Jonathan Reynolds

By Jonathan Reynolds

Retailers do it differently

Retail innovation can play a critical role in boosting European economic recovery, but more support is needed. That was the main conclusion from the work of a European expert group on retail innovation that I recently chaired, which reported earlier in 2014.

retail inno

A poor understanding of the sector and lack of financial, research, and policy support is hampering innovation in retailing and getting in the way of economic recovery across the European Union. We made 17 specific recommendations to European governments, universities, trade associations and retailers in order to boost innovation and competitiveness in the sector.

Key recommendations were to:

  • Build better awareness amongst policymakers of the potential contribution of retail innovation to competitiveness, and to facilitate greater collaboration and knowledge exchange amongst retailers, European Technology Platforms, retail associations, and universities and research institutes
  • Prompt greater participation by retail firms of all sizes and sectors in European innovation funding and projects, including the Horizon 2020 programme; specific recommendations relate to providing support for SMEs, which are often the source of innovative ideas but lack awareness and resources to benefit from funding that will enable them to put them into practice
  • Stimulate and support investment in retail skills and education; in particular to increase knowledge exchange between higher education institutions, trade associations, and retailers, and to develop mechanisms to encourage retail SMEs and start-ups to take part in innovation-related training or skills development
  • Ensure that policymakers use a “retail reflex” in their thinking, to avoid the creation of barriers to retail innovation that result from the unforeseen consequences of policies and regulations in other sectors; the Report recommends that trade associations take action to screen the regulatory framework to assess its impact on retail innovation

In the Report, the members of the Expert Group argued that retailing is the closest sector to the European citizen and consumer in the value chain and is therefore in a better position than other sectors to gather insight into the behaviour of consumers and coordinate and develop innovative strategies within European markets. However, there is a significant gap in the use of public funding for innovation between retailing and manufacturing and between retailing and the economy as a whole. I believe that this is because innovation in retailing, unlike that in sectors such as pharmaceuticals or chemical engineering, tends to be incremental rather than radical, can embrace new business models and processes as well as new technology, and is often conducted in partnership with others in the supply chain. Much innovation within the sector is naturally focused on increasing efficiency, boosting productivity and the speeding up of administrative processes.

The most effective kind of retail innovation can occur when there is a re-engineering of the whole shopping process in a more radical way.

This calls for stronger leadership of the retail innovation process and greater capacity to participate in laboratory environments. Retailers, particularly SMEs, also need easier access to EU information and funding. “The retail sector’s scale, its role as a major employer, and its closeness to the consumer make it a vital part of improving economic performance, communities and lifestyles across Europe,” we suggested. “We need to close the gap between the sector’s existing capabilities and the ways in which it is supported in developing innovative products, services and technologies. We urge the European Commission and other stakeholders to follow our recommendations in order to more fully realize retailing’s capacity to contribute to growth and competitiveness in Europe.”

You can download a copy of the report here.

(The retail sector is a significant contributor to the European economy and society. It is the largest private employer within the EU28 in terms of the number of people employed (18.7 million), employing more people than the construction sector and three times as many people as the financial services sector. It comprises 3.6 million businesses, the vast majority of which (95%) are SMEs. The Final Report from the Expert Group on Retail Sector Innovation is published by the Directorate-General for Research and Innovation of the European Commission and was commissioned as part of the European Retail Action Plan, designed to support the achievement of a single market in retailing.)

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