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Winning Strategies and Retail Transformation

To survive, even winning retailers must stay ahead of the curve by making sure they deliver a strategy that will help them build lasting relationships with their customers.

The pace of change in retail is accelerating. Many established retailers are struggling with declining sales, rising costs, disgruntled customers and employees, and upstart competitors that are nimble enough to adapt quickly and steal market share. Even successful companies can’t sit back and rest—they need to prepare for the next wave of change.

In this rapidly evolving landscape, BCG has helped many of the world's leading retailers become more systematic in exploring and developing strategic options to strengthen their positions, including new store formats, markets, services, and omnichannel capabilities. Retailers may want to consider their existing formats, store footprints, locations, and distribution network, and evaluate whether to close some stores or open new locations. M&A options should be considered as well—today’s competitor may be tomorrow’s acquisition target and may offer an enhanced market position, cost synergies, or both.

The Retail Transformation Journey

Regardless of segment or circumstance, retailers should not be afraid to consider an end-to-end transformation to help them stay relevant; develop new offerings, categories, formats, and channels; or expand into new markets and territories. These retail transformations are not a once-and-done endeavor—winning retailers stay nimble enough to transform their stores and evaluate their offerings on a continual basis to adapt to evolving customer needs.

A successful transformation journey consists of three important stages:

  • Funding the Journey. Retailers need a quick start and early wins from near-term actions, such as cost reductions or revenue boosts, to establish credibility for the leadership team and generate momentum for the larger effort. These steps also raise cash to fund longer-term investments or initiatives without requiring shareholders to adjust their earnings expectations. Most important, these measures demonstrate to employees and investors that management has a plan for success.
  • Winning in the Medium Term. Medium-term measures create deeper change in a company and establish (or reinforce) a differentiated value proposition for customers. These initiatives can include expanding into new segments of the supply chain; lean operations; and levers to improve the product, category, pricing, and promotions performance. They put the company on a stronger trajectory to grow sales, expand margin, and execute against its strategy.
  • Building the Right Team, Organization, and Culture. The third stage is crucial for building a sustainable operating model over the long term. The CEO must be fully engaged in the transformation by communicating the overall vision, modeling the right behaviors, and holding himself or herself accountable for its success. Most companies also need to build up new capabilities and skills in their management ranks. Frequent, consistent, two-way communication is crucial to apprise employees of the current status of the effort and celebrate wins along the way.
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