Explore the transformation of Britain’s High Street, the key KPI’s today’s retailers should be examining, and how a potential Brexit could impact Britain’s consumers

Our guest is Kyle Monk, Head of Insight and Analytics at the British Retail Consortium. In his role, Kyle manages a team of economists and analysts who collect key metrics that measure the health of the UK high street.

Prior to joining the BRC, Kyle worked in policy research and for cross border financial technology suppliers

Episode 40 of RETHINK Retail was recorded on October 22, 2019

TRANSCRIPTION

Julia Raymond:
Hello, today’s episode of RETHINK Retail features my guest Kyle Monk. Kyle joins us today from London where he works as the head of insight and analytics at the British Retail Consortium, also known as the BRC. Kyle, will you start us off by telling us a bit about your background and what you do with the BRC?

Kyle Monk:
Sure. So I’ve worked in retail analytics for just over eight years now. Prior to working here, I’ve worked in policy research and worked for cross border financial technology suppliers. So I moved to the BRC six months ago. I saw an opportunity to take advantage of both skill sets. In previous roles, I primarily worked on market intelligence and sort of cross border data reporting projects. But now I’m managing a team of economists and analysts, basically collecting the sort of key metrics that we use to measure the health of the UK high street.

Julia Raymond:
That’s wonderful. And I noticed that the retail is the largest private sector employer in the UK and there was a stat I saw that 1 in 10 people are working in the retail industry.

Kyle Monk:
Absolutely.

Julia Raymond:
So how do you see the industry evolving? You said you’ve been doing like analytics for eight years now.

Kyle Monk:
Yeah, so the transformation of UK retail has been substantial over the last five years. So there’s been, you know, a combination of, I imagine what you’ve seen in the States. So disruptive new retailers entering the market, primarily visual space, and also the way the consumer is shopping fundamentally changing as well. So online retail is definitely been the catalyst. So I think around 20% of all UK retail spend now happens online and you know, brands that began investing early in digital are thriving for the most part, despite the sort of negative headwinds that we’ve got through, you know, macro factors and British [inaudible 00:01:52] as well. And we’ve got a number of actual, you know, pure play digital retailers. They’re home grown like ASOS and Boohoo who have gone on to go from nothing essentially to become industry juggernauts in a very short space of time.

Julia Raymond:
Certainly.

Kyle Monk:
I guess the unfortunate sort of other side of that is the fact that a lot of retailers didn’t plan early enough. And if you follow the British headlines at all, you’ll see, you know, Death of the High Street, Retail Armageddon is a fairly popular headline. We’ve had a lot of CBAs, we’ve had a lot of Browns going to administration. The stakes are a lot higher than they used to be. You know, that that consumer piece I was talking about, they’re far more discerning than they used to be. You know, there’s expectations of next day delivery, of you know, ethical supply chains, things that, you know, wouldn’t even have sort of been in the popular consciousness even a few years ago are now expectations on behalf of the British shopper.

Julia Raymond:
Mm-hmm (affirmative) next day delivery, sustainability, really hot topics we’re seeing as well at RETHINK Retail. And you mentioned this number is pretty huge. 20% of retail sales in the UK are made online. Do you know how that compares to the global statistic? It just seems high.

Kyle Monk:
So it varies. I mean, so in the US, I think you’re higher. I don’t know the US figure off the top of my head. I think you’re more like sort of 30, potentially edging up towards 40, but I mean, that varies by category, right. So that’s the headline that you know, we’ve got a very good supermarket and food infrastructure in the UK, but supermarkets and food sales are only about 9% share of spend online. Whereas things like electronics as you can imagine are closer to 15, and that’s sort of the max that we see. And you can see that in the high street as well. You know we had, I don’t know if you’re familiar, but Macklin’s are sort of, they were a brick-and-mortar electronics supplier and they went into administration last year just because you’ve got so much competition in that space. You’ve got Amazon from the States, and we’ve got our own sort of digital disruptors in that space as well.

Julia Raymond:
Definitely. And is next day delivery something you’re seeing more and more retailers providing in the UK? Is the infrastructure and the landscape honestly, is that set up for fast progression with delivery?

Kyle Monk:
We’ve got good infrastructure here in the UK. You know, living in London, we’re fortunate to have it better than most. We’ve got one hour delivery in the case of some retailers who are trialing that.

Julia Raymond:
Wow. And that is that grocery or is that some retailers in apparel and things?

