Picture: Graham Barclay/Bloomberg via Getty Images)

Morrisons winning ticket: Safeway

Morrison deal to supply McColls has come from left field but it really shouldn’t have.

Morrisons have quietly been getting on with business while all the focus has been on Sainsburys and their acquisition trail and the Tesco Booker deal. The scale of the Morrisons deal might be smaller, but Morrisons are racking up a string of relationships that will see their wholesale revenue stream take a big step towards the £1bn mark.

So why have Morrisons done this? The revenue from additional wholesale relationships is obviously attractive and adds to the top line but it is the ability for Morrisons to maximise volume through their vertical integration that makes the relationship so attractive and one that shouldn’t have surprised us.

The quality guarantee that comes from owning the farms and fisheries is one that Morrisons have been eager to leverage in their own supermarkets and it was cited as a key factor by Miller, CEO of McColls in moving to Morrisons for its supply. Morrisons own the Safeway brand and with it, it’s quality perception built from many years of Safeway supermarkets. Coupled together, McColls see how they can offer their customers a better quality offer on fresh produce than they have been able to do to date and with it, better ranges and higher sales.

For Morrisons, more volume through the operation equals reduced cost and that is where the Morrison’s customer stands to benefit. Morrisons would have the ability to cut prices for the customer inevitably putting pressure on their grocery rivals.

We have another possibility to float: the revival of standalone Safeway stores. In a conversation with Luke Tugby of Retail Week, we discussed how the Safeway brand would be enhanced though McColls to the point that, in time, it would give Morrisons the opportunity to consider building its presence in the South of the UK where in the past, Morrisons has struggled. It would give Morrisons a premium fascia that would appeal to another demographic, one that would not consider shopping at Morrisons.

It is, of course, speculation, but we do know this: Morrisons are on the front foot and are proactively exploring all avenues of growth. We’d love to know what you think so please do leave a comment.

The Retail Remedy Way – Hands on and foot down to retail growth

the retail remedy way case study

Retail Remedy is a hands-on retail consultancy, bringing our combined experience to the retailer, diagnosing the problems and then guiding the business through change to deliver results.

We work with all kinds of retailers all over the world with turnover upwards of £1m. This case study follows the path of one such retailer; a small business that had grown organically, picking up skills as they went but with very limited retail knowledge. However, sales had been in a slight decline for the previous three years.

This is the story of how we grew their turnover by 40% and increased margin by 3 percentage points.

Under the bonnet - case study

Getting under the bonnet

When we arrived, we found a very passionate team with enthusiasm that far outweighed their retail skillset.  The team were long-standing with management that were highly involved in the day to day running of the business. Their combined dedication and hard work had helped them firefight their way through to create a credible presence, albeit very inefficiently to that point.

Fortunately, they had the foresight to implement software systems for stock and inventory but without core retail practices in place, it was far from optimised. The tools helped the team find a way through the day to day problems they encountered but like with most systems data does not add value without the skill to convert it to information and knowledge.

When we start a project with a client we have a pre-determined set of areas to review, governed only in part by the objectives of the brief. We often find that the retailer only knows a small part of what they need. No-one knows what they don’t yet know. We will always expand our review to cover areas of the business that the owner may think is irrelevant but where we can identify a seam of opportunity to support the business to grow.

In this case, we reviewed all areas of the instore retail operational practices, all aspects of stock handling including management processes, ordering and stock holding levels, product merchandising and pricing, buying, category management including OTB and range review disciplines, staffing, pay and benefits, incentive programmes and e-commerce processes.

answer the why - case study

Answer the Why

With the information that we gathered we devised a phased programme of change that started with buy in from the top down. Like in any business, change does not happen because you say it must, change happens because people can see the benefit to them of doing so. We answered the why.

A three-day visioning workshop helped the team establish “What the brand is” and importantly “what the brand is not”. From this any questions that were raised were held up against the brand values and if they supported it, great, if they did not, then they were challenged. The foundations must be solid and defendable, not by us, but by the teams.

This groundwork can feel over done, but from our experience and what we have delivered for other retailers, we know that it is a valuable use of resource, that in the long term, saves time and helps to facilitate a smooth transition. It gives the business the “Big Plan” to work to and helps to measure progress particularly when you are in the thick of change and results still feel a long way off.

