Making the whole chain agile


Making the whole chain agile

By Jon Brombley
Managing Director

I used to sell guitars in a shop on Tottenham Court Road. Our chain’s command-and-control way of working meant sales were lost on the front line. We needed a new way.

Many of the recent retail woes have been blamed on chains that aggressively expanded into too many stores. The thing is, this wouldn’t be such a problem if those stores were able to optimise to their local context.

Stores that can adapt to local customers and context on the fly will make the most of their estate.

Command-and-control ways of working mean chain stores are the same anywhere you go. But agile, distributed ways of working would mean stores and supply chains that can adapt to their customers on the fly.

Most of the retailers going out of business are over-committed to a large store estate—but few if any of their stores are optimised for their local context. Rather, they’re optimised for cost control. But that doesn’t drive growth and it relies on predictability—in an increasingly demanding consumer world. Stores that can adapt to local customers and context on the fly will make the most of their estate.

Let’s take my former life as an example. Tottenham Court Road is famous for its many instrument shops it brings in footfall from all over the country, even the world. Store stock was managed, however, from the headquarters branch in Scotland. Their nearest competitor was miles away.

So while our bosses saw customers who’d make a special trip to the store to try what they had, get advice and shape a purchasing decision around that—in Central London, we had dozens of walk-ins every day shopping for very particular models of guitar, and if we ran out of stock they could easily buy them next door. So when we were only given limited stock, we would inevitably run out and have to turn customers away—to our competitors.

Of course, centralised ordering means controlled stock distribution and maintained profitability. But in this example, a static view of customer behaviour meant that our store never reached its potential—and much to the frustration of those of us on the front line, the absence of a feedback loop between us and head office meant it never would.

We’ve seen Waterstone’s face up to Amazon by implementing a more localised store approach—each store has the freedom to somewhat localise their product set. Another of the high street’s few success stories, JD Sports, has implemented POS instant feedback loops between stores and central to track and smartly adapt customer experience, and link those interventions to sales.

The next generation of retail platform thinking is already here. Retail startup Bodega create ‘autonomous stores’—cabinets that can be unlocked with a smartphone and placed anywhere. They’re stocked with products that fit the local context—whether that’s a gym (smoothies and fruit) or a University (stationery and snacks). The product set can adapts with local trends and what’s selling.

But you can only really adapt if you have agility throughout the supply chain. Previously it might have been enough to stock the stores and rely on economies of scale to drive margins, but now the whole business needs to be able to respond to feedback quickly. The trend we’ve seen in ‘fast fashion’, with lean production cycles having new products in stores within weeks has left some more traditional competitors flat-footed.

In a world where Amazon can take search data and use it to inform their product development, adding new product ranges wherever they see latent demand or an ability to undercut pricing (i.e. the Amazon Basics range)—retailers need to find ways to meet ever-changing customer needs.

So while it sounds obvious, stores aren’t all the same. To build a chain that is both sensitive to local context and cost-controlled, retailers need to learn from agile ways of working. An organisation that can learn from and adapt to localised feedback can also get more value out of its estate.

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