Wendy 00:44

Okay, hello, everyone. I'm Wendy Liebmann, CEO and Chief Shopper at WSL Strategic Retail, and this is Future Shop. This is where I talk to innovators, disruptors and iconoclasts about the future of retail. My guest today is Jacqueline Windsor, also known as Jac. She is the partner in Strategy and Deals for the Consumer Market and UK Head of Retail at PwC in London. I first met Jac a little bit ago because she joined us last month, actually, at our Future of Commerce 2030 event, the event we hosted in London with the Emerson Group and RetailmediaQ, and she set up contacts for the for the day, and the discussion about the future. And I thought, oh, let's get her on the podcast to talk about those differences between the UK and the US and what we can learn. Welcome Jac, lovely to have you on Future Shop.

Jacqueline 01:05

Likewise. Wendy, good, to reconnect.

Wendy 01:07

That was a great event, and just so much content that came out of that, and lots of great feedback. So thank you for joining us, for that.Your keynote was really interesting to everybody. She did some interesting comparisons between the UK market and the US market. I wanted to continue to have around things like private label, around how many stores do we have, the development of E commerce, all of those things. But first Jac just, just give us a quick overview of what it is you actually do a, PWC, and why you seem to have an American-ish absent, even though you lived in London forever.

Jacqueline 01:43

about you. Yeah. So I think in terms of my day job, if you like, I've got two hats. One is a strategy partner in the M &A space helping companies buy and sell to both financial sponsors as well as strategic sponsors, primarily in the private equity space. I also lead retail for the wider UK firm. But I think more interestingly is I have lived and been educated on both sides of the pond. I ended up in the UK because I married a Brit, but spent some time in undergrad on the West Coast and did my MBA on the East Coast. And my accent hasn't left, despite living in the UK for every 20 years.

Wendy 02:28

Yes, you're a bit like me here. We are, these foreigners enmeshed in other places. One of the things you talked about at the beginning of the discussion in London was, you know, thinking about some of these key market dynamics and consumer dynamics that are similar and different in the UK. And I was, I was really taken by some of those, if If we think about the difference in areas like ethnicity. And I think about the US now and the changing landscape of our world, that we are becoming a much more ethnically diverse country, and I was interested in that. Tell me a little bit about what the differences are. And you know how you think about that, if you're looking at businesses to buy or businesses to support in the work you do?

Jacqueline 03:20

So I think we default to say that we're actually very similar, right? And that is illustrated by the success of respective brands in our respective geographies. But I wanted to highlight some of the differences, both in terms of the shopper profile, but also the retail market structure has different dynamics. So answering your question around the profile of shoppers, Americans are broadly more diverse and more urban. So when you look at the stats around ethnic diversity, Americans are around 60% white, 20% Hispanic and 15% broadly Afro American, whereas the comparative metrics in the UK is over 85% white, then the minorities are broadly Asian and a smaller minority is black, But from the Caribbean mostly. Okay, so quite a different ethnic blend, and therefore different attitudes, preferences and usage occasions that need to be served in our respective markets.

Wendy 06:35

And one of the things that's interesting about that not to get into politics, because that could really make my hair redder, But I think about that in the context of some of the assumptions that we have tended to make over time that are probably that we've learned through this most recent election about different immigrant populations as they are, first generation versus more established in the market, things like that. Because of this. Smaller diversity or the Yeah, the lower percentage of diversity in the UK, do you see as you look at the UK and the US? Do we need to think about the different profile of the consumer in ways that we shouldn't assume anymore about first generation, second generation, we need to be thinking more about tribes.

Jacqueline 05:25

I think there's two comments I would make to that. I think when we think about diversity, it's very connected with urban density. Okay, so when we look at the UK as an example, although it's 85% roughly white, London is the melting pot, but there's only two big cities, okay, with over 2 million people, and that is London, and that is Greater Manchester. And so when you think about diversity, you've really got to think about place making, whereas the US equivalent is 30% of the US population live in cities over 2 million. And so you've got 10 cities in the US where you have that more diverse pool. So that's the first comment I would make. The second, I think, more broadly, and this is really powered by technology, is we're moving from a broadcast right, one to many, to one to a few. IE, customer segmentation, which has been around for a long time, to actually one to one. I.e., personalization, because we have the technology that is able to support that. And so when I think about consumer tribes, I use that word quite purposefully. I'm not talking about segments. So segments have shared attitudes, shared usage, and therefore maybe shared value, attributes. Tribes are actually communities that are engaged around a common purpose, and therefore are engaged as a community with each other, and that is a meaningful difference versus a segment.

Wendy 07:10

And I give an example of that, yeah, give me an example of a tribe versus a segment.

