Value Creation in International Physical Retailing

Abstract

Value creation is the central idea in any retail activity. The key to sustainable business success is the generation of significant value for the customer, as it is the customers that generate the margins upon which retailers' sustainable operations depends. By definition, when value is created for customers, value for the business follows. In an empirical study, we quantitatively investigate the value creation capability of some of the largest food and fashion retailers worldwide on the basis of two financial ratios, that is, their q-ratio and their long-term revenue growth. In a subsequent qualitative analysis, the business strategies of firms with higher and lower value creation capabilities are compared with the objective to identify success factors for value creation. In food retailing, formats that employ discounting strategies and backward integration strategies are among the more successful strategic approaches. Apparently, these approaches are superior in creating significant value for the customer. In fashion retailing, backward integration and fast-fashion strategies turn out to be leading to superior value propositions.