New research suggests that retailers’ inflexible operating models are hindering their ability to be competitive and achieve growth.
The findings highlight the need for retailers to become more agile – constantly learning about their customers and flexing to deliver relevant, engaging and useful interactions with consumers.
The research, Increasing Agility to Fuel Growth and Competitiveness, was conducted by Accenture and surveyed 700 executives across 13 industries in nine geographies about the challenges and opportunities associated with creating cost-competitive operating models and reinvesting in growth. Accenture also polled retail industry analysts on the industry environment and retailers’ performance, as well as their view of these challenges and opportunities.
The research found that the majority of retailers (88%) are focused on getting leaner to free up the funds necessary to reinvest in growth. When it comes to reinvesting those cost savings, most retailers see investing in digital and entering new markets as keys to driving growth. This is consistent with where industry analysts see growth opportunities. Just over half of retailers (52%) strongly feel their businesses are investing in innovation in order to gain a competitive advantage with primary areas of focus being expanding into new geographies (cited by 60%), digital technologies (54%) and enhancing customer experiences (52%).
“The retail industry is evolving faster than ever, and there are tremendous opportunities for retailers to increase adaptability and competitiveness,” said Courtney Spitz, managing director in Accenture Products’ Retail Practice. “It is encouraging that the majority of retailers are willing to use new business models, including partners for business services, shared services, and digital solutions, to drive value and growth. Digital – when part of the overarching business strategy – can simultaneously enhance flexibility and reduce operating costs as well as contribute to growth in new markets and channels.”
Opportunities to Achieve Growth
According to Accenture’s research, retailers see inflexible operating models as a core challenge, with only 17%(compared to 25% of other industry respondents) saying they have an agile operating model that can adapt to consistently deliver on strategy and execute activities that drive value for the organization. Barriers to advancing their operating models, according to retail executives surveyed, include technology (cited by 46%), the cost of the effort (42%) and experience to lead the transformation (42%).
The research also reveals that retailers are further challenged when it comes to executing cost reduction programs and prioritizing growth investments. Only 38% of retail executives surveyed said their companies are prioritizing reinvestment of cost savings in alignment with the business strategy, indicating they are likely weakening efforts and slowing progress.
How to Become an Adaptive Retailer
In order to achieve the adaptability necessary to spur and sustain growth, Accenture recommends retailers take the following three actions:
Rethink the operating model: Digitizing operations and ensuring operating models are fully digital-centric will help enable adaptive retailing, reducing the lead time from product planning to sales, and in turn fuelling growth. Taking it a step further, operating in the cloud will grant businesses access to additional information and technologies.
Make “digital inside” a key element of the business strategy: Digital should be infused in retailers’ core business strategy to help reduce operating costs and increase agility. Digital enhances retailers’ ability to gain and use customer insights to other personalized omni-channel experiences that seek to address customer needs. To be digital inside, retailers should embed analytics everywhere, enable talent with digital tools and adopt multi-speed IT, among other tactics.
Gain everyone on board: Success boils down to leadership support, change management and governance. Retail businesses need to make sure leadership is aligned – from using data to support business decisions, to fully communicating the business strategy, value drivers and anticipated outcomes. Retailers should also organize a dedicated transition team throughout the transformation to becoming an adaptive retailer.