RXUK - InternetRetailing€¦ · & Spencer, which returns to the Elite after three previous inclusions, and to Amazon, Argos and John Lewis on retaining their positions from last

UK TOP5 00 REP OR T 2020 A performance ranking of the largest ecommerce and multichannel retailers in the UK

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February 2020 3 © 2020 retailx.net, distributed by InternetRetailing.net

Welcome to the RetailX Top500 2020 report where this year we’re marking a change of name from the InternetRetailing Top500. The change recognises and reflects the part that InternetRetailing’s research arm RetailX plays in this annual listing of the leading multichannel and ecommerce retailers selling in the UK. We believe this sixth annual report, as with its predecessors, stands apart from the crowd in its performance-led analysis of how leading retailers sell in the UK. The research starts with a Footprint ranking based on size - of revenues, store networks and web traffic - before moving on to analyse that footprint in terms of performance through six Performance Dimensions: Strategy & Innovation, The Customer, Merchandising, Brand Engagement, Operations & Logistics and Mobile & Cross-channel. This approach enables us to judge and rank retailers on how well they perform day-to-day in the UK’s changing retail market.

In last year’s report, we said that the retail market continued to be turbulent – and so it proved. Uncertainty around Brexit meant that we saw two different days on which the UK might have left the European Union without a deal, a change of Prime Minister and, to end the year, a general election. But the uncertainty continues this year, with retailers still not clear on exactly what Brexit will mean for them. At the same time, traders continue to respond as the way shoppers buy continues to change. Customers are now much more willing to buy more products online – but at the same time they remain uncertain about whether they can afford to buy. Thousands of shops are expected to close over the coming year in what has been described as a retail crisis, while shoppers may also be responding to calls for increased sustainability in the light of climate change.

But in 2020, this report suggests, retailers appear to be responding at this time of change

by adapting and developing the way that they sell, whether that’s through stores, through the seamless service that they now offer on mobile or through improved merchandising, delivery and sustainable packaging options. In previous years, we’ve seen a minority of top retailers work to improve their multichannel offerings, while the average retailers lagged behind. This year that seems to be changing as a majority of businesses improve their performance in ways that their customers will appreciate. Even though much remains to be done that general improvement in the wider market makes the performance of this year’s Elite retailers all the more impressive. Our warm congratulations to our Elite retailers of 2020: Amazon, Argos, Dunelm, John Lewis, Marks & Spencer and Next.

INTRODUCTION

From the editor-in-chief

© 2020 retailx.net, distributed by InternetRetailing.net 4 February 2020

OUR METRICS

TABLE 1. OUR METRICS

0. FOOTPRINT:UK retail turnover, ecommerce turnover, web reach and store estate of retail businesses give the ‘heft’ and a preliminary rank. We then modify and weight that analysis through consideration of the following Dimensions:

1. STRATEGY & INNOVATION: the extent to which the retailer is adapting for growth, international commerce and customer responsiveness

2. THE CUSTOMER: measuring the experience from the customer’s point of view

3. OPERATIONS & LOGISTICS: delivery, returns, collections

4. MERCHANDISING: displaying and describing products

5. BRAND ENGAGEMENT: making their brands familiar to the customer and connecting with them

6. MOBILE & CROSS-CHANNEL: beyond single ecommerce or store channels

Performance clusters We’ve ranked the UK Top500 in statistically similar groups. Elite retailers have performed at an exceptional level across all Dimensions, statistically separate from the subsequent clusters. In 2019 they are Amazon, Argos, Dunelm, John Lewis, Marks & Spencer and Next. Our congratulations to new Elite retailers Dunelm and Next, to Marks & Spencer, which returns to the Elite after three previous inclusions, and to Amazon, Argos and John Lewis on retaining their positions from last year. Amazon has the distinction of being the only retailer to have been ranked Elite in all six of the Top500 reports published to date.

Top50 retailers bring us to the 50-retailer point and represent the current standard of UK best practice in ecommerce and multichannel retailing, exemplifying RetailCraft at its best.

Between the Top100 and the Top500, retailers are grouped in a way that expresses their measured performance in a way that goes

beyond their variation in size, reach and turnover. Throughout 2019, we will be continuing our testing and measurement of the whole group, with our findings contributing to the 2020 ranking.

Judgement Our current system started with the IRUK Top500 in 2015. Since then, research methods and metrics have developed steadily. The criteria regarded as cutting edge this year will necessarily differ from those of last year, since many one- time innovations have now moved firmly mainstream.

Knowledge partners We thank BuiltWith for tracking the Top500’s websites and providing information on the software used, such as ecommerce platform and payment methods; and Eggplant for measuring the performance and load times of Top500 websites on mobile and desktop browsers.

We are grateful to SimilarWeb for sharing data on the visits and interaction that Top500 websites receive, and to Pi Datametrics for sharing data on brand search terms.

Elite retailers Congratulations once more to the InternetRetailing UK Top500 Elite retailers for 2019: Amazon, Argos, Dunelm, John Lewis, Marks & Spencer and Next. Ian Jindal, Editor-in-Chief

OUR METRICSOur research covered seven Performance Dimensions (see page 44 for more details):


MEET THE TEAM

CHLOE RIGBY EDITORChloe is the editor of InternetRetailing.net and an award-winning business journalist.

[email protected]

MARTIN SHAW HEAD OF RESEARCH, RETAILXMartin devises the scope and methods of InternetRetailing’s research.

[email protected]

FERNANDO DOS SANTOS RESEARCH PROJECT MANAGER, RETAILXFernando co-ordinates the timelines for our research team. [email protected]

IAN JINDAL EDITOR-IN-CHIEFPublisher, speaker, advisor and NED, Ian leads our editorial and research businesses.

[email protected]

CONTENTS & FIGURES

CONTENTS

CONTENTS

The RXUK Top500 2020 6

The Top500 in graphics 8

From our partner 11

Interview: Doug Gurr of Amazon on customer obsession 12

Elite and leading retailers 14

New and bubbling under 15

Strategic overview: The factors driving UK retail change 16

Strategy & Innovation: Strategically thinking 18

The Customer: Shopper-friendly retailing 21

Operations & Logistics: How the delivery promise is evolving 24

Merchandising: Product information 27

Brand Engagement: Engage with customers 30

Mobile & Cross-channel: Convenient service across channels 33

How the store experience is changing 36

Delivery as a service 38

Case studies: H&M and JD Sports 40

How the RXUK Top500 fits into RetailX research 42

What constitutes a retailer? 44

Research parameters 45

Knowledge partners 46

Conclusion 47

TABLES

1 Research at a glance 4

2 Leading retailers: Strategy & Innovation 19

3 Leading retailers: The Customer 23

4 Leading retailers: Operations & Logistics 25

5 Leading retailers: Merchandising 28

6 Leading retailers: Brand Engagement 31

7 Twenty brands with the biggest UK search growth 31

8 Leading retailers: Mobile & Cross-channel 33

9 Definitions 44

10 Our metrics 45

FIGURES

1 Top500 sectors 8

2 Marketplaces, brands, others in the Top500 8

3 The most popular ecommerce platforms 8

4 How the Top500 has performed since 2016 9

5 How the overall index has developed since 2016 9

6 Average performance by sector 9

7 Average performance by Top500 cluster 9

8 More mobile apps have predictive search 19

9 How fast retailers respond to queries 22

10 Retailers choose delivery for next-day service 25

11 Fewer retailers offer brand filtering of searches 28

12 Few retailers have digitised their stores 34

13 The RetailX portfolio 43

14 Marketplaces see more UK web traffic 43


UK TOP500 LIST

ELITE

AMAZON

ARGOS

DUNELM

JOHN LEWIS

MARKS & SPENCER

NEXT

LEADING

ASOS

B&Q

BLACKS

BOOTS

DOROTHY PERKINS

EVANS CYCLES

H&M

HOLLAND & BARRETT

JD SPORTS

NEW LOOK

RIVER ISLAND

SAINSBURY'S

SCHUH

SCREWFIX

SPACE.NK

TESCO

TOOLSTATION

WICKES

WILKO

TOP 50

AO

AMERICAN GOLF

ANN SUMMERS

ASDA

CHAIN REACTION CYCLES

COTSWOLD OUTDOOR

CURRYS PC WORLD

DEBENHAMS

EURO CAR PARTS

FAT FACE

FOOTASYLUM

HALFORDS

HOUSE OF FRASER

JD WILLIAMS

JESSOPS

NISBETS

OASIS

OFFICE

PETS AT HOME

SHOE ZONE

SUPERDRY

UNIQLO

VERY

THE WORKS

YOURS CLOTHING

TOP 100

ACCESSORIZE

AXMINSTER

BEAUTY BAY

BEAVERBROOKS

BODEN

BOOHOO.COM

BURTON MENSWEAR

CARPHONE WAREHOUSE

CLAIRE'S

DECATHLON

DUNE LONDON

THE ENTERTAINER

ERNEST JONES

GAME

GO OUTDOORS

H.SAMUEL

HOBBYCRAFT

HOTEL CHOCOLAT

ICELAND

IKEA

JACAMO

KAREN MILLEN

L'OCCITANE

LAKELAND

LAURA ASHLEY

LITTLEWOODS

LOUIS VUITTON

MATALAN

MILLETS

MONSOON

MORRISONS

MOSS BROS.

MOUNTAIN WAREHOUSE

OVERCLOCKERS UK

PAPERCHASE

THE PERFUME SHOP

ROBERT DYAS

SEASALT CORNWALL

SIMPLY BE

SIZE?

SKATEHUT.CO.UK

SUPERDRUG

TOPSHOP

TRAVIS PERKINS

URBAN OUTFITTERS

WAITROSE

WATERSTONES

WEX PHOTOGRAPHIC

WHITE STUFF

ZARA

TOP 150

APPLE

BONMARCHÉ

BOUX AVENUE

CLARKS

COTTON TRADERS

EARLY LEARNING CENTRE

EBAY

ESTÉE LAUDER

EVANS

EVERYTHING5POUNDS.COM

FRAGRANCE DIRECT

THE FRAGRANCE SHOP

HOMEBASE

HUGO BOSS

JOJO MAMAN BÉBÉ

KURT GEIGER

LAPTOPSDIRECT

LONG TALL SALLY

M&CO

MAINLINE MENSWEAR

MARISOTA

MENKIND

MICROSOFT

MISS SELFRIDGE

MISSGUIDED

NIKE

OCADO

OUTDOOR & COUNTRY

PARTYCITY

PHASE EIGHT

RADLEY

REEBOK

REISS

ROUTE ONE

SALLY

SELECT

SELFRIDGES

SHOPDISNEY

SMYTHS TOYS

SNOW+ROCK

SPORTSDIRECT.COM

TOPMAN

TOPPS TILES

UGG

VICTORIAN PLUMBING

WHSMITH

WALLIS

WHISTLES

WIGGLE

ZALANDO

TOP 250

ADIDAS

ALDO

ALIEXPRESS

ALLSAINTS

ANDERTONS MUSIC

APPLIANCESDIRECT

BERSHKA

THE BODY SHOP

BRAVISSIMO

CALVIN KLEIN

CASS ART

CHARLES TYRWHITT

CLAS OHLSON

CREW CLOTHING COMPANY

DR. MARTENS

THE EDINBURGH WOOLLEN MILL

ELLIS BRIGHAM MOUNTAIN SPORTS

ESPRIT

FARFETCH

FEELUNIQUE.COM

FOOT LOCKER

FURNITURE VILLAGE

GAP

GABOR

GEAR4MUSIC.COM

GEARBEST

GOLDSMITHS

GUCCI

GUITARGUITAR

HARVEY NICHOLS

HOBBS LONDON

HOME BARGAINS

HOTTER

IRONMONGERYDIRECT

JYSK

JACK & JONES

JACK WILLS

JAEGER

JIGSAW

JOE BROWNS

JONES BOOTMAKER

JOULES

LACOSTE

LEVI'S

LLOYDS PHARMACY

LOOKFANTASTIC

LOVEHONEY

LUSH

MAC COSMETICS

MACHINE MART

TOP 250

MAJESTICWINE

MAMAS & PAPAS

MASSIMO DUTTI

MATCHESFASHION.COM

MINT VELVET

MODA IN PELLE

MONICA VINADER

MULBERRY

MYPROTEIN

NASTY GAL

THE NORTH FACE

OFFSPRING

OLIVER BONAS

OYSHO

PANDORA

PAUL SMITH

PAVERS

PEACOCKS

PHILIPS

POST OFFICE SHOP

PRETTYLITTLETHING

PULL & BEAR

QUIZ

RICHER SOUNDS

ROMAN ORIGINALS

RYMAN

SCAN

SKECHERS

SPECSAVERS

SPORTSBIKESHOP

SUPERGA

SWEATY BETTY

T.M. LEWIN

TK MAXX

TED BAKER

TESSUTI

THOMANN

THOMAS SABO

THORNTONS

TOMMY HILFIGER

TRESPASS

TRIPP

USC

UNDER ARMOUR

VANS

VICTORIA'S SECRET

WAREHOUSE

WELDRICKS PHARMACY

THE WHITE COMPANY

WHITTARD OF CHELSEA


EUROPE TOP500 REPORT 2019RETAILX UK TOP500

TOP 350

ANTHROPOLOGIE

ARCO

AUSTIN REED

AVON

BALENCIAGA

BANANA REPUBLIC

BATHSTORE

BENSONS FOR BEDS

BURBERRY

COS

CALENDAR CLUB

CARD FACTORY

CARPETRIGHT

CATH KIDSTON

CEX

CHAOS CARDS

CHARLES CLINKARD

CLINIQUE

COAST

COSTCO

THE COTSWOLD COMPANY

CROCS

CYCLESURGERY

DEICHMANN

DEMON TWEEKS

DIESEL

DIOR

DREAMS

DULUX DECORATOR CENTRES

END.

EBUYER.COM

EURONICS

F.HINDS

FITNESS SUPERSTORE

FLANNELS

FOSSIL

FOYLES

FRASER HART

FRENCH CONNECTION

G-STAR RAW

GAMES WORKSHOP

GANT

HMV.COM

HP

HABITAT

HAMLEYS

HARRODS

HARVEYS

HATTONS

HAWKSHEAD COUNTRY WEAR

TOP 350

HEMA

HOLLISTER

HUGHES ELECTRICAL

ITS

INTERFLORA

JOY

LAITHWAITE'S

LANDS' END

LEGO

LINDEX

LINKS OF LONDON

MANDM DIRECT

MANGO

MAX SPIELMANN

MICHAEL KORS

MOLE VALLEY FARMERS

MONKI

MONTBLANC

MUSIC MAGPIE

MUSTO

NELLY.COM

NESPRESSO

NET-A-PORTER

NINTENDO

NOTONTHEHIGHSTREET.COM

NOVATECH

ORVIS

PERSONALISED GIFT SHOP

PRETTY GREEN

PUMA

QVC

RS COMPONENTS

THE RANGE

ROHAN

ROMWE

RUSSELL & BROMLEY

SAMSUNG

SLATERS

SOLETRADER

STRADIVARIUS

SURFDOME

TJ HUGHES

TIFFANY & CO.

TOAST

UK ECIG STORE

WALLS AND FLOORS

WEEKDAY

WYNSORS WORLD OF SHOES

YOOX

& OTHER STORIES

TOP 500

ATS EUROMASTER

AGENT PROVOCATEUR

ALDI

ARIA TECHNOLOGY

ARMANI

ASICS

ASPINAL OF LONDON

ASUS

BT SHOP

BANG GOOD

BARBOUR

BAREMINERALS

BARKER & STONEHOUSE

BERRY BROS. & RUDD

BETTYS

BLACKWELL'S

BOSE

BRANDON HIRE STATION

BROWNS FASHION

BUILD-A-BEAR WORKSHOP

CARHARTT

CHRISTIAN LOUBOUTIN

CHURCH'S

CLINTONS

CONVERSE

CRABTREE & EVELYN

CRAGHOPPERS

CROMWELL

CRUISE

CULT BEAUTY

DFS

DELL

DENBY

DESIGUAL

DIGIKEY

DISTINCTIVE DOORS

DOBBIES GARDEN CENTRES

DOLLS KILL

DOVER STREET MARKET

ECCO

FARROW & BALL

FENDI

FIELD & TREK

FIRED EARTH

FITFLOP

FITBIT

FOOTPATROL

FORBIDDEN PLANET

FRED PERRY

FUNKYPIGEON.COM

TOP 500

GAK

GOG.COM

GARMIN

GEOX

GLASSES DIRECT

GOPRO

GOOGLE

GRAZE

GUESS

HACKETT

HAWES & CURTIS

HEAL'S

HERMÈS

HOBBY LINK JAPAN

HOTLINE

INTERSPORT

J CREW

JML

JTF

JACQUES VERT

JEWSON

JIMMY CHOO

JOHN SMITH'S

JUNO RECORDS

KENZO

KIEHL’S

KÄRCHER

L.K.BENNETT

LN-CC

LA PERLA

LEEKES

LENOVO

LOAF

LOGITECH

LYLE & SCOTT

MADE.COM

MENNACE

MOBILE PHONES DIRECT

MOONPIG

MUJI

MUSCLE FOOD

NATIONAL TRUST SHOP

NEPTUNE

NEW BALANCE

OAKLEY

OPONEO

THE ORIGINAL FACTORY SHOP

PC SPECIALIST

PATAGONIA

PEPE JEANS LONDON

TOP 500

PHOTOBOX

PLANET ORGANIC

PLAYSTATION STORE

PLUMBASE

PRADA

PRINTING.COM

PRO-DIRECT

PROTYRE

RALPH LAUREN

RAPHA

RAZER

REDBUBBLE

REGATTA OUTDOOR CLOTHING

RICH TONE MUSIC

ROWLANDS PHARMACY

THE ROYAL MINT

SCS

SCOTCH & SODA

SCRIBBLER

SEE TICKETS

SEVENOAKS SOUND AND VISION

SNEAKERSNSTUFF

STEAM

STUDIO (EXPRESS GIFTS)

