Legal Briefing

Ashfords’ retail roundup

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Retail | 10 July 2018

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Providing a seamless customer experience:
the key to success for retailers?

As Mothercare and House of Fraser announce store closures and Debenhams issues another profits warning, it seems that more and more predominantly bricks and mortar high street stalwarts are struggling to profit in this challenging sector.

For several years now, retailers have been saying their focus must be on ‘omnichannel’ retailing – the combination of multiple online, mobile and offline platforms, to offer consumers a unified personal and practical buying experience before, during and after their purchase. Is this the key to retail sector success?

A tale of two retailers

Toys R Us and The Entertainer were two apparently alike businesses, selling similar goods and operating in the same market conditions. The failure of Toys R Us and the recent success of The Entertainer are a valuable illustration of the implications of failing to offer a seamless customer experience.

What happened?

When Toys R Us went into administration, its failure was blamed on competition from online retailers, changing consumer spending habits caused by inflation and increases in business rates.

At the same time, The Entertainer announced sales growth of 6.8% and an increase in pre-tax profits of 37%. It does not show signs of succumbing to the pressures that allegedly caused the failure of Toys R Us.

Why did it happen?

Toys R Us operated in large, out-of-town retail premises, where products were stacked from floor to ceiling in an environment that offered few ‘hands on’ opportunities for children and parents to try
the toys available.

A retailer's reputation can stand or fall on having systems that function properly. Louise Workman, Ashfords
“A retailer’s reputation can stand or fall on having systems that function properly.”
Louise Workman, Ashfords

Toys R Us’ branding and its online presence were outdated:
There was poor engagement on a personal level with their target market (eg via social media platforms and influencers) and its website did not offer the functionality and delivery options that consumers expect.

In contrast, The Entertainer focuses on store ambience, customer service and advice. Its shops are in town centres with high footfall; children who visit are encouraged to play with the toys on offer.
It recently announced a £600k investment into the refurbishment
of its Westfield store, including the installation of new interactive displays.

The Entertainer admits it does not compete with the likes of Amazon on price, instead it focused on the idea that good value is about giving customers an experience they want, which does not necessarily mean offering the lowest price. Its website offers next-day delivery and a 30-minute ‘click and collect’ service, and it has spent time and money building an omnichannel retail experience tailor made and adapted for its customers.

What lesson can retailers learn?

When The Entertainer announced its sales and profit growth, it also revealed it was investing in a new web platform. Its recent investments in omnichannel technology (including real-time marketing and chat bots) has resulted in an impressive 44% increase in email-click through rates and a 120% increase in mobile device based sales.

In contrast, Toys R Us’ significant debt prevented it from making investment in new technologies and service platforms for its customers that could have helped the company forge a future.

"Compliance with consumer rights law is fundamental. Consumers are protected from misleading and aggressive sales practices and unfair contract terms/notices."
“Compliance with consumer rights law is fundamental. Consumers are protected from misleading and aggressive sales practices and unfair contract terms/notices.”
Legal challenges posed by omnichannel retail

Creating a successful omnichannel infrastructure is practically and commercially complex, requiring significant investment and cross-business collaboration. Consequently, the legal challenges are varied, for example:

  • Investing in technology: A retailer’s reputation can stand or fall on having systems that function properly. IT development/infrastructure contracts can be lengthy and complex and often require specialist legal input and the input of, and liaison between, many business divisions/department
  • Data protection: The new regime forces you to consider what personal data you really need (and to keep that data updated), it could help you offer more relevant products/services to potential customers. Being transparent and clear with customers about how you collect and process their data could also help to build greater consumer confidence in your brand. Get data protection wrong and, in addition to significant fines, your business’ reputation could be irreparably tarnished.
  • Intellectual property: You should seek to protect your investment in omnichannel offerings to prevent competitors seeking to mirror your client experience. Many retail technologies (especially augmented reality) are and can be protected by patents and unique brand names and logos may be registered as trade marks
  • Consumer rights: Consumers are protected from misleading
    and aggressive sales practices and unfair contract terms/
    notices. Consumers also have certain statutory rights (eg a 14-day ‘cooling off period’) which cannot be limited or excluded. Non-compliance can lead to investigations/sanctions by Trading Standards and/or the CMA and, in some cases, criminal sanctions for directors, and disastrous PR
  • Advertising: All advertising should comply with the relevant
    code of practice (eg the CAP code, for non-broadcast advertising). In particular, advertising should be ‘legal, decent, honest and truthful’ and prepared with a ‘sense of responsibility towards consumers and society’. The ASA has wide-ranging powers to protect consumers from advertising that does not comply with the CAP code
  • Regulatory uncertainty: Brexit, the Digital Economy Bill
    and the E-Privacy Regulations are (at the time of writing)
    making their way through the legislative process; their
    final form is uncertain. Each is likely to impact on your ability to implement the technologies described above into your omnichannel retail offering.
Conclusion
  • In the current market, investing correctly in your omnichannel offering could be the difference between the success and failure of your business. Although the legal issues around omnichannel retailing form a small part of a broad and complex commercial strategy, ignoring the law could have wide-ranging adverse consequences
  • Ashfords is a leading national provider of legal, professional and regulatory services. We combine legal expertise, commercial experience and our wider network to help our clients achieve their goals, providing value for time and value for money. Our experts possess specific industry knowledge which can help in-house lawyers in the retail sector.

For further information please contact Louise Workman, 
our head of retail, on l.workman@ashfords.co.uk 
or +44 7894 404015