Shutting up shop: HR on the high street
Rachel Sharp, December 09, 2019
The high street is changing as shopping habits shift amid technological advances. So how can HR ensure its future prosperity?
It’s that time of year again. As is traditional the details have been under lock and key for months. Anticipation has been bubbling around what the theme of the John Lewis Christmas advert will be – and whose voice will be singing the tune. Finally in the early hours of 14 November an adorable animated dragon put us all out of our misery.
In true John Lewis style, the video tells the story of Edgar the dragon, whose excitement about his village’s festivities sees him breathe fire on and ruin a Christmas tree, ice rink and snowman. Marking the department store’s first joint Christmas campaign with Waitrose, the advert ends with a characteristic warm and fuzzy message about friendship, when Edgar’s best friend Ava encourages him to use his fire for good – to light a Christmas pudding.
After bookies’ odds placed Lewis Capaldi as the favourite to follow in the footsteps of Elton John, Lily Allen and Keane, the mystery singer behind the music was revealed to be Dan Smith from Bastille, singing a version of REO Speedwagon’s Can’t Fight This Feeling.
Twitter immediately went into meltdown, with fans left in happy tears and others rushing to snap up all Edgar-themed merchandise (some of which was already out of stock online by the following day).
And so the grand tradition of the John Lewis Christmas advert continues, with this now as synonymous with the festive season as stockings, mulled wine and reindeer. But behind the flashing lights and candy canes of the Christmas season, the reality is perhaps a little less shiny. Even high-street stalwart the John Lewis Partnership has suffered subpar sales in the past year, with the company navigating £2.4 billion worth of debt.
And it’s certainly not alone in facing difficulties. Patisserie Valerie, Debenhams and Thomas Cook have all made headlines for the wrong reasons this year, joining other well-loved brands (Woolworths, BHS, Dixons, Toys R Us…) that have shut up shop over the past decade as victims of the ‘death’ of the high street.
The rate of this decline is accelerating: 2019 saw 1,234 chain store closures in the first half of the year (111 more than in the first half of 2018), according to PwC and the Local Data Company. That equates to 16 stores closing every day.
“There’s two things happening here,” says Liliana Danila, an economist at the British Retail Consortium (BRC). “There’s the overall transformation of the retail industry that has been playing out over the past few years and has been generated by internet shopping changing the way we shop.
“Now that comes against the backdrop of a bunch of other challenges, which is creating a perfect storm.”
These challenges include a series of increases in national minimum wage rates, business rates rising, and Brexit uncertainty placing downward pressure on consumer spending.
Restaurant and food chains are also feeling the squeeze, says Kathryn Austin, chief people and marketing officer at Pizza Hut Restaurants. “The ‘B word’ is creating short-term concerns about the economy, and when consumer confidence is down, people choose not to eat out as much,” she explains.
Which all means retailers – and the HR teams within them – must urgently adapt to change.
“HR’s role will be threefold,” says Guy Youll, HR director at Superdry. “We need to attract the best people into roles they love as we know that makes a difference to what customers feel and buy. We need to focus on head office alignment, so breaking down the traditional barriers between e-commerce and in-store retail to make sure those parts of the organisation are coming together cohesively in an omnichannel business model.
“And third, HR needs to be able to think commercially and long term. We know rising costs put pressure on margins, so HRBPs [HR business partners] need to show they can work with finance and retail leadership teams to think about long-term solutions to mitigate these cost rises.”
“HR needs to understand the macro and micro environment,” says Iain Lewis, HR director at Howdens and former head of resourcing and talent at Woolworths. “If HR is going to be a function that just looks after the people then it’s not going to help solve business issues.”
A key business issue is of course the move to online. “People are using the internet to put others out of business, but then again the internet is also proliferated by high-street players, so e-commerce is creating both challenges and opportunities,” says Lewis.
Tech companies such as Amazon are encroaching on the industry and becoming the largest retailers. Which means traditional retailers need to do the reverse and position themselves more as tech companies, says Fabian Wallace-Stephens, senior researcher at the RSA.