Right decisions - case study

Right decisions, right time, right place

The retail and buying teams were restructured to give the right level of decision making to the right people at the right point in the process. A dedicated buying team was created founded on best practice principles, retaining the existing team’s knowledge and passion for the business and product, but also recruiting the skill and experience that was previously lacking.

We put in place and re-platformed a new ERP system and together with the new resource, we enabled the business to implement and embed core buying processes such as OTB, continuity ranges, range reviews, category management and aged stock processes.

Basic retail practices and processes were reviewed and improved to current lead practice, to deliver a better customer journey and experience.

Immediate and sustainable results

The results of this overhaul were immediate and sustainable. Turnover of products increased; cash flow improved leading to an increased buy; aged stock moved out of the business further improving cash flow and the website made transactional.

With the systems in place, the skills to interpret the data presented, and the processes established, the business could work more efficiently and effectively to grow sales from £1m to £1.4m over 12 months. Not only that, gross margin improved by 3 percentage points too from better buying decisions and less aged stock in the business.

The business is now in a much stronger position to further support its own growth as it adds space in new locations in the coming year. The ability to scale from the practices and processes that have now been embedded into the culture of the business, mean it has the potential to further grow sales and improve margin and the legacy that we have left will benefit the business for more years to come.

This case study is not unusual, in fact it is quite typical of the sort of results we are able to bring to a small or medium sized retailer. It might be that you have reached a tipping point in your growth and need to build stronger foundations to continue to grow. So if you find

  • Your sales have flat lined, or are in decline
  • Your margin or profit are in decline
  • The customer experience that you want is not being delivered
  • Your retail processes and procedures are not as good as you experience elsewhere

Please get in touch with one of our experienced team.

So, if you need support re-focussing to navigate a new path and kick start your business growth get in touch. With our knowledge and experience we can work with you to build a more profitable future, so what are you waiting for?

new retail formula

The New Retail Formula

new retail formula

Fewer stores and less staff hours equals more profit? Is this the new retail formula that all retailers are aspiring to?

We have lost track of the number of retailers that are culling under-performing stores and cutting staff hours in the pursuit of profit in a difficult period of High Street retailing. Luxury purchases have been reined in as inflation starts to rise and political uncertainty makes mortgage and credit card rates look less certain than they once did.

In 10 years’ time fewer shops will have fewer staff working in them and yet we will probably all be spending more on our shopping. The trend is pointing that way. There are certainly more shops being closed than are being occupied by etailers debuting on the High Street. The rise of technology, the ability to shop without getting your wallet out or scanning an item at the till that Amazon is bringing us, would indicate the retail workforce should be worried.

Are town councils worried? Are landlords?

It is going to get harder to squeeze the same rent from the same players so in our opinion, if they aren’t ready to evolve, they should be worried. The need for flexibility and thinking about retail in a fresh way will be paramount. Norms will be challenged. This required evolution is tricky however, if your community shops online how do you protect your Town Centre? Our view has remained solid, if you are not building footfall driving activities (schools, colleges, cinemas, libraries, restaurants etc.) then you are vulnerable. Yet maybe the salvation is in etailing ?

How is it we have the rising trend of etailers opening stores, are they mad? No, they consider themselves opportunists opening showrooms to drive more sales online. Made.com, Loaf.com and other furniture etailers get that the consumer wants to sit on a sofa before they buy it. How that rationale works for books, or fashion is debateable, but Joe Browns is buying it. The online fashion retailer wants to connect with its customer in a physical environment in Meadowhall to be precise.

The customer connects with brands not channels

Total retail sales are all but flat with fluctuations only happening between channels.  We must remember that the customer connects with brands, not channels, and they want a seamless experience whether they are in Sheffield or Portsmouth. To achieve that, staff knowledge and retail experiences need to marry up. When a customer has more information about a product on their phone than the person selling it in a shop, there is a problem.

The physical shop is an opportunity for the retailer to inspire the customer and give them a memorable delightful experience. When the retail experience has barely changed in the last 20 years it’s easy to see where the problem lies.

Etailers taking up positions on the High Street have that in mind; they were conceived in a time of change and are drowning in data that tells them more about their customer than a lifetime of standing at a till will ever do.

So the etailers have the advantage?