Kyle Monk:
It’s a mixture really. So I mean, lots of brands are trying different things. So the Co-Op, a big supermarket over here, are actually partnering with Deliveroo, who are a sort of food … Traditionally been a restaurant to consumer food delivery service, but they’re using the courier infrastructure to get their sort of fresh food and produce from their convenience stores to customers, and they’re eating the delivery costs while they trial that to see how it works.

Kyle Monk:
So you’re seeing more of this sort of radical partnerships to help sort of cut down the friction in the last mile. But yeah, Amazon really, to be honest, has been the main company that sort of put that expectation to consumers’ minds. As soon as they got started offering Prime, and you know in the UK we’ve got a high Amazon usage. I think there’s a stat somewhere like everyone in the UK has used Amazon at least once or something close to that. That is where the expectation come from and now everyone’s having to adapt.

Julia Raymond:
Definitely. I saw a stat for US. It was 80% of households, if you’re just looking at the flat numbers, because some households have more than one prime member, but 80% of households use Amazon Prime. So definitely seeing a lot of expectations changing because of them. How do you feel about … you mentioned like some of the groceries are partnering with Deliveroo and other services to expedite on their delivery capabilities. Do you think this is something that will continue where we see mostly partnerships or do you think they’ll eventually either acquire or start offering delivery directly?

Kyle Monk:
I think brands have to understand their own strengths and weaknesses. So for some companies, they’ll be able to build their own infrastructure and ship that. For others, it’ll make more sense to partner with companies who are better in that space. And we’ve seen it particularly in the grocery market where things are a bit more competitive over here.

Julia Raymond:
Kyle, so you are the Head of Insight and Analytics. So you’re obviously well-versed and in the data space and as these retailers, as you said, become more experiential focused, are there new KPIs or data that retailers should be looking at? Or what are some of the opportunities?

Kyle Monk:
Absolutely. So I think a shift to being customer focused rather than being channel focused is absolutely crucial. So not that long ago, brands would count returns from online off the profit of the store that it was being limited to for some brands. I’ve definitely seen that in the field. So getting a single customer view and understanding the sort of lifetime value of a single customer, better understanding what touch points they have because, you know, there’s research that’s been published that you know, each physical store has a halo effect of online sales. I did some work a while ago with a brand that will remain nameless, but they opened not a pop up, but not far off it within vicinity of three or four department stores and their product actually starts sold I think something like not only 30% more than department stores, but 50% more within a four mile radius of that store opening. So understanding how those kinds of channels or those kinds of deployments affect sales across all channels is definitely crucial.

Julia Raymond:
Yes. And it’s essentially crucial for like ASOS and some of these other brands who were direct to consumer and you know the ones that are now opening physical stores to understand the halo effect. And I think that’s definitely a place that might take some time if they’re traditionally digital.

Kyle Monk:
Absolutely. I think what we’re thinking as well is, particularly in London, and particularly due to, I’m not sure if you’re familiar with business rates, but we have a slightly antiquated tax system where retail I think is 5% of GDP, something like that. But we pay 25% of business rates, which is a tax which primarily affects physical retail. So what we’ve seen is some pure play, but also traditional retailers are opening popups to sort of test different concepts. So MNS, Marks and Spencers, opened a pop up in Soho. They didn’t tell anyone about it or brand is Marks and Spencer’s. It was called like Tom and Martin, something along those lines. And they tested consumer engagement with their products that weren’t actually labeled MNS. So it was sort of part market research, part new product launch. But that spend came out of there sort of op ex, their operational expenditure, as opposed to their capital expenditure, which is normally how a physical retailer is sort of planned and and deployed. So, that’s an interesting development. We’ve definitely seen more of in the last few years

Julia Raymond:
Certainly. And that’s probably something a lot of UK retailers are more interested in because of that tax set up. Is that correct?

Kyle Monk:
It’s a huge cost. You know, I used to do some work for the retailers in the West End of London and you know, they paid hundreds of millions as a collective of stores, which is more than, you know, more tax than most online retailers probably. So it’s something we’re looking to address, and if the government weren’t preoccupied with other things it might be getting more traction. Yeah, it’s hard to move the dial on that.

Julia Raymond:
Definitely. And as we talk about tariffs and taxes, we have to bring up the elephant in the room, which is the Brexit because I read something that was pretty staggering where economists have predicted that the no deal hard Brexit could potentially cost retailers upwards towards 7.8 billion in tariffs. And that’s huge. And I know you have a good finger on the pulse here, so I wanted to get your take.

