Will Fresh Ideas From Amazon Change UK Retail Forever?

Following on from my recent article about the battle brewing between Amazon and Jet for online ecommerce, it looks like Amazon is within a month of launching a fresh grocery service in the UK called Amazon Fresh.

When comparing Amazon and Jet I did suggest that I believe Jet will struggle to succeed even if they can offer lower prices than Amazon. My point was that price alone is not the only factor that encourages a shopper to buy from one store or another. The Amazon approach to customer service means that they will retain many customers even if they need to spend a little more.

However, with fresh groceries I think the market is different. As has been seen in just the past five or six years, the growth of brands such as Aldi and Lidl has been fuelled by consumer demand for bargains.

Amazon clearly faces a challenge in the UK, as the public do not associate their brand with fresh groceries. They don’t spend millions on advertising in the way that the established retailers do – and always have done.

Food is also an emotive subject. Marketing fresh groceries needs a new approach of ‘marketing to the senses’ to entice people to spend. However, Aldi and Lidl have shown that a market is out there for lower-cost groceries. Lower-cost products have been particularly popular since the most recent recession and now these brands have arrived they have become a part of the retail landscape.

Amazon will have a lot of work to do building a connection between their brand and fresh groceries, but it is not impossible. Before the global financial crash who could name any of the discount retailers that are popular in the UK today?

Add this potential for new competition to the excellent ecommerce and supply chain model and innovations such as Echo and Dash and suddenly there is the potential for large-scale disruption in UK retail. Imagine adding to your shopping list just by speaking out loud inside your home, telling the system when you want your groceries delivered, and having a physical button on your fridge that triggers a delivery.

My wife and I spend time every week updating our existing shopping lists and we both hate it. Being able to order online was an improvement over having to spend an hour in the supermarket selecting everything personally, but if Amazon can tie together their various services it could be game-changing.

The result should be good for us all. More innovation in retail will drive up the quality of service and potentially drive prices down. I’m looking forward to seeing how the UK goceries market will develop over the next decade.

What do you think might happen if Amazon enters the UK market this year? Leave a comment here or get in touch via my LinkedIn profile.

First Amazon Fresh Delivery

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Do Banks Need Humans?

Banks have been developing an online offering for many years now. The first online banks arrived in the UK in the late 1990s so the leading companies already have two decades of online banking experience now. Online banking has become more popular with the growth in use of mobile devices and the idea of customers serving themselves has also transferred into branch strategy too.

In June this year Halifax processed 69 million different customer interactions, which is a 47% increase on the same month only one year earlier. 57.2% of all these interactions came from a mobile phone app and a full 66% of all customer interactions came from a mobile device.

The customer interaction data from Halifax also shows that only 10.3% of interactions took place inside a branch and over half of these in-branch interactions were through the customer using a self-service machine. This data suggests that fewer than 5% of all customer interactions at Halifax involve a customer inside a branch talking to an employee.

This identifies two strategic questions:

  1. Are branch networks still important for organisations like banks?
  2. If 19 out of 20 customer interactions are taking place on self-service machines, the website, or apps, how can these interactions be made as easy as possible?

Most banks believe that their branch network retains an important role as one part of a multichannel offering to their customers. Responding to this data from Halifax, their Digital Director, Nick Williams, said: “A growing number of customers want the best of both worlds – the convenience of banking on the move, alongside a helping hand from their local branch when they need it.”

Clearly companies like Halifax will use data and insight such as this to underpin their branch strategy while enriching the features and functionalty of its app, website, and in-branch automated devices. The key strategic focus has therefore become how customers react to their experience of interacting to the bank using the tools provided and subsequently how easy these tools are and should be to use. This is very different to the way that banks might have considered a customer service strategy a decade ago.

I’m going to be writing more about this specific point, how to make service and interactions with your customer easier, but if you have any thoughts on this please leave a comment or get in touch via my LinkedIn profile.

Halifax - High Street, CoventryPhoto by Elliot Brown licensed under Creative Commons.

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Low Prices vs Great Service – which will win in the battle for our wallets?

Can Jet break my Amazon habit? That’s what the new ecommerce site is aiming to achieve now they have finally launched. Their plan is to eventually charge a $50 membership that will give access to prices that beat their giant rival. For the moment those subscriptions are free, to encourage new members.

But Jet faces a long uphill battle. Amazon has been around for a couple of decades honing their business model, which famously reinvests an enormous amount of profit back into improving the business each year. They keep on investing vast amounts to ensure they stay the market leader.

I know that I personally am loyal to Amazon and that’s about more than price alone. I was struck when I read what the Amazon founder and CEO, Jeff Bezos, said about customer service: “The best customer service is if the customer doesn’t need to call you, doesn’t need to talk to you. It just works.”

This captures the essence of what Amazon does nicely. Innovations such as one-click payment have entirely redefined ecommerce and made the online shopping experience pleasant and something that can take seconds – or be an enjoyable browse taking hours.

Amazon has long moved on from selling just books and movies. Their product range is now so vast it’s almost a one-stop-shop for anything. I know that it’s usually the first place I look, whatever I want to buy.

