Fortnum & Mason will ramp up its investment in technology, data and AI, rather than increase prices, as it seeks to mitigate a barrage of costs from Labour’s £40bn autumn budget.
The 318-year-old retailer’s costs are set to rise by £3m a year as a result of increases to the national minimum wage and changes to the National Insurance tax threshold from April.
CEO Tom Athron conceded the increase would “inevitably put pressure” on its cost base. However he said he’d “really rather not increase prices” as a result. Fortnum’s would instead look to absorb the costs by modernising in order to improve productivity and service across its business, he said.
It includes plans to ramp up the use of automation at its Corby distribution centre. It will also be equipping staff in shops with technology that helps them more efficiently replenish stock.
In May, Fortnum’s began rolling out new AI-powered forecasting and merchandising systems developed by Relex across its category buying teams. Previously this was all done using spreadsheets.
“I was bought up in supermarkets, I am programmed naturally not to increase prices, but to seek other ways, typically through productivity and operating leverage to do that,” Athron, who previously spent six years as Waitrose CFO earlier in his career, told The Grocer.
While the ‘royal’ grocer would look for ways to improve productivity at its flagship Piccadilly store and three outlets, Athron categorically ruled out replacing humans with self-service checkouts.
“The most important thing is preserving human interaction with our customers, we won’t be automating customer service in our shops,” he said. Fortnum’s has no plans to cut any jobs either, Athron added.
Following stellar annual and Christmas results last week, Fortnum’s revealed plans to expand its e-commerce offer and launch a loyalty programme in 2025. The scheme would focus heavily on in-store experiences, rather than online or in-store loyalty pricing.
While he maintained the main motivation was to add value to Fortnum’s most loyal shoppers, the grocer’s CFO Justin Carmichael highlighted that increased access to data about its shoppers was another key motivator behind the launch.
“As you start to unlock data, whether that’s transactional, stock, or around customers, it enables our teams to make better decisions to better serve our customers. That is one of the key opportunities,” Carmichael said.
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