That’s according to a new study by Accenture, in which 88% of retailers said they were focused on cost reduction to free up funds necessary to reinvest in growth initiatives. As for where those cost savings are being reinvested, the top three areas were expanding into new geographies (cited by 60%), digital technologies (54%) and enhancing customer experiences (52%).
According to Accenture’s Increasing Agility to Fuel Growth and Competitiveness report, 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. The top barriers to advancing their operating models, according to retail executives surveyed, include technology (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.
In order to achieve the adaptability necessary to spur and sustain growth, Accenture recommends retailers take the following three actions:
1) 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.
2) 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.
3) 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.