By Alan Hunt, managing associate at law firm Lewis Silkin.
On 23 July 2020, The Collective by Lewis Silkin welcomed Martin Raymond of The Future Laboratory to discuss how innovation is vital for luxury businesses in the retail, hospitality and leisure spaces hoping both to survive in the present and to thrive in future.
During our discussion, Martin and I explored how businesses need to re-orientate their thinking towards their customers and communities as well as embrace innovation from a technological and use of space perspective. Not only is this necessary to keep up with long-term trends, but it is an imperative in a context where businesses in the retail, leisure and hospitality industries have been hit hardest by the pandemic, with many of them unable to trade for over three months.
Values: circular thinking, betterment, and inclusivity
Luxury businesses must respond to the challenges posed by ongoing changes to consumer expectations, which have in part been accelerated by the pandemic.
The pandemic has encouraged businesses to provide goods and services that prioritise consumer and community needs – what Martin called a ‘new essentialism’– with added onus on health and hygiene. One solution to this ‘new essentialism’ is to embrace the ‘circular economy’, a system which reflects consumers’ rising interest in sustainable living and which aims to ensure an efficient, sustainable use of resources.
Younger generations in particular are re-evaluating how and what they consume, often choosing to consume products with authentic environmental and ethical concerns front of mind and from businesses with a proven track record of inclusivity and tolerance. The Black Lives Matter movement has been a great example of this, with young people unafraid to demand real change rather than empty gestures from businesses.
Indeed, we are increasingly seeing practical steps being taken by businesses to achieve this societal and cultural betterment, most notably in environmental measures, and not just in the luxury space. This may take the form of reusable packaging, carbon reduction pledges or fast fashion rental, as offered by HireStreet for example.
Fast fashion rental extends the life of garments and reduces waste, creating a beneficial bond of trust between retailers and customers – a new ‘retail covenant’ – where the emphasis is on fulfilment and sustainability. The luxury sector has been at the forefront of this revolution in retail which is now gaining ground and providing new opportunities on the high street.
Data & tech: optimising fulfilment and unlocking demand
Digital technologies will be at the heart of the post Covid-19 lifestyle and economic transformation.
We discussed how the power of data must be utilised in a way that creates a mutually beneficial positive value exchange between consumers and businesses. Although Generation Z consumers are increasingly happy to use multiple payment formats – from biometrics and facial recognition to more ‘traditional’ forms of mobile and contactless payments – they are equally concerned with their data privacy.
Recently, start-ups have come up with new ways of harbouring data in a more reciprocal fashion, reflecting the fact that data is a tradeable asset. For instance, both Datacoup and Ozone AI have developed systems that offer customers tangible returns for investing in their brand and service offer, granting consumers control of their data, which can be exchanged for payment. The consumers of the future may well come to expect similar levels of control over their data, so this is something that brands need to be aware of, and ideally, tap into.
Machine learning, AI, AR and VR will unlock vast new opportunities. Not only will these technologies allow us to navigate locations and time zones, they will also enable retailers (and consumers) to identify, visualise and scenario-solve many of the complex business and social challenges of the next decade.
When new technologies are applied to supply chains and logistics, for example, they can unlock new levels of consumer fulfilment, with speed of delivery now crucial to consumer demand in addition to traditional factors such as product and brand. Decentralising warehousing and logistics operations to bring them into specific communities and localities provides businesses a chance to cut costs and reach consumers quicker, all the while rooting retail operations in local communities.
To this point, Martin raised the example of Ohi, which creates micro-warehouses from unused retail space to offer brands storage centres across the US without long-term leases and to provide greater flexibility and delivery speeds. This innovative use of space and technology has created a powerful and successful service which benefits e-commerce companies and consumers in a very concrete way.
Technology also facilitates the rise of Direct-to-Consumer (DTC) businesses, notably thanks to enhanced logistics and multimedia storefronts. Whereas in the past dominating the high street was the key to retail success, there are now more effective ways to reach consumers, with stores acting as the physical gateway to vast digital and e-commerce operations. Effective use of social media is now a vital element in reaching larger audiences.
To understand how stores are evolving, we discussed how many businesses are ceasing to be merely warehouses and shops, and are instead turning into media ‘hubs’ for broadcasting and showcasing goods or services – increasing reach, unlocking sales potential and bring new business opportunities.
Real estate: developing a 15-minute city
Covid-19 has significantly hastened the rise of remote working (and in time could result in more co-working, co-living and co-creating spaces), precipitating a new push towards blended lifestyle and life-space solutions.
As employees embrace home-working, workplaces will have to become creative, innovative and powerful spaces in order to attract people to them. The same applies to retail outlets reliant on the ‘urban tide’ – the flow of people, especially in the mornings and evenings.
Struggling high streets and shopping centres are being re-invented as work malls, offering meeting, exhibition and co-working spaces for the wider community as well as the traditional retail and leisure services.
We discussed the example of architectural firms SPPARC and Heatherwick Studios renovating the Olympia London to include new offices plus restaurants, hotels, theatres and music venues. This redevelopment sets a new benchmark, helping to shed light on what the realisation of a future civic work and leisure space could look like.
Indeed, the future could see formerly empty commercial space transformed into blended living spaces and vibrant micro-villages with significant opportunities for pioneering retail and leisure businesses brave enough to adopt a multi-model approach to space.
In turn, this blurring of living, working, retail and isolation space could help us to realise Carlos Moreno’s ’15-minute city’ – a concept which places citizen and consumer wellbeing at the heart of its project.
What this all means
Innovators in the luxury sector provide a roadmap for to how the retail, leisure and hospitality sectors more broadly can succeed in the future. In order to thrive, businesses will need to be essential, sustainable and imaginative.
Martin and I agreed that incorporating societal betterment as a core value and adopting a community-orientated approach will be a vital first step for businesses post-Covid-19. Thinking holistically about consumers and the role of individuals within wider communities should, when paired with innovation and creative thinking on the technological and property front, put businesses in good stead for the ‘new normal’ and the years that follow.
The Collective by Lewis Silkin is excited to continue exploring these trends with members – if you would like to join or have an idea for a future event topic then get in touch.
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