No, they just have a mindset that embraces a constantly changing environment. We expect they will face their own difficulties. It’s easy to drag and drop a product onto the home page, less easy to physically move it around a shop to fill gaps in range availability.

Anyone citing the “death” of retail and the UK’s High Streets must be coupled with the inflexible landlord and the retailer navel gazing. What we are seeing is the evolution of retail, natural selection, survival of the fittest. A new retail model is rising that will find more innovative ways to generate profits. The number of what we call retail stores today will decrease, but we will see an increasing number of sites that involve a form of purchase behaviour. Those sites will be served by by people, what we call shop assistants today.

A new retail formula is emerging, be in no doubt, and it will be more productive, with different touch points for the customer but ultimately serving that customer. Online, in store, till-free or with a full customer service, the customer will decide.

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Amazon just passed Go

Amazon is a retail disrupter. Many retailers still hold a fear of what the world’s largest retailer will do to their established business models. On the other hand, many other retailers, rather than let fear paralyse them, use Amazon as a sharp stick to remind them to keep adapting, to never be satisfied, to move with the customer.

What Amazon are good at, above all else, is their relentless observation of the customer. This enables them to spot trends and opportunities and make the experience better, and they are never satisfied that they have ticked all the boxes. Amazon Go is a perfect illustration of that, adapting to smaller basket sizes and time poor customers with technology.

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Tesco, of all the UK grocers has taken this on board; the phrase “customer-centric” litters every Tesco press release and it’s not just lip service, sales are growing again. Sainsburys has acquired Argos and is now sniffing around Nisa, citing customer synergies and improved shopping missions and prices for more customers.

And then there is Morrisons. There isn’t that much to suggest Morrisons are moving with the customer at the same pace as its competitors and yet they have a relationship with Amazon and it could be argued are the more forward thinking of all the Big 4.

When the deal was first announced we thought, yes, that’s a good deal for Morrisons who at the time were faltering with little excitement on the agenda to entice customers into store. In hindsight, and with the new knowledge that Amazon have acquired Whole Foods, there is a more unnerving scenario forming in our minds.

Has Morrisons been astute enough to recognise that Amazon will not stall in their desire to penetrate further into the grocery market and that by entering into a relationship with them in the early stages of their market penetration gives them an advantage? Or has Morrisons positioned itself ready to be consumed by Amazon in one big bite?

Amazon Go, the grocery format with few staff and no checkouts, is a disrupter if it moves into scale. The benefit to the bottom line from reduced staff, where margins are recovered and inflation managed in a struggling economy, is a very attractive model. It is likely that Amazon have acquired Whole Foods as a vehicle to accelerate Amazon Go.  There are trademark applications for Amazon Go in the UK already so it is only a matter of time. And Morrisons already have a relationship with Amazon, the biggest retailer on the planet. Smart or foolhardy?

fashion retail productivity

Fashion Retail Urgently Needs Better Productivity

Fashion retail is in a tough place, and it’s becoming tougher. Sales are more difficult to achieve, margins are under pressure from rising costs, and the weather is being no more predictable with every season.

Just like most retail business, the largest cost for fashion retail is the labour line so we are very surprised when we review a retailer’s wage and productivity model to see how much we can help them save.

Typically, the science behind the allocation of hours to stores is not based on fair and balanced decisions, or in fact, any science at all. The flag ship store is given an easier ride to help it stand out under the gaze of customers and stakeholders. All this does, however, is create an unbalanced and unfair wage model. Addressing this unbalance and getting all stores to work equally hard is a valuable place to start saving cost.

It is not just about redressing the balance; many retailers are carrying out non-value adding tasks too. It is amazing when sales are slowing, retailers can busy themselves with tasks rather than serving their customers. There are only so many times you can count the change float.

By helping retailers review these tasks, changing or improving the processes and therefore the efficiency, we have helped retailers save millions of pounds a year.

One of the most common places to find ‘tasks for tasks sake’ is in the store room, often labelled the engine room of the store. Unfortunately, this engine room is saddled with complexity, confusing and time-consuming processes that are expensive and ineffective.

Fashion retailing is not rocket science. When we are given the opportunity to help a fashion retail business cut through the task-treacle and get back to a simple retailing formula, we not remove unproductive processes, we also leave a fitter fashion retailer with lower costs and more to invest in its future.

