Innovation & Competitive Strategy for Fashion Retailers in the Middle East
This is an excerpt from my management project, 2019.
This project researched the impact of Western innovation approaches on the changing consumer behaviour in the Middle East from the lens of enhancing the shopping experience and customer loyalty, and with the objective of providing fashion retail managers with practical tools to create a comprehensive retail innovation strategy that differentiates and positions their brands competitively in the Middle Eastern fashion market.
As a result of hypothesis testing, a conceptual multidimensional model was developed to serve as a general framework that assists fashion retail managers in the Middle East in making sound and balanced strategic decisions related to the allocation of resources and the use of adequate Western innovation tools for a successful implementation of a holistic brand-driven retail innovation strategy in the region.
Project Background
The fashion retail industry in the Middle East is becoming increasingly competitive especially with the expansion of global brands into the region, which gives the local consumer ample buying options through offline and online platforms. In the past few years, the region has become the focus of many Western companies due to the growth of this market and the emergence of the oil-rich Gulf region as a major retail and banking hub (Welsh and Raven, 2006), which intensifies the competitive environment for both homegrown and global brands. The retail sector in the gulf region is poised to reach USD313 billion by 2021 mainly driven by the growth in population and economy (Deulgaonkar, 2017). On the other hand, the changes on a global scale in consumer behaviour and buying habits have urged global retailers to seek new value propositions with a focus on personalized services and have put innovation at the center of efforts to differentiate their offerings in order to acquire a competitive advantage and seek long-term survival (Kose and Akgul, 2016). This puts brand experience in relation to how customers search, shop, and consume products in the forefront because it impacts consumer behaviour through customer satisfaction and loyalty (Brakus, Schmitt and Zarantonello, 2009).
Worldwide, innovation is considered to be a key success factor and a competitive edge for many companies operating in various industries including retail (Kose and Akgul, 2016). Fashion retailing also benefits from innovation in that it seems to provide a source of competitive advantage to retailers with a long-term strategic perspective through adapting to the individualized needs of customers and enhancing their shopping experience, which in turn helps in attracting and retaining satisfied and loyal customers (Kose and Akgul, 2016). Moreover, the fashion industry, which includes clothing, footwear and accessories, is characterized by being a challenging industry because of the constantly changing trends and short product life cycle - where innovation approaches could offset the challenges through providing creative solutions to enhance human life and deliver an enjoyable customer experience (Kose and Akgul, 2016). In the global fashion retailing arena, various innovative approaches are slowly emerging, including technological innovation such as virtual fitting rooms, body scanners and 3D printers, and magic mirrors (Kose and Akgul, 2016) as well as innovation management of processes, concepts and marketing, however with little evidence of a comprehensive retail innovation and management strategy (Pantano, 2014).
Plenty of literature exists on the application of innovation in retail in the Western world and its effect on consumer behaviour; however, studies on a comprehensive retail innovation strategy and its impact on consumer behaviour specifically in the Middle Eastern market are limited. The Middle Eastern market is sophisticated, and it differs from Western markets in that it includes diversely unique cultures and consumers possess specific cultural characteristics (Welsh and Raven, 2006), which might be troubling for duplicating Western innovation approaches in the region. Therefore, deeper understanding of the Middle Eastern consumer and meeting his specific needs through innovation approaches are essential for homegrown and global fashion retailers in the region in order to develop a competitive edge for their long-term survival.
Innovation, Innovation Management, and Customer Behaviour
Many retailers have put innovation at the center of their efforts to cope with the market changes as discussed earlier.
Walker (2011) defines innovation as an invention “thing” that leads to innovation “use” of new ideas or ways, which can change behaviours, processes, and businesses.
Botschen and Wegerer (2017) states that a retailer’s success comes from a brand driven holistic approach to retailing in the form of innovation strategy, involving online, offline, and the supporting background operations and organization, to ensure a competitive edge and drive future growth. They indicate that structural changes in the industry require a holistic view to innovation including marketing, pricing, processes, management, store design, HR (Botschen and Wegerer, 2017).