“Lots of the most successful British retailers no longer see themselves as retailers but as tech companies, so the question is how can our venerable household retailers become more agile?” he says.
The biggest impact of this shift is on the people working in stores, says Austin. “Jobs are in bricks and mortar, not in online – digital businesses don’t make jobs in the same way,” she says.
Indeed, the BRC’s latest figures show that retailers have axed the equivalent of 85,000 jobs in the past year alone. As retail is the UK’s biggest private sector employer, this could have far-reaching societal implications.
Even in stores that haven’t closed, the workforce is still shrinking as in-store technology automates retail assistants’ tasks to make things more efficient for customers. The most obvious example is the self-service checkout. As Jonathan Reynolds, academic director of the Oxford Institute of Retail Management, associate professor in retail marketing and deputy dean at Saïd Business School, notes, this has left “checkout operators and service employees in retail the most vulnerable of all occupations to automation”.
As far as he is concerned, “robot workers” are already very much a reality. Zara opened a branch in London in 2018 where shoppers could buy or collect clothes at a self-service checkout and a robotic arm picks the product behind the scenes and hands it to them. Specsavers has launched personal shopping experience Frame Styler where software matches a customer’s face to recommended styles of glasses. And Ikea’s augmented reality app allows people to ‘see’ how furniture will look in their home before they purchase it.
Meanwhile, luxury retailer Farfetch aims to emulate the online experience in-store. “The clothing has sensors on it so when customers arrive, their smartphones detect what they might like and add it to a wishlist, recommending items based on what they look at,” says Wallace-Stephens. “Customers can also use this to summon different items to the changing room.”
It’s a similar story behind the scenes, with fully automated warehouses and logistic centres already a reality, and further futuristic possibilities (such as semi-autonomous distribution lorries) in the pipeline.
Which creates an even more concerning outlook for the retail workforce. While new jobs are being created in the logistics and warehousing area of retail (RSA research released in September found that between 2011 and 2018, 40,000 new warehouse and distribution jobs were created by online retailers), growth in advanced robotics threatens to deplete these jobs too.
The human touch
But questions still hang over how advisable it is to hand so many jobs to robots. When a state-of-the-art Ocado warehouse in Hampshire burned down back in February, it took more than 200 firefighters to put the fire out due to the difficulties of people fitting inside automated warehouses.
“These robotic warehouses are built for robots, not for people, so they couldn’t get the firemen in. And the robots just carried on working while the fire was under way so that made it more dangerous,” explains Reynolds. “All warehouses can catch fire, but this shows the challenges of designing the logistics industry around automation rather than humans.”
And there are other limits to tech in retail. Sainsbury’s was forced to scrap a cashless store trial when its drive to accept mobile payments left many customers unable to buy goods. Even self-checkouts have their limitations (the dreaded refrain ‘unexpected item in bagging area’ springs to mind…).
“Growth in self-checkouts clearly reduces the number of checkout operators needed, but retailers also need some pretty socially skilled supervisors to be able to manage those checkouts and sort them out and deal with a potentially angry customer when an error occurs,” says Reynolds. “So you can’t do without people in those situations. It’s not as clear cut as saying it’s a wholesale replacement of manned checkouts with self-checkouts.”
So it seems online and in-store tech is causing jobs to change – but not to vanish altogether. “When you walk around high streets you do see signs in shop windows for jobs, they’re just not necessarily jobs people previously went for,” says Reynolds. “So I think there will be fewer jobs but they will be better jobs in areas like data science, to analyse customer data.”
Wallace-Stephens agrees the onus will be on the digital skills needed for e-commerce. “There might be a need for roles around augmented reality, we could need line managers for robots, and as self-service checkouts get more sophisticated we will need more sophisticated technicians to manage them,” he says, predicting that “blended technology roles” could emerge where human workers both manage robot workers and provide high levels of customer service.
