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“For retailers,” says a new report from the World Retail Congress, “good is no longer enough [and] being average is punished hard.”
Created with OC&C Strategy Consultants, eShopWorld and WPP BrandZ, “High Velocity Retail” [free, registration required] points out that “the barriers of entry to previously high-walled retail marketers have been knocked down.”
“A variable cost world”
A key driver, the report points out, is that the current retail environment is now “a variable cost world which allows insurgent brands to achieve reach without scale.” Instead of scale, it’s now more about meeting (or exceeding) customer expectations. Here’s a visual from the report, depicting the progression to the current variable cost model:
Seventy-five percent of retailers surveyed for the report indicated that their model needs fundamental change if they are to keep up with the industry’s evolution. To get there, the study advises that organizations need direction as well as speed, by defining new performance metrics and then making decisions and deploying capital quickly.
The report points to several characteristics of successful models, some of which sound fairly obvious. In the age of global e-commerce, for instance, shoppers should see local currency, pricing delivery options, and a checkout experience that continues the local branding. Delivery should be fast, returns easy, customer service efficient, and the brand experience consistent across touchpoints.
But there’s now a new emphasis on speeding up operations dramatically, such as the every-ten-minute price changes for the average Amazon product, Levi’s laser tech that creates washed-look jeans 50X faster than previously, or Vodafone’s AI chatbots that enable online purchases to be completed in a third of the time.
New models, rules
There is also a flurry of new retail models that cut out entire segments of the old version. The retailer Wish, for instance, sells private label products directly from Chinese manufacturers to eliminate the need for retailer operations. Store creation service Storr lets anyone quickly create their own online retail store front, pick their products and process sales through Apple Pay and PayPal.
Whether a new startup or a venerable retail brand, the study helpfully provides six rules for winning in this High Velocity Retail world:
- Be the best at something that matters – and pick your battles. E.g., maybe focus on customer service and physical store look/feel.
- Choosing where to follow is as important as choosing where to lead. For instance, most organizations don’t need to build their own tech, but can now choose to subscribe to cloud-based infrastructure as needed.
- If you’re not a winning model, you’re a losing model. The report identifies four winning models, based around value, customer solutions (e.g., supporting a healthy lifestyle in addition to being a food retailer), the uniqueness of the brand or the platform.
- Build your retail ecosystem, with partners as needed.
- Be fearless and set your teams free – with clear objectives for each team.
- Go beyond borders to build your tribe.