In the fashion retail industry, innovation is also crucial to meet customer’s demand and build a competitive edge because today’s customers are on the go, internet connected, informed on international trends, less loyal, and look for quality products at lower prices (Vasiliu and Cercel, 2015).
Some of the most widely used and emerging fashion retail innovation approaches both online and offline are identified from the literature and these are:
- Virtual fitting room (VFR): a new retail service that relies on AR technology to provide customers with the benefits of trying and matching clothes and accessories online in real time using their webcam (Kose and Akgul, 2016).
- Retail price and promotion innovation allows retailers to better gather information, personalize offers and effectively target consumers on the time, location, and personalization attributes (Grewal et al., 2011).
- Personalized location-based promotions has been used to target customers with SMS messages on their mobile devices with promotions that they might be interested in when they are near a store (Grewal et al., 2011).
- Magic mirrors are LCD screens based on AR technology that are used in stores to provide customers the possibility to try and match fashion products in a virtual setting without having to physically try on clothes (Kose and Akgul, 2016).
- 3D body scanner is another promising new technology in offline fashion retail because it allows mass customization of products and acts as an accurate body measurement tool (Kose and Akgul, 2016).
- Self-creation and design and the customer involvement in the creation and acceptance of the final product to meet the customer’s quest for novelty products and services are two approaches referred to in Pantano (2014).
An important theme of study in retail innovation, along with customer’s acceptance of innovation, is the innovation management approaches and adoption including spotting trends, managing information, building internal innovation process and tools, facilitating the adoption of innovation for sales staff and customer service, and creating and implementing innovation strategies (Pantano, 2014; 2016). Although Pantano’s (2014; 2016) work is analytical in nature with no proof, he refers to the importance of innovation management in continuously innovating and competing as well as to the retailer’s capabilities and managerial skills to adjust their internal resources and diminish the risk of innovation failure.
Furthermore, the understanding of consumer perception and its alteration are important in marketing, and especially in services marketing where marketers focus on the above expectations service quality perceived by customers due to the intangibility of services compared to products (Baines, Fill and Rosengren 2017). Retail is considered a service industry and the focus on delivering quality service is crucial, but the introduction of new technologies to improve service delivery impacts consumers and their acceptance and behaviour towards these technologies become equally important (Pantano, 2014). Customer perception and acceptance of retail innovation has been researched mainly using the TAM model to measure customer’s responsiveness and attitude towards new technologies on factors like ease of use, trust, usefulness, enjoyment, and social influences, and results show that consumers accept certain types of technologies that improve shopping experience and loyalty (Pantano, 2014). Another study by Renko and Druzijanic (2014) on the Croatian market indicates that customer loyalty is not necessarily influenced by new technologies. However, perception and acceptance of non-technological innovation such as processes and management are equally important for a successful adoption (Paredes et al., 2018; Pantano, 2014). Sorescu et al. (2011) mentions the importance of co-creation and engaging the customer in the brand value creation through a retail innovation business model including technology, processes and management in order to enhance the shopping experience and loyalty.
Brakus, Schmitt and Zarantonello’s (2009) study on brand experience as it relates to loyalty finds that experience, which includes consumers acts of searching, shopping, and consuming products, affects satisfaction, behaviour and loyalty through how consumers value, perceive, and feel towards brand personality. Hence, the customer journey of before and after the purchase is a determinant of his perception towards the shopping experience. On that note, a widely used measurement tool for customer loyalty amongst companies is the ‘Net Promoter Score’ (NPS) developed by Reichheld in 2006, and which helps a brand determine its level of customer loyalty, satisfaction, experience and perception (Florea, Tănăsescu and Duică, 2018).
In short, a variety of literature on innovation, retail innovation and consumer behaviour in the fashion industry worldwide was reviewed in order to identify the main sources of competitive advantage from the Western world and guide the intervention question “to what extent do innovation approaches impact customer experience and loyalty in Middle Eastern fashion retailing?”. This leads to a comprehensive approach in researching Western tactics and validating these in a Middle Eastern context.