SUNGLASS HUT

SUPREME

SWAROVSKI

SWATCH

TATE SHOP

THOMAS PINK

TIMPSON

TOMTOM

TRIUMPH

UK FLOORING DIRECT

UNITED COLORS OF BENETTON

VAPE CLUB

VERSACE

VITALSOURCE

VIVIENNE WESTWOOD

WARREN JAMES

WATCHES OF SWITZERLAND

WATCHFINDER

WEDGWOOD

WEST ELM

WISH

WOLSELEY

WYEVALE GARDEN CENTRES

YANKEE CANDLE

YESSTYLE

YVESSAINTLAURENT


0 50 100 150 200 250

Other

Ready-made food

Utilities

Books

Automotive goods

Garden

Music, film, TV

Drink

Grocery

Software

Health

Stationery and craft

Home and industrial appliances

Children's toys and accessories

Trade tools and equipment and DIY

Sports and outdoor equipment

Cosmetics

Consumer electronics

Jewellery

Clothing: Sports and leisure

Footwear: Sports and leisure

Homeware

Footwear: Fashion

Clothing: Fashion

Fashion accessories 211

202

183

100

97

92

80

61

60

55

43

42

38

31

21

21

20

18

18

17

17

16

15

11

98

311

182

Sell mostly third-party label products

Sell mostly own-label products

Operate marketplaces

7

FIGURE 1. FOUR IN TEN OF THE TOP500 SELL FASHION PRODUCTS

FIGURE 2. ALMOST FOUR IN TEN TOP500 RETAILERS ARE DIRECT-SELLING BRANDS

Many Top500 retailers sell goods across several different sectors. The ‘other’ category illustrates the diversity of the retail industry

Salesforce Commerce Cloud

Magento Enterprise

Amplience

Hybris

IBM Websphere Commerce

Oracle Commerce

Magento

Other

14.6%

9.4%

9.4%9.2%

6.2%

6.0%

29.2%

16.0%

FIGURE 3. SALESFORCE AND MAGENTO ENTERPRISE ARE THE MOST POPULAR ECOMMERCE PLATFORMS USED BY THE TOP500

Researched in collaboration with RetailX knowledge partner BuiltWith

ABOUT THE TOP500


0.764

0.713

0.67

0.64

0.607

0.5560.458 0.80.587

0.537

0.4

FIGURE 4. HOW THE TOP500 HAS PERFORMED SINCE 2016

The Aggregated Index Value by performance Dimension 2016-2020

RETAILX UK TOP500

We score performance in tests to create an index value. The Aggregated Index Value (AIV) is the sum of the test results. This gives us a way to compare performance by using relative AIV. It’s these relative values – between years, sectors, or clusters – that this page shows. A higher AIV represents greater capability and performance. Our benchmarking suggests that Top500 performance has markedly improved in most areas in recent years

Mobile &Cross-channel

Dimension

BrandEngagement

Dimension

Merchandising Dimension

Operations & Logistics Dimension

The Customer Dimension

Strategy & Innovation Dimension

2016

2017

2018

2019

2020

FIGURE 5. HOW THE OVERALL INDEX HAS DEVELOPED SINCE 2016

The Aggregated Index Value of the Top500 Index 2016-2020

Software


Direct-selling brands


Jewellery

Fashion accessories

Clothing: Fashion


Footwear: Fashion

Homeware

Health




Cosmetics


Grocery


FIGURE 6. AVERAGE PERFORMANCE BY SECTOR

The Average Index Value by sector where 1.0 is the theoretical maximum. Some retailers belong to multiple sectors; sectors with 20 or more retailers are shown

0

50

100

150

200

250

300

20202019201820172016

+32.7%

+15.2% +4.9%+9.8%

FIGURE 7. AVERAGE PERFORMANCE BY TOP500 CLUSTER

This chart shows how much better the average retailers in the top clusters perform, compared to those in the bottom clusters

Mobile &Cross-channel

Dimension

BrandEngagement

Dimension

Merchandising Dimension

Operations & Logistics Dimension

The Customer Dimension

Strategy & Innovation Dimension

2016

2017

2018

2019

2020

Top250

Top150Top350

Top100 Leading

Elite

MEASURING PERFORMANCE

Top50

lowest cluster

Entire Top500

We have been providing members of the international multichannel retail community with research, news and analysis – both printed and digital – for several years now, with increasing depth and frequency. By developing a membership platform for InternetRetailing.net, we’ll ensure that from the wealth of in-depth analysis we create you’ll get rapid access to the most relevant content to suit your interest and needs, even as those change throughout the year. By signing up, fi lling out your interests and joining as a member, we’ll better know what to send you and even what to display as you’re browsing the site.Membership remains FREE to qualifying retailers and brands, and we look forward to welcoming you to our membership, as we work to make InternetRetailing’s research and analysis evermore relevant and useful to your business.

With regards,

Ian JindalEditor-in-Chief, InternetRetailing

Learn from and benchmark against the best practices employed by Top500 retailers

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STRATEGIES FOR GROWTH Lessons in expanding to new territories

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DEFERRED PAYMENTS: 2020A solution within the ‘Payments’ category of RetailDNA

RX001: February 2020

InternetRetailing Blue Paper - Solutions to commercial questions

Blue Papers focus on solutions to commercial opportunities and challenges in multichannel retail and digital direct sales.

Our White Papers, Sector Reports and Top500 performance rankings set out the board-level discussion for commercial success and our Blue Papers examine the point solutions, technologies and systems that form part of the solution.

Drawn from our comprehensive industry directory of technologies and services in use by our Top500, RetailDNA, our Blue Papers form a regularly-updated library of actionable, proven solutions.

Publisher: InternetRetailing

CEO: Ian Jindal

Editor: Alex Sword

Commercial Director:Andy [email protected]

Designer: Julia Webber

InternetRetailing123 Cannon Street London, EC4N 5AU

Tel: 020 7062 2525

Web: www.internetretailing.netSection: Payments

Vendor: Klarna

Product: Pay later

1. Product Development and Design

2. Buying and Sourcing

3. Merchandising and inbound logistics

4. Inventory Management and Distribution

5. Business Management

6. Marketing

7. Selling

8. Fulfi lment

9. Customer Service and support

10. Returns

11. Retention

12. Growth and Market Development

13. Test and Optimise

14. Physical Retail

Custo

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Prod

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Oper

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sSt

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A solution within the ‘Payments’ subcategory of ‘Selling’

‘Payments’

Functional Categories

RetailDNA Solutions Library

Blue Papers

RXS009: Published in London, © 2019 RetailX Limited, www.retailx.net Page 1 of 28

THOMAS [email protected]

Thomas is a retail sector analyst with more than a decade of

experience starting and divesting a multichannel retail business. He is a grants evaluator for Vinnova, a Swedish R&D government agency

MARTIN [email protected]

Martin devises the scope and methods of RetailX’s research

CEO: Ian JindalHead of Research: Martin ShawSenior Analyst: Thomas AnderssonCommercial Director: Andy JamesDesign: Marzena ZychowiczAddress: RetailX, 123 Cannon Street

London, EC4N 5AU© 2019 RetailX Limited

RETAILX SECTOR ANALYST REPORT

BEAUTY & COSMETICSINTRODUCTIONBeauty & Cosmetics brands have long relied on celebrity endorsements to promote products and department stores to sell products. This is changing. While the rise of online shopping has had less of a direct impact on the Beauty & Cosmetics sector than might be expected1, department stores – a key physical channel to consumers for Beauty & Cosmetics brands – have borne the brunt of the shift to online retail. The indirect impact on the Beauty & Cosmetics sector has been a loss of consumer coverage.

Beauty & Cosmetics companies have responded by investing in direct-to-consumer (D2C) business models, as well as by setting up internal venture capital funds to capitalise on the potential from startup brands and technology vendors. Disruptive startups, such as Revolution Beauty, are challenging the status quo by adopting Fast Fashion techniques.

YouTube, Instagram and other social media platforms have impacted on how consumers perceive celebrity, leading to the rise of social influencers. Some of these have gone on to develop their own product ranges, notably Huda Kattan, who in 2018 was ranked 37th on the Forbes list of America’s richest self-made women2.

SHARELINESThe rise of ecommerce has only indirectly impacted Beauty & Cosmetics Celebrity marketing has been disrupted and diluted by the rise of influencersThe companies covered in this report are, on average, 100+ years oldLeading Beauty & Cosmetics companies are now operating internal VC fundsAugmented reality (AR) applications are gaining traction in Beauty & Cosmetics The Fast Fashion business model is being reinvented in the cosmetics space

1. https://fashionista.com/2017/05/beauty-products-packaging-shopping-habits2. www.harpersbazaar.com/uk/beauty/a26320975/influencers-beauty-collaborators-brands/

DEFINITION DIRECT-TO-CONSUMER OR D2C COMMERCEis when brands sell or promote their products directly to consumers rather than via wholesalers and retailers.

TL;DRThe internet abbreviation ‘TL;DR’ means ‘Too Long; Didn’t Read’. In that spirit, here are some consideration points from this report:

• Beauty & Cosmetics companies have been indirectly impacted by the shift to multichannel retailing but the effect on department store chains, traditionally a key retail channel for the sector, has been far greater. This has affected the visibility of Beauty & Cosmetics brands

• Social media has had a fundamental impact on the sector. The rise of influencers has diluted the marketing power of celebrities while increasing the number of relationships that brands need to manage

• In the last five years, four of the Top 10 Beauty & Cosmetics companies have created internal venture funds to acquire

new influencer-driven brands. This has recently extended into technology investments, such as L’Oréal’s acquisition of Modiface, a technology it recently used to promote its brands on Amazon

• Acquiring D2C brands has become an important tool for the larger Beauty & Cosmetics companies as they evolve their business models

• RetailX forecasts a further move towards D2C, which will continue as the relative importance of ecommerce over the high street grows. This move will be further accelerated by entry into new geographical markets where there are no historical reseller relations

ONLINE SALES In 2018, these represented c12.5% of the Beauty & Cosmetics market worldwide. Sales patterns vary by territory. For example, in China, consumers made 23% of all beauty retail purchases online in 2017 (source: Credit Suisse). Sector leader L’Oréal disclosed that 11% of its sales were generated online in 2018.

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A decade of retail disruption and technological advancement has made the battle to gain and retain customers even harder, with the cost of doing so continually increasing. But does it need to be? Is there a smarter way to ‘hack’ the acquisition process? As retailers look for effective ways to grow during the next decade, let’s look at how leaning on partners like Klarna can change the traditional acquisition model. By using collaboration as a tool to tap into a pre-engaged and loyal customer base at a fraction of the cost, retailers can win, grow and build loyalty for the long term.

The changing landscape The purchase journey has become complex and non-liner, with both new entrants and technologies shaking up the traditional shopping experience by adding everything from unlimited inspiration to a plethora of new ways to pay. Is this change a threat? Yes, but it’s also an exciting opportunity for retailers to evolve their approach to engaging with consumers and, as a result, to drive longer term loyalty.

So, what do today’s increasingly demanding customers expect? In a recent study, we commissioned interviews with over 2,000 UK shoppers to find out. It transpires that, in the new era of consumerism, emotional connection is a greater driver of loyalty and advocacy than price or product.

The experience economy Emotional connection comes from customers’ experiences. One in ten of

the consumers we spoke to said they are drawn to retailers for the first time by pop-up shops and real-life interactions with brands. This sentiment was felt most strongly among the ‘experience generation’ – almost one in five (18%) of those aged 16-24 – who hold tomorrow’s purchasing power. According to over a third (35%) of respondents, it is even enough for retailers to be associated with fun content experiences rather than executing them themselves.

But it’s not just about pop-ups and experiential. Consumers also place an enormous amount of value on the logistical experience they have with retailers, and with convenience almost as important as cost. 28% of the consumers we spoke to said that a good returns process would encourage them to make a purchase, while 26% rely on next- or same-day delivery options. Meanwhile, 38% are more likely to shop with a brand or retailer that offers flexible payment options.

The power of partnerships It’s a lot to think about but the good news is that retailers don’t need to go it alone. Help is at hand, though not necessarily through traditional models. While retailers might once have looked to advertisers or affiliates to engage and acquire customers – spending a lot in the process – smart retailers are now forging partnerships with service providers in order to deliver big benefits.

Klarna is one such provider that is pioneering a new approach to powerful partnerships. Not only do our smooth and flexible payment options

offer a differentiating service to draw customers in, we are also investing heavily in building our brand – creating a halo effect that helps drive growth for our partners too.

A recent study by consultancy Kearney found that nearly 40% of shoppers (37%) said that if making a purchase costing £250 or more, they would prefer to buy from a retailer that offered a ‘buy now, pay later’ option.

With Klarna, retailers can ‘hack’ the acquisition process by gaining immediate access to pre-engaged and already loyal consumers, at a significantly lower cost than traditional methods of acquiring new customers. This lowers upfront acquisition costs, in turn increasing the total lifetime value by allowing retailers to focus the saved money on nurturing and advocacy. What’s more, the unique combination of convenience, brand appeal and user experience delivered by Klarna significantly boosts engagement, positive sentiment and propensity to spend over time.

If the last decade was about change, this next one should be about collaboration. By actively seeking out partners to join forces with, retailers can create closer connections with customers. It’s the smart way to win the gain and retain game.

PARTNER PERSPECTIVE

Finding and retaining new customers is never easy but, as Luke Griffiths, UK General Manager at Klarna explains, businesses don’t have to go it alone

Collaboration – the key to smart acquisition

ABOUT KLARNA

With Klarna, customers can shop at their favourite online stores and pay later, getting what they love today. For the last 14 years, Klarna has been connecting major retailers with millions of customers around the world, allowing safe, secure fee- and interest-free payment options.


Amazon is, by almost two decades, the youngest retailer to feature in the Elite ranking of the RXUK Top500 2020. Yet the 21-year-old

is the only one to have featured in that top ranking every year since the series was launched in 2015. It’s done that despite having what some might see as disadvantages.

It’s an online-only retailer in a multichannel and ecommerce industry that has discovered the huge advantage of shops as a place to collect and return online orders. It also broke into an industry dominated by long-standing heavyweight retailers, and it did so at a time when shoppers did – and still do – prefer to buy in shops. But in a relatively short period of time, the retailer has led a change in the way shopping works, both for its own customers and for those of other retailers. But how?

Doug Gurr, who leads Amazon in the UK, says its strategy is simple – it starts and ends with the customer.

Customer obsession“At Amazon, everything we do is underpinned by customer obsession, so the customer is most important to us now and always will be,” says Gurr, Amazon’s UK country chair. “It is the fundamental principle that drives our business today all around the world.

“Our strategy for customer obsession is simple – start with the customer and then work backwards. Looking ahead,

we will continue to measure ourselves in terms of customer-centric metrics. We invest for the long term and will continually refine and improve our offerings based on customer feedback.”

If Amazon can’t easily give the customer what they want, it stands ready to make it up. Amazon’s second key focus is firmly on innovation. “We love to invent for our customers,” says Gurr. “When we are innovating, we always start with the customer and work backwards, striving to provide them with ever-better convenience, selection and value.”

Investing in talentIn order to deliver that innovation for the customer, the retailer invests heavily in developing talent across the UK. “We have ramped up UK investment to house 1,000 additional highly-skilled roles in Manchester, Edinburgh and Cambridge, while across Europe, we will be providing space for over 5,500 highly skilled researchers and developers working across Amazon’s 25 development centre sites,” says Gurr. “These jobs range from machine learning scientists, robotics engineers and solutions architects to software, hardware and flight engineers.”

INTERVIEW

Amazon is only the RXUK Top500 Elite retailer to have appeared in the top ranking in all the Top500 reports so far. Chloe Rigby asked Doug Gurr, UK country chair, about the Amazon approach to retail

A story of customer obsessionCo

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Amazon’s extensive locker network supports its high level of delivery promises


Such investment is set to continue well into the future. “In 2020 and beyond, we will keep innovation competitive by continued investment in hiring and training a diverse workforce,” says Gurr. “At Amazon, we believe the key to innovation is diversity – whether that is having global R&D (research and development) teams across geographies to understand local issues, or encouraging more women to enter STEM (science, technology, engineering and mathematics) careers through our Amazon Amplify programme. We want to attract and retain the best and brightest talent across the world to foster greater innovation and raise the bar for customers.”

Why stores matterDespite its role as a pureplay retailer, Amazon is clear that it represents only one part of retail, and that shops remain important to its customers.

Gurr points out that in December 2019, only 21.3% of UK retail sales were made online, according to the Office for National Statistics (ONS). That suggests, he says, that, “79% of UK shopping by value remains in physical stores.” The Amazon response? To launch its own stores in partnership

with the type of retailers that sell on its own website (see picture caption above). “In June 2019, we launched Clicks and Mortar, a pilot programme to help up-and-coming online brands sell in store for the first time,” says Gurr.” By working with small business support network Enterprise Nation, we have helped more than a hundred small online businesses test physical retail for the first time with Clicks and Mortar pop-ups in Manchester, Cardiff, Edinburgh, Sheffield and Leeds, with more to come this year.”

Despite the retailer’s success so far, it says it won’t rest on its laurels. Instead, it still believes there’s much more to do. “At Amazon, we often say, ‘It’s still Day One’,” says Gurr. “We’ve only just begun and there’s still so much more to come. In truth, none of us know where customers will take us next. That is a challenge, but an exciting one, and that is the beauty of innovating on behalf of our customers.”