Asda – Some Quality Decisions Needed

By Phil Dorrell

The woes of Asda have been well documented by countless newspaper columns and down beat interviews. After 11 consecutive quarters of sales decline the time has come for a response that moves away from what it has always done; after all the definition of madness is doing what you’ve always done and expecting a different result.

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Chasing the drifting spend by reducing prices further and continuing to reduce costs is frankly silly, yet the paymasters at Wal-Mart will want costs decreasing ahead of sales. With margin and operating profit apparently declining too, it all adds up to a bit of a pickle. The price perception brought about by the discounters is only going to lead Asda further down the wrong path.

As a store manager, competing against Asda in the 90’s was hard as they had a great non-food range, a burgeoning George range and an increased presence of aspirational food, something that Safeway prided themselves on. Now most of this has been washed away.

Asda’s food range is frankly cheap. It might be cheerful but it lacks excitement and is definitely unable to satisfy Sainsbury or Tesco customers. The George range that started off with Next type quality has been cost engineered down to the sort of product nobody is going to be proud to wear, and certainly not show the label. The non-food range is choker with cheap product and the seasonal aisle smacks of lazy buying trips to China. Where is the ambition? Where is the product to recapture the customers who migrated to Aldi for price and stayed because their quality was better?

I am an ex Asda colleague and want them to be better, but this just makes me, and countless others, frustrated that their myopic focus on price and cost will ultimately turn them into a poor man’s Wal-Mart. Asda need a comprehensive range review in every major category to identify where the quality at a great price product comes in. Opening price points should not be sacrificed but aspirational product needs sourcing to win back a consumer who is feeling a little, but only a little, better off than they did 5 years ago.

The other factor in all of this is regional ranging, and I don’t mean the local lamb or the farm cheese but a more discerning look at the product ranges aligned to the demographic mosaic of the area. If in a wealthy area of Wakefield I cannot buy a real French stick on a Friday then Sainsbury here I come.

M&S playing catch up on online grocery delivery

It feels odd to say it in 2017, but one of the UK’s most well-known food retailers are only now announcing a move into online grocery delivery.

M&S have announced their intention to trial online grocery deliveries within certain postcodes. Although the mechanics are still being decided, Ocado have been named as a possible partner for the trial.

Morrisons already partner with Ocado for online grocery and with the expertise of Ocado and the strategic turnaround of Morrisons, the relationship appears to be flourishing. The model operates out of Dordon customer fulfilment centre but is expanding into store picking using technology developed with Ocado.

Different customer, different model

The M&S model will probably look a little different, primarily because the range is much narrower than that of Morrisons, and the basket size smaller. Nor is the customer shopping mission comparable, with M&S catering more to the convenience, meal for tonight, market compared to Morrisons family shop mission.

If the Ocado deal goes ahead there will be a couple of options: will M&S list its range on the Ocado website, like Waitrose, or will Ocado assist M&S in fulfilling its own orders? The later seems more likely but with smaller orders the economics would be challenging. Scale is imperative: more orders, more picks, more journeys, equals higher costs.

Smart move

Ocado launched Smart Pass, like Amazon Prime, where customers pay a subscription rather than for each delivery. This has resulted in more transactions but smaller basket sizes for Ocado, shopping more often and completely aligned with the convenience supermarket shopping mission. M&S would fit that model very well, loyal customers shopping frequently but with smaller basket sizes.

Playing catch up has its advantages

Amazon reportedly took a punt on Prime, more on gut feel than substantiating data. Ocado may have made a similar decision. But by the time M&S launch, Ocado will have data to support a decision and this knowledge will be attractive to M&S. Sometimes playing catch has its advantages.

The timing of M&S online grocery shopping while late, has the advantage of learning from other grocer’s business models and Ocado’s now profitable operation. M&S will understand the pitfalls to avoid and the points of advantage to seek out. Expect small incremental steps rather than giant leaps.

tesco farm value pricing

Planning ahead puts Tesco ahead of plan

It’s a far cry from the £4bn Tesco earned 5 years ago but it is still a very healthy improvement on last years profit in a grocery landscape that has changed almost beyond recognition.