Research methodology, data analysis and results
A mixed-method technique in data collection and analysis was adopted, and that is a questionnaire technique to collect data from fashion retail customers followed by semi-structured one-on-one interviews to collect data from fashion retail customer service employees.
The data was analyzed separately to test the hypothesis that retail innovation approaches (independent variables in table 10) from the West could impact customer behaviour in the Middle East. Data collected from questionnaires was analyzed quantitatively using correlation and regression statistical approaches to look for relationships between dependent and independent variables (See table 10). Whereas, data from interviews was analyzed qualitatively to look for reasons behind the themes from questionnaires and gain further insight on the issue from a different angle, which enriches the answer of the research question.
The quantitative analysis indicates that statistically the hypothesis is partially true, and that technological innovation is a good predictor of customer behaviour in the Middle East. However, Promotional and management innovation are not good predictors of consumer behaviour, but they are positively associated with technological innovation. This answers the research question related to what extent does each variable impact consumer behaviour. However, further qualitative analysis from employee interviews was conducted to understand the reasons.
The qualitative analysis supports the findings from the quantitative analysis that technological innovation has a positive impact on customer behaviour in the Middle East and also reveals the reasons, which are related to novelty, uniqueness, and less time consumption attributes. Furthermore, the findings from the interviews confirm the positive association between the promotional and management innovation variables and the technology variable identified in the quantitative data, and both customers and employees positively perceive promotional and management innovation coupled with adequate technological and management approaches for a successful implementation.
Findings and Recommendations
The findings from this study necessitate clarity in formulating and implementing a comprehensive strategy, since Botschen and Wegerer (2017) stress the importance of a brand driven holistic approach to retail innovation strategies involving all touch points as well as the background operations to deliver a competitive advantage and drive growth. For this reason, a multidimensional model followed by a MATA (multi-attribute trade-off analysis) model were created to represent a guide for fashion brands in implementing a proper and holistic retail innovation strategy in the Middle East.
MATA is a tool that can help decision-makers in strategic planning choose between alternatives and find solutions to complex problems involving multiple attributes or criteria (Tabors and Hornby, 2005). MATA was used following a multidimensional model depicting the base case scenario that will assist managers create and implement a successful holistic retail innovation strategy with the appropriate attributes.
The goal is to assess the extent of impact of variables (see table 10) and attributes on consumer behaviour, hence the significance measures from the regression and correlation analysis were used to develop the multidimensional model (see figure 24), from which a multi-attribute trade-off analysis is created (see figure 25).
Figure 24 depicts the direct and indirect impact of independent variables on consumer behaviour. Figure 25 uses the criteria from figure 24 as well as criteria from the quantitative and qualitative analyses to rank the attributes according to their importance in affecting consumer behaviour and delivering a successful innovation strategy. Hence, a decision maker should consider improving or investing in the primary attributes as well as the background or supporting attributes and dismiss the trade-off attributes according to the ranking shown in figure 25.
The multidimensional model and multi-attribute analysis presented above are used as a general framework aimed at helping managers in the region set clear objectives, tackle decision dilemmas, and create balanced innovation strategies that would affect consumer behaviour.
As a general recommendation, fashion retailers need to assess their capabilities (for example, through a technological and non-technological audit), identify gaps, develop and enhance their innovation capabilities for a successful innovation strategy deployment.
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Keywords: #InnovationInRetail , #RetailInnovation , #InnovationManagement , #CustomerExperience , #CustomerLoyalty , #InnovationStrategy , #FashionRetail , #MiddleEast
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Asst. Prof. of Marketing
3yHello, great study! Thanks for citing us Arzu Karaman Akgül . We would really like to see the results of the study in a journal.
General Manager E-commerce & Omnichannel at Chalhoub Group | Business Leader Delivering Growth, Enhanced Profitability & Brand Expansion | Tech & SaaS | Digital Marketing | Start-ups & Scale-ups
4yGreat insights Elias!