INTERVIEW

“We are delighted to be included in the RetailX UK Top500. At Amazon, we have a relentless focus on the best selection, prices and buying experience for our customers, so it is a great privilege to be included as a top retailer” Doug Gurr, UK country chair, Amazon

Amazon is halfway through a year-long pilot to use pop-up stores to work with smaller retailers that have built their businesses online. It is working with Enterprise National to launch ten ‘Clicks and Mortar’ over a year. The first, shown above, opened in Manchester in June, and represented a move onto the UK’s high street for a retailer that has previously sold only online. About 100 small businesses – the kind of businesses that already sell on its marketplace website – are expected to sell through Clicks and Mortar shops. In 2018, 58% of products sold on Amazon’s site were sold by smaller sellers

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The RetailX Top500 – previously the InternetRetailing Top500 – has tracked the leading ecommerce and multichannel retailers that sell in the UK since 2015. At the top of the index are two groups that highlight the very best performing retailers in UK retail. The Elite group features those at the cutting edge of performance, while Leading retailers are those that demonstrate best practice across their businesses. Both lists change from year to year, driven in part by the metrics selected in the Strategy & Innovation Dimension to best reflect retail state-of-the-art.

Elite retailersSix retailers appear in this year’s Elite group: Amazon, Argos, Dunelm, John Lewis, Marks & Spencer and Next. Amazon is the only retailer to have appeared in the Top500 Elite every year since the index was first compiled in 2015. Its six top rankings are significant because it is the only online-only retailer ever to have been named an Elite retailer, reflecting the way it has used its performance in Operations and Logistics to rival those with stores.

That’s because a company’s size, as measured in the Footprint Dimension, accounts for 30% of its ranking in the Top500 – and most of the UK’s largest retailers are multichannel, selling both online and through shops.

Argos and John Lewis come closest to rivalling Amazon’s track record. Both appear in this category for the fifth time, having been ranked Elite all but one year. Argos was ranked Leading in 2017, as was John Lewis in 2018.

Marks & Spencer is ranked an Elite retailer for the fourth time, having been ranked Leading in 2016 and 2019. Next and Dunelm both appear for the first time. Next has previously been classed as a Leading retailer on four

occasions. But Dunelm moves straight up to the top echelon, having been classed as a Leading retailer on only one previous occasion, in 2018.

Elite retailers Amazon and John Lewis can be classified as ‘department’ type retailers, selling across a number of distinct categories. The same is true, to an extent, for Marks & Spencer, which sells clothing, homewares and food, and also Next, which trades in the fashion and homewares categories. While Dunelm too has a department-style structure, that structure is firmly focused around homewares.

It’s notable that this year there are no supermarkets ranked Elite, after three years in which at least one grocer, variously Asda, Sainsbury’s and Tesco, has consistently appeared in this ranking.

Leading retailersThe Leading group this year features 19 retailers. Fashion clothing is the largest category to be represented in the group. Asos is the only pureplay in a group of five that also includes Dorothy Perkins, H&M, New Look and River Island.

Asda, Sainsbury’s and Tesco all appear from the supermarket sector, while health and beauty is represented by Boots, Holland & Barrett and Space NK – the latter making its first appearance.

Trade and DIY tools and equipment retailers are well represented by B&Q, Toolstation and Wickes. Wilko also makes an appearance, although it also sells in categories from health and beauty through to stationery, crafts and toys. Footwear retailer Schuh is ranked Leading for the fourth time, sports clothing businesses JD Sports and Evans Cycles both for the second time, and outdoor retailer Blacks makes its first appearance in the group.

ELITE AND LEADING RETAILERS

Multichannel retailers dominate the RXUK Top500, where pureplays can compete only due to exceptional performance, primarily in operations and logistics

Stand-out performers


NEW AND BUBBLING UNDER

NEW AND BUBBLING UNDER New retailers enter the RXUK Top500 each year, but many more lie just on the other side of the Top500 borderline. Here we list the 44 new members for 2020 and the ‘bubbling under’ British retailers that are close to featuring in the index. This ‘bubbling under’ group are the largest retailers in the Growth 2000 index and its 150 members will feature in the next report in that series.

TABLE 1. NEW THIS YEAR

BALENCIAGA CLINTONS HEMA LYLE & SCOTTPERSONALISED GIFT SHOP

WALLS AND FLOORS

BERRY BROS. & RUDD CROCS HOTLINE NASTY GAL PRO-DIRECT WOLSELEY

BRANDON HIRE STATION CRUISE INTERSPORT NATIONAL TRUST SHOP PROTYRE YOOX

BROWNS FASHION DOLLS KILL JACQUES VERT NELLY.COM RAZER YVESSAINTLAURENT

BT SHOP EURONICS JOY OPONEO ROWLANDS PHARMACY

CARHARTT FITFLOP LA PERLA PATAGONIA TOAST

CHRISTIAN LOUBOUTIN GEARBEST LN-CC PC SPECIALIST UK FLOORING DIRECT

CHURCH'S GOG.COM LOAF PEPE JEANS LONDON VIVIENNE WESTWOOD

TABLE 2. BUBBLING UNDER

ABEL & COLE CAMPER GOUSTO LIGHTINTHEBOX REVOLUTION BEAUTY THOMPSON & MORGAN

ABERCROMBIE & FITCH COMPLETE CARE SHOP GRAILED LINZI ROKIT TIMBERLAND

ABSOLUTE-SNOW.CO.UK CORSAIR GRATTAN LIZ EARLE SAMUEL WINDSOR TISO

ACE (EXPRESS GIFTS) CREATE AND CRAFT GREEN MAN GAMING LOVEKNITTING.COM SECRETSALES TOOLSTOP

ACNE STUDIOS CROCUS GROWELL MAGIC MADHOUSE SELECT SPECS TREDZ

ALLBEAUTY DERMALOGICA GYMSHARK MAISONS DU MONDE SHOPTO URBAN INDUSTRY

AMARA DOLCE & GABBANA HTC MAJE SKAGEN VERO MODA

AMBROSE WILSON DRONESDIRECT HAWKIN'S BAZAAR MARC DARCY SMYTHSON VESTIAIRE COLLECTIVE

ANGLING DIRECT DROP HELLOFRESH MERLIN CYCLES SNAPFISH VIAGOGO

APPROVED FOOD DUNNES STORES HIGH & MIGHTY MILITARY 1ST SOCIETY6 VICTORIAPLUM.COM

ARMANI EXCHANGE EMMA BRIDGEWATER HORNBY MOBILES.CO.UK SOCKSHOP VIKING

BAKER ROSS ENVATOMARKET HUSH CLOTHING MOLTON BROWN SOFA.COM VIRGIN WINES

BELKIN EPSON I SAW IT FIRST MR PORTER SPORTPURSUIT VISTAPRINT

BLACK CIRCLES ESPARES IDEAL WORLD NEWEGG SPORTSSHOES.COM WACOM

BLINDS2GO EVE SLEEP THE IDLE MAN NOTCUTTS SSENSE WATCH SHOP

BONDARA FASHION EYEWEAR IHERB THE OUTNET STANLEY GIBBONS WAYFAIR

BOOKDEPOSITORY.COM FASHION NOVA IN THE STYLE PATROL BASE STELLA MCCARTNEY WEIRDFISH

THE BOOK PEOPLE FASHION WORLD INSTANT PRINT PERUVIANCONNECTION STERLING FURNITURE WESTERN DIGITAL

BOX.CO.UK FEATHER & BLACK JAPAN CENTRE PETER CHRISTIAN STUBHUB THE WHISKY EXCHANGE

BRADFORDS FORTNUM & MASON JARROLD PREMIER MAN SUPERBUY WOLF & BADGER

BRANDALLEY FREE PEOPLE KALEIDOSCOPEPROFESSIONAL MUSIC TECHNOLOGY

SUPERFI WOODHOUSE CLOTHING

BRORA.CO.UK FREEMANS.COM KATE SPADE QD STORES SÉRAPHINE WORDERY

BULK POWDERS FURNITURE123 KWIK FIT RAY-BANTLC ELECTRICAL SUPPLIES

ZAVVI

CCL COMPUTERS GEMPORIA LEISURE LAKES BIKES RESERVED TAILS ZEE & CO

THE CAMBRIDGE SATCHEL COMPANY

GETTINGPERSONAL.CO.UK

LIBERTY LONDON REVERB TEESPRING ZOOPLUS


UK retailers are working steadily to improve their performance online and across retail channels as they trade at this time of ‘retail crisis’. Yet a challenging environment appears to be fostering both innovation and a fresh commitment to giving shoppers the retail experiences that work for them, whether they prefer to buy and browse in-store or online from desktop or mobile websites and apps, or social media, or across all the channels that are relevant to them.

Setting the contextStores are currently closing across the UK in what the Centre for Retail Research (CRR) has termed a “retail crisis”. It predicts that 17,556 shops will close this year – up from the 16,073 that it recorded closing during 2019. In January 2020 alone, department store Debenhams and nursery retailer Mothercare both shut stores that had been a familiar presence on UK high streets for many years. Professor Joshua Bamfield, director of the CRR, says the closures come at a time when customers are spending less while retail costs are rising. “The commercial pressures of higher labour costs, business rates and relatively weak demand will continue to undercut profits and force the weakest companies to close stores to enter administration,” he said. “The high street and suburbs will continue to decline.” Some retailers opt for Company Voluntary Arrangements (CVAs) that allow them to trade through their difficulties, renegotiating costs such as property rents and lease lengths. But research from real estate company Colliers International shows that of 23 UK retailers that have gone through a CVA process since 2016, 13 have later gone into administration. While CVAs aren’t helping every retailer that uses them, they may be having a wider effect on the

retail landscape. David Fox, co-head of retail agency at Colliers, has said that CVA usage has lowered rents, threatening the viability of shopping centres. One international retailer, IKEA, is reported to have benefited from bargain prices to buy a London shopping centre. It now plans to open its own small format store in Hammersmith King’s Mall.

According to the British Retail Consortium, last year was retail’s worst year on record, marked as it was by the first ever overall decline (0.1%) in annual retail sales, while online non-food sales grew by just 2.6% on its index.

This comes as shoppers continue to change the way they buy, opting to shop more often online. The BRC found that by the peak shopping months of November and December 2019, 34.2% of retail sales took place over the internet – 1.8 percentage points higher than at the same time in 2018. The BRC cites factors including CVAs, shop closures and job losses over the course of 2019. Political and economic uncertainty also played a role. In 2019, BRC chief executive, Helen Dickinson, said, “Twice the UK faced the prospect of a no deal Brexit as well as political instability that concluded in a December general election.”

This political instability is set to continue through 2020, as the UK waits to see what leaving the European Union will mean in practical terms

STRATEGIC OVERVIEW

‘In the ever-changing landscape retailers are now faced with, it’s more important than ever to evolve and be agile, efficient and deeply connected to our customers’

Leading UK retailers are being pushed to perform in a highly competitive retail environment. The results of this can be seen in this year’s Top500 research

The factors driving change in UK retail


both for retailers, who are used to managing European supply chains, recruiting European staff and selling cross-border into the EU free of tariffs or customs – and for the customers who buy from them. If UK shoppers feel they have less money to spend, they are likely to cut back on what they spend on retail.

Factors affecting UK retailing also include a new level of environmental awareness among consumers, especially younger generations, and a move towards buying more sustainably. That might mean buying fewer retail products, or opting to buy items that have a lower carbon footprint. Retailers certainly appear to be responding to those concerns and are opting to use less packaging and to replace plastics with recyclable alternatives. The popularity of replacements to single-use items, from bamboo coffee cups to shopping bags, is growing.

Dickinson said, “Looking forward, the public’s confidence in Britain’s trade negotiations will have a big impact on spending over the coming year. There are many ongoing challenges for retailers: to drive up productivity, continue to raise wages, improve recyclability of products and cut waste.” She noted it was essential that the government make good on its promise to review, then reform, the broken business rates system which, she said, “sees retail pay 25% of all business rates, while accounting for 5% of the economy.”

How retailers are respondingThe “challenging retail environment” has become a common refrain for retailers reporting financial results both in 2019 and into 2020. Yet they are working hard to adapt, as Jason Hargreaves, chief executive of Top150 value fashion retailer Matalan, said in January, when the business reported its latest, third-quarter, figures. Hargreaves cited, “unprecedented levels of political uncertainty” that had hit overall sales and profits. But also, Matalan’s online business had grown by a quarter. This was a time, he said, for retailers to adapt. “In the ever-changing landscape retailers are now faced with, it’s more important than ever to evolve and be agile, efficient and deeply connected to our customers,” he stated.

His comments describe a pattern that is visible in this year’s Top500 research. From graphics that illustrate the performance of the Top500 over the years (see page 9), it’s clear that performance has improved steadily over time to reach its best yet in 2020. It’s notable that this year, some services that were once considered cutting-edge are now used by most of those selling in this market. Almost all (94%) retailers now offer easier ‘hamburger’ style navigation

on their mobile websites, for example, while most (61%) offer next-day delivery and more than half (52%) offer click and collect services. More than two-thirds (69%) show fulfilment options on their product pages, while 65% offer autocomplete search suggestions for those looking for a product on mobile. Almost all are using social media to some extent, with 97% on Facebook and 90% on Instagram.

Individually, these incremental improvements might not seem significant. Taken together, they represent a steady shift towards building a highly capable retail sector empowered by digital technologies to offer fast-improving services to their customers. We can see a sector moving on from a moment in which Elite and Leading retailers moved much faster towards joined-up and seamless service. More recently, retail performance is seen to be improving more widely and across the board.

Some of these improvements are smart and highly targeted, with traders moving back from offering services that may not proved as popular or profitable as hoped. Fewer now offer next-day collection, for example, while same-day and nominated day and time delivery are also in decline.

In the coming pages, we explore the six Dimensions that inform our Top500 listings, and we then go on to look in more detail at what exactly retailers are doing to improve the way they operate. We see how they are improving delivery services (see page 37), as well as how they are investing in experiences that they hope will keep their stores relevant (see page 39).

STRATEGIC OVERVIEW

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Matalan chief executive, Jason Hargreaves, says it’s more important than ever to be agile in this current time of political uncertainty


The Top500 crowd is starting to catch up with the leaders. Across this year’s index, there’s evidence that retailers are moving at speed to adopt best practice approaches to multichannel selling. Latest research for the Strategy & Innovation Dimension shows retailers making it easier for shoppers to buy via mobile, across channels and via convenient delivery and collection services.

More are now providing a strong service as standard. But it’s telling that the research also shows significant numbers stepping back from super-fast and convenient collection services, and even from some delivery and returns services. Perhaps that’s because those not offering the best service in their sector have found it did not prove economic to compete in this way.

RetailX researchers aim to understand in the Strategy & Innovation Dimension how Top500 retailers are serving their customers and to recognise those that are using the latest technologies and retail services to provide multichannel convenience and the best customer experience. They have analysed Top500 traders’ performances against more than 50 metrics that they judge have the potential to improve service and set best practice standards. They consider approaches and technologies that are already well-established as well as those that are emerging. Those metrics are taken from across Top500 research, assessing performance in cutting-edge areas, from merchandising and operations and logistics to brand engagement and mobile and cross-channel.

STRATEGY & INNOVATION

Retailers stand out in the Strategy & Innovation Dimension when they are early to adopt significant new technologies and enable convenient shopper experiences

Thinking strategically

CONVENIENT DELIVERY, COLLECTION AND RETURNS

Most retailers now offer customers next-day delivery and the ability to collect online orders in-store. But RetailX research shows a row-back in the numbers currently offering more sophisticated fulfilment services.

DeliveryIn 2020, fast and convenient next-day delivery is offered by 61% of Top500 retailers. But other potentially convenient delivery options remain cutting edge. A minority of traders offer Saturday (26%), Sunday (11%) or nominated day (13%) delivery. Still fewer offer nominated time (5%), or same-day delivery – those that do stand out in the research as a result. The research also found that 55% of retailers show their fulfilment options on the landing page in 2020, while 69% do so on the product page.

CollectionMore than half of retailers (54%) now offer shoppers the ability to collect in-store the items they ordered online. But same-day collection (6%) and collection in-store from the retailer’s own lockers (1%) both remain the preserve of leading retailers. Retailers offer collection in an average of 94 hours (almost four days) – and a median of 72, or three days.

ReturnsBy law, retailers must accept returns within 14 days of an online purchase. However, this year’s research suggests that how those returns can be made is becoming less flexible. In 2020, 43% of UK Top500 retailers enable traders to return an online order to the store, down by five percentage points from 48% a year earlier. The fastest category declines are among direct-selling brands, where 42% offer the service, down by 8pp from 50% last year, jewellery (-8pp to 48%), and trade and DIY equipment and tools (-8pp to 39%). The sectors where the service is most commonly offered include children’s toys and accessories (58%), fashion clothing, accessories, footwear and groceries (all 52%), while it is least available among those selling consumer electronics and health (both 31%). This fall in the number of retailers offering return to store is surprising to RetailX head of research, Martin Shaw. “This service seems a key part of multichannel retail,” he says, “but perhaps just not enough shoppers were using the service, compared to the number opting to return by post, to make it worth maintaining the infrastructure.”

RetailX research shows a row-back in the numbers of retailers currently offering more sophisticated fulfilment services


Below, we look in depth at retail performance across business-critical measures. Delivery, collection and returns enable shoppers to take ownership of and, if necessary, return their goods in the most convenient manner. How products are presented to smartphone users matters because zoomable images and predictive search both enable customers to make purchase decisions with confidence. Checkouts that work, stock checking and recommendations and a wide variety of customer communication channels all go to improve customer service and the customer experience, however they choose to engage.

EUROPE TOP500 REPORT 2019STRATEGY & INNOVATION

TABLE 2. LEADING RETAILERS IN THIS DIMENSION

AMAZON MARKS & SPENCER

ARGOS NEXT

ASOS OASIS

B&Q RIVER ISLAND

BOOTS SAINSBURY'S

DUNELM SCHUH

H&M SCREWFIX

JD SPORTS TESCO

JOHN LEWIS WICKES

0% 20% 40% 60% 80%

2019

2020 increase

+5pp

+15pp

+15pp

+8pp

+10pp

+17pp

+13pp

+17pp

+10pp

+8pp

+16pp

+23pp

+16pp

+15ppDirect-selling brands

Fashion accessories

Jewellery

Footwear: Fashion



Clothing: Fashion


Cosmetics




Homeware


FIGURE 8. MORE MOBILE APPS HAVE PREDICTIVE SEARCH THIS YEAR THE FRACTION OF TOP500 APPS WITH PREDICTIVE SEARCH HAS INCREASED IN EVERY SECTOR BY A MINIMUM OF FIVE PERCENTAGE POINTS (PP)

CHECKOUT

Offering the option of checking out through a third-party checkout provider can make it easier for shoppers who don’t want to share their details – yet it is still a minority option. The most popular is PayPal, offered by 31% of Top500 retailers, but Amazon Pay and Facebook checkout are each offered by 9% of them. Some 44% of retailers show payment options on the landing page, while 23% enable one-click ordering, which will require shoppers to have previously saved their payment details on the retail website.

