Diversify or die: Why broader horizons could be the key to retail success
Businesses operating in retail today will have to overcome a number of obstacles on their journey to success.
As the recent fortunes of brands big and small have shown, companies that don’t find the right strategies to meet the challenges of the modern industry run the risk of failure.
At a time when evolving consumer technologies, new channels of engagement and emerging international markets are making the sector more varied than ever, diversification could be the key to long-term success.
The challenges of modern retail
It has become increasingly clear in recent years that retail is an unforgiving industry for brands that don’t get their strategy right.
For smaller businesses, tight profit margins, cost pressures and reliance on a few important clients can create an ever-present risk of drifting into the red.
This was recently illustrated by the collapse of fashion and homeware brand Orla Kiely, which was forced to cease trading despite increasing turnover from £7.2 million to £8.3 million last year. Its profits fell from £109,000 to £74,000, according to Companies House.
Much larger companies are also struggling in the current retail landscape. In the UK, large chains such as Marks & Spencer, House of Fraser, Carphone Warehouse and New Look have had to close some high street stores, while Toys R Us and Maplin have both gone into administration this year.
While there is no guaranteed formula for success in this challenging marketplace, it is becoming increasingly clear that any business too heavily dependent on a single channel is putting itself at risk.
This is particularly true for retailers that have sought to establish themselves on the high street and failed to invest sufficiently in their ecommerce platform.
Consumers are spending more online than ever before in 2018, according to the Capgemini/IMRG eRetail Sales Index. The research showed that the UK’s online retail sector recorded 16.8 per cent year-on-year growth during the first half of 2018.
Helen Dickinson OBE, chief executive of the British Retail Consortium, recently commented: “There’s no escaping the fact that retail is changing. With fewer people visiting physical stores and fewer purchases being made there, at the same time as costs are going up year on year, it’s no surprise that we’re seeing many retailers reduce their store portfolios.”
The value of diversification
With so much change and growth taking place in the retail industry at the moment, it has never been more important for businesses to diversify and plan for success across various channels, engagement platforms and geographical regions.
It’s particularly clear that no retail brand hoping to achieve long-term success can afford to ignore ecommerce. Within this space, the mobile channel is becoming increasingly significant, underlining the importance of retailers optimising their web content for mobile and catering to the groups who do most of their shopping on handheld devices.
According to eMarketer, worldwide ecommerce sales totalled $2.304 trillion (£1.749 trillion) in 2017. Mobile sales accounted for 59 per cent of this total – up from 40 per cent in 2015.
Modern retailers must evolve to keep up with current trends and also be ready for what the future could bring, such as potential growth in voice search and ‘conversational commerce‘.
As far as geographical diversification is concerned, there is a lot for ambitious retailers to gain by expanding into new, emerging economies, which could offer more scope for growth than established, saturated markets.
Retail Gazette reported earlier this year that parts of the Middle East and Africa are proving increasingly lucrative for retail businesses, partly thanks to rising spending power in local populations.
In order to succeed in new markets, however, firms must do their research beforehand and ensure they are equipped with the necessary tools to establish their brand and engage with local audiences.
Localise to succeed
Communicating effectively in foreign languages is one of the big challenges that comes with expanding into new regions and countries.
As well as ensuring their online content and marketing material is translated accurately, ecommerce businesses need to ensure they lay the foundations for long-term customer relationships by communicating in a way that is relevant and appropriate to the target audience.
Through localisation, retailers can reduce the risk of alienating consumers and maximise engagement by adapting their content for each market they enter.
Another process that can prove vital in a company’s quest to establish itself in a foreign market is multilingual search engine optimisation, which helps to boost the brand’s online visibility in specific destinations based on local keyword research and tailored content.
As the retail industry continues to expand and evolve all over the world, these sorts of methods will prove increasingly important to businesses that want to increase their chances of success through diversification.
Those that are effective in communicating their brand message and building relationships with customers in global markets will be well-placed for future growth and profitability.
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