Jacqueline 07:15

So there are new parents might be a segment, right? But I'm not connected necessarily with all other parents, because of other defining characteristics that separate us. Whereas an example of a tribe might be something around next gen luxury consumer, potentially the green pound. There is a rally cry, if you like, that connects this community. Streetwear consumer might be another. So it is beyond kind of your profile alone that separates the segments. There's something that connects your identity and expression

Wendy 08:02

In the US the thing that's always amazed me, it's always for growth has has often come from kind of this one size fits all proposition opening more and more doors with a more universal offer, whether it's a, you know, a Walmart or 300 Macy stores, that kind of thing, and very little until recently, localization, personalization. But when you think about that today, and you advise companies, how do we need to think about that differently?

Jacqueline 08:33

Yeah, so when we think about personalization, it's really with a small ‘p’ because what is the objective of personalization? Personalization is giving consumers the knowledge and control over how they want to experience that brand, what they buy, I customize products and how do they want to engage more broadly? Okay? In practice, technology allows you to do two things. One is give consumers what they want based on their stated preferences, or give customers what they want based on learned preferences, i.e., AI, and so an example of the former might be customized products, Nike, ID. Learned preferences might be Amazon with us. So being really clear what the role of technology is doing, as opposed to personalization

Wendy 09:41

This is why it's so important, right? Because when we come from this one size fits all and three, 50 million people, and we look at things in in Old World segments, perhaps, or demographic groups, I'm always conscious of the nuances within this, and especially. Again, why do I keep going back to the election? You know, some of these things that have emerged where we've assumed X, and really, if we look more deeply, we would have probably seen Y, which we have seen in a lot of our most recent How America Shops® research everybody go and look online and see what that says, www.wslstrategicretail.com. As a big CPG brand, a fashion brand, you know, fill in the blanks retailer that ability to capture the nuances requires a different way of thinking, right? Yeah, it's much more complex, and AI fits into that, or where AI fits into that.

Jacqueline 10:34

The dilemma, I think, for brands and retailers is that consumers want personalization, if it delivers a benefit to them, but also want to protect their privacy, right? So the UK stats, if you ask the nation, over 75% want personalization if they personally benefit. But the equivalent number, IU, over 75% are worried about data privacy. So as long as you ask people for their information to be able to tailor their experiences with tangible benefits that you have to continuously remind them of, that is, I think, the dilemma for grants and retailers, it's communicating clear benefit.

Wendy 11:23

Yeah, we were having that conversation. I was at an event yesterday, talking about a lot of technology and health and wellness, and some of the medical community we're talking about, we can do lots of things, but people are very concerned about how much data they reveal about their health conditions. And, you know, the regulations here are sort of protected in some areas, but not in others. So the same kinds of we could do it, but are we ready to do it? So anyway, that's that all of this is really helpful, because I think it, it enables us to start to think about if we're building future organizations, and whether it's, you know, brand, marketing, media, retail, distribution, all of those things, that there is some that there is still opportunity to think in, in more, in traditional segments or traditional ways, about the how we approach people, but that The richness sounds like, from what you're saying, is in digging deeper to, you know, people's values and the tribes they belong to, not just the segments they appear to be in.. So the other thing that was interesting to me, and in what you presented, was thinking about the retail market dynamics. I'm always conscious here about, again, this luxury of scale, what we've had so many stores, the growth strategy for a lot of retailers was just let's open another store, open another store, open another store. And clearly, with the growth of digital and E commerce, that's had an impact, and people are now thinking about this their physical real estate base, or the number of stores they need. I was fascinated by what you presented, which also talked about the degree of online penetration in the UK versus what we see in the US, or where we are at the moment in the US. Can you talk a little bit about that? What, what that looks like, the difference, and then the implications of that in terms of number of stores.

Jacqueline 13:25

Yeah, and I think there's structurally, I mean, the US is much bigger, and I think that plays out in some of the retail stats, right? You've got five times as much retail selling space per capita than the UK. Your average store size is some four times as big as what we have in the UK, but interestingly, we have higher online penetration, I think, from a cost to serve perspective, it's just easier because we're geographically smaller, so UK penetration for online, across food and non-food, is 30% The equivalent number in the US is around 22% okay, so I think there's some reasons for that, but I think interestingly, what does that mean for the store? I think we've moved from a world pre COVID, multi channel to digital, first during COVID, when we didn't have access to stores, to a world now that is increasingly Omni. And I use those words again, quite purposely, omni versus multi, because in an omni channel world, it is relatively seamless for a consumer to research, discover, transact, fulfill and engage across multiple channels and platforms with an operating model that is able to support that, as opposed to historically, where channels were effectively not joined up, always okay on any dimension, range, pricing, customer experience. I think today there. Four, the role of the store is being redefined. It is not a transactional channel alone. It also serves other usage occasions, from amplifying or activating new products to helping customers choose assisted sale, to connecting with those customers, one on one, but also connecting customers to customer, or actually redefining space as a leisure or wider destination. So therefore you need a store, but I think the number of stores you need and what the format and pitch of those stores will have to change to be able to serve that end to end customer journey.

