Chairman Interview – Peter Williams, boohoo.com
In the first of a series of interviews with business leaders from the consumer and retail sectors, Peter Williams, Chair of online retailer boohoo.com, shares his views on the latest challenges and opportunities facing the industry.
Peter Williams is one of the most highly respected Senior Directors in the fashion and retail industry. As well as Chair at boohoo.com, he includes amongst his portfolio Chairman roles on the board at the Domino’s Pizza franchise in Turkey and Russia, online optician Mister Spex, accessories designer Sophia Webster and home furnishing business Brissi, and he is Senior Independent Director and Chair of the Audit Committee at Rightmove plc.
Formerly CEO at Selfridges, he has sat as Chair or NED on the boards of a number of UK and world leading brands, including JJB Sports, EMI, GCAP Media, ASOS, Blacks Leisure Group, Jaeger and Cineworld Group plc and spent nearly 12 years as a Trustee and Chairman of the Audit Committee of the Design Council.
NB Note this interview was conducted prior to boohoo.com announcing sales grew 44% year on year in the four months to the end of December 2019, with profit margin in the same period improving by 170bps to 54.2%
Q. Much has been made of the impact of discounting. What steps do you think retailers need to take to combat the increasing pressure on prices and the impact on margin?
In the fashion business, if you don’t sell your merchandise at full price in season then you are faced with double whammy effect of missing the full price margin at that time and then having to take a reduced margin when you sell it later.
A significant new dynamic affecting the market is the ability online for online retailers to effect changes in price immediately, that then feed through in real time for the consumer. In the old days of bricks and mortar retailing, retailers were able to control and hold prices more easily. You typically had two sales periods in the year when the consumer expected prices to be discounted – the January Sales after Christmas and the Summer Sale typically during late June. During the rest of the year merchandise would be sold at full price. The internet has changed all that. Now the price of a product can be altered online almost immediately and the price change is available to the consumer in real time. The digital world enables the retailer to be nimble and fluid with respect to pricing. Many brands dislike this new environment as they would much prefer more price stability.
Take the example of the online retailers, Asos and boohoo. They are always presenting the customer with new price propositions – it may not be money directly off the product itself but it may be, for example, free next day delivery or free delivery if you buy a specified amount of merchandise. The internet pure-plays are constantly offering price discounting in one form or another and the consumer loves it. In any survey of consumers, when you ask what would they most like to see happen in retail, they will say “lower prices”. When pressed, they might go on to make the case for a nice store environment or focus on the quality of the product, but the consumer has and always will love a bargain, or at least a perceived bargain.
Competing with the pure-plays on price for those retailers reliant on a store estate is a massive challenge. If you want to change prices or do a price promotion quickly in a store, it takes the best part of probably a week or two to get that ready because you have to produce point of sale material, update the ticket price on the merchandise, produce special promotional signs for window displays and POS.In the case of a pure-play retailer, a decision can be made now and within half an hour it’s on the website.
In reality the notion of maintaining ‘full price’ for long periods of time has gone. Margin is a much more moveable feast.
In reality, discounting has always been a feature of retail. It’s just become more accentuated because the web has made it easier to do, there are more retailers doing it and you are not going to get any resistance to it from the consumer. It’s an open door.
Q. How do you see Artificial Intelligence impacting the retail sector?
It’s still a bit too early to tell as to the wider impact on the sector, but there is a clearly a huge amount of potential innovation. There are already applications focused around buying patterns and preferences with algorithms developed to drive recommendations and increase sales. Various initiatives are taking place based on trying to develop the use of AI around fit. You can imagine a scenario whereby you put a picture of yourself up online and give say two data sets such as your height and weight. The technology will create an avatar of you in the clothes you are selecting, and help you make the decision around fit and look from the comfort of your own home whilst browsing online. There will continue to be constant advances in technological innovation, some of which we can’t envisage as yet, that will help the consumer with their purchase.
As a keen shopper, I like looking for things I have never heard of or never seen before. I love to browse and discover new products and new brands. My concern around AI is that it becomes so predictive and as a consumer I end up being dictated too. I fear I would lose the joy of discovery that the retail experience can bring.
I would tend to react against the sense that I might be losing my individualism. AI has to be used and interpreted with care because I think there is a risk that you could have the opposite effect. The consumer could get the impression that they are not actually being helped but are being influenced in a way that they don’t like. The risk is that we lose a little of the individualism and flair that is an inherent part of the fashion industry, if we become too dependent on AI tools to drive purchasing decisions.
Q. A number of articles I have read of late have reflected on the impact of Blockchain on the retail and consumer industries, in particular the potential for improving the efficiency of the supply chain. How do you see Blockchain impacting the sector?
Blockchain is not really something that I know a huge amount about, certainly not enough to offer any detailed comment. However, from what I do know, I can see the possibility that it will offer the opportunity for improving security around data capture in particular.
Q. What do you think as to the impact of the Future High Street Fund?
It’s a help, but by no means the whole solution. The fundamental problem, irrespective of the level of rent and rates, is that there are simply too many stores. There is too much physical retail space in weak High Streets and shopping centres. If all you do is subsidise the you are not solving the underlying problem. You are left with too many stores looking a bit tired and dowdy with not enough people in them. The High Street needs to sharpen up quite a bit in terms of its attraction. You are not going to achieve that if retailers have too many stores in too many locations as everything is getting diluted. Whilst we should never look a gift horse in the mouth and any contribution from government or a lessening of the tax burden on stores is welcome, it doesn’t solve the overriding problem.
Q. It has been predicted retail job losses may number up to 164000 in 2019. Where do you see opportunities for job creation in the sector?
It is difficult to say. Online business will continue to grow. Whether selling in the UK or internationally, UK based ecommerce has a wealth of opportunity stretching out in front of them. However it is difficult to see where job creation in traditional stores in and in the High Street will come from. There could be some increase in job numbers if the cost of opening a store (rent / rates etc.) starts to come down which reduces the barriers to entry and encourages people to start their own business. Entrepreneurial owner managed stores could grow as a result if those structural changes occur, but being realistic I expect we will continue to see a reduction in the retail workforce through 2019.
Q. How do you anticipate Brexit will impact retailers and consumers in the UK?
The biggest challenge facing business is the continual lack of certainty. Even today it is still very confused; nobody is clear at all as to what might happen; and I think that continues to provide uncertainty in the mind of the customer. Unless people are making purchases of essential commodities, food etc. to live, the lack of clarity leads people to be concerned about the wider economy and the impact on job security. As a result major purchase decisions are being deferred. The lack of clarity leads consumers to be cautious and careful and this will have a significant negative effect on the wider economy, and the retail and consumer sector in particular.
Brexit is one of the biggest decisions being made in my lifetime. We are certainly in for a very interesting year.