Ecosystems to deliver new wave of growth for retailers
The U.S. retail market is heating up with exciting partnerships designed to deliver new customer propositions and experiences, and create new growth for retailers.
The recent news of Ikea partnering with Adidas – to understand what people want and need when it comes to exercising, sleeping and eating at home – is a great example of two brands with complementary synergies joining forces to benefit from shared insights. Such insights can be funnelled into R&D and inform new product and service lines.
Partnerships are also transforming the in-store environment and giving consumers access to a wider array of products and services. Walmart recently announced that it’s expanding its partnership with digital automotive marketplace, CarSaver, to sell cars from kiosks at Walmart stores. And Kohl’s is leasing store space to food grocer, Aldi, in a bid to optimize its existing real estate footprint and increase store footfall by offering customers new value.
Over the course of the next 12 months, we’re likely to see more retailers look beyond their brand or industry confines to see what partnerships or innovations they can capitalize on by teaming up with other players, large and small, in the retail sector and beyond.
The reason for the renewed momentum around partnerships is that growth is becoming increasingly challenging to come by, and large retailers are realizing that they cannot achieve it as quickly as they would like by going it alone.
According to Accenture Strategy research, less than a quarter of large retailers globally are very confident that they will achieve their 2020 growth targets, and 71% are concerned that current growth strategies are at high risk of disruption.
As such, retailers are rethinking their growth strategy, particularly many of the traditional bricks-and-mortar and department stores, which have been slow to innovate or have failed to keep up with new customer trends.
Our research suggests that 82% of retail leaders globally say that building ecosystems – where companies join forces with a multitude of players to share customer insights, technology and industry knowledge – is critical to gaining a competitive advantage.
Such ecosystems – as proven in other industries, including technology, financial services and consumer goods – can enable rapid innovation, proto-typing and proposition co-creation, as well as helping retailers to access new customer segments or enter new markets. A third of large retailers globally are looking for ecosystem partners today.
The beauty of ecosystems is that no single company owns or operates all components of the solution. The value generated from this type of collaboration is much larger than the combined value each of the players could contribute individually. Critically, the risk is distributed equally, which will reassure many retailers.
Research shows that 61% of executives at large retailers believe that more than half of their company revenues will be generated from ecosystems in the next five years. In time, even direct competitors will put aside rivalries in a form of ‘co-opetition’ to pursue new growth opportunities.
Retailers pursuing disruptive growth by building ecosystems should consider:
1. Setting the vision: For ecosystems to deliver growth, it’s important for retail leaders to consider what the strategic intent and innovation goals are upfront. When ecosystem players combine their functional, technology and industry strengths and capabilities, they can deliver exciting new customer propositions and open new markets.
2. Identifying the right partners: Selecting the right partners is critical to ecosystem success. Retailers should look for partners with complementary capabilities, a collaborative mindset, industry experience, customer relationships and data to set themselves up for success. They must also clearly define how data will be shared and how success will be measured. Proper governance frameworks can ease fears and reduce friction among participants.
3. Orchestrating the ecosystem: Once companies with distinct capabilities join together with a shared vision and clear outcomes, they can launch and operate their ecosystem. The process involves planning and testing the ecosystem design and piloting the market play. Successful ecosystems will enable retailers to drive new value beyond what they’re able to do in isolation.
The creation of ecosystems presents another opportunity for retailers to tap into new sources of growth and get ahead of the waves of change that are currently impacting the industry. With the right partners, collaborative mindset and pre-determined measures of success, retailers have a lot to gain.
Jill Standish, is senior managing director, global retail lead, Accenture.
Frank Layo is managing director, Kurt Salmon, part of Accenture Strategy.
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