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Ecosystems to deliver new wave of growth for retailers

The U.S. retail market is heating up with exciting partnerships designed to deliver new customer propositions and experiences, and create new growth for retailers.

The recent news of Ikea partnering with Adidas – to understand what people want and need when it comes to exercising, sleeping and eating at home – is a great example of two brands with complementary synergies joining forces to benefit from shared insights. Such insights can be funnelled into R&D and inform new product and service lines.

Partnerships are also transforming the in-store environment and giving consumers access to a wider array of products and services. Walmart recently announced that it’s expanding its partnership with digital automotive marketplace, CarSaver, to sell cars from kiosks at Walmart stores. And Kohl’s is leasing store space to food grocer, Aldi, in a bid to optimize its existing real estate footprint and increase store footfall by offering customers new value.

Over the course of the next 12 months, we’re likely to see more retailers look beyond their brand or industry confines to see what partnerships or innovations they can capitalize on by teaming up with other players, large and small, in the retail sector and beyond.

The reason for the renewed momentum around partnerships is that growth is becoming increasingly challenging to come by, and large retailers are realizing that they cannot achieve it as quickly as they would like by going it alone.

According to Accenture Strategy research, less than a quarter of large retailers globally are very confident that they will achieve their 2020 growth targets, and 71% are concerned that current growth strategies are at high risk of disruption.

As such, retailers are rethinking their growth strategy, particularly many of the traditional bricks-and-mortar and department stores, which have been slow to innovate or have failed to keep up with new customer trends.

Our research suggests that 82% of retail leaders globally say that building ecosystems – where companies join forces with a multitude of players to share customer insights, technology and industry knowledge – is critical to gaining a competitive advantage.

Such ecosystems – as proven in other industries, including technology, financial services and consumer goods – can enable rapid innovation, proto-typing and proposition co-creation, as well as helping retailers to access new customer segments or enter new markets. A third of large retailers globally are looking for ecosystem partners today.

The beauty of ecosystems is that no single company owns or operates all components of the solution. The value generated from this type of collaboration is much larger than the combined value each of the players could contribute individually. Critically, the risk is distributed equally, which will reassure many retailers.

Research shows that 61% of executives at large retailers believe that more than half of their company revenues will be generated from ecosystems in the next five years. In time, even direct competitors will put aside rivalries in a form of ‘co-opetition’ to pursue new growth opportunities.

Retailers pursuing disruptive growth by building ecosystems should consider:

1. Setting the vision: For ecosystems to deliver growth, it’s important for retail leaders to consider what the strategic intent and innovation goals are upfront. When ecosystem players combine their functional, technology and industry strengths and capabilities, they can deliver exciting new customer propositions and open new markets.

2. Identifying the right partners: Selecting the right partners is critical to ecosystem success. Retailers should look for partners with complementary capabilities, a collaborative mindset, industry experience, customer relationships and data to set themselves up for success. They must also clearly define how data will be shared and how success will be measured. Proper governance frameworks can ease fears and reduce friction among participants.

3. Orchestrating the ecosystem: Once companies with distinct capabilities join together with a shared vision and clear outcomes, they can launch and operate their ecosystem. The process involves planning and testing the ecosystem design and piloting the market play. Successful ecosystems will enable retailers to drive new value beyond what they’re able to do in isolation.

The creation of ecosystems presents another opportunity for retailers to tap into new sources of growth and get ahead of the waves of change that are currently impacting the industry. With the right partners, collaborative mindset and pre-determined measures of success, retailers have a lot to gain.

Jill Standish, is senior managing director, global retail lead, Accenture. 

 

 

Frank Layo is managing director, Kurt Salmon, part of Accenture Strategy

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Regulatory Watch: Weekly recap of retail-related legislative and judicial developments – July 23

BY CSA Staff

Wages

Chicago, IL – A majority of city aldermen has signed onto a bill that would pilot a Universal Basic Income (UBI) for a small segment of the city’s population. The legislation would direct the Mayor’s office to establish a program that offers at least $500/month to one thousand families in the city. If enacted, Chicago would be the largest U.S. city to test a UBI. The bill is before the Committee on Workforce Development and Audit, the chair of which is also a sponsor.

Paid Leave

Federal – The U.S. Chamber of Commerce announced its support for the Republican-backed Workflex in the 21st Century Act. The bill would exempt employers from state and local paid leave laws if they offer a certain level of leave for both part-time and full-time workers. The chamber’s announcement comes after congressional hearings on the issue and just ahead of the expected announcement of a companion bill to be introduced by Sen. Rubio and other leading Republicans in the Senate. Any paid leave proposal will be a heavy lift during an election year.

Dallas, TX – The city secretary announced that an effort to place a paid sick leave ordinance on the Nov. ballot failed to submit enough valid signatures. Activists submitted close to 120,000 signatures for approval but more than 50,000 were rejected leaving the initiative short of the necessary threshold. Supporters are asking for a recount and have threatened litigation although no suit has been filed. The city council could also act directly if the initiative process continues to stall.

Scheduling

Abercrombie & Fitch – The retailer has offered a $9.2 million settlement with nearly 61,000 current and former employees who allege that the company violated California’s call-in scheduling law. The allegation are specific to a state law mandating companies must pay employees who report to work but are asked to go home if business is slow. The focus of the case is whether or not the company should have paid the workers for the time the employees took to call in. A U.S. District Court judge will determine if the settlement is appropriate.

Labor Policy

Labor Department – The Trump Administration officially rescinded the Obama-era persuader rule which mandated that employers disclose relationships with consultants and law firms providing advice on union organizing campaigns.

