To be a successful retailer in a single territory is tough. To take things up a level and grow by expanding into new territories is tougher still. For this reason, when we came to assess retailers for the Strategy & Innovation Performance Dimension of the IREU Top500, we first set out to identify the businesses that sell across European territories and do so via different channels.
This means working at scale, but it’s important to recognise this doesn’t mean imposing systems and approaches from a corporate HQ. To expand abroad, retailers have to localise, to enable shoppers to read about products and services in their own languages and to pay in their own currencies.
This requires nimbleness and adaptability, which plays into our second set of metrics, which are around the kinds of services offered across different territories. Flexible delivery options, bug-free and intuitive apps, and an understanding of local payment options all play into our work here.
“To rank highly in this Dimension, it’s not enough simply to be a big retailer,” says Martin Shaw, InternetRetailing’s senior researcher. “Our work also recognises smaller businesses that are at the cutting edge too.”
What the Top500 do: international strategy
Retail growth within Europe increasingly relies upon successful expansion into new markets. For this reason, we were keen to quantify how well retailers are doing here.
Our work reveals that, on average, Top500 retailers offer two currencies and three languages, and trade in four territories. Considering there are 15 currencies used within the EEA and 26 official languages, this may not seem impressive. However, it’s worth remembering that 17 members of the EU use the Euro, which inevitably skews the figures.
Another factor to consider is the idea that, while successful expansion abroad generates profits, getting international expansion wrong can be costly. Our findings would seem to back up anecdotal evidence that retailers are cautious when expanding abroad, preferring to focus on markets one by one before committing to beginning anew elsewhere.
What the Top500 do: innovation
Here, we weren’t looking for the kind of digital novelties you’ll find in flagship stores or the presence of an in-house innovation lab. Rather, our emphasis was on measuring the digital basics that suggest innovation and an appreciation of what’s going on at the cutting edge are deep in the company DNA.
We asked questions around core performance issues such as whether retailers offered websites that loaded quickly; whether retailers offered alternative results rather than a ‘no results’ default when customers made an unsuccessful search for an item; and whether retailers offered quick and flexible options for delivery and collection. We also wanted to make sure these offerings were well executed. Here, retailers’ apps were often revealing.
“Having an app that is frustrating for a customer to use is worse than not having an app, and this is reflected in the Strategy & Innovation Index,” says Shaw.
The fastest websites, as measured by the SpeedIndex applied by InternetRetailing Knowledge Partner NCC, are to be found in Norway, the Netherlands and Denmark. A little more than a tenth (11%) of retailers showed alternative results following a search that otherwise would have produced no results. Here, retailers in Norway, the Czech Republic, Finland, Sweden and Denmark stood out, with more than 40% of traders selling in these territories taking this approach, tackling a problem that many traders have yet even to recognise.
In terms of delivery and collection, we focused on click and collect, next-day delivery and nominated-time delivery. These may seem mundane services to retailers working in territories where ecommerce has had a long time to develop, but we shouldn’t underestimate the flexibility and logistics expertise needed. To do this at scale and across territories compounds the difficulties.
We found that 14% of Top500 retailers, measured in all the markets they serve, offered click and collect, while next-day delivery was available from 6% of retailers, and nominated-time delivery from 4%. The Netherlands led the way in click and collect, with 64% of retailers operating in the territory offering the service, followed by the UK (63%) and the Netherlands (61%). Next-day delivery is far more commonplace in the UK than in other territories, offered by 59% of Top500 retailers operating in the market.
To put that into context, the equivalent figure for France is less than half that, at 22%. Nominated-time delivery was offered by 14% of retailers in the UK, followed by Romania and the Czech Republic, where the figure was a little less than 10%.
What leading retailers do
So what does it take to be a leading performer in the Strategy & Innovation Dimension? You’ll find detailed case studies on the approaches adopted by five companies in the Top50 (Asos , H&M, Ikea , Zalando and Zara ).
More generally, we found that Top50 performers typically tended to perform well across a variety of metrics and especially strongly in specific metrics where they have invested time and money. Ikea’s app, for example, has an augmented reality feature so that customers can visualise how items of furniture will look in their homes.
Amongst other Top50 retailers, BonPrix , part of the German Otto Group, performs strongly in terms of not offering a blank ‘no results’ page, for enabling customers to save items to a list and for the high number of product shots. Again, these may not seem exceptional features, but the company operates in the fast-fashion sector, and it’s particularly essential that its customers can locate and buy items quickly and easily.
Apple’s key strengths encompass the ability to save items to a list and the number of product images. The company also makes it easy for customers to pick up items from the store. Taken these strengths together, they, perhaps unsurprisingly, might suggest a design-driven company that cares deeply about the look of things and wants customers to visit its stores.
For a contrasting set of priorities, consider the British groceries behemoth Tesco . This is a company with multichannel operations that rely upon convenience and reliability because nobody wants to be in for hours waiting for bread and milk to be delivered. The company excels in offering reliable Sunday delivery, plus nominated-time delivery and nominated day delivery.
Amazon similarly excels in deliveries, offering nominated-time delivery and constantly investing to improve the number of options – and, in turn, the level of convenience for its customers. However, it’s strong in other areas too, in areas such as dynamic pricing and tailoring recommendations to local factors. Viewed as a retailer that does many things well and at huge scale, it continues to be an essential study for its competitors.
As InternetRetailing.net editor Chloe Rigby notes in her strategic overview, the effects of Brexit may have a profound effect on the overall European retail landscape in the years ahead, especially if Britain can’t secure favourable access to the EEA.
What it won’t do is mitigate the need to look ahead and not only identify new markets, but look at incremental improvements that will help retailers better serve these markets. As we look to updating the IREU Top500 and refine our methodology, we would still expect those retailers that performed well this year largely to continue to outshine competitors.
That’s because, in our estimation, these are retailers that have already demonstrated expertise in the different retail disciplines that make up the metrics in the Strategy & Innovation Performance Dimension. It follows these are the retailers that are best set for future success.