Retailers desperately need to review or renew the way they do business in order to survive profound changes in the market and the economy – that was the finding of our recent survey of UK retail business models. But how? Here we’re republishing some of the advice from three retail experts and business analysts in the report.
Tim Ward, Chief Executive, Quoted Companies Alliance:
Cost-cutting across the board is not always beneficial – it can hamper a business’s ability to survive, for example, by restricting cash to innovative projects that could deliver a new product or service or by cutting key drivers of the business.
The current economic environment could be the new ‘normal’ where the economy does not return to previous highs. Businesses need more than ever to focus on revenue growth and how they can adapt their business models to the challenges presented by this market (ie little credit available and a lack of bank finance).
The thinking which was used to arrive at the current situation will not be successful in developing a plan to thrive in this environment. This is when non-executive directors and other external influencers can play a key part in developing new thinking and new behaviours.
Jonathan Kestenbaum, CEO, NESTA
Regardless of what sector you are in, survival means gaining an edge on your competitors. And the best way to do this is by investing in innovation – developing new products, services or business models which create value for your customers.
NESTA’s research shows that those companies which invested in innovation – measured by the percentage of sales from new products – grew twice as fast as non-innovative firms…
Successful innovation is often less about ‘magic bullet’ breakthroughs – and much more about core attributes such as adoption, flexibility and agility.
David Bush, Associate Director, Retail Sector, Grant Thornton UK:
Q. What changes in business models (ways of doing business) are needed if retailers are to survive in today’s uncertain economic climate?
A. Retailers need to adapt more to modern technology. This means creating seamless channels to market; eg Next: mail order, stores, internet. The proposition is still the same. Retailers need to turn the data that they have on customers into information, so that they are better at selling product that customers want, when they want it.
Q. What should retail business leaders focus on to survive?
A. Ultimately, successful retailers need to be able to sell product that their customer wants to buy, at perceived good value (not necessarily the cheapest) and the stock needs to be available at the right time (ie supply chain needs to be right – no good the product sitting in the warehouse rather than stores). Strong customer flow is key, then all the retailer needs to focus on is ensuring repeat business and up-selling to increase the average transaction value. If the customer base is declining, then the retailer is ultimately doomed.
Q. Where are the weaknesses in today’s retail business models?
A. The major weaknesses are taking the customer for granted and not responding quickly enough to sudden drops in customer footfalls. Once the customers are gone, it is very difficult to regain them.
* Read more comment and analysis in our report: Pressure unabated: UK retailers contemplate business model change [ 489 kb ] (PDF).