Research launched at the World Retail Congress suggests retailers are struggling to cope with the pace of evolution in the industry. Seventy-six percent of the world’s leading retailers say their model needs to change in order to remain relevant in the next five years. A further 21% said they have doubts about the sustainability of their models. Additionally, only 3% of retailers believe their current proposition will remain sustainable in the next five years.
The report was produced by OC&C Strategy Consultants and eShopWorld in partnership with World Retail Congress. Researchers interviewed global retailers from across the evolutionary spectrum to understand how they are developing their businesses in this environment. It also analysed financial performance data for the world’s leading 800 retailers, Brand Z statistics on retailer brand value and OC&C Retail Proposition Index data on how individual retailers were rated by consumers across individual elements of their offers.
According to James George, International Managing Partner at OC&C: “For retailers, a good business model is no longer enough. Being great achieves enviable success, but being average is punished hard. Retailers are recognising this. Three quarters said they need to change their business models in order to be relevant in the future.” The research, ‘High Velocity Retail’ identifies the path to success for retailers in a world where the speed of change is unprecedented.
The World Retail Congress was launched in 2007, to be a platform for senior retail executives. Members meet and discuss the most important topics affecting retailers across the world. The report suggests the crucial rules for winning in a high velocity world include:
Winning retailers pick their battles
A considered strategic positioning remains vital, especially as the investment required to compete on all fronts is excessive. Amazon spend over $20bn annually on technology while Walmart spend over $5bn in capex on eCommerce and technology. It is just not possible for many to play this game. Retailers are therefore being thoughtful about where to invest and where to follow. In fact, the retailers that are most highly rated by consumers globally are ones that have distinctive strategic positions.
Being at the frontier of speed is not always necessary
Retailers should be making clear trade-offs about where they operate at the frontier, and where they can afford to follow the leader. For example, much is written about speed of delivery yet it is still the case that 40% of eCommerce delivery in the UK is slower than next day.
Another example is SHEIN, a Chinese retail brand, which has developed a fast fashion proposition for millennial and Gen Z consumers. SHEIN emphasises rapid production cycles, but slow fulfillment times. The company has used this fast/slow model to rapidly scale in a range of international markets. The crucial point is to provide a solution for your customer’s specific needs, not to try and deliver everywhere.
George added, “Retail has been speeding up for a long time. But in the present High Velocity world, it is not just about speed, but about combining it with meaningful direction. Winners are focusing on being the best at something that matters to customers. They avoid the pitfalls of going nowhere fast or trying to do everything badly. “
Go beyond borders to build your tribe.
As the demand for online shopping grows around the world, retailers need to consider their strategy for attracting cross-border consumers. Younger generations (Millennials and Gen Zers) across the globe are resembling each other in their attitudes towards shopping. They are also spending more than any other generation.
The report suggests technology is having a homogenising effect on consumer behaviour. The internet and social channels make it ever easier to share ideas and access the same information and media. Brands providing access to the same products and services across markets and the power of truly global celebrities and influencers appear to be playing their part in this trend. The report suggests retailers should look to target these cross-border tribes and segment their customer base by similar attitudes. Rather than – or as well as – traditional demographics.
“Crucially, speed will not cover up flaws or inconsistency in the underlying proposition. As the world speeds up and barriers to entry fall, the challenge for retailers is to translate this clarity of focus into prioritised investment decisions that develop the things that really matter to your target customer.”
Enterprise Times: What this means for retailers?
According to this joint report retailers must plot a path to the strategic higher ground quickly. Otherwise, they are doomed to fail. Retail has been speeding up for a long time and retailers are under tremendous pressure to keep up. Keep up with competitors, keep up with social media, keep in contact with key target audiences.
Unfortunately, in this fast-changing retail world, ‘keeping up’ is not good enough. The report suggests retailers and brands need to consider cross-border eCommerce in order to appeal to a younger generation
To appeal to the younger generation, a brand truly needs to understand and align itself with that target audience. It’s about anticipating the needs and wants of that generation, and developing the products and services needed.
The report is really weighty with plenty of information about finding the appropriate business models to succeed in a high velocity world. However, very little was evidence was prepared on the fundamentals – developing and harnessing a close relationship with key audiences. These are essential ingredients needed to support a brand’s business model.