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David Jones CEO John Dixon talks business with The Future Laboratory cofounder Martin Raymond.
Martin: One of your key focus points has been online. How did you change the nature of online in the UK, in the way you did it at Marks & Spencer (M&S)?
John: Just reflecting on how strong the online market is in the UK vis-à-vis this market, it shows the incredible opportunity online represents within Australia. Only about 5.5% of turnover in Australia is derived through online. In the UK, it’s almost three times that rate at 15.5%. We also need to stop talking about omnichannel and multichannel retail.
Martin: We use the term Phygital.
John: One of the things we talk about in the UK is another version, digical. That’s the physical store and digital coming together. A retailer should think about this opportunity to continue to give customers fantastic product, customer service but in the most experiential environment, be that in-store or online. That’s really for me what separates the great digical, total retailers. Those that aspire to get into that space. You can’t break the channels anymore. How do you make that experience as easy and seamless for your customers as possible? Also, respecting the fact that some customers might research in a store and then order at home, for example. There’s a lot of that happening the other way around; researching through a hand-held device and then going into the store.
Martin: You think about M&S, traditionally people went to the store. What were the differences when you started promoting and pushing online as a customer alternative? Did that change the demographic?
John: What was interesting with the M&S model is it typically had a slightly more mature customer. So what we started to see was, it was a fantastic way to start getting a slightly younger customer into the business. Even analysing some of the sales and sizing differences we were getting through the online channel. As we started to experience product returns to stores, we started to see the sorts of people that were returning, the types of products being returned, certain categories that had a higher rate of return. That gave us a richer sense of information. Certainly in the early years, they were seen as separate channels.
Martin: Were you surprised with the findings? You had quite an exceptional customer service model. What surprised you most about the traditional customer versus the new one?
John: One of the most interesting insights actually was where products were being returned to. One of the original assumptions we made on how we would range choice in our stores was actually being quite helpfully updated and informed by the sorts of products customers were returning to stores. Perhaps those were stores that didn’t range some of the products that were being bought online. You could see which were the most heavily returned items and perhaps therefore, there was a gap within the ranging.
Martin: Of particular stores?
John: Exactly. One of the other lessons for all retailers was actually the advent of click and collect. A lot of retailers were excited about growth opportunities from online but also slightly fearful of what that was going to mean from an impact on profit, in terms of the cost of getting that order to a customer’s home. What happened is actually a win-win for both customers and retailers, because having them pick up an item in store is a far more economical model for retailers. We also talk about experiential retail and how you can really create more desire. That customer is perhaps thinking they are only coming to the store to pick up an item and going out with three or four other items because they saw something new.
Martin: A lot of people are now moving click and collect to the centre of the store.
John: I think you have to be careful about this. At the end of the day, our job is to make customers’ lives as easy as possible. I think sometimes the theory that you should put your click and collect service right on the top floor...I think the customer is likely to reject that. You’re actually making their life more complicated. One of the interesting learnings that we had, particularly in running the food business at M&S, was being able to facilitate convenience for customers. Customers perhaps collecting apparel items after work and also picking up dinner for that evening. We all recognise people are living far more frenetic lives and being more time pressured.
Martin: Think about M&S entering the online market. What would you do differently with hindsight?
John: I think we would do lots of things differently. I think click and collect is something we wanted to get out faster than we did. I think understanding some of the opportunities in terms of how you more effectively market to distinct customer groups. I think the whole approach of discounting. I used to call it "carpet bombing". You would just have 20% off everything. But actually, it was about understanding which customers responded better to that, rather than coming into this brand feeling dragged down by this constant drumbeat of discounting.
Martin: I think that is something we are aware of coming to Australia and visiting. The number of times you see stores in discount mode.
John: There’s a message here in terms of price integrity. Customers aren’t stupid. They start to question if the first price was the right price.
Martin: Do you think we can change the way we can redefine this, give customers what they want without soiling the integrity of the brand?
John: Depending on your brand, retailers have to think about how to add value. Adding value can be done in different ways. Aldi add value to customers in a way that’s different to Selfridges for example. Again, it comes back to what does your brand stand for? Do you understand the needs, wants and desires of the core customers? If you are genuinely in touch with customers, they will give you plenty of answers. Then, you have to further segment that.
Martin: What is your definition of the best kind of service delivery you can get?
