310: Beyond The Classic Retail Business Model (part 1)

With thin margins and fierce competition, sticking to the classic business model might not be viable enough to ensure future success. The next wave of retail profits will likely come from innovative and disruptive business models that go beyond the traditional “buy and sell” approach to wholesale and retail. In this episode, we’re exploring some of the most promising avenues that retailers should consider. Whether you’re looking to integrate services, adopt a subscription model, or even launch your own brand, this episode will equip you with insights to stay ahead of the curve and redefine what success looks like in the future of retail.

Listen to this podcast episode to:

• Discover what defines a new business model and why simply expanding your product line isn’t enough.
• Explore new revenue and value opportunities by moving up the supply chain, offering services, or implementing subscription models.
• Learn from live examples of retailers who have tried and tested these new business models.

 

 

The different types of new business model

1. Launching owned brands:

• Shifts from being a wholesaler or retailer to becoming a producer or manufacturer.
• Moves away from a “buy > move > sell” model and creates a “buy > move > make > move > sell” operating model.
• Allows for more control over end-to-end finances and corporate values, such as sustainability.
• Examples: Amazon move to set up their owned brands whilst Target have over 50 owned brands in their portfolio.
• Watchout for potential operational complexities and the need for new skills and investments.

2. Marketplace or platform models:

• Shifts control of fulfilment and customer service to third-party brands.
• Growth driven by the flywheel effect often connected with (but not originated by) Amazon.
• Balances brand control, quality, curation, and scaling.
• Examples: eBay and Amazon are market leaders, although many other retailers have recently adopted a marketplace model.
• Requires significant effort to build momentum and maintain core brand values.

3. Service-based models:

• Transitions from selling physical products to selling services or experiences.
• Examples: IKEA’s in-home assembly services, Selfridges’ in-store beauty appointments, Harrods’ bespoke offerings.
• Requires different skill sets and operational structures.
• Services may include bolt-on services (e.g., assembly, installation) or independent services (e.g., beauty, wellness, hospitality).

4. Subscription models:

• Generates revenue through recurring fees rather than one-off purchases.
• Must offer significant and continued value to avoid customer fatigue and churn.
• Examples: Amazon Prime which has a selection of features all centred around the core proposition of fast, free shipping for ecommerce orders.
• Creates a sticky customer proposition which boosts repeat purchases, in turn making revenue more predictable and generating higher customer lifetime value.
• The watchout is to focus on building an ultra-compelling value proposition to justify the subscription cost and make it a no-brainer.

Each model involves a strategic shift and requires careful planning, investment, and consideration of the core business’s ongoing needs.

Be sure to check out episode 311 where the conversation continues and more business models are explored.

Additional episodes to listen to next

In episode 256: Creating A New Business Model, Oliver takes a look at crafting a new business and operational model while maintaining synergy with the core business.

Also be sure to check out episode 292: Leaping The Transformation Gap as fellow retail expert, Steve Dennis, joins to explain the key mental leaps that we must take to make meaningful transformations. And as a new business model is one of the most disruptive transformations you can take, there will be loads that you can learn from this conversation.