As established retail players continue to be outperformed by creative newcomers, a new study by Boston Consulting Group (BCG) and the World Retail Congress (WRC) has called on retailers to double down on innovation – or risk losing their seat at the top table.
According to the study, Investing in the Future: How Retailers Use Innovation to Gain an Edge, retailers that are leading the way in innovation are investing approximately 13% of their annual revenue in innovation initiatives, and seeing a 21% return on investment for doing so.
Lagging Behind
At the same time, retail ‘laggards’, who are investing an average of just 3% in innovation, are seeing a 9% return on investment.
As a result, the study notes, said laggards tend to find themselves trapped in a ‘vicious cycle’. Their reluctance to invest adequately in innovation pilots prevents them from achieving significant improvements in performance, resulting in lower return on investment (ROI). Consequently, they further reduce funding for innovation, perpetuating the cycle.
Continued Innovation
“Even in a year of uncertainty, with many focused on delivering on the basics, continual innovation remains crucial for retailers to maintain competitive advantage,” commented Nate Shenck, BCG’s global head of retail.
“You have to fight on a weekly, daily, and hourly basis to maintain it.”
Elsewhere, the study, which surveyed more than 400 senior leaders across 11 retail sectors, also found that innovation leaders tend to prioritise investment in three areas: operational improvements (71%), e-commerce (60%), and Big Data, AI and analytics (58%).
Many are also investing in multiple projects at the same time, partnering with third parties on innovation initiatives and seeking to ‘shape consumer preferences rather than simply react to trends’.
The study was published to coincide with the World Retail Congress, taking place in Paris this week.
