172 V I EWPO I NT Diversification, scaling and innovation are key to helping retail businesses take opportunities in times of crisis R E I NT J AN HOLT E RMAN : D I E BOL D N I XDOR F Riding a dangerous wind Describing 2022 as a dull year in retail would be incorrect. Some businesses were still in the midst of a digital transition process ignited by Covid-19 while working hard to solve supply chain issues when new challenges knocked on their door. The impact of global crises led to higher prices for energy and raw materials. At the same time, inflation and an overall feeling of uncertainty made consumers more careful in their spending, and higher interest rates complicated growth plans for retailers. A Chinese proverb describes a crisis as “an opportunity riding a dangerous wind”. Despite the challenges, these crises present opportunities for businesses to gain a competitive edge and outsmart others in the market. There are three growth paths to counter these challenges: diversifying, scaling and innovating. Diversifying by spreading investments across multiple markets can be a good approach to managing risk, especially in times of uncertainty. It allows businesses to offset losses in one market by gains in another. Moreover, it offers the opportunity to ‘cross-pollinate’ and learn from experiences on the growing side of the business that can be applied on the less flourishing side. Similar to diversification, scaling requires investments. The difference is that you invest in parts of your current business; doing more of the same rather than starting something new. This may be a clever approach for retailers, especially in a market that is ripe for consolidation. Efficiencies of scale combined with a larger footprint typically increase both profit margins and total revenues. Innovation in retail is often driven by the consumer and it pays to be ahead of the game rather than a follower. Within your retail concept, are there ways you can offer new services to your customers to make them happier, so you can retain them better and make them spend more, while saving on the average cost per transaction? Innovation represents a less disruptive approach than the two described above, and lets you improve customer and staff journeys in a controlled way. These three strategies have one thing in common: they can deliver true success by having a very flexible, scalable and open IT infrastructure. Together, they will help you ride the dangerous winds whenever they occur. Let’s have a look at three examples to make it all a bit more tangible. Electric vehicle (EV) charging comes to mind when thinking about diversification. Suppose you are a convenience retailer with fuel pumps in front of your stores. You are suffering from high prices which have resulted in a lower influx of customers. What if you installed EV chargers next to your fuel pumps, so drivers can charge their cars while spending money? Given the number of government incentives to promote e-mobility, and the current attention for sustainable retailing, the time for entering into EV charging may be now. Next up: readiness to scale. Reaping the true benefits of scaling up may be more complicated than it looks at first glance. Adding new “Innovation in retail is often driven by the consumer and it pays to be ahead of the game”
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