Kyle Monk:
Yes. So I believe the economists who actually came up with that prediction used to work here. So yeah, it’s definitely something that’s very close to and that our members are incredibly concerned about. So I mean, to put it in perspective, I think there’s something like 5,600 tariff lines that the UK would have to renegotiate should, you know, or revalue should have no deal Brexit happen. Yeah. There’s been some talk where they’ve essentially gone to the WTO and said, “You know what, we’d like to keep what we’ve got currently with the European standards should we leave.” It’s taken a lot of time and a lot of effort, but we’ve just about got consensus from everyone that, and even the hard line leave campaigners that are no deal would be pretty disastrous. I think we’ve sort of parked that as a possibility.

Kyle Monk:
The new government’s moving a deal. But I mean the costs, particularly to food, would be staggering. I mean we are net imports, so I think we import something ridiculous like 70% of our fresh food. So you know, consumers would have a dramatic decrease in choice. Those tariffs would be passed through downstream into higher prices for consumers, which you know, would then have knock on effects like retailers potentially having to sort of assess which chains of theirs or which branches they kept open. You know, traditionally when that happens, it’s the stores and the poor areas that get hit first. So there’s a huge chain of events that would be unleashed should that happen, which I’m hoping – touch the wood – that we’ve managed to circumnavigate with the latest decision last weekend.

Julia Raymond:
That could, yeah, that could be disastrous really because food retail is the largest portion of retail revenues. Obviously, we all have to eat. So yeah, that would be a big hit. And is this … I’m assuming this is all over the news and consumer confidence is lower. Is that something that you guys track?

Kyle Monk:
Yeah, so I mean, we look at … we use the GFK consumer confidence index. It’s one of the longest standing here in the UK and probably one of the most robust and it tracks monthly sentiment and asks a series of questions around, you know, “How do you feel about your personal financial situation? How do you feel about the country’s economic situation?”

Kyle Monk:
And what’s really interesting is that actually when people are asked about their personal financial situation over the next 12 months, overall things are positive. That’s a plus four, which is roughly in line with where we were in September of last year, which is, you know, given what we’ve seen, quite surprising. But when you ask them how they think the economy will perform, it’s minus 35, which is 10 points below where it was this time last year. So that gap I think is quite telling of perhaps how we got to where we are now. People, you know, know that the economy is suffering. They know that things are worse due to the uncertainty that we’ve experienced the last three years and the general political gridlock. But somehow they don’t connect that and Brexit with their personal finances. So it’s interesting.

Julia Raymond:
That’s really interesting because sometimes it will, you know, go the opposite and then you have a recession, right, where people aren’t spending their money.

Kyle Monk:
Exactly. I mean we have seen sales declined. So although things are positive, you know, we’ve seen online sales slow to single digits, whereas historically for the last few years is that we’ve seen double digit growth and overall particularly food. Food sales are okay. Non-food, fashion, et cetera home wares not so good. We’ve had sort of six months to eight months of falling sales, and one of the worst Junes on record despite good weather and all the other factors that generally make for a good month. So yeah, although consumers seem neutral-ish about their personal finances, we have seen sales decline over last period.

Julia Raymond:
Okay. So consumers are pretty neutral, but there’s not the same growth or rate of growth that you’ve seen in previous few years.

Kyle Monk:
No.

Julia Raymond:
Well, turning to a more positive note, what is something, as you look into 2020 in the next five years even, that you are most excited about in the retail industry?

Kyle Monk:
So I mean there’s a lot of good news in the UK retail industry, despite all the doom and gloom. There’s a lot of brands doing incredibly well. We’ve seen a lot of, you know, innovation within the industry. I think the changes that we’ve seen, and the brands going to administration, as bad as that is, there are brands coming up to replace them. And we’re seeing resurgence as well in sort of ethics in retail, which I personally find very reassuring given the sort of wider conversations being had at the moment about the environment and climate change, and equally the protest we’re seeing in London, sustainability is on the agenda. And actually a lot of retailers are sort of rising to the challenge and you know, developing product ranges that essentially cater to those views and that have less of an impact on the environment.

Kyle Monk:
So I think a continuation of that. It’s definitely one of my things I’m most excited about. There’s a lot of, I guess, head room in the UK retail industry. A lot of brands are trying to find out what the next big thing is. So you know, there’s a lot of buzzwords out there, blockchain, AI, AR, et cetera. So brands are quite rapidly testing all those different technologies to see which ones stick and which ones don’t. I think they recognize that they need to invest to survive. That ultimately ends up with better experiences for consumers.

Julia Raymond:
Absolutely. Sustainability and innovation. Two topics that you touched on being excited about for the future. And I think we all are. So it was great, Kyle, to have you on the show. Really interesting insights, love hearing about the UK market specifically with all the change going on. And I hope to have you on the show again some time.

Kyle Monk:
Thanks for having me.