STOCK CHECKING AND RECOMMENDATIONS

RetailX researchers track the extent to which Top500 retailers help customers explore their range through stock checkers and product recommendations. They found that 75% of retailers recommend similar products, and 28% enable customers to check store stock. More than half (56%) enable shoppers to add a product to a wishlist.

CUSTOMER COMMUNICATION CHANNELS

Top500 retailers this year enable their customers to engage with them via ten different communication channels, from email and telephone to various social media platforms.


PRESENTING PRODUCTS TO SMARTPHONE USERSThe relatively small size of smartphone screens make it a priority for retailers to enable their customers to quickly find products. Predictive search and zoomable product images also help in that quest.

SearchPredictive search makes it easier for app users to find the products they are looking for. As they start to type in the search box, suggested search terms appear. There’s been a fast uptake of this among Top500 retailers over the last year, with 38% of retailers with mobile apps now including it in their apps – a rise of 10pp from 28% last year. “This feature,” says Shaw, “makes navigation much quicker and the fact that top retailers have been doing it for years means it’s something consumers now expect.”

The fastest uptake came in retail categories where the details might be more important, while no categories decreased their use of predictive search. Some 45% of those selling jewellery use this technology in 2020, up by 23pp on last year. Other fast rises came among those selling cosmetics (+17pp to 52%) and fashion clothing (+17pp to 48%). Predictive search is most widely used in the sports and outdoor equipment sector (61%), homewares (59%) and least commonly by direct-selling brands (25%). “Perhaps there’s less need for it as many brands don’t have the large SKU ranges that make it most helpful,” says RetailX’s Shaw. More widely used is the autocomplete dropdown, which suggests terms that shoppers might use to search a mobile website.

Visual search is still very much an emerging technology – only 8% of retailers use it in 2020. By contrast, 94% of retailers offer a three-line ‘hamburger’ button, enabling shoppers to navigate mobile websites more easily.

Zoomable product imagesWhen shoppers can zoom in to product images on their smartphones, they see more detail of an item they are considering buying. Top500 retailers appear to have recognised the way this helps their customers’ experience, overwhelmingly adding this feature to their mobile websites over the last year, according to the latest RetailX research. It found that 70% of the 490 Top500 retailers measured in both periods now use it. That’s a rise of 13pp on the 57% that did so last year. Shaw said the feature needed to be implemented skilfully if it was to be useful to customers. “On mobile devices especially, product imagery needs to be full width and high resolution, while not significantly impacting on visual load times and time-to interaction, to be competitive,” he said.

RetailX research shows that in 2020, every retail category adopted zoomable images, with the fastest growth among grocers (+24pp to 81% of 21 Top500 grocery retailers), and those selling stationery and craft (+21pp to 64% of 32 traders). Despite the growth, stationery and craft remained, however, the category where zoomable images on mobile websites were least likely to be used. The feature was most commonly found in the sports and outdoor equipment (85%), health (84%) categories and in grocery (81%).

STRATEGY & INNOVATION


Designing retail from the shopper’s point of view can help boost sales. When retailers make it easy for existing and potential customers to buy from them, it’s more likely that they will do so. In The Customer Dimension, RetailX researchers explore both the customer experience and the customer service that Top500 retailers provide. They look at whether, and how, retailers deploy tools that they judge will make the experience easier. And they look at this across channels from the mobile web and mobile apps to customer service. Researchers measure performance in this area across 36 metrics covering areas from how customer service is offered and how fast service teams answer shoppers’ questions through to website speeds, one-click ordering, product ratings and returns policies.

The findings are presented below through two key questions. First, how easy do retailers make it for customers to get in touch? This is important for shoppers both before and after they buy. Before buying, they can use different channels to ask questions about a product. Before they buy, shoppers may also look to see how they will be able to get in touch if an order goes wrong.

Certainly if they have after sales questions, they will want to get in touch via a range of channels. How a query is dealt with is likely to have an effect on whether they return to buy again – and so response times matter as well as the number of communication channels. Websites – on desktop and mobile – are the primary source of information for shoppers, and so the speeds at which they operate are an important part of the customer experience.

The second question is: how easy is it for shoppers to find, choose and buy a product? This area of enquiry looks at how retailers support customers in finding the right item – and how easy they make it to buy and return that product. All are important areas of the customer journey – getting them right can make a big difference to customers’ satisfaction with their shopping experience.

THE CUSTOMER

In The Customer Dimension, RetailX researchers measure both user experience on retail websites and customer service from the customer’s point of view

Shopper-friendly retailing

HOW EASY IS IT FOR CUSTOMERS TO GET IN TOUCH WITH RETAILERS?

Communication channelsWhen shoppers want to contact a Top500 retailer they can choose to do so through an average of 10 channels, from telephone and email to live chat on their website or mobile app and direct messages on social media. But once a retailer offers the channel, how easy is it for shoppers to find the information they need in order to get in touch? RetailX research found that just under a third (30%) of retailers show their contact phone number on their landing page, but only 7% show a contact email on that page, while almost all have a ‘contact us’ page with these details or a web submission form.

One in five retailers (23%) offer live chat on their website, and 11% prompt shoppers for a chat within a minute of them arriving on the landing page. Fewer – at 8% – offer live chat on their mobile app. Of the 183 retailers with apps that were assessed both in 2020 and in 2019, uptake of live chat on the app grew by one percentage point (1pp), from 7%. Live chat is most commonly found in mobile apps in the sports and outdoor equipment category: 14% of retailers in this category use it, following growth of 2pp over the year from 12% last year. That’s followed by sports and leisure clothing (11%). Use has also grown among those selling trade and DIY tools and equipment (+4pp to 9%). But live chat is less likely than last year to be found on mobile apps operated by those selling fashion accessories (-2pp to 7%), and cosmetics (-2pp to 8%). Live chat’s reduced usage in sectors where customer preference is subjective will surprise some but could reveal that retailers do not view live chat interactions as analogous to a product-oriented conversation with an in-store sales representative. Instead, retailers may view live chat as providing operations-type customer support covering delivery queries or returns, for example. Finally, three sectors used live chat to the same extent as last year: home and industrial appliances (9%), homewares (10%) and jewellery (11%).

Response timesResearchers tested customer service quality by sending a simple email enquiry (through a form on the retailer’s website, if that option was available) and making a phone


THE CUSTOMER

FIGURE 9. AVERAGE RESPONSE TIMES FOR RETAILERS TO AN EMAIL OR WEB FORM QUERY

call, again with a simple request for information on the retailer’s services. Emails were answered in an average of 17 hours 35 mins (up to a maximum of 72 hours - responses after this time were considered non-responses) and a median of 12h 59m. The time taken to respond was higher than last year, with the median response time up by 175 minutes – or two hours 55 minutes – on the previous year. Response times were faster than last year among those selling sports and leisure footwear (-48 minutes to 14 hours and 47 minutes) and sports and leisure clothing (-118m to 13 hours and 33 minutes). But they slowed down among those selling homewares (+410m to 13 hours and seven minutes) and trade and DIY tools and equipment (+333m to 10 hours and eight minutes).

A call to customer service took an average of 2m 32s and a median of 2m (120s) to complete. Researchers rated the service they received at a median four out of four and the degree to which the issue they raised was resolved at four. Both measures stayed the same as last year. It’s a mixed bag but, in general, retailers are responding more slowly to consumer requests for information this year than last. It’s a basic performance metric but one of the few in which the average retailer isn’t improving.

Website speedThe speed of a website is key to customer service online since those sites are one of the customer’s primary sources of information on a retailer and the products they sell and, more importantly, is a key sales channel for almost every

retailer. RetailX research in collaboration with knowledge partner Eggplant found that Top500 websites were visually complete on desktop browsers in an average of 9.8s and took an average of 10.3s to download fully. The median visual completion time of 9s was the same in both years, but the median download time of 9.68s is 1s slower in 2020 than a year earlier. Download speed is related to the size of websites: desktop websites were an average of 3.1MB, and a median of 2.8MB in size in 2020. In 2020, the median size was 38,500 bytes more than in 2010. Leading retailers’ landing pages are visually complete in just over a second, although they often take a few more seconds to finish loading some aspects of the page. It’s this prioritisation of content, more than the volume of content (and size in MB) that separates the best retailers from the rest at website performance.

On mobile, websites were visually complete in an average of 8.36s, and took an average of 8.98s to download fully. The faster mobile download speed in comparison to desktop can be explained by the finding that they were lighter than desktop sites, at an average of 2.6MB and a median of 2.3MB. But mobile websites remained at similar speeds as in 2019: the median time to visual completion (8s) and to full download (8s) stayed the same.

Looking at how deeply shoppers engage with retailers, RetailX knowledge partner SimilarWeb finds that visitors accessed an average of 9.77 pages per session, spending an average of 5m 25s on the Top500’s websites. Just under a third of visits (31%) to the average Top500 website bounce; the median website sees 27% bounce.

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HOW EASY IS IT FOR SHOPPERS TO FIND, CHOOSE AND BUY A PRODUCT?

Finding the right productFinding a product is easier when shoppers have good navigation tools to hand. The simple three-line ‘hamburger’ menu is fast becoming standard on mobile websites, and in 2020, 94% of Top500 mobile sites feature this. That’s up by six percentage points (pp) from 88% in 2019. The feature was adopted most quickly by those selling stationery and craft materials (+17pp to 88%) – although this remains the sector with the lowest uptake – and by those selling children’s toys and accessories (+13pp to 92%) and home and industrial appliances (+13pp to 95%). The feature is most common among grocers (92%). RetailX head of research Martin Shaw says: “It’s emblematic of the continuing adoption by many in the Top500 of mobile-first browsing – which until recently was only a buzzword to hundreds of the UK’s largest retailers. In 2020, perhaps for the first time, we can say that the Top500 in general, rather than just the Top100, are mobile-first or, at least, mobile-optimised retailers.”

Shoppers can now see how other customers rated products on more than half (55%) of websites – up by 2pp from 53% in 2019. Product ratings are now most common among grocers (+10pp to 73%), those selling health products (+8pp to 72%), and trade and DIY tools and equipment (71%). Product ratings are least deployed by retailers selling in categories where opinions are perhaps very subjective, including jewellery (40%), fashion clothing (40%) and fashion footwear (42%). The fastest declines in the use of product ratings were among those selling home and industrial appliances (-7pp to 67%) and sports and outdoor equipment (-4pp to 77%).

When it comes to making product suggestions, 39% of retailers recommend a product that complements the one that shoppers are looking at. Just 5% enable shoppers to add an image to their product review.

Buying and returning itemsOne in five (20%) of retailers enable shoppers who have already registered their details to buy in just one click. Leading retailers have offered such services for years now

THE CUSTOMER


ASOS LOUIS VUITTON

B&Q MARKS & SPENCER

BRAVISSIMO NEW LOOK

DUNELM NEXT

EVANS CYCLES RIVER ISLAND

FAT FACE SAINSBURY'S

ICELAND SPACE.NK

IKEA TESCO

JOHN LEWIS WILKO

and in 2020 more retailers than ever are matching this level of speed and convenience. A good customer experience during the return process can be the difference in a shopper trying to purchase from the same retailer again. By law, retailers must give their customers 14 days, or two weeks, to return a product they bought online. Top500 retailers give shoppers an average of 10 weeks (70 days) to return a product, but the median is much lower at 3.7 weeks (26 days). Some individual retailers offer their customers as long as a year to return a product, a figure that is likely to distort the average.


How retailers get online orders to customers can make a real difference in where shoppers choose to buy. When delivery options are limited, slow or expensive, it’s easy to go elsewhere. Conversely, speedy and cheap delivery or collection can remove an important barrier to the final purchase. Importantly, retailers must ensure that their delivery promise stays profitable, while at the same time remaining attractive to customers. As many have found, this is a tricky balance to strike.

In this Operations & Logistics Dimension, RetailX researchers evaluate the promises thatTop500 retailers make around delivery, collection and returns as they build a picture of how their capabilities have developed over time. They consider how the offer varies between sectors, to what extent traders pass on the full cost of getting an item to the customer, and to what extent retailers go beyond the legal minimum requirements when it comes to returns. “RetailX adopts the perspective of the customer, the ultimate arbiter of retail performance, when making these assessments,” says Martin Shaw, head of research at RetailX.

Research findings are presented here through three questions. Firstly, what do Top500 retailers offer on delivery? Within that, the focus in on whether retailers opt for premium super-fast delivery services or for a slower but potentially more reliable and cheaper service.

Secondly, are attitudes to collection changing? That’s a question asked in the context that slightly fewer retailers are now offering collection at all, and that the number offering next-day collection and other premium services has also fallen, in some cases significantly.

The final question is, how are returns policies changing? Here researchers look at where and how shoppers can return unwanted goods to the retailer they bought from, and at the differences in service compared to 2019.

OPERATIONS & LOGISTICS

The provision of premium click and collect and delivery services is less popular in 2020 compared to the previous year, RetailX research suggests

How the delivery promise is evolving

WHAT DO TOP500 RETAILERS OFFER ON DELIVERY?

In recent years, we’ve seen a move to enable ever-faster delivery, but is that now in retreat? RetailX research shows next-day delivery is more widely available in the UK in 2020, compared to 2019, but the options of same-day, Saturday and Sunday delivery have become slightly less available. At the same time, the cost of standard delivery has risen, although the minimum order threshold for free delivery threshold has stayed the same.

Next-day deliveryResearchers found more retailers offering next-day delivery in 2020 than in 2019. Some 61% of Top500 retailers now make this option available, up by three percentage points (pp) from 58% last year. Shoppers can opt for next-day delivery to at least the same extent as last year in all retail categories.

The fastest rate of adoption is in children’s toys (+7pp to 63% of traders in this category), jewellery (+7pp to 60%), and in home and industrial appliances (+6pp to 57%). This fast delivery option is most widely available in the cosmetics sector (+3pp, 68%) and among those selling sports and leisure clothing (+0pp, 67%) and fashion footwear (+5pp, 66%). It is least widely available among those selling stationery and craft and consumer electronics products (both 54%), homeware (51%) and trade and DIY equipment and tools (49%).

Same-day deliverySame-day delivery remains a niche option in 2020, with slightly fewer retailers (5%) offering the service than the previous year (6%). Same-day delivery is most widely used by those selling health products (+2pp to 11%), groceries (-3pp to 10%), cosmetics, trade and DIY tools and equipment (both 9%). It is least widely used in sports and leisure footwear, clothing, and sports and outdoor equipment (all 3%) and by those selling children’s toys and accessories (-3pp to 3%). More fashion footwear retailers have taken up the service (+2pp to 5%), while fewer of those selling home and industrial appliances and stationery and craft products (both -4pp to 4%) offer the service.




AMAZON MARKS & SPENCER

AO MOSS BROS.

ARGOS NEW LOOK

ASOS OASIS

BOOTS PETS AT HOME

DUNELM SCHUH

EURO CAR PARTS SHOE ZONE

HOLLAND & BARRETT SPACE.NK

LITTLEWOODS YOURS CLOTHING

FIGURE 10. RETAILERS INCREASINGLY CHOOSE DELIVERY WHEN OFFERING NEXT-DAY FULFILMENT

Next-day fulfilment is one of the most expensive and competitive operations for retailers. In 2020, they’re more likely than ever to offer next-day delivery but the same is not true for next-day collection, which is less popular this year

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Saturday deliveryThe use of Saturday delivery is also slightly less popular, with 27% of retailers offering this service in 2020, down from 30% a year earlier. It has most commonly fallen off among those selling sports and outdoor equipment (-9pp to 22%), home and industrial appliances (-8pp to 23%) and sports and leisure clothing (-7pp to 19%).

Customers buying groceries (30% of grocery retailers offer the service), cosmetics (28%) and homewares (28%) are most likely to be able to order for Saturday delivery, while those buying sports and leisure footwear (21%), jewellery (21%) and sports and leisure clothing (19%) are least likely.

Sunday deliverySunday delivery is also less available in 2020 (11%) than in 2019 (13%). Among the different shopping categories, those selling fashion footwear (-3pp to 12%), fashion accessories (-3pp to 11%) and jewellery (-3pp to 9%) were most likely to stop offering the delivery service. Sunday delivery is most common among retailers selling groceries (+1pp to 16%) and consumer electronics (-2pp to 13%) and least common at retailers selling jewellery (-3pp to 9%), sports and outdoor equipment (-1pp to 8%), and stationery and craft (+0pp to 1%).

Delivery costs The cost of delivery is higher in 2020 than in 2019. This year, the median standard delivery charge at Top500 retailers is £4.50, up from £3.80 in 2019. The cheapest standard delivery charges are found at retailers selling consumer electronics (median of £2.90), stationery and craft (£2.90) and health products (£2.90). The highest costs are found among those selling fashion clothing (median £3.80, average £4.60), homewares (median £3.90, average £8.20) and trade and DIY tools and equipment (median £4.70, average £4.90).

The median minimum order value for free delivery has stayed at £40 in 2020, the same as in 2019. Standard delivery takes an average of 4.7 days.

ARE ATTITUDES TO COLLECTION CHANGING?

Click and collect is slightly less easy to find in 2020 than in 2019, while it now takes slightly longer for retailers to deliver online orders to stores or other locations for collection. The more significant change is that quick turnaround times from order to collection are much less available than they were last year.

