Crisis in retailing serves a stark warning to universities
Angus Laing, Co-Founder & Chairman Nurture Higher Education Group
That the retail sector is in turmoil cannot have escaped anyone’s attention. In the UK alone BHS, Debenhams, House of Fraser, long established retail names, indeed institutions, are closing, restructuring and downsizing or occasionally being rescued by opportunistic investors. The pace of change, the refashioning of the retail sector, is remarkable and at one level it looks to be a tale of unrelenting doom. The sense that the high street, that emblem of retailing in the UK, is dying.
Yet Britons continue to be a nation of shoppers. It’s not as if we have given up on our consumption fix. Rather our behaviour has changed and the options open to us to consume have changed. What satisfied us 20 years ago no longer cuts it for the British consumer. While competition for the consumer pound is intense there are clear winners. Where was Zara or Primark at the turn of the millennium? Where for that matter was Amazon or Asos? They were there, or just emerging, but they were the subservient players, now they are the dominant players. It’s not just on the high street. Take food retailing. The notion of Aldi and Lidl as serious players in UK food retailing two decades ago was laughable. Today Sainsbury and Asda explore merging in order to take on these two, at least in British terms, upstarts.
At the core of these fundamental shifts in retailing is the issue of value. The increasingly divergent value propositions which different retailers offer consumers. Choice of where and how to shop. Different approaches to consumer service. This reframing of value is occurring against a backdrop of fundamental change in our habits. Whether we are part of the digital native generation or not, the way we interact with people, organisations, government has changed. When did you last go into a bank branch? Has your teenage child ever been into a bank branch?
So what relevance does this have for universities? We are established, trusted, key local institutions. We are fixtures of the local community being significant employers, we bring students into the town, we are the anchor tenants (institutions) in the local shopping centre (community). It would be impossible to imagine, say Lancaster without Lancaster University. People will continue to want education, they will need the skills to secure those high paying aspirational jobs, to secure their status. That demand is not going to go away, certainly not in a knowledge-based economy.
But let’s pause and ask about value. Let’s ask about the range of products we provide. Let’s ask about the service we offer our consumers, our students. Let’s ask about our operating models. Let’s ask about our routes to market and how we reach our consumers. Because, ultimately, no institution, no matter how venerable, can survive if it does not deliver value to those who consume its services. This is not about the absolute value of education, it is about the relative value of different educational provision. It is about the costs and benefits associated with accessing a service from one organisation compared to that of another.
The majority of universities operate in a manner and form akin to that of the department store, with a broad product range under one roof. They are large, sprawling, costly, and often housed in historic premises, with significant borrowings to cover costs of improving those premises. Legacy back office and support systems which are costly to maintain and difficult to update. Layout of the product offering is often confusing, certainly to the first-time consumer. Decent if somewhat variable service. Very traditional operations, and nothing particularly memorable about the overall experience. The University of Whichable?
We are in the department store trap. Weak and confused positioning, high sunk costs in legacy infrastructure confronting competitors with clear positioning and different cost structures. Incremental improvement to do better than other department stores does not break the trap. The challenge is to deal with the category killers, those super competitors which have fundamentally different operating systems and assumptions. The irreducible core of strategy is between delivering value based on distinctiveness and value based on cost leadership. In breaking free from the department store trap and competing with potential category killers the options are to compete on quality and service or price.
So, in thinking about how we can confront these challenges, as we do at Nurture, let’s go back to retailing and consider some of those retailers that are thriving amongst the chaos, capitalising on our ongoing shopping habit. Whether on the high street or online there are players, new and established, delivering value and attracting consumers. Amazon delivering vast choice, ubiquitous accessibility and convenience. Lidl offering a limited range but deeply discounted prices with minimalist service. Next with its clear value offer and integration of bricks and clicks. The White Company’s emphasis on style and service targeting a clear demographic. Zara bringing fashion from catwalk to store at speed.
Looking at this cross section it is evident that they represent very different routes to success. Divergent approaches to the consumer experience. Utilisation of different channels to reach consumers. However, all share strong brand identity, clarity of value proposition, operational agility, and relentless utilisation of data. Coupled to a clear alignment of culture and operating systems to the core brand proposition. It is difficult to imagine such statements currently being made in relation to universities. There are, however, tendrils of evidence from the university sector in the UK suggesting an ability to break free of the department store trap.
Take positioning. Loughborough University with its focus on student sport and competitive ethos. The University of Strathclyde, with its emphasis on applied disciplines and close engagement with practice. Take market reach. Coventry University with its distinctive operating structure and multiple and varied delivery channels. Lancaster University with campus partnerships in Malaysia, Ghana, China and Germany. In all these cases there is a recognition and exploitation of distinctive capabilities, whether positional or organisational. However, even in such cases the extent to which such strategic focus permeates throughout an institution may be questionable, rather sitting atop an unconvinced and unchanging academic base. Yet ultimately success in delivering clear strategic positioning or operating models is dependent on that focus percolating throughout the university. Impacting on the core academic model of the place and nature of research, the way teaching is delivered and the staffing mix, this is the really contentious change territory. The next decade will test the ability of universities to manage such change.
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