The vast majority of retailers are feeling the squeeze of an increasingly digitized world, and many recognize that their business models must evolve in order for them to remain relevant.
New research from OC&C Strategy Consultants on “High Velocity Retail,” unveiled at the recent World Retail Congress, found that 76 percent of “the world’s leading retailers” believe they’ll lose relevance with consumers over the next five years if their methods don’t change.
An additional 21 percent of retailers admitted that they are dubious about the sustainability of their current models. Just 3 percent were convinced that their current efforts would sustain their businesses through the next five years.
OC&C’s report, created in partnership with e-commerce technology firm EShopWorld, also compiled recommendations based on collected data and interviews with highly successful, adaptive retailers.
“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,” said James George, international managing Partner at OC&C. “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.”
The report cautions retailers that they need to “pick their battles,” warning that trying to compete with e-commerce giants like Walmart and Amazon on free shipping is a fool’s errand. “Amazon spends over $20 billion annually on technology. Walmart spends over $5 billion in capex on e-commerce and technology. It is just not possible for many to play this game,” OC&C said in a statement accompanying the report.
The group’s findings also reveal that speed to market and fast fulfillment might not be as important as retailers tend to believe.
“Retailers should be making clear trade-offs about where they operate at the frontier, and where they can afford to follow the leader,” OC&C said. “For example, while there is much written about speed of delivery, it is still the case that 40 percent of e-commerce delivery in the UK, which is one of the world’s more developed e-commerce markets, remains slower than next day.”
So what should retailers focus on instead?
Cross-border commerce is the way to grow a tribe, according to the High Velocity Retail report. The connectedness brought about by social platforms has created a technology-driven “homogenizing effect,” OC&C asserted. Gen Z and millennial shoppers (two generations with massive purchasing power) are sharing ideas and style trends globally. Brands should provide the same products and services across markets, and segment their consumer bases by attitude rather than relying solely on traditional demographic data.
“Excellence in cross-border e-commerce is an essential part of being a high velocity retailer today,” said EShopWorld’s U.S. president, Cynthia Hollen. “Leading retailers know that building their brand and expanding their customer base around the world is the best way to achieve significant and lasting growth in today’s competitive landscape.”