Martin Shaw, RetailX head of research, says it probably makes more sense for retailers to invest in competitive delivery options than in collection. “However convenient collection is, the consumer still has to do a lot of the legwork,” he notes. “Not so with delivery. Consumers time and again say in surveys that they like collection, but the evidence suggests that they don’t like it enough, when compared to other options, for retailers to invest in those systems as much as in delivery, which continues to become more speedy and customisable, in terms of time and location, across the Top500.”

Click and collectMore than half (54%) of Top500 retailers enable shoppers to buy online and collect in-store in 2020 – down from 56% last year. Customers are most likely to be able to collect cosmetics (63% of cosmetics retailers offer collection), fashion clothing (62%) and fashion footwear (61%). The only category where more retailers offer the service in 2020 than in 2019 is in health products (+1pp, to 47%), while significantly fewer retailers selling groceries (-6pp to 50%), sports and outdoor equipment (-7pp to 59%), and trade and DIY tools and equipment (-9pp to 50%) offer click and collect.

Next-day collectionIn 2020, 19% of leading retailers enable shoppers to collect their online orders the following day. That’s down by 7pp from 26% last year. The service has become less available across all sectors, most noticeably among those



selling trade and DIY tools and equipment (-13pp to 23% from 36% last year), consumer electronics (-14pp to 21%), and sports and outdoor equipment (-14pp to 22%). At the other extreme, it is slightly less available among those selling fashion footwear and jewellery (both -3pp to 21%) and stationery and craft products (-3pp to 14%).

Same-day collectionThe availability of speedy same-day collection has fallen fast during the last year – across all sectors. 7% of Top500 retailers offer the service in 2020, down by 4pp from 11% last year. It is most reduced among those selling children’s toys and accessories (-6pp to 10%), sports and outdoor equipment (-6pp to 9%) and consumer electronics (-8pp to 8%). Availability has reduced more slowly among those selling fashion clothing (-2pp to 3%), cosmetics (-2pp to 4%) and fashion accessories (-2pp to 4%).

How long does collection take?The standard time between placing an order and collecting the product in-store rose by four hours to a median of 73 hours – just over three days. The median time to pick-up reduced by 10 hours to 55 hours (just over two days) among those selling children’s toys and accessories but increased among those selling sports and leisure clothing (+14h to 86 hours), footwear (+16h to 86) and home and industrial appliances (+21h to 77).

Third-party collection pointsCollecting online orders at a third-party collection point remains relatively uncommon in 2020 since almost two-thirds (65.8%, or 329) of retailers do not offer this service to shoppers. But 125 retailers (25%) do enable pick-up at one or more third-party services, while 37 (7.4%) offer at least two, seven retailers (1.4%) offer three, and one retailer (0.2%) offers collection via five networks. The most commonly used third-party network is Collect+, used by 68 retailers, or 13.6% of the Top500, followed by myHermes ParcelShop (46 retailers, 8.6%), DPD collection point (43, 8.6%), UPS (27, 5.4%), DHL (20, 4%), Doddle (8, 1.6%), HubBox (5, 1%), GLS ParcelShop (3, 0.6%), InPost parcel lockers (3, 0.6%), and Pass My Parcel (2, 0.4%).

HOW ARE RETURNS POLICIES CHANGING?

Under UK law, consumers can return an item they bought online within two weeks for a refund. Yet many retailers go well behind this legal minimum, with the average Top500 retailer offering 70 days – or 10 weeks – for shoppers to change their mind. That’s likely to be a deciding factor for many as they consider where to buy, with how easy it is to make a return another key issue for shoppers.

Returning to different locationsSending an item back in the post is the single most common way that shoppers can return unwanted online orders, with this option advertised by 67% of Top500 retailers in 2020. That’s followed by returning to one of the retailer’s stores (43% of multichannel retailers) which is down by a significant 5pp from 48% in 2019.

In 2020, more retailers enable their customers to make their return via a third-party location, with 25% doing so in 2020, up from 20% a year earlier. The greatest changes are to be seen in the sports and leisure footwear (+10pp to 40%), fashion clothing (+9pp to 35%), sports and leisure clothing (+9pp to 37%) and fashion footwear (+8pp to 38%) categories.

Return via pick-up from the house continues to be offered by a small but significant minority (15%) of retailers.

Pre-paid returnsSignificantly more retailers now underwrite the cost of sending back an unwanted online order. In 2020, 38% of retailers offered pre-paid returns. That’s up by 16pp on the 22% which did so in 2019. The trend was visible in all sectors, with the biggest rises in jewellery (+26pp to 36%), sports and leisure clothing (+23pp to 49%), and sports and outdoor equipment (+22pp to 42%).


How retailers present a product makes all the difference to whether shoppers choose to buy. When that product is presented online – where shoppers cannot touch and feel an item for themselves – detailed attention to merchandising becomes all the more important. To be confident in buying an item, website visitors need to know how big it is, what it’s made of, how it works and how they might use it in the context of their own day-to-day lives. Online merchandisers use tools such as search filters, zoomable images and product reviews to communicate those points and to help shoppers find and buy the

item that’s right for them. Giving shoppers all the information they need is not only important in helping them to buy in the first place but may also help to reduce the level of returns.

How effectively do Top500 retailers merchandise their websites? RetailX researchers scored the leading websites against more than 35 metrics in this Merchandising Dimension in order to assess how retailers showcase their goods and how they encourage shoppers to buy. In doing so, they aim to understand both how retailers present their products and to establish a benchmark for those measuring their own performance against competitors, both in their own sector and across the Top500.

The information is broken down here into three questions. First, how do Top500 retailers help customers to find the product they are

MERCHANDISING

Retailers lead the Merchandising Dimension when they fully explain their products to customers and give all the information they need in order to buy

Product information

HOW DO TOP500 RETAILERS HELP CUSTOMERS FIND A PRODUCT?

When retailers sell tens of thousands of products, finding the right one can be a challenge, especially since so many shoppers are using the relatively small screen of a smartphone to do so. Retailers help them to narrow in on the item they want through tools including in-site search, and through navigational filters.

Search and navigationTop500 retailers are making it easier for shoppers to find the items they are looking for. Almost eight in 10 (78%) now offer drop-down suggestions when website users start to type a search term on their website. 61% do so on their mobile website, while 40% suggest full search terms as the shopper starts to type. (See the Strategy & Innovation Dimension (page 18) for more on how predictive search has grown over the year). Browsers can continue to scroll down infinitely on 26% of mobile websites, while 94% of mobile websites feature the three-line ‘hamburger’ button that makes navigation easier on a smartphone.

Almost all enable users to narrow down their search using navigational filters. The most common search filter is by product type, used by 95% of the Top500. That’s followed by price (60%) and by brand (49%). Search by product type has seen a big uptake over the last year, with its use growing from 87% in 2019 to 95% in 2020 of 488 retailers measured in both years. Its use grew in all categories, most notably in jewellery (+23 percentage points (pp) to 45%), cosmetics (+17pp to 52%), and fashion clothing (+17pp to 48%).

But while more retailers offered search by product type, fewer offered search by brand. In 2019, 54% of the 488 retailers measured in both years enabled shoppers to use this filter but in 2020, less than half (49%) do so. The biggest falls in use are in the stationery and craft category, where use fell by 14 percentage points (pp) from 53% to 39%, and in the home and industrial appliances (-12pp to 67%). There were only small rises in use, found in the children’s toys and accessories (+1pp to 72%) and sports and outdoor equipment categories (+1pp to 75%).

When a website user enters a search term that finds

When retailers sell tens of thousands of products, finding the right one can be a challenge, especially on a smartphone


MERCHANDISING


ANN SUMMERS JD SPORTS

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FIGURE 11. FEWER RETAILERS OFFER BRAND FILTERING OF SEARCHES IN 2020 THE FRACTION OF RETAILERS WITH BRAND FILTERING OF SEARCH QUERIES

no results on the website, 42% of Top500 websites show a blank page, while the remaining 58% show alternative information such as popular or trending products. This is an approach thought more likely to result in a sale.

Emerging technologies in this space include visual search. This year, just 8% of Top500 mobile apps enable shoppers to search using an existing image or one taken using their smartphone’s camera.

considering buying, using website navigation and search to narrow down the range on offer, while offering recommendations of other similar products that may be relevant? Second, how well do retailers explain the products they sell, and to what extent do they enable people who have already bought the item to share their opinions? Finally, how easy is it for shoppers to buy an item? Do they have to register before checking out, and what payment options are available for them to use?


HOW DO RETAILERS EXPLAIN THEIR PRODUCTS?

Once a customer has found a product, how can they be sure it’s right for them? That’s where images, ratings and reviews come into play. Retailers also make product recommendations to show customers similar items they might not have considered, as well as flagging up individual products in daily deals and advertising banners.

How images are usedIn 2020, almost three quarters (73%) of Top500 retailers use several images of a product on the product page. Seven in 10 (70%) make product images zoomable on their mobile website, as do 54% of those with mobile apps. The average Top500 retailer shows an average of 4.3 images per product on its desktop website and four on its mobile website.

Ratings, reviews and sharingMore than half share on their websites the product ratings (55%) and product reviews (57%) that other customers have given, while 30% of those with mobile apps share product ratings. 40% enable shoppers to share a product with friends and 3% enable them to ‘Like’ a product on their website via social platforms.

Product recommendations, deals and moreAlmost three quarters (74%) of retail websites recommend similar products to the ones a customer is already looking at, and 26% recommend an ‘upsell’ of a higher-specification or more expensive product, or of a product that complements one already in the basket. These tactics can let the shopper know about a product that may interest them but they may not have previously seen. Almost nine in 10 (87%) run banner advertising to flag up services or products on their website, 36% do so on their mobile website, and 63% show an obvious promotion on their website. Just under a quarter (24%) of those with mobile apps flag up daily deals to app users, while 74% offer push notifications from the app. These can be used to alert shoppers when a relevant deal, product or service becomes available. Just 7% highlight popular products by flagging them as a best seller on their website.

MERCHANDISING

HOW EASY IS IT TO BUY?

Apparently small changes can make it much easier for shoppers to complete their transaction, which is reflected in both conversion rates and sales.

Checkouts In 2020, more than six in 10 (38%) Top500 retailers require registration before checkout, while the remaining 62% allow shoppers to complete their transaction by guest checkout, including Apple Pay, Amazon Pay, PayPal and Google Wallet. The number requiring registration has fallen by 19pp since 2019; the number offering the option of guest checkout has risen by the inverse of 19pp at the same time.

Making it easier to buy through guest checkout involves a trade off against the amount of information that retailers can gather about a potential customer, and the figures suggest that more are opting to demand that shoppers register. However, it may also increase the likelihood that shoppers will buy, thanks to speedier checkouts and the greater likelihood of payment details being up-to-date.

Wishlists and site performanceIt’s easier for shoppers to buy an item that they previously saved while browsing and 56% of Top500 retailers enable shoppers to add a product to a wishlist on the website, as do 60% of those with apps.

It’s also easier for shoppers to buy when they get onto the website with no problems. Top500 websites have an average bounce rate of 31% in 2020, according to research done in collaboration with RetailX knowledge partner SimilarWeb. Once on the site, the average Top500 browser visits ten (9.8) pages and spends 325 seconds – that’s five minutes, 25 seconds – on the site.


Leading retailers promote their brands through owned and third-party channels and involve their customers in expanding brand awareness. They provide a good view of the company on social media and engage with customers visiting their websites, blogs and ‘about’ pages. Ideally, they are also seen to share customer feedback and reviews by any of these channels. By doing so, satisfied customers effectively help raise awareness of their brand’s successes, while constructive criticism from less satisfied customers may well prove helpful in reworking the way that products or retail services work.

In the Brand Engagement Dimension, RetailX researchers analyse how Top500 retailers reach out to their existing and prospective customers, provide ways for their customers to get in touch, and recommend products. They do so through 35 different metrics assessing performance in areas from social media presence and sharing to product page features and the time shoppers spend on their website. Data from RetailX Knowledge Partner SimilarWeb shows how often – and for how long – people visit Top500 websites. Additionally, data from RetailX Knowledge Partner Pi Datametrics shows how internet users search for different brands that sell in the UK.

The findings are grouped here through three key questions. First, how do Top500 retailers engage with customers? For this, the focus is on the communication channels that businesses make available to shoppers, and how they engage with them on their own websites.

BRAND ENGAGEMENT

Retailers are finding new ways to talk to shoppers, RetailX research suggests

Engage with customers

HOW DO TOP500 RETAILERS ENGAGE WITH CUSTOMERS?

Retailers who support two-way conversations with existing and potential customers can both answer their questions and provide information and advice that may help secure a sale.

Communication channelsUK retailers continue to reach potential customers through a wide variety of channels. In 2020, the average Top500 retailer actively operates, or is available through, 9.6 communication channels, and a median of 10, where channels include direct-to-customer ones such as email and live chat as well as broadcast feeds on social networks. That’s similar to 2019 and up from eight channels in 2018. This year, 97% of Top500 retailers have a Facebook page, and 90% have an Instagram profile. Some 88% are on Twitter, 82% are on YouTube, 69% have a Pinterest account and 13% have a Snapchat account. Most flag up their social presence, with 88% linking to their social pages from the landing page. Almost half (46%) enable shoppers to share a product on social media. Of those that are on Twitter, the average Top500 retailer has 2.4m followers. But the average is likely to be skewed by those retailers with the largest followings, since the median retailer had 312,737 at the time the research was carried out in early 2020.

Live chat is available on 46% of Top500 websites – and this pops up on 11% of Top500 landing pages within a minute of a visitor arriving. Live chat on mobile is as yet less widely available, offered by only 8% of those with apps.

Visitors to 70% of Top500 websites can sign up to receive the newsletter from the landing page.

Engagement on retail websitesThe average Top500 retailer’s website receives 8.8m visits a year and a median of 2.3m, according to data researched in partnership with RetailX Knowledge Partner SimilarWeb. Visitors spend an average of 324 seconds (5.4 minutes) and a median of 293s (4.9m) on Top500 websites. They visit an average of 9.8 pages and a median 7.1 pages. But almost a third (31%) of visits to the average website bounce –and therefore fail.

Shoppers help boost awareness and trust of the products they are looking at online when they share them

BRAND ENGAGEMENT


TABLE 7. THE 20 BRANDS THAT SAW THE BIGGEST GROWTH IN UK SEARCHES‘SHOPDISNEY’, FOR EXAMPLE, WAS SEARCHED 10X MORE IN THE YEAR TO AUGUST 2019 THAN IT WAS IN THE PREVIOUS 12 MONTHS

KEYWORD TOTAL SEARCHES PERCENTAGE INCREASE

SHOPDISNEY 101,400 1163%

LOOKFANTASTIC 484,300 672%

VICTORIA'S SECRET 1,091,600 204%

FENDI 985,500 169%

TIFFANY & CO 891,500 155%

WAYFAIR 9,861,000 151%

DR MARTENS 2,792,000 147%

YESSTYLE 523,600 144%

ROMAN ORIGINALS 1,570,500 141%

SEASALT CORNWALL 104,500 137%

AND OTHER STORIES 2,064,000 137%

BAREMINERALS 207,100 134%

FLANNELS 5,586,000 132%

PAVERS 827,500 131%

LULULEMON 1,178,500 129%

WEEKDAY 633,000 129%

COTSWOLD COMPANY 523,700 129%

BONMARCHE 1,095,000 129%

MONKI 1,370,000 129%

DIOR 883,500 129%

BRAND ENGAGEMENT


ARGOS JOJO MAMAN BÉBÉ

AVON MARKS & SPENCER

BOOTS MATALAN

DUNELM NEXT

ELLIS BRIGHAM MOUNTAIN SPORTS

OVERCLOCKERS UK

EVERYTHING5POUNDS.COM SAINSBURY'S

HALFORDS WICKES

HOBBYCRAFT WILKO

JD SPORTS THE WORKS

These 20 Top500 brand keywords enjoyed the biggest rise in searches in the 12 months to August 2019, measured as a percentage of their total in the previous year. Researched in partnership with Pi Datametrics

Second, how far do retailers support customers in sharing products online? The focus is on the extent to which retailers support product reviews and ratings on both websites and mobile apps. Third, how easy do retailers make it for shoppers to check out? Research in this section takes into account the need to balance the ease of a guest checkout with the role of the ‘owned’ website in gathering data from opted-in customers, which is useful for building future relationships with those shoppers.

Finally, how often do shoppers search for retail brands that sell in the UK? The answer to this question provides a useful measure of how well brands are communicating with their target audiences.

HOW FAR DO RETAILERS SUPPORT CUSTOMERS IN SHARING PRODUCTS ONLINE?

Shoppers help boost awareness and trust of the products they are looking at online when they share them. Most retailers now feature simple product ratings and reviews on their websites.

Reviews, ratings and recommendationsShoppers often read product reviews and ratings when they are deciding whether an item is right for them – or not. More than half of Top500 retailers feature product reviews (57%) and ratings (55%). Of retailers with mobile apps, 30% feature product star ratings on their mobile app. 5% enable users to illustrate their website review with an image. Some 8% of retailers with apps make it easy for shoppers to find the products they’re looking for by offering visual search.

Sharing productsMore retailers now enable their customers to share the products they find on their websites with friends. In 2020, 40% of Top500 retailers do so, after a 14 percentage point

(pp) rebound from 26% last year, which was an all-time low. Researchers had expected a continued reduction this year as retailers (and especially brands) turned their attention to selling through their social channels using new features from the leading networks. It seems, however, that despite a reduction in obvious social media links on product pages in the immediate aftermath of the 2018 Cambridge Analytica scandal, those links are now reappearing on websites that had removed them. Shoppers at four in 10 Top500 retailers are now seeing social media suggestion. The feature saw the fastest uptake in the trade and DIY tools and equipment sector, rising by 24pp to 50%. This is now the Top500 category where sharing with friends is most commonly suggested.

Retailers selling home and industrial equipment increased their use of this tool, which is found on 46% of websites in this category – 24pp more than in the previous year. A significant number of children’s toys and accessories’ retailers also added social sharing compared to last year, with 46% retailers enabling their viewers to share, up by 19pp on the previous year.

