57 BUSINESS ADVICE capital to invest in future growth. Fortynine percent of retail CEO respondents are planning divestments of poor performing, challenged and non-core assets in the next 12 months. The index shows M&A will play a key role this year although activity is likely to slow. Fifty-eight percent of retail CEO respondents are planning M&A in the next 12 months, primarily to access new technologies (37 percent), capabilities (35 percent) and vertical integration (35 percent). 4. Embracing technology to unlock efficiency, enhance customer experience and power new business models – Technology is underpinning the majority of retailers’ efforts to defend margins and drive growth. Technology is likely to be the most heavily ring-fenced expenditure category in retail budgets. Artificial intelligence (AI) will play a central role in technology investments, with its applications split between embedding AI into current infrastructure and exploring new initiatives across various AI branches. 5. Investing to develop entirely new value propositions – retailers can leverage existing assets and make investments that take bigger steps by expanding or pivoting into brand new sectors. A move into technology, media, health, real estate or financial services could open new areas of growth. 6. Exploring partnerships to support new business models and enhance operating models – delivery platforms and new entrants are transforming the retail landscape as they rapidly expand beyond their original focus areas to capture a larger market share across multiple retail segments. Online food ordering and delivery platform companies, which initially built their businesses around restaurant meal delivery, are now aggressively moving into grocery, convenience and other retail categories, leveraging their established logistics and technology infrastructure to diversify revenue streams and meet evolving consumer demands. Malin Andrée, EY Global, EMEIA and Nordics Retail Leader, says: “We are thrilled to be collaborating with WRC to deliver a report at a time where retail is withstanding major disruption. Despite increasing uncertainty, with change comes opportunity and retailers must be bold. Looking back over the challenges collectively overcome in the past decade and listening to the retail leaders we interviewed for this report, I have been struck by the positivity, resilience and innovation that is inherent in the sector.” Embrace innovation The report explores how the retail model can adapt for growth. By focusing on delivering an effective and robust omnichannel experience for customers, by embracing the transformative opportunities provided by new technology and by exploring different business models, successful retailers will be wellpositioned to withstand disruption and can shape the future with confidence, whatever it may hold. The report, developed in collaboration with World Retail Congress, calls for retailers to embrace innovation, build collaborative ecosystems and diversify offerings to create new value, to confidently meet the evolving needs of global consumers. Ian McGarrigle, Chairman, World Retail Congress, says: “Leading retailers have consistently outperformed market expectations by investing in new business strategies and we know retailers are exploring alternative business models such as pre-owned, rental, subscription, repair, health services, media and logistics. However, these models face challenges in scaling and generating significant revenue compared to traditional sales. The key factors hindering their success are time and money. “Large retailers have seen some success, but the revenue from these new models remains relatively small. The focus should be on profitability and growth, as newer revenue streams are growing faster and have greater potential. Retailers need to take iterative steps to build scale, leveraging customer data and gradually embedding new models to drive growth and profit over a five- or 10-year horizon.»
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