In order to compete in this climate David Lewis has adopted a multi-pronged strategy: product ranging, cost cutting and market penetration.

The introduction of entry level sub-branding was designed to compete head on with the discounters: quality at good prices to deliver great value for money. Despite initial challenges, mostly by the press rather than actual customers, the sub-brands have found their place in customer’s baskets and a comfortable market share. Such it the range success, further products are being added.  On their own, however, they are not enough to dent the discounter’s market share.

The need to compete without going head to head on price sets Tesco apart (and ahead) of Morrisons and Asda. Cost cutting through switching to twilight rather than night filling gives Tesco room to manoeuvre although the effect of this hasn’t been without it’s negatives. On our recent visits we have noticed availability issues coupled with a slip in the standard of presentation.

Cost cutting looks to have a continued focus this year given the drop in the number of 24 hour stores so we will be looking for Tesco to improve standards if they are to maintain customer service. Currently this feels like an area in which Tesco are exposed.

The other strategic move is market penetration and the proposed acquisition of Bookers. There are some hurdles to overcome here, namely some heavy weight shareholder resistance who are concerned by the price, how distracting it is from the core UK business and how difficult it will be to create shareholder value from the deal.

In our opinion this is a good longer term strategy for Tesco. It will result in increased buying power and adds a revenue stream from day 1. If the deal fails to progress a gap will be exposed in cost saving synergies already planned and there will inevitably be a trail of debris to be cleaned up, distracting resource that should be focused on moving forward.

Further out, we are still expecting a move back to overseas markets for Tesco. Now is not the right time for far to many reasons but depending on the pace of change nationally and a signed deal with Booker, we would still expect this to be within a 5 year outlook.

What is clear is Tesco is a retailer with its finger on the pulse of the UK grocery sector. There may be bumps in the road ahead but these are manageable when you have a clear sense of direction and a team that is fuelling the engine. Even the discounters are watching their backs.

pep&co poundland

Poundland, Pep&Co and Toblerone

Following the Steinhoff owned PepKor acquisition of Poundland in August 2016, Retail Remedy were invited to a briefing at Poundland, Woolwich to discover what we can expect for the price sensitive shopper on the High Street.

The Woolwich Poundland store was chosen as much for its future as its past: formerly a 99p store, across the street from an existing Poundland, and before that an M&S, it is now a Poundland, and significantly, one of the first to have a Pep&Co shop in shop.

Bricks and mortar retailing is in decline

Pep&Co, set up by Andy Bond, burst onto secondary High Streets in 2015, with the ambitious but delivered plan to open 50 stores in 50 days. Now with 88 stores, the next target is 100, which will be realised 674 days after opening their first. No mean feat at a time when we are told bricks and mortar retailing is in decline.

Now with the acquisition of Poundland, and the ability to run the two brands under PepKor UK, the next milestone on the horizon is 100 Pep&Co shop in shops by the Autumn of this year. Pepkor has a strong leadership team, premiership quality even, but hopefully not with the short tenure ‘premiership’ is normally associated with.

So, what did we learn?

Poundland – Loving the Pound

The road ahead looks positive, starting with addressing the legacy issues of Poundland and the 99p stores acquisition. The fact that the remaining un-integrated 99p stores has now been placed into administration, demonstrates the priority of this. Additionally, it was communicated that of those stores, most were unprofitable and no 99p stores colleagues are losing jobs.

We have commented previously that the inclusion of higher priced items in Poundland was a risk, and could derail the simple pricing mechanic for which Poundland is famed. The theme of “loving the pound” and ‘simplifying multi price” was high on the agenda of the briefing.

The bulk of Poundland sales come from items priced at a pound, but when Poundland add simple price points outside of this, which still drive great value to the customer, then it does work.

Expect price points of 50 pence, £2 and £5 to appear in Poundland stores, but expect them to be clearly defined, segmented in separate bays and ends and expect those items to represent great value. In doing this, Barry Williams said, “we can access other products in other categories”.

More Toblerones

More on the agenda for Poundland is creating more Toblerone. Famous for selling 170gms of great branded chocolate at £1, everyone inside Poundland is passionate, almost obsessed, about Toblerone. But what other lines can they become famed for, obsessed about and convert to best sellers?

