London, June 12 2019 image via ING Media

I am an international hybrid and a long-time journalist with a broad span of intellectual curiosity and a passion for ideas to help business work better, with basic human values to underpin the process.


On Markets Working Well, Retail Innovation And Consumer Ethics

On Markets Working Well, Retail Innovation And Consumer Ethics

The great retail upheaval in Britain continues, as Sainsbury's and Asda announce an intended £13 billion merger .The air is filled with talk of surging share prices, the threat of job losses,  lower prices for consumers, and also close scrutiny of the deal from the Competition and Markets Authority (CMA).

The CMA will be headed by new chair Andrew Tyrie, the former chair of the UK Treasury select committee. Its primary role, as the government states, is "to make markets work well for consumers, businesses and the economy." Mr Tyrie has been endorsed for the post of Chair by the Business, Energy and Industrial Strategy Committee (BEIS) in a report published on Friday following a pre-appointment hearing.

Not only is the organisation expected to have a major expansion of its responsibilities after Brexit, but Mr Tyrie has a reputation, earned in dealing with the banks as chair of the Commons Treasury committee and head of the Parliament Commission on Banking Standards, for being a fierce interrogator undeterred by obfuscation. He has also been fiercely critical of failing technology at banks, a subject covered in my last blog post.

So we should be in for some close examination of the retail sector, which is changing rapidly due to technological transformation, but also shifting patterns in consumer choice and self-identification. I captured some of this in 2015 in a piece for Forbes on the arrival of the discount supermarket Lidl to the edge of the high street of well-heeled Sevenoaks in Kent.

Anyone interested in the wisdom of the Sainsbury's/Asda merger will be reaching for the UK Government's green paper published earlier this month on Modernising Consumer Markets.

The green paper has been hailed by the Behavioural Insights Team (BIT), also unofficially known as the 'Nudge Unit' as a "milestone" in its bid for governments, regulators and businesses to "nudge for good" in Richard Thaler's phrase.

At its launch, UK Business Secretary Greg Clark said that Britain now needed to renew its established innovative, pro-consumer approach "as new technologies present new challenges and opportunities”.

While we await the CMA's thoughts on the merger it may be worth thinking about the shifting sands of consumer ethics in this new technology world of challenges and opportunities, and how they are affected by business models and affect them in turn.

There is plenty of media coverage from 2014 to 2018  to suggest that the retail sector has suffered from being 'ripped off' by customers with the arrival of new technology, such as self-service tills. In fact that 2018 link refers to the problem at Sainsbury's - mentioned again here in a media story last month suggesting that shoppers stole a whopping £3 billion last year.

New security measures and CCTV cameras are not always possible, given historic store layouts, or at least not without great expense at a time when the sector is struggling on many fronts. While retailers seem reluctant to come out and talk about the problem, you only have to talk to embattled managers in the stores you frequent to determine that there clearly is one.

Personal experience: I watched a man leave my local M&S wearing apparel he appeared not to have paid for the other day - the tags were hanging off as he sauntered out to his car ignoring the young lad who pointed it out to him. When I mentioned it to the food hall manager, he told me that it was very common to have people come in, load up with expensive items such as champagne and just walk out without paying. A lack of security staff and CCTV meant this was not a rare occurrence.

The same is true at the local Waitrose, which has recently installed CCTV around the self-scan tills. I commented on the fact that you now need a member of staff to see your car park ticket if you are self-scanning before telling the machine to give a £1 refund (on £10 spent if you have a MyWaitrose card). "Really?" I asked. "It was costing us about £16,000" was the response.

Are people becoming less honest because post-Brexit times are having an impact on their wallets, or do they just not identify with these established retail businesses anymore ? It's an interesting question, and one that the 'Nudge Unit' might want to consider.

My other regular supermarket haunt is Lidl, which by virtue of being new perhaps is also laid out in a way that would make walking out without paying much harder. But it also has a completely different atmosphere of novelty and surprise - and its customers are far more representative of multi-ethnic Britain.

When Lidl topped Waitrose to become the UK's seventh biggest grocer last year, it was clear that something more than lower prices was afoot - it was about changing perceptions on  self-definition and aspiration. While many people in Britain still like to be identified by where they shop as an indication of who they are, I suspect many more simply do not care, and like to pick and choose. There seems to be a trend:  earlier this year Aldi overtook Waitrose in a satisfaction survey, and earlier this month Lidl edged further ahead than Waitrose again on market share.

With repeated surveys showing 'bad news for the Big Four', it's hard to imagine what the rationale would be for the CMA to allow the merger of Number 2 and Number 3 in terms of size.

In adapting to the surprise element of what's on offer at the discount retailers UK consumers are revealing themselves to be exactly what the UK government keeps urging of its businesses : innovative and open to change. Yes, it's about lower prices but it's about more than that as prices are never the whole story behind consumer choice. Neither is it about technology as an offering: at time of writing, neither Aldi nor Lidl offer online shopping.

There has been interesting research done into how consumers behave if they believe a business somehow deserves it. A business that has for years prided itself with a persona such as 'upper middle class' may just find that it doesn't work anymore as a draw. Changing that image rapidly by introducing "essentials" as a range may still not be enough to shake off years of its cultivation.

While there are many opinions on both sides  as to whether or not technology is making us more equal, or unequal, when it comes to the retail sector and the rise of challengers, the interesting thing may be that by allowing more consumer choice, you are also fostering greater social equality.

One to ponder, while we await the future of Sainsbury/Asda.






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