The three ‘R’s are the building blocks for our children’s education. The joy of re-visiting these as a parent-teacher in lockdown has not been unbridled, but a necessary and worthwhile investment that will hopefully reap dividends.
Retailers devising survival strategies likewise need a diligent focus on the three ‘R’s of Risk, Regulation and Reputation. These are building blocks to enable businesses to survive the current crisis and thrive beyond it.
Starting with the first ‘R’, risk and opportunity are two sides of the same coin; without a defined approach to risk, you cannot seize opportunities as they arise in your market or niche. Retailers in particular face an array of strategic, financial and regulatory risks, not forgetting the clamour for ESG from customers and investors.
The second and third ‘R’s both play into your understanding and appetite for risk. Regulation especially requires the sort of medium-term thinking that may seem like a luxury during a crisis.
Yet, to be resilient, a retailer must be able to cope with swift changes in regulation, which tend to follow major shocks. So, directors need to ask themselves: how would we respond to regulation arising from a second wave of Covid-19? Or a no-deal Brexit?
Retail leaders should also keep a watchful eye on immediate risks arising from the third ‘R’ – reputation – that have potential to trip them up as they chase opportunities.
Successful retailers have rightly focused on long-term relationships with customers, collecting data, identifying points of differentiation and creating smooth, personalised experiences. Such long-term relationships are hard-won but quickly lost and scrutiny by customers, investors, regulators and employees can all erode trust.
Conversely, some immediate challenges to both reputation and regulation could also present opportunities to reinforce trust when well-managed. Examples from the current crisis include:
Employee and customer safety
The Health & Safety Executive and environmental health officers have been very clear they will take enforcement action where appropriate, highlighting many examples of failure to maintain social distancing and thousands of complaints from customers and employees. Will you suffer the disruption, social media attention, bad press and costs of a prosecution following regulatory intervention? Or will you be able to celebrate customer confidence and employee engagement?
Lack of liquidity and accumulated stocks
Cashflow and a build-up of product are forcing retailers to launch aggressive and ongoing promotions and discounts. As an unexpected consequence, we see rivals reporting alleged “unfair” pricing to the Advertising Standards Authority. How will you pursue pricing strategy that entices customers without triggering investigation by regulators or public accusations of crowding out competitors?
Supply chain behaviour
The actions of your suppliers can wreak havoc with your good name. Witness Boohoo being “dropped by Next, Asos and Zalando over exploitation claims” and similarly pilloried on social media. That this reaction took place even before an investigation corroborates the claims shows how fraught supply chain issues can become. But for all the tears at Boohoo HQ, retailers who embrace supply chain transparency and are vocal about it could raise smiles for customers.
Putting risk, regulation and reputation at the heart of board decision-making has arguably never been more important. It is not just having the policies. Are you sure they are lived and breathed? Risk, compliance and legal teams may have an eye on this as part of their day-to-day, but who on the board is leading from the front?
Do you join up the risk and marketing perspectives to turn positive stories of risk management into opportunities to develop your brand? In the heat of the battle for market share this deserves as much proper attention as marketing strategies.
Nathan Peacey, partner at Foot Anstey