John: I think it’s ultimately about giving customers what they want, as quickly and as conveniently as you can. That’s the pragmatic side of it. How can you reinspire your customers? How can you create that level of desirability?
Martin: Do you think there is a need to return to the human aspects of service to the store? Or should we push the virtual assistant?
John: I think it comes back to the role of your brand and the format of your store. If we think about CBD flagship store experiences, it is absolutely about that. It’s about VIP suites, it’s about offering beauty rooms, style advisers. That’s how those sorts of businesses can add value to the customer and how you can help increase the dwell time of the customer. If it’s an online grocery shop, that’s a more mundane and convenient service. You need a front end of a website that is easy and simple, and if you have ordered product for a one hour slot, it better get there on time. You can’t take a broad brush approach.
Martin: Interestingly, John Lewis in the UK introduced a button on the online shopping service. You could press it and you could call an assistant and speak to them. That increased sales over a period by 30%. The fact you have the reassurance of calling somebody in the nearest store and they would answer the phone, which is an intriguing proposition. I quite like that idea. What do you think of Australian retail? Should they look to abroad?
John: I’ve been hugely impressed, actually. Coming to a market where the economy has been growing for 25 years is a pretty rare feat. I think unemployment is pretty low, interest rates are under control and it doesn’t have a lot of the issues that have plagued the Eurozone. I think about the UK at Christmas; people consciously avoiding going to busy shopping centres because of what happened in Paris. The other really positive thing about the Australian market is the customer service culture is very strong. I think there’s a nice informality to the type of advice and service that you get here. I think online has a way to go and is relatively undeveloped compared to other markets such as the UK.
Martin: Is the market becoming oversaturated? There’s still a lot of international retailers coming in. Should Australian retailers go abroad?
John: I don’t think Australia is any more oversaturated than any other markets. The fact it is such an attractive place in many ways, including a good market to do business, I am not surprised many international retailers are coming here. To answer your question about Australian retailers having success overseas, absolutely. There is no reason why not. It comes back to if it’s a strong brand, if customers in those new markets understand what it is all about, if you’ve got fantastic product, if you’ve got fantastic service and you can do all that in an exciting, experiential way. I think the only barrier is the counter-seasonality, which international retailers coming into the Southern Hemisphere have also found a challenge.
Martin: If you closed your eyes, what is your initial impression of retail in Australia? What were the things you were surprised about?
John: I think a very high quality level of service. In my first five weeks, I had been to Perth, Adelaide, Melbourne, Sydney and tried to get around in a relatively short period of time. I think the quality of the malls is impressive, the mix of international brands and some fantastic Australian designer brands is very strong. I think online, we touched on, represents a big opportunity. If you are an Australian retailer, by not being a first mover, that can be quite advantageous. You can learn some of the lessons and mistakes that were made in the UK. Particularly in the food market, people were putting down ridiculous amounts of new space within the supermarket area 10-15 years ago. They have somewhat regretted that now because there has been little to no growth from the bricks and mortar perspective in the last few years as a lot of business moved online. I think that’s again, an opportunity that presents itself here by learning from those mistakes in other markets.
Martin: In the UK market, they changed the nature of discount retail. They came in with premium offer at value prices. Here, when we visit, we’re not sure that’s hit home. They’re almost sleeping giants.
John: I like your analogy about sleeping giants. Aldi and Lidl have been in the UK a good 20 years before they really got a foothold in around 2008/2009. Probably because the four big supermarkets have had it their own way for a long, long time. The Aldi’s and the Lidl’s are now affectionately known as the LADS. The Limited Assortment Discounters. I was talking earlier on, the almost mundaness of the aisle shop. Customers have rejected the evergrowing catalogue of products bombarding them, it was taking so long to get around and it was almost too much choice. You had these disruptive retailers coming in with a much more limited assortment and almost taking the hard work out of choice. They also had a low cost retail operation and they’ve been able to pass on the benefits to customers in price. That’s something, coming into the Australian market, you notice Aldi having a foothold.
Martin: You can see them starting to use the same tactics as in the UK.
John: It will be interesting to see if there are any parallels with the clothing side. We touched on the level of discounting that’s going on in the apparel market and other big markets around the world. Whether that is seen as an opportunity here to put pressure in the mid-market.
This interview was conducted at ‘The Future Laboratory Retail Futures Forum’.