Wendy 15:46

You raised several points. One, you raised the point about the physical space. So I think about the the online penetration and the physical, physicality of things are closer in the UK, I think, yeah, in the US, where you know, those points of delivery are often further apart, m y first question is, how do we make money? Is that one of the issues in the US, because we have to go further to deliver on a two hour basis, or a four hour basis, or whatever, is that model, something that is, you look at the business here, you would say, oh, that's always going to be an issue, unless you can solve the last mile piece, yeah,

Jacqueline 16:35

talks about references subject to what is your business model today And what category plan. So let's take those in turn. For business models, if you're a legacy retailer in non-food, you probably have too many stores in the wrong places that you that are under invested. Okay? So there is definitely a portfolio optimization, maybe rationalization. For digital first businesses, both from a demand and supply perspective, because consumers want to go back to store, and the cost of digital customer acquisition is getting too expensive. Digital first want a store footprint, right? And they're doing it in two ways. One is their own stores, but that has CAPEX requirements, or actually working with third party partners, right? So even some of the established players, the Ultas, the Sephoras, of the world, they're doing their retail partnerships to extend reach in a more asset light. Okay, there are some differences in terms of category when you think about last mile. In the UK, when I talked about the 30% that goes across food and non-food. If you look at non-food, it's actually closer to 40%. Whereas food is around 10%. Now why is that? Because I think the commercials for cost to serve rapid meal delivery versus your weekly shop is still hard to make money, so subject to whether you're a legacy business model, digital first and the category you play in will define how many stores you need and whether you can make money off of it.

Wendy 18:27

Walmart just announced its, its third quarter results, which are quite extraordinary, ahead of forecast. I think their ecommerce was up, they're almost making money. And so that is always interesting to me, as you look at that sort of total Omni proposition, and then they're talking a lot about, obviously, you know, order online, pick up in store, deliver to your home, in the garage, in the fridge, all of those sorts of things. But that Omni story that you, or Omni proposition that you, you laid out there, I think about the complexity, not just from a retailer standpoint, but from it depends on what category I'm in.

Jacqueline 19:07

And I think it's also interesting that there are different digital models that you can adopt. In the UK marketplaces have, I think, accelerated. So you've had Tesco, which is a big supermarket in the UK, launch their marketplace. You've had Kingfisher, which is a big DIY player in the UK, launch its marketplace, right? And in principle, it serves the purpose for the customer as well as the commercials, because it is it in, fills a range well, extends it in, fills the range that you don't currently offer. Right? With a operating model that is asset light, because of dropship models, you don't have to control everything, you can charge for some of those added value services, right? Right? So I think that is the other consideration is, what is the right to tomorrow, to adopt.

Wendy 20:08

Increasing nuance and complexity. And I think about it. You know, all our work. I mean, you are very consumer driven in your work, and we are very shopper driven in ours, and sometimes people don't know the difference. I must tell you that, which is interesting. But as we think about that, it does, you know, how do you, how do you for me and for our team, it's always about, how do I keep the shopper, you know, front and center so I can think about how they want to access a brand, an experience, all of those.The other thing that was really interesting to me in the work that that you have been doing, and you talked about, was when I look at private brand, private label and the penetration, and you know, in this market, it's growing, but in the UK and Europe and in other countries, it has been so much a bigger part of the offer. And so can you again, talk a little bit about that and the differences in the UK versus the US, and then, you know how we might learn from some of the best in class, private brand retailers in UK?