Social sharing is popular among those selling cosmetics, but less so among those selling groceries (-1pp to 38%)


and consumer electronics (38%). Perhaps shoppers buying tools and toys are just more likely to have other people who are interested in what they are considering buying, whether that’s professional colleagues, fellow DIY-ers, or relatives looking for present ideas for children. Just 3% of the Top500 allow users to ‘Like’ their products using a social media plugin, a four percentage point drop on last year, when use of the feature was also at an all-time low. On mobile, 46% of those with apps enable users to share an item on social media.

HOW EASY DO RETAILERS MAKE IT FOR SHOPPERS TO CHECK OUT?

Retailers balance making it easy for shoppers to checkout and complete their purchase with gaining marketing information that they can use to communicate and build a relationship with their customer. Adding a social login or third-party checkout to their website can make checkout faster and increase conversion, at the cost to retailers of being more anonymous.

RetailX research found that shoppers must register before they buy at almost two-thirds (62%) of Top500 retail websites. Almost a third (31%) offer PayPal checkout – up by 4pp from 26% last year. Other checkouts are less popular: 9% enable checkout via AmazonPay, 9% through Facebook and 5% through Google checkout. Brand engagement normally means reaching customers before a sale takes place, although it also includes retaining a customer for his or her lifetime. It may be this consideration which means some retailers opt to keep control of the checkout, but of course such services generally take from the retailer’s margin as well. It would appear that with a growing number of retailers, this trade-off makes sense, presumably due to higher conversion rates when offering third-party checkout.

Looking in more detail at how the most popular of those options is used, researchers found retailers trading across all sectors added the PayPal checkout to their website. It was adopted most quickly among those selling consumer electronics (+14pp to 23% of retailers selling this category), fashion clothing (+8pp to 29%), cosmetics (+8pp to 31%) and home and industrial appliances (+8pp to 15%).

The smallest growth was in jewellery and sports and leisure footwear (both +2pp). That may be because the option is already widely used in sports and leisure footwear and in fashion footwear (both 36%), and in sports and outdoor equipment (35%). Those selling trade and DIY tools, as well as home and industrial appliances (15%), are the least likely to enable payment via PayPal.

HOW OFTEN DO SHOPPERS SEARCH FOR RETAIL BRANDS THAT SELL IN THE UK?

Brand awareness of leading retailers can be measured by how often people search online for them. This can be viewed as both a proxy for the opportunity of future brand engagement and a measure of its historic success. RetailX Knowledge Partner Pi Datametrics analysed searches for retail brands on Google UK for the year to August 2019 and found that Google came out top, with 353.8m hits. Amazon came second, with 207.6m, followed by eBay with 197m. Following on were Argos (158m), Next (82.1m), John Lewis (59.5m), Asda (57.7m) and Tesco (54.7m). Asos (50.2m) and Debenhams (49.4m) completed the top 10.

The top 20 also included Screwfix (48.3m), New Look (43.8m), Marks & Spencer (43.6m) Sainsbury’s (42.7m), Sports Direct (41.3m), Currys (38.1m), B&Q (37.5m), IKEA (35.9m), Boots (35.6m) and Very (33.3m).

The analysis excluded some retail keywords – such as “apple”– that were likely to capture searches that were unrelated to a retail brand. However, it did include “amazon” despite the newsworthiness of the South American geographic region of the same name over the summer. That said, a search for “amazon fire” on Google UK currently returns almost exclusively hits for Amazon’s range of Fire products.

Looking at which retail brands saw the biggest gains in brand awareness, as measured through searches, Shop Disney enjoyed a 1,163% rise in searches, to 101,400, followed by Look Fantastic (+672% to 484,300), Victoria’s Secret (+204% to 1.1m), Fendi (985,500), and Tiffany & Co (+155% to 891,500). Other interesting results included Wayfair, which gained 155% more searches, to 9.9m, while searches for Flannels grew by 132% to 5.6m.

BRAND ENGAGEMENTBRAND ENGAGEMENT


The smartphone is now firmly established as the largest single online shopping channel in the UK. It’s grown fast in popularity in an ecommerce context as shoppers use the one device that they always have with them to buy quickly whenever they want, and wherever they are. Mobile phones have made it possible to buy from home or work, while commuting or while out and about. Retailers have found innovative ways to use the smartphone’s different features, including cameras as barcode scanners. It’s become a handy place for shoppers to house their favourite retailers’ mobile apps, giving them a shortcut to completing all kinds of shopping tasks online, at the time that suits them.

At the same time, mobile can act as a bridge between online and the store, helping to organise multichannel services, from buying online and collecting in-store to returning an unwanted online order to a store. Such services give customers flexible and convenient shopping experiences that make it easy for them to buy during the course of their everyday lives.

In the Mobile & Cross-channel Dimension, RetailX researchers look at how Top500 retailers serve shoppers across channels. They assess whether retailers have a mobile app, and also what cross-channel services they provide for their customers. In addition, they hit the shops to find out how digital-in-store is working on the ground.

The findings are presented here through three key questions. First, to what extent do Top500

MOBILE & CROSS-CHANNEL

Flexible cross-channel services make shopping easier for customers on the move, writes Chloe Rigby

Convenient service across channels


AMAZON JOHN LEWIS

AO MARKS & SPENCER

ARGOS NEW LOOK

ASDA NEXT

BOOTS SAINSBURY'S

BURTON MENSWEAR SCREWFIX

DOROTHY PERKINS TESCO

EBAY TRAVIS PERKINS

HOLLAND & BARRETT VERY

TO WHAT EXTENT DO TOP500 RETAILERS ENABLE SHOPPERS TO BUY VIA MOBILE APPS?

More than a third of Top500 retailers have an iOS app for use on Apple smartphones and tablet computers. That’s up by 7pp to 35% in 2020. Android apps, for use on other brands of smartphones, have also risen in popularity, although not yet to the same extent as iOS apps. In 2020, 22% of retailers have Android apps, up by 5pp on last year.

Grocers were the most likely to add both types of app during the year. Half (50%) of Top500 retailers have iOS apps. Among the 20 retailers measured in this category in both 2019 and 2020, there was a 12pp increase in those with an iOS app, from 40% to 52%. More than a third (37%) of grocery retailers have an Android app, with the number growing by 9pp from 28% last year. App adoption was also significant among those selling health products. In this category, 30% have iOS apps (+12pp from 18% in 2019) and 25% have Android apps (+8pp from 17%).

iOS apps are popular in cosmetics (50% of Top500 retailers have them) and jewellery (50%), but the use is lowest among those selling trade and DIY tools and equipment (-1pp to 35%) and direct-selling brands (35%).

Android apps are most popular among those selling groceries (37%) and home and industrial appliances (36%) and least popular among direct-selling brands (19%), followed by those selling health products (25%).

Android apps have risen in popularity, although not yet to the same extent as iOS apps for apple smartphones


retailers enable shoppers to buy via mobile apps? The use of apps is growing but varies by type and by retail category. The mobile app is a unique marketing channel via push notifications as well as a platform for innovative features such as virtual reality shopping or visual search for similar products.

Second, what multichannel services do retailers offer? Use of in-store collection and returns of online orders feature here, as do store location and stock-level information on websites and linking in-store purchases to online user accounts with electronic receipts.

The final section analyses the in-store experience in those Top150 retailers that have shops in London with a focus on features of the ‘digital store.’

WHAT MULTICHANNEL SERVICES DO RETAILERS OFFER?

Retailers offer a more convenient customer experience when they connect their online business with their stores and develop a shopping journey that is as seamless as possible. Shoppers then find it faster and more reliable to order the product they need online and collect it in a store. Similarly, when a product is not wanted after all, returning to a store or a third-party return point will often prove more convenient than sending by mail. This year’s RetailX research reveals that multichannel retailers are now less likely to offer collection and returns in their own stores. For more on these subjects and on delivery, see the Operations & Logistics Dimension (page 24).

Click and collectSlightly fewer retailers now give online shoppers the option of picking up their order in one of their stores. Some 54% do so – down from 56% last year. Same-day collection is less widely available in 2020, with 7% of Top500 retailers now offering this. That’s down by four percentage points (pp) from 11% last year. Next-day collection has also reduced in popularity, with 19% offering it in 2020, down by 7pp from 26% last year.

At the same time, the service now takes longer. The median standard time to collect increased by four hours to three days and one hour in 2020. But the cost collection remained the same, at a median £1.

Reserve and collect may offer a useful option for shoppers who prefer to pay as they pick up the order they placed online. But it seems to be losing its appeal for retailers. In 2020, just 4% of retailers offer this, down from 5% in 2019.

One in three (34%) of Top500 retailers now offer to deliver products to at least one third-party click and collect service. A quarter (25%) offer collection through one third-party provider, while 7.4% offer it via two providers and 1.4% offer it via three. Just 0.2% offer five choices of third-party provider.

FIGURE 12. FEW RETAILERS HAVE DIGITISED THEIR STORES

Researchers visited the London stores of the Top150, recording dozens of metrics with a focus on digital and multichannel-enabled features

80%

20%

YesNo

80%

20%

YesNo

94%

6%

YesNo

94%

6%

YesNo

85%

15%

YesNo

94%

6%

YesNo

39%

61%

YesNo

94%

6%

YesNo

And there’s still room for improvement in old-fashioned customer service

Can staff reserve an item that is available on the website but not in this store for you to collect later?

Is there mobile (till-less) payment in-store?

Does the retailer provide digital receipts for in-store purchases?

Were you greeted?



CollectPlus, with 7,000 pick-up points around the UK, is the most popular provider, offered by 40% of those Top500 retailers who use a third-party provider. That’s followed by myHermes ParcelShop, with 4,500 pick-up points and used by 27% of retailers in this category. A quarter offer DPD, which has 2,500 points, 16% use UPS Access Point, with 2,800 points, 12% use DHL Collection Point, while 5% offer Doddle.

Only 1% enable shoppers to collect their online orders from a locker that they own. That’s the same proportion as did so in 2019.

Cross-channel returnsFewer retailers now enable shoppers to return their order to a branch of their own store, yet more now support returns via a third-party provider. In 2020, 43% of retailers enable shoppers to return their online order to a store. That’s down by 5pp on 48% in 2019. But a quarter (25%)of the Top500 allow customers to return their order to a third-party location. That’s up by 5pp on the same time last year. Perhaps retailers find that it’s more efficient for them to outsource the process, or perhaps using a third-party operator is likely to be more convenient for shoppers who decided to buy online rather than in a store in the first place.

UNDERSTANDING THE IN-STORE EXPERIENCE

RXUK Top500 researchers hit the ground in London during the summer of 2019 to find out to what extent stores run by Top150 retailers incorporate multichannel and digital features. They visited a flagship store where possible, with each visited twice to ensure accuracy. Not all of the retailers have stores in London, and some are pureplay retailers, but in total, researchers visited 140 stores. Fifteen per cent of the stores visited were in shopping centres, while the remaining 85% were in high street locations with ground floor access. The largest group of stores had one floor (43%), while 36.1% had two floors and 3.5% had six floors.

How digital in-store works in practiceResearchers found that 43% of stores had wi-fi. Of those stores with wi-fi, 34.8% required a password, and 58% required shoppers to register in order to gain access. 9% of the wi-fi networks could be accessed via social media credentials, while 12.1% were offered by a third-party, not directly by the retailer.

Staff were equipped with tablets in 19% of stores, and staff in the same proportion of stores could reserve an item available on the website but in that store for later collection. Almost half (48%) of stores featured stationary tablets that customers could browse. Customers were signposted to a special desk or place to return items in 8.8% of stores.

Of all the stores, 18% featured in-store experiences while the remaining 82% did not.

PaymentShoppers could checkout using mobile payment in 6% of stores, while 2% of stores signposted app checkout. Self-checkout was available in 3% of stores, and the retailer provided digital receipts for in-store purchases in 15% of stores.



The role of UK stores is changing, with the RXUK Top500 Elite retailers at the forefront of this change. At a time when customers want to make more of their purchases online, all of the multichannel Elite retailers have rethought what their shops are for. These retailers are responding to their own experiences which tell them that while shoppers often want to buy online, at other times they want to visit a store.

Argos’ sales, for example, are often made online – it turned over £2bn from mobile transactions alone in its 2018/19 full-year. Yet most of its shoppers also visit a store in the course of their transaction, either to place or pick up an online order. Dunelm, meanwhile, has moved its online business to a new platform that enables it to offer new multichannel services such as click and collect.

John Lewis says its customers spend more and remain more loyal when they shop across a number of channels. But as spending with department stores quickly moves online – according to the Office for National Statistics, 16.8% of department store sales took place online in December 2019 – John Lewis is focusing on the in-store experience to persuade shoppers to visit.

Online may have overtaken store sales at Next but the retailer says those stores still offer valuable multichannel services. Marks & Spencer is reconfiguring its store estate to adapt to how its shoppers now want to spend with it. Eventually, it aims to make a third of its turnover from the clothing and home categories online. It is currently reducing its floorspace accordingly, through both reducing the size of its stores as well as closures.

As these changes occur, here are three key ways that the RXUK Top500 Elite retailers have developed their use of shops:

Using existing stores as collection and returns pointsNext’s customers spent more online (£1bn) with it than they did in its stores (£874.3m) in the six months to July 2019, but the clothing and homewares retailer argues that its shops remain vital because so many of its shoppers want to pick up or return orders there. Simon Wolfson, Next’s chief executive, explained in those results that 50% of its online orders are delivered to its shops, while 82% of returns are made via its shops. “It is counter-intuitive,” he said, “but the fact is that stores have become an important part of our online service, although their rents are way out of kilter with the value they provide as collection and returns centres. So if stores are to remain open, retail rents must fall and, fortunately, that is exactly what they are doing.”

Dunelm, meanwhile, offers free click and collect from 170 stores and enables shoppers to return their online orders in-store as well. Marks & Spencer is looking to a ‘clicks and bricks’ future, in which shoppers use both stores and online to buy in the way that is most convenient for them. Shoppers at its Oban food hall, for example, can use a fitting room to try on the clothes that they buy using click and collect before deciding whether to keep them. John Lewis enables multichannel returns and collection both at its own stores, at branches of Waitrose and at third-party shops.

Argos’ digital format stores enable shoppers to order and collect items within hours, using its hub and spoke logistics model. About 300 of these stores are now located within branches of its sister supermarket, Sainsbury’s, while others are in locations including underground stations.

Despite being an online-only retailer, Amazon enables collection and returns to a range of third-party collection points and via its network of lockers, some of which are in third-party stores such as Morrisons.

IN-STORE IN FOCUS

Finding new ways to bring shoppers in-store is key for retailers as online continues to grow, writes Chloe Rigby

How the UK’s Elite retailers are developing their store experiences


IN-STORE IN FOCUS

In-store experiences John Lewis is focused firmly on experiences as a way to bring visitors to its stores. In November, the retailer opened its new look ‘customer centric’ Southampton store, which it described as an ‘experience playground’ where shoppers can listen to talks and take part in workshops offered by a team that includes interior designers, chefs, wine experts, gardeners, gadget specialists, personal stylists and make-up artists. The store includes the first Waitrose Cookery School within a branch of John Lewis. Peter Cross, customer experience director at John Lewis & Partners, said at the time, “Our goal is to offer customers unrivalled access to expertise and impartial advice in as many areas of their lives as we possibly can – in a way that is uplifting and inspiring.

“We know that shopping for a new gadget or beauty product can be a daunting experience, with so much choice on offer. We want to help navigate customers through that. Our new concept shop is an example of how we’re reinventing the department store of the future to make us stand out from the competition.”

At Marks & Spencer, 35 stores currently offer a ‘fit and style’ personal stylist service in-store that is designed to complement its online styling service.

In-store technology Marks & Spencer has aimed to build more inspirational stores which feature digital technology while offering multichannel collection and returns services. In 2018, it launched trials of ‘mobile, pay, go’ payment that enable customers in six of its convenience stores to avoid queues by completing their transaction on their mobile devices. It has also deployed more than 7,000 mobile devices to enable staff to search for products and get real-time stock updates, as well as ordering items for customers.

Last year, Argos opened its first self-service store, within Sainsbury’s Dulwich branch, where shoppers browse the range and pay for the item they choose via a tablet computer before picking up their order at a new collection pod. At the time, Sainsbury’s Argos chief executive, John Rogers said, “We’re continuing to test innovative new formats and, with the launch of our first self-service digital store, we’re offering shoppers a speedier way to pay, as well as giving our colleagues more time to serve and help customers.”

Dunelm’s store staff are equipped with tablet computers which they can use to assist shoppers who want to see the larger online range, or order an item for in-store collection or home delivery.

John Lewis is also using digital technology to attract shoppers into its stores. Last year,

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John Lewis’ Southampton store is its first to have an in-store Waitrose Cookery School

Argos shoppers can browse and pay from a tablet, before collecting their goods at a collection pod

it trialled a virtual reality and augmented reality experience, Visualise your Space, in its Kingston, Cambridge and Horsham stores to help shoppers see how their interiors ideas would look in their own homes. Caitlin Price, John Lewis’ head of buying for furniture and flooring, said at the time that customers find it hard to go for bold looks because they are unable to visualise them in their own home, and instead revert to “safer” grey or beige furnishings. “This new technology will enable customers to be braver in their choices, and test technology that architects and interior designers have been using to visualise their designs,” she said.


In 2020, logistics is firmly centre stage in the customer journey and experience, enough to be flagged up by retailers in their advertising and social media posts. It’s a far remove from when fulfilment was a strictly back-end concern. Today super-convenient delivery, collections and returns promises are powered by strong order and warehouse management and enterprise resource planning systems. The perception is that customers often buy from a given retailer based primarily on the delivery, collections and returns experience.

But while leading retailers, including those in the Elite and Leading groups of RXUK Top500 retailers, have developed such services, there’s evidence from this year’s RetailX research that others are choosing to drop the services that may make less economic sense for them. Instead of offering nominated day and time deliveries, many are choosing to offer a standard next-day delivery service, or a choice of next-day collections. Same-day delivery and collections are very much the preserve of a few leading supermarkets and retailers. The others are concentrating on making sure that their delivery promise is both robust and profitable.

