Less than 5% of British Retail Executive Directors have an E-Commerce Background

April 12, 2016

  • RAPID GROWTH IN IMPORTANCE OF E-COMMERCE OUTPACED CORPORATE EXPECTATIONS

LONDON, UK (April 8th, 2016) – There is a lack of significant relevant e-commerce experience on the boards of major British retailers, reveals research by global executive search firm DHR International.

DHR International found that only 5% of executive directors at the leading UK-listed ‘bricks and mortar’ retail companies* have a background in e-commerce which risks putting High Street retailers at a competitive disadvantage compared to online-only retailers.

DHR International explains that many traditional retailers realise the threat from e-commerce, but, as yet, have struggled to bring relevant talent from the world of e-commerce onto their boards. Therefore the need to transform traditional retail businesses to be more online-focused, including developing the necessary logistical structures, continues to be a significant boardroom issue.

DHR International adds that in its early stages, many retail boards underestimated the pace at which e-commerce would alter their industry over the next two decades. Consequently, high street retailers have only recently shifted their strategic focus towards online shopping in a bid to compete with internet-only retailers, such as ASOS and AO World, and are now competing for talent to develop their digital offering.

Jan Westerink, partner in DHR International’s Consumer and Retail Practice, comments: “In hindsight, traditional retailers responded too slowly to the challenge of e-commerce but they now recognise they have to add senior people to their online operations. Retailers need to get their e-commerce offering right or risk losing market share.”

“In-depth knowledge of the e-commerce sector at board level will be invaluable in developing a multi-channel approach, which is key for the future of the retail industry. For instance, many fashion retailers are adopting similar online services to ASOS in order to keep their share of the market.”

High street retailers focus on internet shopping to compete with e-commerce retailers

DHR International says that boards at many retailers have not always been proactive in advancing their businesses’ home grown digital offerings. As a result, traditional retailers have often been forced to develop their online presence through partnerships with and acquisitions of established e-commerce retailers.

Examples of high street retailers looking to established e-commerce companies to bring in the skills and infrastructure needed to compete in the online market include:

  •  Sainsbury’s undertaking the acquisition of Argos in spring 2016
  • House of Fraser partnering with digital merchandising platform Elevaate to manage their ‘digital shelf’ in real time
  • Marks and Spencer’s using an Amazon platform for their e-commerce for 7 years until 2014
  • Morrison’s acquisition of internet retailer Kiddicare for £70 million in 2011
  • Morrisons’ 2013 signing of a 25-year partnership agreement with online supermarket Ocado

Jan Westerink comments: “Acquisitions can be a high-risk strategy. Companies need to tread carefully when buying in online retail expertise from the outside.”

“Some major retail chains have successfully expanded their online presence, but many more are still playing catch up. Significant strategic change can often take a long time to bear fruit, and the speed of the transition to e-commerce and now m-commerce has wrong footed many analysts.”

DHR International adds that if traditional retailers do not address the challenge from online-only retailers, it may risk their ability to stay competitive.  Entertainment retailer HMV is a prime example of this. Initially slow in responding to the digitalization of the music, film and gaming markets, despite growing competition from online retailers like Amazon and music download sites like iTunes, HMV entered administration in 2013.

Bought by retail restructuring expert Hilco, HMV has since made a comeback with Digital Managing Director James Coughlan, former head of Vodafone’s digital music business, leading the relaunch of e-commerce site HMV.com and the HMV app.

Increasing competition for individuals with a background in e-commerce

DHR International says that there is now growing competition between high street and online-only retailers over individuals with a proven track record in e-commerce to add to their board.

Jan Westerink explains: “With the speed at which ‘bricks and mortar’ retailers have adopted e-commerce, many retailers have had a problem in retaining individuals with strong online experience. What top talent in the digital sphere are most often looking for is an opportunity to work on truly transformative projects, and the traditional retailers are not always set up to offer that.”

An example of this is Angela Ahrendts, CEO at Burberry from 2006 to 2014, who left her position to become the senior vice president of retail and online shopping at Apple.

DHR International also notes that there are already several prominent board members at major UK-listed retailers with a strong e-commerce background, including:

  • Mark Newton-Jones, Chief Executive Officer at Mothercare, who took Next online in 1998 as the Director of the Next Directory and is also a non-executive Director at online fashion retailer, Boohoo
  • John Browett, Chief Executive at Dunelm Group, who was previously CEO of tesco.com
  • Jon Rudoe, Sainsbury’s Digital and Technology Director, who had previously led marketing and user experience at Ocado
  • Robin Terrell, Chief Customer Officer at Tesco, who was Vice President and Managing Director at Amazon
  • Peter Fitzgerald, an independent non-executive Director at Debenhams, who is Country Manager at Google Japan

Major European retail boards have even less significant e-commerce experience than their UK counterparts

DHR International’s research also found that the leading European retail companies have less relevant e-commerce experience on their board of directors than their UK competitors. Only 1.8% of members on the main board of European retailers have a background in e-commerce.

DHR International points out that lower rates of e-commerce penetration within European markets is an important reason behind the lower levels of online experience on European boards, it is not yet seen as a necessity.

Percent of board members of major retailers with a background in e-commerce – Europe trails the UK

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The UK is currently the World’s third largest e-commerce market, and the UK represents 30% of the entire European e-commerce market, compared to 16.8% and 13.4% for Germany and France respectively.

Jan Westerink says, “The e-commerce market is not yet as important to European retailers as it is to their British counterparts, but that is likely to change rapidly in the near future.”

 E-commerce penetration in UK market substantially ahead of European rivals**

Retail_boards_2.JPG 

* UK-listed ‘bricks and mortar’ retailers with a market cap of over £100 million

** Source: Ecommerce Foundation, 2015