Jacqueline 21:12

I, having lived obviously in both countries, having shopped for grocery in both countries, I do think the UK is very sophisticated in terms of private label, or what we call own brand, okay? And just to put it in perspective, for grocery, online, private label penetration is 50% okay, that's double what is in the US, yeah, okay? And it's really come to life, particularly in a cost-of-living crisis, where people are constantly seeking value for money, not good cheapest, but value for money. And I think there's lots to learn on how what we call the Big Four supermarket have really innovated and redefined different roles of own brand, which I'm really happy to elaborate on. So I think historically, when we thought about private label, it was what I called the fighter brands, right? It was product that was offered at substantial discounts to a national brand, but nowhere promising the same benefits, right? The way British grocers have thought about it is actually other ways. Some of those ways include thinking about price architecture so they will have good, better, best, own brand with different prices and therefore quality equation. So as an example, Sainsburys is a very big supermarket in the UK. Their fighter i.e., the entry private label is called Sampson Street, but the most expensive is called Taste the Difference. So very clear signaling where own brand plays. Another thing that they've done is innovate for specific needs that they don't feel the brands have plugged so they will have aisles around, “free from”, you know, free from certain ingredients, gluten, wheat, milk, black dust, etc, immigrant. So really serving specific tribes. We have a big Polish community, for example, in the UK. But I think what is really interesting is that they have adopted the FMCG playbook. They have developed brands in their own right? Okay, so if you think about Tesco another well, it's the largest grocer in the UK. They have what they call Venture Brands that they look at certain categories of subcategories, such as premium ice cream or Italian food or pet food, and they're like, there's a gap here, and we're going to develop our own branded product. So from a consumer point of view, they don't know it's owned by Tesco, okay? So when I think about the repertoire of private label in the UK, it's everything from fighter own brands, innovative brands, good, better, best brands, as well as brands in their own right.

Wendy 24:17

We're seeing a little bit of that happen across grocery across beauty and personal care, obviously, fashion separate story. But as we think about that, sort of the Targets of the world were always very good at that for a long time, and then I they sort of lost their way a little bit, and they seem to be working harder at it again. But then I see in the US, and I don't know if you're seeing the same thing, that there's the fighter brand proposition, and then more, what I'm going to call exclusive brands. So you know, a brand that nobody else is selling, right? Yeah, right, filling that spot. And so less of again, back to that word of you. Wants less of the nuance or sophistication that that we see in the UK, and yet, I think about it here, and I think we've got scale. Why aren't more of the retailers doing that here? So I don't know if you have a point of view on that at all, but I'm just trying to think about the similarities and differences.

Jacqueline 25:18

I think, you know, when I thought about key success factors that enable this is rec for the brands, okay, recognizing there is a role for private label and brands, and you should be working with the retailers of what that category should look like. So what the retailers are doing is not targeting a world when it's 90% own brand so I can keep the margin. You still have to offer a credible and mixed range, again, with nuances by category. So this is good old fashioned category management. Where do we need some of the big national players? Where do we need some freshness and some disruptive brands? And what is the role of private label within that? Yeah, so it is a win win situation, not a win lose.

Wendy 26:14

The other one that, the one that struck me in this recent trip to London is a brand like Mark & Spencer, right. And for those people who don't know Mark & Spencer, it's mainly, it's, you know, a High Street. It's a sort of a, we might call it a, you know, a small discount, right? I'm small in small, but small in store size. A little bit with fashion, with beauty, with food and beverage should be the other like food and beverage, fashion, beauty, etcetera. And I, you know that the that organization, and I know it's gone through a lot of tumult, as we might say here, over the last few years, but it felt to me like it was now a very compelling place to shop, that the quality of food and beverage, wine, all of that was terrific. That the offer in terms of, you know, meal seven, seven pound for a meal for four, all that kind of quality messaging was there. The fashion really improved. I bought myself a few things. Husband bought my bought himself many things, so much so that we got to know Tim at the checkout. I bought bras and knickers, and then he bought, I don't know, sports jackets and all of those things, the way they presented the store, the simplicity of, you know, different size bras, different sized men's suits, how they were presented a total, Integrated retailer with its brands, and it was just a wonderful, compelling surprise. We don't think about a retailer like, Marks & Spencer in the US,

Jacqueline 27:48

Because Target is different, because a lot of their range is through exclusive partnerships historically, although they are moving into getting, you know, the right concessions, such as Ulta, etc,, yeah, I think Marks & Spencer, it is a great case study of turning around performance with a very simple and well executed playbook. Yeah, it doesn't take a consultant to say, get the value quality equation right, introduce sufficient newness, simplify the cost pace, and invest in your stores. That's done. It is super Now, historically, they were 100% private label, ie, everything was branded M&S, or stuff branded m and s, they have started selling third party brands, yeah, where you have that killer brand, both in food as well as things like beauty. Yeah. So again, Stuart Machin, the CEO is very vocal on social please read the annual report and just follow him, because I think every retailer actually, it's not just about the idea. It's about excellent and ruthless execution. Yeah,

Wendy 29:01

Yeah, thank you for, thank you for directing us to that. Because I, as I said, it'd be couple of years since I'd actually spent any time. You know, we forget sometimes that we too are shoppers, and all of a sudden you're acting like a shopper, and you're walking around with bags, and you go, wait a minute, what was it about that experience? So, so to everybody listening, we have some great imagery and things like that that we will let you access…Now, the other thing before we finish, there's so much we can talk about here that I was thinking about, you talk about this notion of vibecession, and I'm really intrigued by that again. And would you just explain to everybody what you mean about that? Yeah.

