Shopping for a new retail operating model
August 30, 2019
RESEARCH REPORT
In brief
In brief
- Retail survival requires a radically new operating model and revamped C-suite roles to support how business is done today.
- A purpose-led operating model is key as retailers evolve from purely selling products to wrapping products in services and experiences.
- A seamless, channel-less approach positions retailers to fine-tune products, services and experiences for the nuances of each market.
- It is time for retailers to reinvent their relationship with data because data, not margins or products, unlocks competitive advantage.
Despite all the changes and disruption in retail today, retailers have not materially changed their operating model in 50 years. This is a significant weakness. Right now, retail disrupters are breaking new ground with breakthrough business models that require completely new operating models. Meanwhile, incumbents struggle to catch up. Some are even going out of business because they are not moving quickly enough.
What retailers need is a new operating model aligned with the realities of retail today. It must be purpose-led, market-focused and data powered to deliver more customer responsiveness and new business efficiency. To build it, the key is to revamp C-suite roles, manage P&L differently and inject digital and analytics into ways of working. Without action, retailers risk following in the footsteps of companies that are now long gone—and long forgotten.
Retailers experienced a 37% increase in disruption between 2011 and 2018, the second highest jump among all industries in the Accenture Disruptability Index.
Purpose is the new product
According to Accenture Strategy research, purpose, not products, turns shoppers into buyers. This is why the new retail operating model must be grounded in purpose. It should also be flexible enough to support business models like subscription, marketplaces, rental, resale and retail as a service—which all make it easier to fully deliver on the retail purpose.
A dedicated C-suite leader can help retailers connect the dots between what they sell and their purpose. In the new retail operating model, it is the Chief Product Officer (CPO). The CPO creates and sources physical products and connected services and experiences. And as needed, the role orchestrates an ecosystem of trusted partners to deliver them, simultaneously fulfilling the brand purpose and creating new revenue streams.
Markets are the new channels
In the traditional retail operating model, a strict sales-by-channel mindset prevents merchandising based on integrated, data-driven views of consumers. Instead, decisions are largely made by the revered Chief Merchant who essentially “tells” customers what they want to buy rather than “listening” to their needs and desires. This model is not customer focused or cost-effective to scale.
What’s needed is a seamless, channel-less approach—a market-focused retail operating model. Online and offline merchandising and marketing teams need to be combined into one organization, led by the Chief Commercial Officer (CCO). Data insights help the CCO understand what makes customers tick and what makes each market unique. And in a profound change, P&L is restructured away from products to markets to track customer lifetime value.
Data is the new foundation
Retailers have oceans of data. Yet they lag in optimizing it for several reasons that stem from legacy business and operating models. By shifting to a model where data is the shared foundation, retailers can improve decisions around serving customers and running the business. It is also critical to invest in digital technologies that unlock cost savings that can be reinvested to grow the top line. Systems must be flexible, modern, digitally-decoupled and API-enabled so retailers can integrate seamlessly into ecosystem partnerships.
In the new retail operating model, the Chief Digital Officer (CDO) oversees investments in data platforms, artificial intelligence (AI) and machine learning capabilities to empower people, eliminate repetitive tasks and boost efficiencies. The work of the CDO makes it possible for the CPO and CCO to quickly adjust to changing customer and market demands.
25%
of traditional retailers think their company is data driven—the lowest among all industries.
16%
of traditional retailers view their company as a digital business.
Buying into change
Building a new retail operating model is a profound, and profoundly important, change. It starts with the new C-Suite focusing on four fundamentals:
Use whole-brain leadership
Leaders need right-brain creative and left-brain analytical thinking to master the art and science of retail.
Unlock funds to drive growth
A bottoms-up, zero-based view of all expenses is key to reduce old-world assets and reinvent for top-line growth.
Shop for new revenue streams
The focus should be on new value propositions that reflect a deep understanding of target customers.
Stock up on the right capabilities
Retailers need to look outside their four walls to fill skills gaps, making smart “build, buy, borrow” decisions.
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