They have created a perfect balance where everything the customer wants is on offer and the customer service is so good that you almost never need to get in touch. The system just works. In the past 5 years, as a regular customer, I have only needed to contact them once and the fault that time lay with the courier.

Payment is simple, delivery is simple, and returns are simple. It’s a textbook example that shows how great service and service simplicity will drive repeat business. Customer loyalty is created because of the great shopping experience.

A rival, like Jet, may offer lower prices, but if they cannot match this kind of shopping experience – and even improve on it – then I won’t switch. If I won’t switch, perhaps many others won’t eitherAnd then there’s Amazon Dash, what will Jet answer that with?

Time will tell. Jet clearly believes that there is a more price-sensitive market that they can target, which means they believe that Amazon customers are less focused on price. Instinctively I think they might be mistaken, but who knows? Amazon itself will probably relish the competition, but with so many years honing the Amazon customer experience Jet has a big challenge ahead.

Amazon

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Apple Pay Launches in the UK

Apple Pay has arrived in the UK. I saw Pete Markey, the Chief Marketing Officer of the UK Post Office proudly demonstrating his Apple Watch on LinkedIn earlier this week – presumably paying for something by tapping his watch on a post officer counter. This is a giant leap forward and shows how traditional brands are embracing new technology to keep ahead and give their customers the experiences they demand. My bank, NatWest, has recently emailed me to let me know about my new wallet and to encourage me to sync it for use.

The system works for small payments up to £20 and requires an iPhone 6 or 6 Plus or Apple Watch. The user can just tap their device on a payment terminal to make an instant payment – just like a contactless card.

The Apple system has been live in America since October last year and the UK market is the first to come online outside the US. Most banks, and credit card issuers have lined up to support the system so most British iPhone users will find that any retailer with an existing contactless payment system will be ready to take their Apple payment from today.  Not all banks were ready in time and organisations like HSBC missed the launch date – I wonder if their customers noticed this too and if it had an impact?

It’s an important development for Apple to choose the UK as their second launch market. The UK is seeing a wave of financial innovation taking place with many new brands entering the market for products such as savings, investments, loans, and even basic retail banking.

I mentioned some of this in my last blog here. Brands like Renault are entering the UK financial services market even though they are naturally thought of as being a leader in a completely different market. The arrival of Apple Pay just underlines the point I was previously making. But there will be two real ingredients necessary for success in this new world of financial products and service providers – the power of your brand and your expertise in delivering first rate customer service.

Apple has great experience in both these areas so the future looks bright for Apple Pay, but as the major banks plan their own strategic paths for the years ahead, they need to consider just how much the market has changed. Only a few years ago, nobody could have considered that a ‘tech’ firm would be launching a new nationwide payment system in the UK. With initiatives like Bitcoin, M-Pesa and peer to peer lending (Funding Circle, Zopa) and currency exchange (www.moneyswap.com) which has cut out the traditional role of banking institutions, the change is now a reality.

It’s been hard to quantify just how successful Apple Pay will be but we know they took 2% of the US market within the first 6 weeks and there will be an expectation to do the same in the UK between now and the end of August.

As it becomes easier for companies to carve out their own niche area within the broader financial services market what are the existing players doing to ensure that their brands remain valued and their service levels meet what customers expect in 2015? We’ve been here before with utilities companies in the 1990s and ISPs in the 2000s, what is common to the success of all is ultimately the winning customer experience that the best brands deliver. So it will be with Apple Pay and every new ground breaking financial service innovation and bespoke provider.

Apples

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UK Retail Eyes Strong Growth

 This post is by Liz Parry, Strategic Account Director at Teleperformance UK.

The British Retail Consotium (BRC) just published new data indicating that retail growth in the UK is stronger than it has been for a long time. Total spending in June was up 2.9%, which is the strongest monthly growth since January 2014.

The BRC cites several reasons for this strong uptick in retail data, but one of the most important factors appears to be the weather. Outdoor toys and summer clothes all sold well because summer did actually arrive, helping to boost retailer numbers.

But in other news, the media is reporting how the British budget might affect retailers – in particular the announcement that the UK minimum wage is set to increase to what the government defines as a ‘living wage’. Credit rating agency Moody’s has already predicted that this will either increase retail prices as retailers pass on the cost or it will result in job losses.

The signals are not good. However one might argue that if every retailer needs to conform to the same new pay scales then all will be equally affected, so perhaps Moody’s is too gloomy? However, I’m also concerned that something as ephemeral as the summer sun can have such a dramatic effect on the overall retail industry too.

In all this talk of the minimum wage and sunshine boosting profits, I think the bigger picture is being lost. UK retail today is changing dramatically. Not just because of the multichannel expectations of customers today, but even the expectations of the in-store customer.

Younger customers have changed the way that they communicate with friends and family because of the mobile Internet and social networks. Retailers need to understand that this recasts the in-store experience too.

Customer service is no longer about fetching and carrying from the back of the store or just processing a payment. Customers are expecting the in-store team to have a detailed knowledge of the products they are selling and to be able to advise on anything from the best pair of shoes to the right tablet for reading books.