Jacqueline 29:40

I mean, we actually stole it from an American financial journalist, and it basically captures the phenomenon of an a relatively more positive economic outlook is decoupled from what consumers are feeling. Okay, so both consumer sentiment. Despite more favorable economic indicators, both Americans and the Brits, sentiment has gone backward, even though the economy but what is really interesting is that the Americans are still spending. It's double digit versus pre pandemic levels, versus the Brits, who have more money in their pocket, have sucked it into savings, and we're only marginally up on consumer spending versus pre pandemic. So the vibesession is simply decoupling of economic and consumer outlook, but actually how that manifests in terms of spending, Americans are still spending relatively more than their British counterparts. Yeah,

Wendy 30:39

Yeah, yeah. And it is that that's the to me, one of the lessons from that, aside from that, it's a great firm, is that, you know, certainly global companies who assume they can say, Oh, we get it here. So it'll it's the same thing there, it's not so pay attention to the different way people respond. But yes, we've seen that. We just finished off our latest How America Shops® study, and one of the things we saw a preview of the data just before the election. So, you know, a couple of weeks before the election and the some baseline questions that we've been asking for years around you know, how are you feeling about your future? Finances, optimistic, pessimistic, security, the pessimism numbers was done in terms of the increase in them. And I remember when our research director shared them with us, I was like, Oops, it's the economy, stupid. Which was to coin a phrase from James Carville, one of the Democratic operatives from the Clinton era, and that, you know, these two things were, were totally decoupled, as you would say. So, really fascinating.

Jacqueline 31:46

I think, for both countries, we had an earlier election than you guys. And obviously you've had your recent presidential. We've also, in the UK, have had the budget. So irrespective of who you vote for, what is coming out is actually at least we know who won. There is some certainty, and therefore that at least we can plan within that framework, yeah, and so I think that will be net helpful to businesses and consumers.

Wendy 32:21

Clarity versus uncertainty. So just stepping back as we wrap up, just thinking about, as you look to 2025, from your purview, what are the two or three things that you would say to us, companies, global companies, whether they're brands or retailers, that they should really just keep on them, you know, keep in their mind as they build out this more certain future, at least politically.

Jacqueline 32:49

Yeah, I mean, I speak in terms of my day job. We speak to loads of people, right? Corporates, brands and retailers. We talk to investors, uh, private equity, VC, we talked to lenders, and the three things I continue to highlight is as follows, one is protect the core before you grow protect the core because it is around defensibility and it's about resilience. Because although we've had the elections, we clearly don't know what the next Black Swan is going to be, right? So it's building agile and resilient business models to navigate any headwinds. Because, as we know from the last four years, it's unexpected. Second is the market forecast for any category you're playing is broadly negative or single digit growth across every single category, food and non-food. And therefore, you've got to find growth outside your core, whether it's new geographies across the value chain, complimentary products and services, you've got to find new spaces. And third, and there's no chat with a retailer without mentioning your reputation as a responsible business. This is not for consumers, because they will not pay for it. This is about protecting and complying for from an investor perspective, whether it's shareholders, private equity, etc, the requirements for what you need to do as a responsible business across the ESG agenda is increasing,

Jacqueline 41:31

and so you've got to do it from that respect. So protect the core, find new pockets of growth and enhance your responsible business reputation.

Wendy 34:35

Yeah, I know lots of people pay lots of money to you to do this and provide that guidance. I appreciate that so much more to talk about. You have to come back and talk to us again as the year moves on, because I've about number 23,000 questions

Jacqueline 34:50

Yeah, but I want to add on. I know I've been in this space for 20 plus years, right? And the amount of change we've experienced in the last five is already. More than the previous 15, right? But I think innovation, therefore, is also moving at pace, and it's a really exciting time to actually be in consumer markets. Yeah, yeah, because of the innovation that we are experienced both as businesses, but also as shoppers.

Wendy 35:19

Yeah, no. Thank you for that. And I feel exactly the same way. I think there are so many opportunities now, if we see them, as opposed to assuming that the world has ended, as opposed to thinking about, wow, how do we grow here? Let's go.

Let's do it. Let's do it. Let's rack up more. That's all we can want.

Jacqueline 35:36

So let's go shopping. Let's support do it. Let's do it.

Wendy

Thank you, Jack, this is great.