Leading the way on deliveryMany of the thousands of products that Argos sells are available elsewhere. That’s why the retailer, ranked Elite in Top500 research, has focused on competing on convenient delivery times. Its hub-and-spoke logistics model enables it to get products to shoppers as quickly as possible. Shoppers can order online from anywhere – whether

that’s using their smartphone or in a digital format store – for delivery as quickly as same-day for orders placed by 6pm. Shoppers appear very willing to pay for such convenience. In its 2018/19 full-year results, parent company Sainsbury’s reported that use of Argos’ £3.95 same-day delivery service had grown by 13% over the year, while the service could deliver to 90% of UK postcodes within four hours.

Amazon has also focused on delivery as it has moved from cutting prices and offering free delivery to a strategy of convenient delivery. The retailer, like Argos, uses local hubs to ensure that stock is so close to customers that it can be delivered to Prime members in as quickly as an hour. Non-members can choose to pay for a range of eight delivery services, or to pick up from a collection point. There’s also free delivery for those spending a minimum amount who are willing to wait for their parcel. Both, however, are in a small

minority. In 2020, 5% of Top500 retailers offer same-day delivery, although 61% offer next-day delivery, up from 58% a year earlier.

Convenient collectionsJohn Lewis was an early leader in offering convenient collections when it took the step of offering collections not only from its own stores but also from those of its sister business Waitrose. It also offers collections through the CollectPlus network.

Argos’ fast collection service is also proving effective. Shoppers can – and do – pick up their orders within minutes of ordering. Same-day collections rose by 10% in its last financial year. In the Dulwich branch of Argos in Sainsbury’s, shoppers can even browse and pay on self-service tablets and collect orders from dedicated pods.

Amazon may not have a UK-wide network of stores but it offers customers

FOCUS ON FULFILMENT

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Argos puts delivery and collection front and centre of its website

The way leading retailers deliver and enable collections and returns provides a competitive advantage


FOCUS ON FULFILMENT

a wide variety of collection options, from local collection in third-party stores to thousands of lockers around the UK, in locations from airports to underground stations and other retailers’ stores. Yet Top500 research shows the proportion of retailers offering click and collect has fallen to 54% from 56% in 2019, while only 19% offer next-day collection – down from 26% in 2019.

Delivering the luxury touchWhen shoppers are paying more for their goods, they also expect more from delivery. Shoppers in areas including central London can opt for same-day delivery from Net-A-Porter, when ordering by 10am – or same evening delivery, when ordering by 2pm. They can also select their own nominated day for delivery up to seven days. Same-day premier services come with a £12 fee, although shipping is free, at the time of writing, on orders over £200. Other delivery options include next business day, while £5 standard deliveries are delivered within three days. More flexibility is offered through DHL’s on demand delivery service, where shoppers can schedule their deliveries, leave it with a neighbour, or collect from a DHL service point or parcel locker. Customers then have 28 days to return their order; free collection can be booked online. However, the retailer notes that high levels of returns could result in an account being closed.

Upmarket supermarket Waitrose – whose Portishead branch used to deliver ‘to your yacht’ – has more recently piloted in-fridge deliveries, through its While You’re Away delivery scheme. Drivers use smart locks and one-time codes to access customers’ homes where, equipped with shoe covers and body cameras, they deliver to the kitchen, even putting chilled items away in the fridge.

Returns that workShoppers at more than 100 retailers can return – and/or collect – their online orders via supermarket Asda and its Asda toyou service. First introduced in 2015, it can now be managed from a phone or from in-store screens, where returns labels can be printed

out in store. More third-party collection points have sprung up in recent years, and RetailX research suggests that in 2020, retailers are less likely to accept returns in their own stores; availability has fallen by five percentage points to 43%. At the same time, they are more likely to enable their customers to return an item via a third-party location (+5pp to 25%). Perhaps any retailers that made the switch found it more cost-effective to do so.

Members-onlyMany retailers are now reserving the best service for subscribers. Pureplays such as Amazon and grocers Ocado and Tesco have led the way in this. Members of Amazon’s Prime membership scheme can get deliveries in as little as one hour, while shoppers at the supermarkets sign up to delivery pass schemes that enable them to pay once for free deliveries during peak or off-peak times. H&M’s loyalty club members are encouraged to download its app and get free collection plus free delivery on orders worth £20 or more.

It’s an approach that has certainly worked well for Amazon. In its 2019 full-year figures, it said that its £79 a year Prime scheme – which comes with a range of benefits – had more than 150m members around the world.

Sustainability mattersMany Top500 online and multichannel retailers are now urgently rethinking the way that they send goods out – from the packaging they use to their transport fleet. Plastic bags are fast being replaced with printed paper bags and compostable wrappers. Amazon has even experimented with doing away with packaging altogether and sticking address labels to product boxes.

Meanwhile, couriers are introducing electric vehicles into their delivery fleets. DPD, for example, has recently taken delivery of what it believes is the largest single UK commercial electric vehicle order to date – 300 electric Nissan vans. That takes its total electric fleet to 450 and it aims to reach 500 by the end of the year. DPD chief executive Dwain McDonald said, “These vehicles are changing the way we work. It isn’t just a case of plugging them in and saying, ‘Job done’. We are rethinking and re-engineering how we deliver parcels now and in the future, with different route networks and new types of depots. It is an all-encompassing revolution for our industry and electric, emission-free vehicles are at the heart of that vision. This enables us to say to more and more customers, ‘We’re delivering your parcels emission-free’, which is a key selling point when we are talking to retailers.”

John Lewis has prioritised making it easy for customers to collect their online orders

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HOW H&M IS CHANGING FROM GLOBAL TO LOCAL… SUSTAINABLYIn recent years, H&M has transformed the way it does business. It’s gone from being a one-size-fits-all global giant, to a retailer that still sells around the world, but does so with a more finely tuned local strategy. The fashion to homewares retailer, ranked Leading in RXUK Top500 research, is integrating its online services into its physical stores and is putting customers in charge with a mobile app that helps them connect with online or their local shop – which ever is better for them.

Shoppers can now collect and return their online orders at more and more stores as H&M rolls out this strategy. They can also turn on ‘in-store mode’ to search their local store for the products they want to buy, even from a distance, using text search and visual search. When customers are already in the shop, they can scan clothes tags for more information. They can find out whether sizes and colours are available in the store or online, what the item is made of, how to look after it and how to style it. Customers who sign up to become H&M members can opt for free delivery, collection and access to different ways of paying as the retailer meets shopper demands while, at the same time, getting to know its customers better.

“Our ongoing transformation work to meet customers’ ever-increasing expectations is bearing fruit,” said H&M chief executive Karl Johan Persson in the company’s financial statement for the first nine months of its 2018/19 financial year. He added, “Looking ahead, we remain humble considering the challenges brought by the rapid shift in fashion retail. Our transformation work is therefore continuing at a fast pace in all parts of the company.”

At the same time, H&M is testing new and innovative ideas, with a fresh emphasis on sustainability. Shoppers at its new Stockholm store, for example, can now rent skirts and dresses from its Conscious Exclusive collections. The store is designed to be more inspirational, displaying images shoppers have shared of how they wear H&M products. But it’s also convenient, with payment available through self-service checkouts. In the Netherlands, H&M is testing a bicycle delivery option that’s particularly relevant to that market. In the UK, shoppers can recycle clothes at any H&M store, receiving a £5 voucher in exchange for each bag.

H&M’s strategy is about getting closer and more convenient for its customers. The figures suggest that it seems to be working. Online sales grew by 30% in the first nine months of its 2018/19 year, and overall sales by 12%, while pre-tax profits after one-off costs were 25% ahead, compared to the same time in the previous year.

CASE STUDY

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Shoppers can search products in their local store via the H&M app

Shoppers can recycle clothes at H&M’s UK stores

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WHY JD SPORTS STORES REMAIN VITAL AS THE RETAILER EXPANDS ITS MULTICHANNEL SERVICE

JD Sports has moved upmarket and developed its multichannel approach to retail – while growing sales at the same time.

The retailer, ranked Leading in RXUK Top500 research, is at the heart of a wider JD Group that turned in a 47% rise in sales in the first half of its 2018/19 financial year, including a 10% rise in like-for-like UK sales. Pre-tax profits were also 30% up on the previous year.

At the time, JD Sports executive chairman, Peter Cowgill, said improved conversion rates reflected “consumers’ increasingly positive reaction to our elevated multichannel proposition, where a unique and constantly evolving sports and fashion premium brand is presented in a vibrant retail theatre with innovative digital technology.”

The JD Group says that JD Sports’ “elevated multichannel” approach is attracting more premium brands to sell in its stores, which in turn encourages shoppers to visit. That means, it says, that its network of shops – the group has more than 2,000 sports fashion stores around the world – will remain as least as important as they are now.

Those shops sit firmly in a multichannel context. JD sells online in markets around the world, offering its wares in local languages and currencies, while digital is firmly embedded in its stores. In-store digital devices such as kiosks, web tills and iPads all widen the choice for customers visiting its stores. Visitors can use them to see the full JD Sports range on the website and see where items are held.

The in-store experience extends to the JD mobile app – where users have the option of listening to JDX Radio from wherever they are. Shoppers can search the app for up-to-the-minute brand news. They can view the latest product arrivals from premium brands and can use live search to prompt an automatic list of search queries that are trending at that moment. Push notifications offer information on sales and delivery offers. Customers can only sign up to JD’s unlimited delivery service from within the app. Meanwhile, fast, filter-led navigation is designed to help customers narrow down their search for a product, by size, colour, collection or price, while 360 spin images and product videos enable them to see items up close. Users can scan barcodes for more information or track their orders within the app.

Looking ahead, multichannel is set to remain a focus for JD Sports as it continues to develop its customer experience and to expand its multichannel services into new markets. Its international business will be supported by a new warehouse that’s expected to open this year in Belgium to supply European markets in the wake of Brexit.

CASE STUDY

The JD mobile app helps keep customers up to date with the latest news and products from the brand

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The RetailX Top500 (RXUK Top500) this year has a new name – one that reflects its position within the larger RetailX research and publishing stable. The new name for the listing of the UK’s leading retailers, previously called the InternetRetailing Top500, comes in the sixth year of publication. It comes as RetailX research refocuses on an analysis of European and global ecommerce and multichannel retailing that’s at the same time wider and more in-depth. That analysis recognises the place of the UK’s Top500 retailers in a connected retail landscape that also includes marketplaces and retail brands, and stretches beyond the UK to markets across Europe.

Beyond retailers Many online retail sales no longer take place from regular retail websites. Rather, as the Sankey chart below shows, regular retailers see only about 34% of UK web traffic to the Top500 according to data researched in collaboration with SimilarWeb. The largest share (45%) goes to marketplaces, where a relatively small number of platforms see almost half of all retail traffic that touches Top500 retailers. A smaller share (21%) goes to brands that sell directly to customers. Given these insights into the way that customers shop, it follows that RetailX would look further and more closely at marketplaces and at direct-selling brands. The annual RetailX Brand Index was published late last year and looks at how brands take on the challenges of selling directly to their consumers, rather than via third-party retailers. It also lists the leading pan-European brands that sell across the countries of the EEA plus the UK and Switzerland. Find out more about the RetailX Brand Index 2019 at internetretailing.net/rxbx.

In the coming year that will be followed by the latest edition of the RetailX Europe Top500, and by the first RetailX Marketplaces report. The marketplaces report follows the shopper’s attention as it’s drawn towards destinations that

offer a wider and more international range of goods. It will look at the performance, capabilities and trends of these direct-to-consumer marketplaces that are now a vital location in trading goods, and will assess how both retailers and brands can most effectively use them.

Sustainability is a new focus for RetailX publications, and 2020 will also see the first RetailX Sustainability Report. The report will look at what it means to be sustainable when selling online, and how retailers can help their customers to achieve the reduced carbon footprint that so many now prioritise. It will build on research already covered in 2020 in a new eDelivery report, Sustainability after the buy button 2020. That report looks at delivery emissions and plastic waste and what retailers in the UK and Europe can do to reduce them - in a context in which shoppers seem enthusiastic about protecting the environment but have as yet done relatively little to change their online shopping habits or to pay more to mitigate the environmental effects of their purchases.

Beyond the UKThe next RetailX Europe Top500 will bring the latest ranking of leading retailers selling in the 32 markets of the EEA plus the UK and Switzerland. As with previous editions, it will assess how retailers and brands approach selling to a larger geographic area where customers speak a wider number of languages and buy in a wider number of currencies, but with regulatory alignment within a single market. Case studies analyse how the most successful retailers, including Allegro, Argos, Darty, H&M, Rue du Commerce and Zara, use ecommerce within their businesses. Find out more about the RetailX Europe Top500 report at internetretailing.net/rxeu

Alongside this pan-European coverage, we also report in detail on markets worldwide, through the analyst reports produced by the Netherlands-based Ecommerce Foundation, now part of the

BRAND ENGAGEMENT

The annual listing of UK Top500 retailers is now part of a wider and more in-depth focus on the state of ecommerce and multichannel retail across Europe

How the RXUK Top500 fits into RetailX research

RETAILX RESEARCH


COUNTRIES AND

MARKETS

SECTOR REPORTS

MAC

RO A

NAL

YSIS

research, drivers and exemplars by sector

data, insight and analysis on trading conditions by m

arket

PERFORMANCE RANKINGS OF RETAILERS AND BRANDS

Brands 21%

Marketplacehosts 45%

Otherretailers 34%

Microsoft 13%

Apple 2%Other brands 6%

Amazon 25%

eBay 18%

AliExpress 1%Other marketplaces 1%BT Shop 3%Argos 2%Tesco 1%John Lewis 1%Google 1%Asda 1%Asos 1%Currys PC World 1%Marks & Spencer 1%Screwfix 1%Steam 1%Ikea: 1%Sainsbury's 1%B&Q 1%Next 1%CeX 1%

Others 15%

RETAILX RESEARCH

RetailX family. During 2020, the Ecommerce Foundation Country and Regional Reports will include information on the performance of top retailers and brands selling direct to shoppers within each market, alongside analysis of the sector and of related economic and market drivers.

Recent Ecommerce Foundation reports are currently available on markets including India, Australia, China and the USA, while an exhaustive Europe-focused programme of reports is planned for the coming year. The first two will cover the Danish and UK markets. Find out more about the country and regional reports at retailx.net/countries.

Across sectorsRetailX analyst reports focus on individual retail sectors to give our audience of ecommerce and multichannel retail professionals new levels of insight into the factors driving customer behaviour, and retail performance within each. The latest sector reports are on beauty and cosmetics, fast fashion and luxury. Each provides the strategic and commercial context in which the best retailers and brands perform in their market sectors. They combine more than four years of in-depth company performance research with

RESEARCH AND ANALAYSIS FOR THE RETAIL PROFESSIONAL

analysis of sector dynamics to help retailers better understand the current state of each sector and plan for the next five years. Find out more about the sector reports at retailx.net/sectors.

FIGURE 14. MARKETPLACES RECEIVE A DISPROPORTIONATE AMOUNT OF UK WEB TRAFFIC

This chart shows the UK web traffic to the websites of the Top500

Unique web visits researched in collaboration with RetailX knowledge partner SimilarWeb

FIGURE 13. THE RETAILX PORTFOLIO

EUR OPE TOP5 00 REP OR T 2019 A performance ranking of the largest ecommerce and multichannel retailers in the EEA and Switzerland

In partnership withRXEUTOP500

UK TOP5 00 REP OR T 2020 A performance ranking of the largest ecommerce and multichannel retailers in the UK

In partnership with

RXUKTOP500

A s p e c i a l r e p o r t d r a w n f r o m t h e I R E U To p 5 0 0 e c o m m e r c e a n d m u l t i c h a n n e l r e t a i l p e r f o r m a n c e i n d e x

In partnership with

B R A N D I N D E X 2 0 1 9

D I R E C T - S E L L I N G B R A N D S I N E U R O P E

www.internetretailing.net

Published globally with

RXS03: Published in London, © 2019 RetailX Limited. Page 1 of 24www.retailx.net

INTRODUCTION

In 2017, Chinese consumers accounted for around a third of the personal luxury goods sector, representing approximately four times the value of the total domestic luxury market in China. The global market for personal luxury goods is forecast to grow to €290bn by 2020.

Between 2008 and 2017, the personal luxury goods market grew from €167bn to €262bn (5.1% CAGR, 2008-2017), pushed by these Chinese customers. Yet in July 2018, fewer than 60% of luxury websites offered a Chinese language version.

The luxury sector has been relatively slow to adapt to digital when compared to other retail sectors. In this report, we review the digital-first startups, along with established brands, that are now embracing digital.

SHARELINES:

Chinese consumers spend one in every three dollars spent on personal luxury goods globally

Europe accounts for 33% of the global personal luxury market, yet only 19% of total luxury sales are attributed to Europeans!

The pre-owned segment is a growing aspect of the luxury market

Pureplay luxury retailers’ share of all online luxury sales has declined to around 25%

TL;DR

The internet abbrebviation ‘TL;DR’ means ‘Too Long; Didn’t Read’. In that spirit, here are some consideration points from this report:

• The luxury sector grew 5.1% CAGR (Compound

Annual Growth Rate) between 2008 and 2017

(€167bn to €262bn)

• The personal luxury goods market is predicted

to grow to €290bn by 2020

• Chinese consumers have become a major force

and now account for one in every three luxury

purchases globally. While the emergence of the

online channel has increased the reach and

growth prospects of luxury brands, it has also

increased costs

• While Chinese luxury consumers have driven

growth in the sector, it is prone to volatility based

on domestic and international events (a Chinese

government crackdown on graft; the cooling of

US-Sino trade relations)

• Luxury brand owners have exploited their

financial power (Richmond’s acquisition of

YNAP) and flexed IP (24sevres.com - LVMH)

• We profile the luxury groups (the Multibrands)

and provide dashboards for their trading fascias

• Our 23 companies offer four languages each

on average, with English, French, German and

Chinese the most frequent

• Our semantic analysis shows the growing use

of digital retail terms in the listed companies’

Annual Reports, 2008 to 2017

• The circular economy – second-hand or

‘recommerce’ – is a new opportunity in luxury,

covering items from luxury cars to vintage

watches

OUR ANALYST THOMAS ANDERSSON

Thomas is a retail sector analyst with over a decade of experience starting and divesting a multichannel retail business. He is a grants evaluator for Vinnova, a Swedish R&D government agency.

