It can sometimes be a tough decision for a retailer: spend money on implementing a new system that may or may not pay off, or spend that money on improving your stores or opening new ones? To stay ahead of the game, however, innovation has to happen.
The majority (93%) of Retail Winners want to be seen as leaders in innovation and only 7% as fast followers, the Ramping Up Retail Innovation* report by RSR (Retail Systems Research) reveals. Retail Winners are defined as retailers with sales above the industry average.
In contrast, 60% of other retailers want to be seen as leaders and 34% as fast followers … and there is even still the 4% that want to first see the innovation and then still think about if they’re interested in taking part.
Additionally, only 21% of non-Winner respondents think they are more innovative than others in their retail vertical and 32% in their revenue band — respectively, 59% and 51% of Winners responded positively to these statements.
Most retailers (88% of Winners, 68% of others) agree that information is critical to their success, but this also highlights that a third of non-Winners don’t see information as important.
More than half (61%) of Winners and 36% of others agree that they need to do more experimentation to improve the shopping experience in order to succeed.
RSR also asked retailers which innovations are very important in their companies.
“Almost all Retail Winners [93%] believe customer-facing innovations are very important, while [88%] recognise the value of automating operational processes to create the efficiencies needed in order to fund those customer innovations,” says RSR. Around two thirds of non-Winners (72% and 68% respectively) responded the same.
Only 38% of non-Winners indicated that new product development is very important in their companies, while 73% of Winners said it is.
If there’s no development in products, you can start to see why almost half (47%) of non-Winners indicated that we feel like we’re being left behind, other retailers move more quickly is one of their top three business challenges that drive them to innovate (only 17% of Winners responded the same).
Amazon is seen as a big challenge that leads them to innovate, 83% of Winners and 66% of others responded when asked what their top three business challenges are that are driving their innovations.
We need operational efficiencies to fund our customer initiatives as well as customer expectations continue to rise are also top drivers for respondents (73% of Winners and 70% of others).
“They are expected to deliver top and bottom lines, which leaves little money for innovation and a lot of investor frustration. This is a circle that must be broken if they are to find success.”
Providing a better customer experience tops respondents’ top three opportunities that they expect to come from a successful innovation (71% of Winners of 68% of non-Winners). Building customer loyalty is also in the top three for Winners.
Non-Winners see increased revenue and improved bottom line as their top opportunities.
This highlights how non-Winners focus on the end goal, instead of how they can reach it.
“This is not to say that Retail Winners don’t care about increasing top and bottom lines: that would be ludicrous. However, when forced to play lifeboat and select their top-three opportunities, Winners look to the means, not the end.”
Once they’ve implemented an innovation, how do they measure the success?
ROI, customer satisfaction and positive cash flow are the most frequent ways in which Retail Winners measure the success of an innovation. Other retailers also see customer satisfaction and ROI as good ways to measure, but they also measure it by traffic and conversion.
“Retail Winners go straight for the bottom line. In other words, they expect innovation to drive concrete results. They look for return on investment, while non-Winners tend to cleave to improving traffic and conversion in both web sites and stores. One would generally expect traffic and conversion to be an outcome of customer satisfaction (which almost two thirds of all retailers cite as a top-three success metric).”
Non-Winners tend to look to the end, and not always the means to the end, the authors add.
How are ideas tested?
When asked about the top two ways they test out new ideas, two thirds of Winners indicated that they use pilot programs. This is the single largest way among Winners, with the second highest response being focus groups, followed closely by A/B tests.
Non-Winners also use pilot programs (45%) and focus groups (43%), but the next highest response (40%) is we look for others who have done it first.
Various sources will influence thinking to create new ideas. Customers and internal are the biggest business-related sources of new ideas for 73% and 71% of Winners. Non-Winners are likely to use other retailers (45%), or customers, adjacent industries, or adopt others’ innovations are their own (43% each).
“Clearly, Retail Winners listen to their customers, and also clearly, they’ve got some pretty good thinkers within their own enterprise. The implication there is that they give their employees the time and space to think about ways and technologies to improve the business.”
Other sources include current vendors, consultants and other technology companies. Using vendors as a source of new ideas places a bigger onus on these suppliers to create innovative labs and experiment with new ideas themselves.
* RSR uses its own model, the BOOT Methodology, which helps them better understand the behavioural and technological differences that drive sustainable sales improvements and successful execution of brand vision.
The survey was conducted in June and July 2018 and received answers from 103 qualified retail respondents. Quarter of respondents reported more than $5-bn revenue for 2017, 30% between $1-bn and $5-bn, and the rest reported revenue below $1-bn.