Social Media losing impact in retail, says Capgemini

13 October 2014 Consultancy.uk

The role of social media in the customer journey has declined compared to two years ago, concludes Capgemini in its research into the habits of consumers. In addition, social media is found less important than other shopping channels in the purchase and payment stage, a stage wherein the physical store is still found the most important.

Digital Shopper Relevancy
Since 2002, consulting firm Capgemini researches the shopping habits of over 50.000 consumers worldwide, and gathers insights in the changing patterns of purchasing behaviour as part of its ‘Consumer Relevancy’ and ‘Future Consumer’ research program. For its most recent research, entitled ‘Digital Shopper Relevancy Report 2014’, Capgemini hired ORC International, a global research firm, to survey the habits and preferences of more than 18,000 digital shoppers worldwide. 

Based on the research, Capgemini concludes that consumers are attributing less importance to social media as part of their customer journey compared to two years ago. Looking at the different stages of the customer journey, it can be said that the role of social media declined at all stages of the shopping experience in all sectors surveyed, including at the two most relevant stages for social media: ‘awareness’ and ‘choice’. 

Change in Importance of Social Media

According to the respondents, the experience in retail stores is more important in their shopping sprees than using social media, for instance by following retailers, finding out about new products through blogs, and participating in online retail customer communities. Social media is also considered less important than the internet, email, smartphone apps, or the use of technologies in-store. “Despite the surge in Facebook’s ad revenues and marketing innovations like Twitter’s new ‘Buy’ button, there is definitely a question mark over where and how ‘social’ fits into the shopper journey. Our report suggests that retailers still have work to do at every stage of the purchasing journey in order to make social media play a useful, valuable role in buying a product or service,” comments  Kees Jacobs, Global Digital Proposition Lead, Capgemini Digital Customer Experience, on the findings.

Relevance of Different Shopping Channels

Looking at the different channels in the purchase and payment stage of a product, the traditional store experience is still voted the most important with 72% rating this experience as ‘extremely important’ or ‘important’. The physical store is followed by internet shopping, voted as ‘extremely important’ by 36% and ‘important’ by 31%, adding up to 67%. The gap between retail stores and online shopping will, however, become smaller in the future, as 51% of the respondents indicated their intend to spend more money online. Social media, rated ‘(extremely) important’ by only 37%, finds itself at the bottom of the list, just above call centres.

Comparing high growth markets with mature markets, the researchers conclude that high growth markets, such as Brazil, Mexico, India and China, place more importance on digital technologies and hence on social media. This represents, according to the consultants, opportunities for brands present in, or wanting to expand into, these markets.

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Debenhams administrator handed legal threat from Sports Direct

24 April 2019 Consultancy.uk

Earlier in April 2019, the long-suffering high street entity of Debenhams finally collapsed into a pre-pack administration, wiping out equity for shareholders including Sports Direct. Now, Mike Ashley, the controversial owner of Sports Direct, has threatened legal action to remove FTI Consulting from its role as Debenhams’ administrators, following the obliteration of his stock in the company.

As the retail sector in the UK continues to endure a torrid period, British retail stalwart Debenhams endured a spectacular fall from grace. The high street ever-present was founded in the early 19th century, with a single store in London, before expanding to 178 locations across the UK, Ireland and Denmark. However, following a string of profit warnings and several rounds of lay-offs, the company engaged advisors from Big Four firm KPMG to consider its options in the Autumn of 2018.

At the time, Debenhams Chairman Sir Ian Cheshire insisted that the chain was not heading for insolvency, or that it was actively embarking on a company voluntary agreement (CVA). Nevertheless, Debenhams fell into administration in Spring 2019. The news saw Chad Griffin, Simon Kirkhope and Andrew Johnson of FTI Consulting appointed as joint administrators, immediately selling the retailer to a newly incorporated company controlled by secured lenders.

Debenhams administrator handed legal threat from Sports Direct

The pre-pack administration deal meant Debenhams was able to access significant additional funding, preserving 165 of its stores, though plans to close around 50 under-performing stores in the next three to five years remain in place. At the same time, the deal maintained its commercial relationships with suppliers, employees and pension holders. However, it also effectively led all of Debenhams’ previous shareholders – including the retail magnate Mike Ashley – to lose their equity.

Ashley’s Sports Direct firm had increased its stake in the department store chain in 2018, but stopped just short of the 30% stake which would require it to put in a formal offer to fully acquire the business. The transaction fuelled speculation that Ashley was waiting for the opportune time to acquire Debenhams, particularly in the wake of his swoop for House of Fraser. Ashley’s deal there enabled Sports Direct to buy the firm out of administration in a pre-pack deal, allowing the new ownership to controversially wash its hands of the company’s pension scheme in the process.

While some believed this was Ashley’s intent for Debenhams, FTI’s decision to sell the store to its creditors has instead resulted in a sizeable loss for Ashley. The hit of around £150 million from his loss in Debenhams comes after an analysis by The Sunday Telegraph suggested the tycoon had accrued “a sprawling web of stakes” in rival companies, and that he may be nursing losses of more than £500 million.

Bad press

Ashley – who recently lost a complaint ruling by British press regulator Ipso allowing the Times to note that he shared many characteristics with North Korean dictator Kim Jong-un – has been outspoken in his contempt for FTI since the news broke of Debenhams’ sale. The Sports Direct CEO has called for the resignation of FTI from its role as administrator, after his stake in the department store chain was wiped out. The Guardian stated that a letter to FTI saw Sports Direct’s lawyers even threaten legal action to remove the advisory firm as administrators because of a conflict of interests.

According to the reports, the document claimed, “[Sports Direct] will do everything available to it to unwind the damage caused to the company and other stakeholders (including large and small shareholders) by the events of today including but not limited to challenging the appointment [of FTI as administrators] and all consequences of it.”

The letter allegedly claims that FTI had been involved with Debenhams since the second week of February, and had engaged with the group’s lenders. The legal team reportedly suggested that this would consistute a conflict of interest, because FTI sold the retailer’s operating companies to the same lenders via a pre-pack administration.

This comes weeks after Sports Direct was itself accused of becoming overly cosy with a professional services firm, which has seen its auditor Grant Thornton placed under scrutiny for its continued role with the firm. In 2018, it was reported that Grant Thornton was set to stand aside from the role due to competition rules. It had held the role since before Sports Direct floated on the London Stock Exchange in 2007, while Phil Westerman, the Partner at Grant Thornton responsible for signing off Sports Direct's accounts, had himself undertaken the work for five years. 

Neither situation is understood to have changed, leading to the questioning of the independence of Grant Thornton’s auditing work with Sports Direct. Such is the level of bad press surrounding the retailer, that the Big Four of the accounting and advisory world – wary of incurring a new scandal of their own – are said to have ruled out taking the contract over.