[email protected].

CEO: Ian JindalHEAD OF RESEARCH: Martin ShawSENIOR ANALYST: Thomas AnderssonCOMMERCIAL DIRECTOR: Andy JamesDESIGN: Marzena ZychowiczADDRESS: RetailX, 123 Cannon Street, London, EC4N 5AU © 2019 RetailX Limited

Welcome to the RetailX sector analyst reports, where we combine RetailX’s four years of in-depth company performance research with analysis of the sector dynamics.

Our reports provide the strategic and commercial context in which the best retailers and brands perform in their market sectors.

We have two reports each year: The first is our Analyst Report, focusing upon the current performance and sector dynamics. The second is our Strategic Report, which looks through a strategic planning lens at the 2-5 year outlook – showing glimpses of the future in the current practice of the best.

The full schedule of 2019 Sector Reports can be seen at retailx.net/reports

Let us know of sectors you’d like to see us cover – [email protected]

MARTIN SHAW HEAD OF RESEARCH, RETAILX

Martin devises the scope and methods of RetailX’s research.

[email protected].


LUXURY 2019


THOMAS [email protected] Thomas is a retail sector analyst with more than a decade of

experience starting and divesting a multichannel retail business. He is a grants evaluator for Vinnova, a Swedish R&D government agency


Martin devises the scope and methods of RetailX’s research

CEO: Ian JindalHead of Research: Martin ShawSenior Analyst: Thomas AnderssonCommercial Director: Andy JamesDesign: Marzena ZychowiczAddress: RetailX, 123 Cannon Street

London, EC4N 5AU© 2019 RetailX Limited


BEAUTY & COSMETICSINTRODUCTIONBeauty & Cosmetics brands have long relied on celebrity endorsements to promote products and department stores to sell products. This is changing. While the rise of online shopping has had less of a direct impact on the Beauty & Cosmetics sector than might be expected1, department stores – a key physical channel to consumers for Beauty & Cosmetics brands – have borne the brunt of the shift to online retail. The indirect impact on the Beauty & Cosmetics sector has been a loss of consumer coverage.

Beauty & Cosmetics companies have responded by investing in direct-to-consumer (D2C) business models, as well as by setting up internal venture capital funds to capitalise on the potential from startup brands and technology vendors. Disruptive startups, such as Revolution Beauty, are challenging the status quo by adopting Fast Fashion techniques.

YouTube, Instagram and other social media platforms have impacted on how consumers perceive celebrity, leading to the rise of social influencers. Some of these have gone on to develop their own product ranges, notably Huda Kattan, who in 2018 was ranked 37th on the Forbes list of America’s richest self-made women2.

SHARELINESThe rise of ecommerce has only indirectly impacted Beauty & Cosmetics Celebrity marketing has been disrupted and diluted by the rise of influencersThe companies covered in this report are, on average, 100+ years oldLeading Beauty & Cosmetics companies are now operating internal VC fundsAugmented reality (AR) applications are gaining traction in Beauty & Cosmetics The Fast Fashion business model is being reinvented in the cosmetics space

1. https://fashionista.com/2017/05/beauty-products-packaging-shopping-habits2. www.harpersbazaar.com/uk/beauty/a26320975/influencers-beauty-collaborators-brands/

DEFINITION DIRECT-TO-CONSUMER OR D2C COMMERCE is when brands sell or promote their products directly to consumers rather than via wholesalers and retailers.


• Beauty & Cosmetics companies have been indirectly impacted by the shift to multichannel retailing but the effect on department store chains, traditionally a key retail channel for the sector, has been far greater. This has affected the visibility of Beauty & Cosmetics brands

• Social media has had a fundamental impact on the sector. The rise of influencers has diluted the marketing power of celebrities while increasing the number of relationships that brands need to manage

• In the last five years, four of the Top 10 Beauty & Cosmetics companies have created internal venture funds to acquire

new influencer-driven brands. This has recently extended into technology investments, such as L’Oréal’s acquisition of Modiface, a technology it recently used to promote its brands on Amazon

• Acquiring D2C brands has become an important tool for the larger Beauty & Cosmetics companies as they evolve their business models

• RetailX forecasts a further move towards D2C, which will continue as the relative importance of ecommerce over the high street grows. This move will be further accelerated by entry into new geographical markets where there are no historical reseller relations

ONLINE SALES In 2018, these represented c12.5% of the Beauty & Cosmetics market worldwide. Sales patterns vary by territory. For example, in China, consumers made 23% of all beauty retail purchases online in 2017 (source: Credit Suisse). Sector leader L’Oréal disclosed that 11% of its sales were generated online in 2018.

Welcome to the RetailX Sector Analyst Reports, where we combine RetailX’s four years of in-depth company per-formance research with analysis of the sector dynamics.



AMERICA EUROPE ASIA, PACIFIC

eCRRX/202001

2020 Reports

DENMARK 2020eCommerce Market Report

In partnership with


eCRRX/202001

2020 Reports

GERMANY 2020eCommerce Market Report

In partnership with

PRIVATE EQUIT YDrivers of our industry ’s future

RXPETOP500

THE SUSTAINABILIT Y REP OR TDrivers of our industry ’s future

RXSTTOP500


THOMAS [email protected]

Thomas is a retail sector analyst with more than a decade of

experience starting and divesting a multichannel retail business. He is a grants evaluator for Vinnova, a Swedish R&D government agency.


Martin devises the scope and methods of RetailX’s research.

CEO: Ian JindalHead of Research: Martin ShawSenior Analyst: Thomas AnderssonEditors: Chloe Rigby, Jonathan WrightCommercial Director: Andy JamesDesign: Marzena ZychowiczAddress: RetailX, 123 Cannon Street London, EC4N 5AU© 2019 RetailX Limited


•Fast Fashion’s growth has been due to market drivers, including Just In Time manufacturing process, globalisation, low-cost supply chains, rising Internet penetration, increasing household disposable income, historically low interest rates, and the near-shoring of supply chains

•Market inhibitors include concerns about sustainability and labour conditions, and supply chain exposure to political uncertaintyonfreetradeandtariffs

•Benetton and Inditex adopted JIT around the same time but interpreted theprocessesdifferently.Benettonproduced large volumes of a narrow set of SKUs in raw form and dyed

them to meet customer demand. Inditex’s produced a limited volume ofdifferentlinestocreateahighthroughputofdifferentgarments.Inditex’s interpretation – Fast Fashion – revolutionised the fashion industry

•Online shopping’s growth in the 2000s, low-cost manufacturing and near-shoring combined to make Fast Fashion mainstream

•Sustainability and labour concerns have not to date had a major impact on Fast Fashion retailers, nor overall customer demand. However, Fast Fashion retailers now sell ‘sustainable collections’ to cater to this growing consumer preference.


FAST FASHIONWelcome to the RetailX Sector Analyst Reports, where we combine RetailX’s four years of in-depth company per-formance research with analysis of the sector dynamics.



INTRODUCTIONFast Fashion has cemented its status as the driving force within the fashion industry. The sector emerged in the late 1990s when runway creations were quickly copied and introduced to consumers at a much cheaper price – a development enabled by cheaper Far Eastern supply chains. Coupled with increased internet penetration from the early 2000s, the legacy ‘two-season-fashion’ model (AW/SS – Autumn/Winter, Spring/Summer) turned into ‘evergreen fashion on steroids’.

So entrenched has the Fast Fashion approach become that even luxury and higher-end fashionbrandshavedevelopedmonthlyproduct“drops”(high-profilelimitedreleasesof products) as a marketing hook, rather than their more sedate biannual seasons.

Fashion retailers increasingly include a limited range of Fast Fashion products within their overall mix fast items and seasonal continuity. This is a marketing necessity to entice customers to visit stores or websites, even if those products are sold at break-even or a loss.ThisisnottobeconfusedwithretailersthathavemadeFastFashionaprofitablebusiness approach at scale.

SHARELINESThe advent of social media has dispersed and democratised celebrityConsumer concerns about sustainability do not appear to have slowed the market’s growthThe Japanese automotive industry’s Just In Time (JIT) manufacturing method influencedFastFashionZara is a frontrunner in the Fast Fashion industryFrom luxury to value brands, Fast Fashion has permeated the industryFast Fashion’s growth was aided by several market drivers, while its continued growth is challenged by a mix of inhibitors


eCRRX/202001

2020 Reports

UK 2020eCommerce Market Report

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DEFINITIONS

TABLE 9. DEFINITIONS

The multichannel landscape is more complex than merely ‘having a website’ or ‘operating a store’. In choosing which companies to include in the RetailX Top500, we have considered companies’ intent, capabilities and activities around the recruitment and monetisation of customers. The definition of a ‘retailer’ for inclusion in our research is:

DESTINATION: the retailer has created a destination that, in the minds of customers, is a source of product, service or experience. Whether this destination is a shop, a site, a place, a time or an event, it’s the sense of ‘locus’ that counts.

FASCIA-FOCUSED: the assessment focuses on individual trading names, rather than a parent company that may operate more than one brand. Since the group structure is invisible to customers, it does not have a bearing on the position of brands owned by a group. The challenge is to turn group capabilities into trading advantages that the customer would notice across brands.

PURPOSE: the retailer has created goods and/or services for the specific purpose of selling, for consumption by the purchasing consumer.

MERCHANDISING: the retailer actively sells and is not just a portal for taking customers’ money. This means the selection, promotion and tailoring of retail offers for customers.

ACQUISITION: the retailer actively markets, recruits and attracts customers with a promise or proposition to the destination.

SALE: the retailer takes the customer’s money. The retailer owns the transaction as the merchant of record.

RECOURSE: the retailer is responsible for the service, fulfilment and customer satisfaction owing from the sale.

EXCEPTIONS: in every good list there’s an exception, where we may include a certain business due to its influence upon retailers and retailers’ customers. Some of these companies will be included within the Top500 and others are tracked for information on their impact on retailers.

COMPANIES EXCLUDED FROM THE TOP500

MARKETPLACES: where a candidate retailer is simply a marketplace, the company is not featured. Where a marketplace undertakes customer acquisition, manages payment, customises offers and recommendations and offers recourse on purchases, then the company will be eligible for inclusion.

PURE TRANSACTION/TARIFFS: where ecommerce is ancillary to the primary purpose of a business, we will not necessarily include them. Online payment for gas or electricity is excluded since the purpose here is to supply energy. Travel companies are not included in the Top500. We have also excluded media-streaming services.

BUSINESS-TO-BUSINESS AND DIRECT-SELLING BRANDS:

while the scope of retail is normally direct to consumer, two trends are challenging this – the move for brands and previously solely B2B businesses to sell direct to consumers; and the increasingly retail-like behaviour of B2B brands, in terms of acquisition, promotion, personalisation and service. We have therefore included certain B2B businesses and direct-selling brands.

WHAT CONSTITUTES A RETAILER?


TABLE 10. OUR METRICS

0. FOOTPRINT DIMENSION0.1 UK retail turnover, ranging from £1m to £56bn – average £760m0.2 The ecommerce subset of the above, ranging from £500,000 to £10bn – average £350m0.3 UK web traffic, ranging from 380,000 to 4.4bn page views per annum – average 87m views per annum0.4 Number of UK stores, ranging from 0 to 11,500 – average 124 stores

1. STRATEGY & INNOVATION: 1.1 Strategic practice, including an expert-designated selection of metrics that catalogue a retailer’s embrace of technological or organisational best practice 1.2 Innovative practice, including a selection of metrics from other Dimensions that, to date, are only used by the leaders

2. THE CUSTOMER: 2.1 Customer service response time and helpfulness – Facebook and email 2.2 Desktop and mobile homepage performance, including engineering and responsiveness 2.3 Mobile and desktop website navigation – the ease of finding a desired product, including tabs, icons, search and filtering 2.4 Customer feedback – incorporation of customer reviews and product ratings on the product display page 2.5 Mobile app – the incorporation of customer reviews and product ratings in mobile app product display pages and the personalisation, performance and user experience of apps [retailers with mobile apps]

3. OPERATIONS & LOGISTICS: 3.1 Delivery capability including 10 metrics covering the range of options, and competitiveness of timeframes and pricing 3.2 Returns capability, including 10 metrics covering the ease of the returns and refund process to the customer, and the range of options, including return to store 3.3 Collection capability, including nine metrics covering the number, type and convenience of collection locations and the costs and timeframes of the services 3.4 An assessment of the mobile website’s usefulness to customers who want to see the availability of stock, both for ecommerce orders and in local stores 3.5 Mobile app – visibility of stock availability and locations in the app [retailers with mobile apps]

4. MERCHANDISING: 4.1 Customer-perspective review, including 23 metrics covering design, navigation, the relevance of search results, product information and visual appeal 4.2 Mobile app assessment, including nine metrics covering use of notifications, product display and personalisation [retailers with mobile apps] 4.3 Merchandising and product review, including number and depth of promotions, the fraction of a retailer’s range with reviews and descriptions, the number of images per product and the fraction of range that is out of stock [largest retailers]

5. BRAND ENGAGEMENT: 5.1 Social media presence and availability, including 22 metrics, taking into account size of audience and interaction with it on Twitter, the net change over three months and use of 10 social networks, email, and blog 5.2 Mobile and desktop website review – assessing the integration of social media, sharing and social validation 5.3 An assessment of mobile apps’ incorporation of social media [retailers with mobile apps] 5.4 Brand-name keyword searches – total and YoY increase by UK consumers

6. MOBILE & CROSS-CHANNEL: 6.1 Mobile home page performance, including engineering and responsiveness 6.2 Mobile website assessment, including the use of screen real estate, the ease of navigation and the ability to track the availability of goods at physical stores 6.3 Multichannel features, taking into account use of physical store estate for order fulfilment and return, store information on the website, in-store functions of apps and cross-channel loyalty accounts [retailers with stores] 6.4 Mobile app, including 24 metrics, measuring the usability and functionality of apps 6.5 Digital store assessment of the Top150’s London stores.

SUMMARY OF ELEMENTS INCLUDED IN EACH DIMENSION:

RESEARCH PARAMETERS


KNOWLEDGE PARTNERS

THANK YOUOur thanks go to our title sponsor Klarna for helping us to bring our insights and findings in this report to professionals working in ecommerce and multichannel

KNOWLEDGE PARTNERSRetailX would like to thank the following Knowledge Partners for their original data insights as well as support, advice and guidance in producing the RXUK Top500.

KLARNA.COM

builtwith.com eggplantsoftware.com

similarweb.compi-datametrics.com


This year in retail will inevitably be dominated by the UK’s departure from the EU – and by planning for the arrangements that are to follow the end of the transition period in January 2021, once agreed.

Brexit has now moved from general uncertainty to specific uncertainties. Previously there was some expectation or hope that Brexit would either not happen at all or would happen as a ‘soft’ rather than a ‘hard’ Brexit. Both would have had the effect of little or no change to customs, tariffs and immigration rules. The general uncertainty of that time has now gone, shown to be a phony war. Now the ecommerce and multichannel retail sector is faced by specific uncertainties around labour, skills, imports, exports and the wider supply chain. Each of these represent a specific challenge to retailers as they re-examine the costs and methods of doing business. After 2020, selling abroad will have new meaning.

At this point we’d be delighted to be able to give words of comfort or specific advice on dangers to avoid and opportunities to take. But at the time of writing, all we can say is that the work is to be done, rather than having been done.

However, there’s one final, and perhaps more upbeat, point to make. That to reiterate our findings from the pages of this report that continue to show retail performance steadily improving across the wide-ranging metrics that RetailX researchers map. As last year, it’s not just the Elite and Leading retailers who show these steady improvements, but the Top500 as a whole. And as last year, it’s clear that businesses are moving away from features that perhaps do not work as well or as profitably for them as they might have expected, while doubling down on those that do. To take just one example: while more are offering next-day delivery, fewer now enable next-day collection. This illustrates a mature, evolving industry that, we would argue, is now very well-placed for whatever comes next.

As the next chapter unfolds, we’ll be continuing our research both in the UK and across the wider European market. And, as always, we’re interested in how we can extend our research and improve the quality of our findings. Get in touch with ideas and potential datasets via [email protected] or tweet @RetailX.

CONCLUSION

In conclusion

EDITOR:

Editor CHLOE RIGBY

Editor-in-Chief IAN JINDAL

DESIGN:

Design Manager JULIA WEBBER

MARKETING:

Marketing and Circulation ADDISON [email protected]

SALES:

Commercial Director ANDY [email protected]

Group Creative Solutions Director MARVIN [email protected]

RESEARCH:

Head of Research MARTIN SHAW

Research Project Manager FERNANDO DOS SANTOS

© RetailX Limited, 2020.

This report may not be stored in a retrieval system, distributed or sold in whole or in part without the publisher’s express permission. Fair quotation is encouraged, with a link to the report’s URL on RetailX.net or InternetRetailing.net. All charts and figures marked with are provided under the Attribution-NoDerivatives 4.0 International (CC BY-ND 4.0) license (https://creativecommons.org/licenses/by-nd/4.0/). You are welcome to use these in full with a link to this report, retaining the copyright notice

This report is based upon our reasonable efforts to compile and analyse the best sources available to us at any given time. Opinions reflect judgment at the time and are subject to change.

RetailX at InternetRetailing Media Services Ltd123 Cannon Street,London, EC4N 5AUTel: +44 (0) 20 7062 2525Printed in Great Britain.ISSN 1759-0582www.retailx.net

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