Why being innovation-led is critical to the survival of traditional retailers

Tony Stockil, MD, Javelin Group, part of Accenture Strategy

Helen Mountney, MD, Kurt Salmon, part of Accenture Strategy

Rebecca Tully, MD, Retail, Accenture


Traditional retail is in crisis, experiencing one of the most dynamic transformations in its history. The tidal wave of digitisation has transformed how consumers search and shop for goods, while innovative disruptors and online players are claiming an ever greater share of the market. We’re now at a tipping point where retailers need to rethink their strategy if they want to survive.

Consumer behaviour is evolving

Consumer behaviour is constantly changing: people are consuming less while shopping across a multiplicity of channels. At the same time, consumers increasingly expect a seamless and consistent experience. This means retailers need to be alive to people’s needs and able to respond quickly.

Focusing on innovation will no longer be an optional extra but the central driving force, retailer by retailer, offering by offering. Yet many remain hesitant to invest. Why is this?


"In order to compete effectively in this new digital era, retailers need to become innovation machines. It is through strategic innovation that retailers can change the game by shifting into new categories, new services, new ways of engaging with customers."-Tony Stockil, MD, Javelin Group, part of Accenture Strategy


Barriers to innovation

For traditional retailers, the IT legacy estate is one of the biggest obstacles to innovation. High rents and leaseholds, and the introduction of the living wage, represent further barriers.

Overcoming such barriers is not going to happen overnight. But there are steps that retailers can take to accelerate the pace at which they innovate.

What can retailers do to start their transformation?

1. Innovate strategically as well as tactically

To compete with disruptors, retailers may consider innovating at a tactical level. This may mean using technology to improve the customer experience in the physical store environment.

Coop Italia recently unveiled its ‘Supermarket of the Future’, which uses interactive tables, vertical shelving, digital displays and real-time shopping data to help consumers find out more about special offers and their favourite products.

Coop Italia’s Supermarket of the Future - reinventing the customer experience in grocery shopping

 

To compete in the long-term, leading retailers are also innovating strategically, by looking at how they can pivot their entire business model to better meet customer needs.

2. Find a niche

When developing an innovation strategy, some retailers try to be all things to all people. Yet this can be a mistake. Retailers need to define a clear purpose: What is the role they will play in the lives of consumers, both practically and emotionally? The most successful retailers are those that understand why they are famous and then play to these strengths. Focusing on the one area where they excel is important for retailers to build an enduring brand.


If you look across the retail landscape, the retailers that are doing well are the ones that have clearly identified their niche, understood what they are famous for and are exploiting that.”- Helen Mountney, MD, Kurt Salmon, part of Accenture Strategy


3. Make IT a core revenue driver

Traditionally, IT has been seen as a support function within retail. Today, leading innovators consider it to be one of the main revenue drivers.

To compete with digital pure-plays, leading firms are accelerating the speed at which they develop and release applications, so they can respond quickly to market change.

The ability to leverage the value of big data may also prove vital as consumers put a bigger premium on personalisation. Sephora has harnessed mass-personalisation to help shoppers buy cosmetics online: the store now uses big data to make recommendations based on a consumer’s skin type and tone.

Coop Italia’s Supermarket of the Future

 

4. Look outside

The skills that retailers need to innovate are not all native to the retail industry. For many, innovation will require a significant investment in strengthening their IT capability. Setting up a learning environment within the organisation will allow retailers to experiment and learn quickly from their failures and successes.

Many leading retailers are also becoming more ‘open’ and looking outside their organisations for inspiration. Tapping into the ecosystem of tech start-ups and forming partnerships with innovative players can help retailers to stay ahead of the competition. The most innovative do not necessarily call themselves retailers – they call themselves technology companies.

To survive in the digital era, retailers need to become disruptors – re-basing their businesses around innovation, making technology a revenue-driver rather than an overhead, and putting data-driven personalisation at the heart of their customer strategy. They need to transform into brands with strong, authentic purpose that makes customers want to spend time with them, can interact with and make their own.


For more information, please click here.

Shares