decisions to combat a specific problem but they hint at the extreme nature facing all of retail right now. New technology can help to reduce this but it remains a major challenge for operations, the (honest) customer’s experience and the bottom line.

The John Lewis Partnership submitted planning applications for building nearly 800 residential homes as part of their transformation. Previously, they’d announced their intention to start building and renting homes to consumers and this is steadily making progress. The planning also includes a new Waitrose store, gym and flexible workspaces. The homes will be furnished from John Lewis and include a mix of affordable housing. The transformation from retailer to residential property building and rental continues to raise attention. Whether you agree with the strategy, it is however hugely positive to see progress happening as it moves towards becoming a reality of the business model.

Read more about how retailers must consider new sources of profit in this LinkedIn article: Future retail profits from new business models: 50%

The decline of the traditional retail model

July: In a Barbie world

The summer’s Barbie movie has driven perhaps the most extensive set of brand collaborations, takeovers and promotional activity that we’ve ever seen. The marketing budget for the movie was larger than the budget for creating the movie itself, and there can’t be many consumers that had no expose to the brand this year. Will this represent the chance to reinvigorate the brand in its traditional toy market to create long term value – or is the future in licensing the brand for clothing collabs and other products?

Also in July, Chinese mega-retailer, JD.com, launched a new AI, ChatRhino, which is focused on the retail sector and supply chains. The tool includes a chat interface to automatically edit product images and prepare for ecommerce listings, generate marketing assets. And brands can seemingly quickly list products on JD’s platform too to start selling. There is also a digital presenter to support livestreaming and video content with customisable images, voices, movements, backgrounds and more. There are also capabilities for supply chain modelling although the specific examples are light on detail.

July also saw a host of other retail stories, including:

  • Selfridges opened a “Swap Shop” in their classic flagship store
  • Meta launched Threads as their new social media app and direct competitor to Twitter/X. Threads became the fastest-growing app ever, with 100m users in a few days.
  • Superdrug have overhauled the accessibility of their website, allowing customisation of design elements to enable readability and usability.
  • THG have acquired the London newspaper, City AM, providing a platform for content and adverising.

August: An app that fits into consumer lifestyles

Petco have launched an app to help pet owners track key info for their pets and make easy purchases. The app can store details about pet nutrition, wellness, vaccinations and even grooming details. This is a great example of creating a helpful tool for customers that embeds the brand within the customers’ life – especially for an emotionally important topic like pets!
A move that would inspire Pets at Home.

Other big stories from August included:

  • In the UK, TikTok Shop are launching a new logistics programme, similar to Amazon’s “FBA” service, entitled Fulfilled By TikTok (FBT).
  • Amazon are trialling using AI to read and summarise reviews.
  • Currys introduced a new supplier collaboration portal to share sales performance and customer insights. “Currys Tech Insights” would later become a key enabler for their retail media network.
  • Continuing the trend from January, Walmart and Wing are partnering to start offering drone deliveries from 2 stores in Texas to offer 30-minute deliveries.
  • Shein started to experiment with in-store propositions across the USA. The Chinese fast fashion retailer are partnering with the Sparc Group – a JV between the Authentic Brands Group (including Forever21) and the Simon Property Group.

September: Amazon allow you to outsource your entire supply chain function

‘Supply Chain By Amazon’ launched in September. This is a new B2B service offering which allows sellers to delegate their end-to-end logistics to Amazon. The service’s scope is broad and includes collecting inventory from sellers’ or suppliers’ manufacturing sites, cross-border shipping, handling customs and duty payments, in-country logistics, ground transportation, managing store stock levels, and automatically replenishing inventory. It can also be coupled with their existing services, items can be picked, packed and sent to customers. The upstream supply chain management is a major shift and could be a great benefit to many smaller brands that struggle with this side whilst also lacking the scale of larger companies. Additionally, the store replenishment side is another interesting angle. Collectively, this would make it hugely more “sticky” to work with Amazon and much harder to move away from the ecommerce giant in the future.

This is a huge move and further underlines the importance of moving beyond the traditional business model – as discussed in podcast episode 255: Moving Beyond The Traditional Business Model and episode 256: Creating A New Business Model.

255: Moving Beyond The Traditional Business Model - The Retail Transformation Show with Oliver Banks

256: Creating A New Business Model - The Retail Transformation Show with Oliver Banks

October: Tesco expands their retail media network

Tesco launched a number of new media channels to expand their advertising offering to brands. Working closely with long-term partner, dunnhumby, the expanded media network will include space on scan-as-you-shop devices, over 1500 screens in stores, new sponsored product ad placement space online as well as product placement on Tesco’s TV ads. The scan-as-you-shop development is most interesting and innovative. It will include dynamic ads served to customers as they shop so it will be interesting to see how this is implemented to avoid frustrating customers and stop them switching to other checkout options.

As discussed on the episode, if this can be added alongside modern networks, with location based services, there will be the opportunity to personalise ads to specific customers based on their specific location in store. Discover more about modern networks in this LinkedIn article or webinar.

Meanwhile, UK mobile network operator, EE, have expanded into consumer electronics via their upgraded ecommerce site. The move represents a clever way of staying aligned to customers through smart devices. The move is a great example of how the fiercely competitive retail landscape evolves.

November: AI x DIY for home improvement help on hand

Home improvement group Kingfisher, launched an AI virtual assistant to give DIY tips to customers. The chat feature allows customers to ask questions such as how to install a basin or for painting tips. The tool has initially launched in France under their Castorama brand, and is ready to chat across a number of different languages to help serve customers. It will be interesting to see if and how the tool adjusts across different brands – for example, their mass-market B&Q brand vs their more professional Screwfix brand in the UK.

Also in November, Amazon announced a partnership with car manufacturer, Hyundai. Amazon will start selling cars over the next year and Alexa will be available in Hyundai cars soon. And during an AWS summit, Amazon announced a new workplace chatbot called “Amazon Q” which will help companies find and understand information.

December: Creating an operating model ripe for acquisition synergies

THG agreed to acquire beauty brand Biossance and are set to instantly transform the business’s financial performance through its Ingenuity service. THG Ingenuity is a retail-as-a-service offering to brands and retailers a broad range of flexible offerings, from ecommerce pick and pack, to translation services, payment platforms, and more. Instantly moving a newly acquired company into this model allows them to rapidly maximise the financial synergies of acting as a group.

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