Lynne Weedall, former group HR director of Selfridges Group, says this means HR has its work cut out finding the best tech talent. “There are new skills and capabilities required, particularly in digital, analytics and technology, and in this space we are competing against the Googles and Apples of this world,” she says.
“That requires a whole new mindset and new ways of working, new policies, rewards, training, etc. You cannot apply old HR policies and thinking to this new workforce – it just doesn’t work.”
Yet Reynolds warns against obsessing over digital acumen. “Customers want to have their cake and eat it – they want cheap goods quickly and efficiently but they also want personal attention. And doing both is hard and expensive as you can either spend money on tech or on training people,” he says.
For some retail brands, the in-store experience could be far more critical to survival than a snazzy website or the latest tech, he suggests.
Which brings us to the concept of experiential retail stores, which has been around for some time. The idea is that, because of the convenience e-commerce now offers, customers need a specific compelling reason to visit a bricks-and-mortar store. At the more extreme end of the scale sits the likes of Samsung and its innovative showrooms where customers can play with the brand’s technology but can’t buy it; there is no stock and it is firmly described as ‘not a shop’.
“We used to joke that one direction of the high street would be a sort of theme park of the future where people would go on an experience. And I think while that’s a bit extreme, it gives a taste of thinking differently,” says Gordon Fletcher, academic director of business 4.0 at Salford University Business School.
Experience isn’t all about entertainment though. It can also be about specialist knowledge. “It’s that classic difference between going to a posh restaurant with a wine waiter who knows pages and pages of wines individually, versus a fast-food outlet where there’s one choice,” Fletcher says. “So it’s about where the niche lies… then where people with that skillset can fit that niche.”
Chris Noice, head of communications and research at the Association of Convenience Stores, says large brands and high-street chains can take lessons from local convenience stores on this. “Convenience stores do well with in-store experience because of their place in the community and also the majority of people working there are local. Some people coming into community local shops just want to talk to someone,” he says.
“Also every location and product offering is different – two stores half a mile away could be very different from each other because of the demographics. No-one knows better what their customers in the area want than the people running local shops, so there’s hyper-local targeting and personalisation.”
While you might assume high-street pubs and restaurants would already have this experiential side of things sorted, they are having to work ever harder here, says Liam Powell, HR director of pub chain Marston’s.
“Wherever anyone has discretionary spend, it’s pressure on us in how they choose to spend it,” he says, pointing out that pubs have taken a hit from online too, with the likes of Netflix meaning people decide to stay at home more. “Why should people choose to go out rather than stay at home? The reason is experience and providing a connection.”
For Marston’s this means keeping a workforce of 14,000 staff engaged and supported to do their jobs through significant investment in sales training. “It’s about having great people creating great experiences and moments in an environment that is better than the competition,” Powell says.
So among calls for more digital capability in retail stands a critical need for softer skills too. Wallace-Stephens points to “in-store influencer” skills. “We already see this today in fashion,” he says. “Or in supermarkets there are staff providing advice on nutrition and helping customers explore new recipes.”
“We’re now looking for people that have a natural affinity with others and who want to bring a bit of themselves to the service,” says Dawn McIntyre, director of HR UK and ROI at Specsavers. “In the past we would have focused more on the role and responsibility, whereas now there’s more emphasis on the individual – that’s something I don’t think you can just put in a training programme.”
Employees also need to be able to cater for emerging consumer trends such as veganism and sustainable shopping (requiring new specialist expertise in the form of nutritionists and sustainability managers, for example).
Austin has had veganism in her sights for some time at Pizza Hut. “We use ideas groups so all team members can share feedback from customers that the food group can then explore. And the food group will put ideas out to frontline staff too,” she says. “Then it’s about training and retraining the front of house around the new processes needed.”
“This takes a major cultural change as well,” says Reynolds. “When M&S started focusing on sustainability, the people tasked with it were nicknamed the ‘sales prevention team’ as people felt they were stopping [buying teams] buying things. So the organisational culture needs to buy into these trends as well.”
And it’s not just the skillsets of frontline staff that must change. Reynolds explains that the skills senior leaders have used to get to the top won’t be enough to now steer their brands through transformation.