Ultimately the customer will decide: items that represent great value, that they shop Poundland for, the cross-town deals that people talk about and keep coming in for. With these high volume unit sales, comes even better purchasing from suppliers and greater margin opportunities.

The potential “Toblerone” of the future could be reading glasses at a £1 and quality phone charging cables at, you guessed it £1.

Simple but effective, focused retail processes

The introduction of a new availability process for the top 600 lines sold in Poundland, means store colleagues and managers can highlight the best sellers, and ensure 100% availability to the customer. Items on the top 600 list are highlighted on the shelf edge, have space flexed to ensure greater shelf fill, and are subject to daily reports to check for missed sales and potential issues.

Why 600? Well they account for 40% of the trade, and could be worth 2% LFL this year; simple but effective ways to drive sales, much like Poundland itself.

The next challenge is product, how to generate more new products and ensure the store is always fresh. The price lever has been pulled to the max, so product needs to be the differentiator. From what we saw today, there are plenty of reasons to be optimistic.

Helping customers discover Pep&Co

Fashion for the whole family and aimed mainly at Mums with kids, the Pep&Co brand is price conscious. There was concern at bringing the shop in to Poundland, but so far it has been well received. Poundland stores are often alongside stores such as Primark, Select and independents, so the customer is already there.

Pep&Co’s biggest challenge is customer awareness. Still a brand in its infancy, and although a great success story, there are still only 88 stores to date. It is hoped the integration into Poundland will help spread the word. The target, as well as 100 full Pep&Co shops by Autumn this year, is also 674 Poundland stores selling 5-6 bays of Pep&Co basics.

The team are anxious to show that Poundland has brought in a fashion retailer, and not that Poundland is now selling clothes. Although Pep&Co does range some £1 price points such as the kids school polo shirt, the highest price point is £20 and 95% of the range is under £10.

The focus now is continuing to simplify and drive Poundland, whilst growing and integrating Pep&Co. GHM has now gone and all the stores have become Poundland which does help to simplify the offer. At a time when UK Inflation is increasing, Poundland’s answer is give the customer a fixed price retailer. Makes sense.

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Is the thinking at Sainsbury’s as joined up as it could be?

The latest Sainsbury’s “Food dancing” advertising campaign wasn’t to everyone’s taste. The POS in store seemed random and did not obviously connect with the aisle ends it highlighted. However, once the TV ads launched, the dots were joined. Sainsbury’s, rather than selling groceries, wants to sell an experience. An experience that brings people together and an experience that is highly enjoyable: cooking and eating.

Buying groceries in itself is a bit dull, let’s face it.

The in store experience can be more entertaining but ultimately it is what happens at home with the product you have bought that is the fun bit.

Sainsbury’s recognise that. They are building brand associations with fun in the family kitchen.

And it’s not just food.

Sainsbury's interactive outdoor ad

Tu Clothing interactive ads respond to weather

Sainsbury’s is launching Tu Clothing outdoor responsive ads which change depending on the weather. We all know how weather affects clothing sales and the challenge customers often face with fashion seasons being out of sync with British weather.

Playing with the fact that the weather is changeable in Spring, and showing clothing that is weather appropriate in the ad, makes TU clothing immediately relatable.

The caveat to what is, in our view, a clever campaign, is what the customer finds in store.

From advert to in store experience

We have challenged TU clothing in-store execution in the past and we are still to be convinced that Sainsbury’s aren’t leaving sales in the aisles by not addressing merchandising, signage and simple stock principles.

Reporting on Sainsbury’s Q4 we see that clothing sales have increased 5% which is ahead of the market. Very commendable for a range that is of high quality and competitively priced so we can only imagine what it could achieve if store standards were addressed in all stores.

We hope that the dots have been joined and that what the customer’s perception is of TU clothing after seeing the advert, is supported or surpassed in store.

Whether the campaigns succeed or fail will depend on meeting customer expectations in store. No advertising campaign can deliver sustainable growth if the dots are not joined and the whole operation isn’t working to the same agenda and timeline.

Sainsbury’s are also working to a cost cutting agenda and to date this looks like it is in conjunction with improving customer service. We feel confident that this will continue to be the case and yet there is still the niggling doubt that re-investment may be directed towards the ‘hot’ projects like Argos digital stores, Habitat when store standards are key to future growth in an unstable market.