Strengthen your business resilience, grow your top line and measure success. Uncover hidden insights and unlock the potential behind data with Fusion Analytics. We will convert unstructured data into visual stories to measure the success of your strategic initiatives.
What Really Drives Retail Growth?
What separates those retailers who are excelling?
Fusion Retail Analytics examined over 75 metrics and found there are 7 principles driving success.
A clear understanding of their company’s growth relative to overall industry norm:
Omni retail has been growing at 4.5% a year in North America, so in general growth below this rate means falling behind and slowly dying. It’s a counterintuitive insight to be growing your revenue and at the same time, dying, but there is no clearer signal that your relevancy with consumers and your competitive strength is weakening than when your sales growth trails the industry norm. This is why the best retailers ensure comprehensive measurement of their industry.
A strong and differentiated value proposition:
The growth rates of retailers with a strong value position grew 4.1% better than the industry norm. The best way to define your value proposition is by the number of attributes you are ranked first on, including against your E-com competitors.
Intelligent network expansion:
Expanding your footprint into new communities, or a competitor closing their stores, as witnessed during COVID-19, on average drove 3.5% additional growth. The key to their successful expansion was that none were overbuilding, thereby eroding their value proposition and leverage per store.
Profit-recycling:
Pushing cash flow back into the business, helped drive an additional 2.1%. The basic concept behind Profit Recycling is that as your business revenue grows, you leverage your fixed and semi-fixed assets, but you hold your EBITDA constant, thereby pushing the additional cash flow back into the business to drive more growth. This is what Amazon does, they are not winning because they are online - thousands of retailers are online - Amazon is winning because they are following all seven principles outlined here, including profit-recycling.
Strategic category expansion:
Successful retailers are typically expanding their merchandising mix into adjacent new categories helping them drive an additional 1.8% growth. The successful recipe to their expansion is to look at the category’s profit pool, consider the competitive intensity and, crucially, ensure the categories dynamics align to their existing value proposition.
A focus on eliminating customer bottlenecks:
Re-allocating budget and attention to ensure a smooth customer journey drove 1.6% of incremental year-over-year sales for successful retailers. Tactically, the best retailers examine all their activities systematically, aligning them along the consumer’s journey, then understanding, prioritizing, and solving any bottlenecks to revenue growth.
Focusing resources on what truly matters:
Everything else, all the other activities, and there are dozens of them, with daily distractions, and weekly fires, all collectively drive less than 1%. It doesn’t mean your team can drop the ball on them, lots of activities are required as table-stakes, but to grow faster than your competitors, to be winning, and not dying, it is critical to focus on the top drivers.
The Bottom Line:
A strategy, organization structure, budget and measurement system that is aligned for growth. Ensure you are looking at market share, not the false comfort of sales, constantly be improving and measuring your value proposition, and focus on the big wins.
About Fusion:
Our innovative Revenue-Opportunity-Chain platform is a top-down, enterprise wide, omni model that considers all performance variables, identifying their relative contribution to year over year sales growth. Let Fusion help you set priorities and make the best decisions to drive sales and top line growth.
COVID-19 Drastic Impact on Consumer B&M Shopping Behaviour
The retail landscape has experienced a transformation unmatched in recent history. Since the start of the pandemic, brick and mortar (B&M) retailers have been forced to adjust to customer behaviour shifts, changes they thought would occur over a decade, not a year. As we begin to recover from the grips of the pandemic, B&M retailers will need to measure customer behaviour to build strategies, make investments, and compete in the new-normal marketplace. Fusion can help!
Covid-19 Lifted E-Commerce Penetration When Rising Case Counts Forced B&M Closures
Grouped Retail Categories Industry penetration - By Channel
(2018 – 2021 data, across all of Canada)
The largest and most obvious shift in customer behaviour has been the rapid move to online. Pre-pandemic transactions made online were just over 10% of the Canadian retail business. As of April 2021, the online retail business had grown to 23%, more than doubling in a single year. As Canada moves from pandemic response to recovery there will certainly be a return to B&M, but new customer habits have been formed and most are demanding that retailers be Omnichannel.
Consumers’ B&M Visit Trends
(Grouped retail categories, across all of Canada)
B&M Shopping Habits and Preferences as Access Convenience Became the Number One Driver of Visits
Top drivers important for visit
(Importance ranking for all retail categories,
across all of Canada)
B&M retail shopping, to some degree, continued during COVID-19, conditional on public health restrictions. This caused consumers to reduce the number of times they shopped and the number of retailers they visited. Three key drivers became much more important for customers when deciding on which retailer to visit, all of which were related to minimizing their personal exposure to COVID-19. The most important driver that drove choice was simply convenience: the distance the consumer had to travel to the store location. The ability to get everything in one place also became considerably more important, as having to do a second trip to complete their shopping mission was something customers wanted to avoid. Lastly, low regular prices grew substantially as a consumer priority while having great limited time sales events decreased in importance as the traditional customer habit of chasing down sales at different retailers was avoided because it meant more exposure to the risks of COVID-19.
The accelerated growth of eCommerce and the expectation that online shopping habits will continue, along with the anticipation of continued impact from COVID-19 and its variants, means the future B&M retail environment will be one of intensified competition for a piece of a smaller pie. However, those who can address customer needs and concerns most successfully by, for example, offering seamless Omnichannel; staying top-of-mind; providing a safe environment with the right assortment and prices, will win disproportionately as customers have shown that they want to visit fewer retailers.
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