“You’ve still got some leaders who are old, white, male and stale and have grown up with store-based systems,” he says. “So much of consumer behaviour is driven by younger demographics so there’s a real mismatch between who’s in the boardroom and the customers.”
That doesn’t mean HR should be doing a wholesale revamp of the board though. “These people do still have the commercial acumen for running a retail business, and irrespective of channel there are certain skills around buying and price setting and strategy that you need,” says Reynolds. “And a number of pure-play online businesses founded by enthusiastic young tech entrepreneurs have failed because they had the technical but not the commercial skills.”
Superdry’s leadership programme challenges leaders to think “future first”, says Youll. “Unless we have leaders that are very much thinking about the future then we’ll struggle to remain relevant and edgy and in line with our consumers.”
“Outside of retail you can maybe get away with leaders who are more old fashioned in their approach, but because a lot of young people work in retail, we need a different type of leader.”
The question is whether today’s retail workforce – both frontline and leadership staff – can make the move from the skills of the past to those needed now and in the future. And how.
“Before retailers reskill or upskill they need to understand what skills they have in the organisation and what the jobs needed in the future are,” says Wallace-Stephens. “We’re not going to be able to take 2.8 million people and give them 2.8 million tech roles.”
And pointed questions lie around who should pay for this shift. “There’s this need for reskilling, but it’s not happening at the moment as many retailers are asking ‘why should I pay for this and reskill people who then go and work for a competitor?’,” says Reynolds.
“One of the suggestions has been to repurpose the apprenticeship levy to help with retraining. But if we’re reskilling existing employees then who pays for it? Is there a qualification framework that needs to be designed for this purpose? Whose responsibility is it?”
Reynolds proposes copying Singapore’s model, where the government has invested in reskilling the retail sector. Many feel the UK government has already made attempts – the Future High Streets Fund, for example – but that these have fallen short. The RSA has called for the government’s Industrial Strategy to address three areas in retail: upskilling and reskilling, adapting to the changing role of physical stores and high streets, and benchmarking good work.
“One solution could be a sector-wide platform of lifelong learning,” says Wallace-Stephens. “That would be a system that uses digital badges or microcredentials to accredit skills retail workers need and allow workers to move more easily across roles.”
Austin says it should start with the UK’s education system: “Look at schools – where do [people] learn about customer service? We need to make sure that schools and colleges build retail in as a career option, whereas at the moment there’s a bit of a gap.”
The challenge is that retail still has an image problem, Austin adds. “A big long-term problem is professionalising careers in the sector,” she says.
“In Europe retail and hospitality is a very respected and professional career. But in the UK it is seen as low-skilled, when in fact many of the roles aren’t – they are running multi-million-pound businesses.”
“Retail has a big churn of people as some see it as a part-time job,” agrees Youll. “For us the focus must be on making sure everyone who comes through the door has the best experience, and we coach and develop the people who do decide they want a career in retail so that they stay with us.”
A new era
The killer question is whether such strategic activity on the part of HR will be enough to halt the high street’s decline. For many the answer is positive.
“Look back 130 years to when the first department store, Whiteleys, appeared – it was such a different business model that there were riots in the street and people burnt an effigy of the owner,” says Reynolds. “Now the department store is dying and the likes of Amazon are the radical new kids today. Retail has always been about change – it’s just that we happen to be seeing more of it than usual at the moment.”
Youll agrees: “Do I think the high street is dead? No. But do I think the high street needs to move on from the old ways of operating? Yes.”
“We’ve come to the end of an era of the high street as we remember it and that nature of the high street is not going to reappear,” says Fletcher. “But that doesn’t mean the death of the high street itself, just the death of the high street as we know it; the high street of 2029 will look very different from today.”
And whatever this looks like, one thing will remain constant, feels Fletcher: “It must involve employees, as people are the reason other people go to the high street.”
So over to you, retail HRs…
This piece appears in the December 2019 print issue. Subscribe today to have all our latest articles delivered right to your desk