Credit by Oliver Wyman
For most of the industry, whether physical incumbent or pure-play online, the old formulae for success are no longer good enough. We see six models that will prosper in the new world, each based on a particular dimension of strategic control. Most retailers will likely combine elements of more than one of these models to achieve success and continued growth.
1. PRODUCT LEADER
WHAT IS IT?
Product leaders offer market-beating products that consumers cannot get elsewhere. These products offer value for money and unbeatable quality on dimensions the customer cares about.
HOW TO WIN?
Product leaders have the ability to design and create products that satisfy consumer needs. They are also able to source effectively to deliver these products at reasonable prices. Their products are not limited by the geographic reach of their own channels – demand for them is strong enough to sustain third party channels.
In this model, as product leaders expand into more markets, their increasing scale enables higher R&D spending and better supplier terms, further improving product quality and reducing costs. While global scale confers advantage, we also see a role for small, local producers. The growing consumer demand for low-carbon-footprint, ethically produced food and apparel has benefited smaller-scale producers, who find it easier to sell
their wares through online platforms. New technologies such as additive manufacturing – that is, 3D printing – and semi-autonomous sewing robots could also reduce the cost of creating customized products and apparel. Technology could thus herald a comeback
for “preindustrial” crafts and artisan products.
WHO IS DOING THIS TODAY?
Most apparel players are vertically integrated and aim to be product leaders. Zara is a leader in fast-fashion thanks to innovative supply chains designed to respond rapidly to customer demand.
In the food sector, the model is at the core of the success of upmarket retailers such as Mercadona and Marks & Spencer, as well as the discount chains Aldi and Lidl. Aldi has recently started to sell its own products beyond its own stores, via the Chinese
e-commerce marketplace Tmall.
2. MAGNETIC ECOSYSTEM
WHAT IS IT?
Magnetic ecosystems create compelling shopping and consumption experiences that give customers strong reasons to keep coming back. They do this through exclusive features that deliver seamless, hassle-free shopping or add value to an ongoing consumption experience.
HOW TO WIN?
Magnetic ecosystems are usually created through a mix of strategies. A magnetic purchase experience might involve personalized recommendations, one-click payment, and same-day delivery. To create ongoing customer engagement, companies could set up user communities, proprietary apps, and connected devices – all available to customers who stay in the ecosystem.
Some of these strategies work well on a market scale: social networks, rapid delivery services, and discounts at partner brands. Others have the potential to go global, for example, connected devices or integrated payments infrastructure.
WHO IS DOING THIS TODAY?
Amazon Prime makes the shopping process seamless with their one-click payment, free next-day delivery, and no-quibbles returns. They offer ongoing value to members with services such as personalized promotions and free streaming of exclusive
video content.
Nike has created a system of connected devices and compatible sports apparel, participatory events, and personalized trainer apps. These give customers strong reasons to buy compatible products and stay within Nike’s ecosystem. Read more here
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