Smart retailers understand that connecting their information-rich online service with chat support and product reviews to the in-store experience is a critical part of understanding how customers shop in 2015.

Getting this new model of customer service right is going to define who succeeds in British retail over the next few years – not how much sun the country gets in summer.

Marks & Spencer Cheshire Oaks

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Where Will Smart Energy GB Go Now?

What will happen to the smart meter programme now that the chair of Smart Energy GB has been ousted?

Baroness McDonagh found out in a call to the Energy Secretary Amber Rudd that her two-year stint is now over. McDonagh had called for a big-hitting private-sector manager to come and run the rollout of smart meters across the UK. She was openly critical of the ability of the public sector to manager such a large programme on time and within budget. And now she is gone.

Obviously politics are involved here, but let’s put the politics to one side and just consider what it means for the industry. Will the smart meter programme work or not?

On the negative side there is the message this sends to others who are critical of the current approach. If the chair can find that she is fired just for suggesting a new management approach is needed then will anyone lower down the hierarchy speak out about problems? This is a classic leadership issue. If you make the team fear that they will lose their position, status, or livelihood by being honest then a culture of fear and silence is created. That is not good for the government or for the industry.

The Institute of Directors has warned that it looks like a disaster waiting to happen. Specifically they have warned that this is the largest ever government-run IT project in history and is fraught with risk.

The Smart Energy GB programme is set to cost the government £10.9bn and aims to install over 50 million smart meters in 26 million homes across Great Britain by 2020. It is estimated that consumers can immediately save £17bn by using metered energy rather than estimates.

In the Diginomica blog, Derek du Preez commented:

Experience tells me that there is no smoke without fire when it comes to these large government projects – as soon as people start pointing to problems, whilst the public sector leaders start claiming ‘everything is fine’, I start to get worried.”

In my opinion, this is the problem. The UK government should accept that the public sector has a patchy record on large-scale technology projects – at best. This is not a criticism of the government, or a partisan comment, however it remains a fact that government is not best suited to rolling out these enormous projects.

The truth about the problems is obscured by the argument over McDonagh’s exit. If she was exaggerating the need for better management then it should be easy to point to a delivery plan and to show that things are on track. However, many industry insiders and trade bodies are backing her comments and by her removal a culture of silence has been created.

Personally, I would recommend a review of the independent report completed last year where the present approach was verified. If the updated review confirms that all is on track then that’s fine, but there should also be a willingness to change approach if the report finds otherwise.

The potential savings from this smart meter programme are too great for the nation to ignore. We can’t get caught up in partisan politics and electioneering to the point that nobody can criticise the approach. Let’s independently verify who is right – this project is too big and important for energy in the UK to be allowed to fail.

Onzo Smart Energy Meter Kit Display

Photo by Digitpedia Gadgets licensed under Creative Commons.

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Do Executives Really Believe in Great Customer Service?

A new report from the Institute of Customer Service (ICS) suggests that the suspicion of many customers is actually true – that most executives have no idea what their customers really want. In addition, these same executives are charged with ignoring the ideas coming from their frontline teams because the board already “knows” how to run a business.

The statistics from the ICS research (which questioned 650 UK employees) paint a sorry picture:

  • Only 51% of line managers believe that their executive team is interested in customer insight
  • Fewer than half of line managers believe that their executive team understands what the customers want
  • Just 36% of line managers believe that customer ideas for service improvement are listened to
  • Only 28% of the companies questioned in the research have an executive at board level with customer service responsibilities

This analysis of the ICS research in Forbes magazine lists some examples of UK companies that are taking customer service seriously:

  • At Boots, customer service is the first thing on the agenda at every board meeting
  • The CEO of Halfords was hired specifically because of her track record on improving customer service at McDonalds.
  • Supermarket chain Morrisons has created a staff bonus scheme that directly connects the bonus paid to customer satisfaction.

I think that it’s great to see these well-known brands putting the customer experience at the top of the executive agenda, but as the ICS research shows, far too many companies are detached from what their customers really want.

Several industry analysts have noted that this is becoming a key strategic battleground. Smart company executives are already placing the improvement of the customer experience above reducing cost and increasing profit on their list of priorities because these leaders can see that customers are expecting more. The brands that ignore what their customers want will soon find that this has become more important than they could ever imagine.

However, I believe that smart companies with go further than just including customer experience in their list of board priorities. The way that companies are structured today has to acknowledge that in the age of the customer, business is different. Companies needs to understand – far more than ever before – how customers think and behave.

Every customer-facing function within the organisation needs to be connected and synchronised. This includes customer service, but also advertising, marketing, sales, and functions like PR that reach out to the media. All these functions create an impression of the brand with the end customer and therefore they need to be managed together.

This is why the board needs an executive with a customer experience focus, not as a token gesture, but in a genuine coordination role managing any part of the business that faces externally.

The ICS research shows that many companies are not thinking this way yet, but this creates opportunity for those that are ahead of the curve and realise the importance of their customer relationship.

What do you think of the ICS research and the idea that boards need to be focused on the customer experience? Leave a comment here or get in touch via my LinkedIn.

The boardroom

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