Are there barriers to innovation in retailing?

Abstract

Recent data from the Community Innovation Survey challenge some of the conventional arguments that retailing is inherently less innovative than other sectors within developed economies. According to the data, firms in the UK retail sector are now converging on the all-sector average. Drawing on qualitative research undertaken within retail firms, this article begins by examining some of the implications of this and the reasons why survey data may still underestimate the extent of innovation in the sector. One of the potential contributory factors to an increase in reported levels of innovation may be a reduction in barriers to innovation. In a new analysis of the data, the article explores the nature and incidence of such barriers in the UK. It judges that, although barriers were already perceived to be low, further reductions may have played a part in stimulating innovation. However, amongst other factors, it also notes that the sector still lacks any reliance upon universities and HEIs to assist with strategic innovation. The article further concludes that present economic conditions are likely to detrimentally affect a number of the cost and market factors, which are the most significant barriers to innovation in the sector.

Keywords:

• retailing
• innovation
• Community Innovation Survey
• barriers to innovation
• business engagement

Notes

1. Tesco ranked 21st of the top 850 UK firms in terms of its R&D expenditure of £128m in 2008. (Marks & Spencer ranked 14th of the top 850 UK firms in its increase of R&D expenditure in 2006 but was not surveyed in 2008).

2. Quotations are drawn from interviews conducted with UK retail executives responsible for innovation within their firms. See section A note on sources and methods for details.

3. In the first CIS to include retailing, (conducted in 2005 and requesting information on innovation occurring between 2002–04) the sector's response comprised 1545 of the total of 16,445 UK firms surveyed (93% of responses). Of these, 18% of respondent firms employed more than 250 people.

4. R&D as a percentage of sales.

5. Innovation in the survey is defined as ‘major changes aimed at enhancing competitive position, performance, know-how or capabilities for future enhancements. These can be new or significantly improved goods, services or processes for making or providing them. It includes spending on innovation activities, for example on machinery and equipment, R&D, training, goods and service design or marketing’.

6. See http://www.fashionretailacademy.ac.uk

7. See http://www.manchester.ac.uk/aboutus/news/archive/list/item/index.htm?year=2007&month=september&id=123544

8. The Retail Industry Business Engagement Network (RIBEN) consists of a consortium of four of the UK's leading retail research centres based at the universities of Southampton, Oxford, Leeds and Surrey, funded by the ESRC over five years. Resources including Knowledge Transfer Partnership (KTP) awards, CASE doctoral studentship awards, vouchers for SMEs to access business-relevant research expertise in their regional universities, and support for business placements involving doctoral students have been made available by ESRC to improve links between social science HEIs and the retail sector.