Labor Department – The Labor Department’s Wage and Hour Division released its first substantive guidance on independent contractor classification. The guidance relates to the caregiver industry but has broader implications. Last June, the agency withdrew an Obama-era administrative interpretation that broadened the definition of an employee, capturing many independent contractors. The newly released Field Assistance Bulletin is intended to clarify how the agency will interpret a company’s responsibilities. In short, the guidance returns to its historical approach that considers the “totality of the circumstances to evaluate whether an employment relationship exists” and “will evaluate all factors … to reach appropriate conclusions in each case.”

Labor Department – Arthur Rosenfeld, a former general counsel of the NLRB under President George W. Bush, has officially taken over as head of the DOL’s Office of Labor and Management Standards. Among other things, the office oversees the audits of labor unions and labor leaders and going forward, will likely determine if worker centers and other alt labor organizations should be treated as unions. The business community has long asserted that groups like Fight for $15 and the Restaurant Opportunities Center (ROC) are really labor front groups and should be treated as such and not as “community-based organizations” like the labor community contends.

NLRB – An administrative law judge rejected the proposed settlement of a collection of cases between the NLRB and McDonald’s. The cases allege that McDonald’s USA and its franchisees were joint employers and that they violated the rights of workers. The settlement would have compensated workers and absolved both franchisor and franchisees of wrongdoing. McDonald’s USA can choose to resume the trial, attempt to reach a new settlement agreement with the Board’s general counsel or appeal to the full Board.

Taxes

Federal – The U.S. House Judiciary Committee is holding an informational hearing on July 24 regarding the impacts of the landmark Supreme Court ruling in South Dakota v. Wayfair. The case effectively removed the physical presence standard for sales tax collection authority for states. As a result, several states have moved to expand their authority resulting in more businesses having additional tax collection obligations. Many committee members have long questioned the impact this expanded authority would have on interstate commerce. During his 5-year tenure heading the committee, the chairman has yet to allow debate on similar legislation and at this stage it does not appear that new legislation is forthcoming.

South Carolina – The revenue commissioner announced that the state would move forward with guidance for collection of sales taxes by out-of-state sellers in the wake of the South Dakota v. Wayfair decision. The commissioner does not see the need for additional legislative action by the general assembly.

Utah – During a recent special session, the legislature passed a bill to establish an economic nexus threshold similar to the one established by the Supreme Court in the South Dakota v Wayfair case. Existing law ties the additional revenue to a tax break for manufacturers. The governor will soon sign the legislation into law and retailers above the threshold will need to begin collections in 2019.

Soda Taxes

Philadelphia, PA – The state supreme court upheld the city’s 1.75 cents per ounce tax on sugary beverages. The law has been in effect since its passage in 2016 and the collected revenue had been put in reserve while the litigation was pending. The court ultimately found that the city’s tax on “beverage distribution” – i.e. an excise tax and not specifically a tax at point of sale – was not in violation of state law. Additionally, the majority opinion noted that the state legislature has the authority to limit the city’s taxing powers but has yet to do so in this instance. There is a bill to preempt localities from implementing similar taxes pending in the House but the bill sponsor has acknowledged it is unlikely to pass both chambers and be signed by the governor before they adjourn for the year. The legislature is currently on recess until September.

Key Takeaways

  • The ongoing conversation over restrictive scheduling mandates – now playing out in both Philadelphia and Chicago – could potentially distract employers from many existing reporting pay requirements already on the books across the country. As Abercrombie & Fitch and other retailers know all too well, these laws, many of which have been on the books for many years, are very attractive to the trial bar. Operators need to ensure that they are fully aware of and well versed in the nuances of these various laws.
  • The size, scope and importance of the City of Chicago means that the potential piloting of Universal Basic Income there means the issue has “arrived” in the national conversation. If the issue continues to gain traction and more cities were to follow suit, this could have significant impacts down the road on the entry-level employment market. Operators need to pay close attention as this issue unfolds.

Legislature Status for Week of 7/23/18

  • The United States Senate is in session this week
  • The United States House is in session this week
  • Five state legislatures are meeting actively this week:
    • MA, ME, NH, NJ, OH

Podcast

Check out our Working Lunch podcast each week that includes further analysis into these legislative issues, policy, politics and much more. You can find Working Lunch on the Nation’s Restaurant News website, or by clicking here, and when you download the podcast and subscribe on iTunes here.

The Regulatory Wrap-Up is presented by Align Public Strategies. Click here to learn how Align can provide your brand with the counsel and insight you need to navigate the policy and political issues impacting retail.

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The Container Store launches new branding campaign

BY Marianne Wilson

The Container Store celebrating its 40th anniversary with a new advertising campaign and a next-generation store prototype.

The storage and organization retailer is launching a new campaign designed to bring to life its brand goal of maximizing space. With the new tagline of “Where Space Comes From,” the campaign seeks to convey the Container’s Store commitment to helping customers accomplish projects, maximize space, and make the most out of their homes.

Featuring everyday people facing the challenges of space, the campaign concept, created in partnership with the retailer’s agency of record, Preacher, comes to life in a series of 30-second spots launching on national cable, local broadcast and streaming video. In addition, bite-sized videos will exist online, along with a robust push of the creative idea through out of home, radio, magazine and in-store signage.

“This branding effort aims to bring our purpose to life across all of our channels,” said Melissa Collins, chief marketing officer, The Container Store. “Through deep consumer insights work, we know consumers look to us to help them accomplish all the storage and organization projects they’ve set out to do and we hope to reach them with this new campaign.”

The new campaign comes on the heels of the launch of the retailer’s next-generation store in Dallas. The new concept will serve as a test and learn environment to determine elements for eventual rollout to new and existing locations.

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