New research by international trade and development agency Cosaris suggests that food retailers will have to transform their business models in order to prevail in today’s crowded market.
According to the report, Transformation: The future of successful food retail, some 83% of food retailers surveyed said that ‘shopper understanding and engagement’ is a key area of concern.
However, it also shows that few know how and where to effect change, or don’t appreciate the importance and urgency of fundamental change in order for them to survive.
Just over three-in-five (61%) said that they struggle to create new business concepts. Over half (54%) said that profitability is a huge issue. More than one-in-three said that changing social values and digital transformation were among their biggest concerns.
The study surveyed more than 500 food retailers, manufacturers and service providers including the majority of the top 100 European store chains. In addition, Cosaris interviewed over 100 senior industry experts.
Room For Improvement
The report also records the areas where retailers believe they need to improve.
First and foremost, they identified that they have to focus better on the shopper (82%).
Social and environmental responsibility also has room for improvement, according to 63% of respondents, while fewer than half (45%) believed that organisational efficiency needed improvement.
Interestingly, just over one-in-four (26%) believed that changing their business model was a major priority.
Six Focus Areas
In addition to retailers’ responses, the Cosaris report also asked retail experts to detail what areas are key in order to build a successful future.
They identified six areas: shopper engagement, shopping experience in-store and online, employee welfare and participation, retail personalisation, convenience and the development of new business models.
For the most part, the study found, retailers keep following dated methods with dwindling returns. Some retailers do focus on improving pricing and efficiency.
But increasingly, a 'race to the bottom' isn’t feasible, since discount retailers and online players operate on completely different business models.
A Better Shopper Experience
Shoppers want convenience, i.e. an easy and straight-forward experience, the study also found.
They want to be able to seamlessly avail of online stores as an extension of bricks and mortar varieties. Furthermore, regional, local and personal aspects need to be catered for.
Cosaris also suggested that retailers should also offer up comfortable social spaces and helpful employees, which encourage customers to remain and return.
Similarly, shoppers want to know about their food, i.e. how it’s made, how healthy it is, and whether it’s socially and environmentally responsible. Finally, they want innovation and technological advancements that enhance their shopping experiences.
Embracing Transformation
When asked by Cosaris as to how the retailers felt about their ability to transform, the results weren’t overly optimistic.
A mere 7% answered they felt they were ‘where they needed to be’, and fewer than one-in-five (24%) knew what transformation meant on a day-to-day basis. The majority (62%) admitted they were at the very beginning of the transformation process.
For many operators, the focus seems to be too immediate and short-term, Cosaris notes.
Almost two thirds are happy to ‘stay in their comfort zone’ and don’t really see the need to fundamentally change their business model. 40% are working on optimising their current business model and just under one fifth (24%) are focussing on short-term issues.
Any retailer that clings to the old ways, Cosaris suggests, will face a potential 'slow death' with falling profits and a drawn-out customer exodus.
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Kevin Duggan. Click subscribe to sign up to ESM: The European Supermarket Magazine.
