Business model transformation

Faced with mounting challenges and rapidly changing consumer behaviour, the retail sector is being forced to fundamentally overhaul its business model. The latest Global Executive Research 2025 report, produced in collaboration between the Ebeltoft Group (to which INQUIRY belongs) and the World Retail Congress, shows that whilst retailers remain generally optimistic about the future of their businesses (69% have a positive outlook for 2030), uncertainty regarding the future of traditional physical retail is evident.

The survey participants were mainly senior executives from the retail sector, including 41% of CEOs and 30% of other C-suite executives.

Pressure on the traditional model

One in six respondents (around 16%) admits, with a sense of concern, that their current business model requires a fundamental overhaul to be fit for the future. This need is particularly evident in the Food & Groceries and Health & Beauty sectors.

A key indicator of this pressure is the decline in the expected commercial importance of physical shops. Although as many as 8 out of 10 executives (79%) still rank the brick-and-mortar shop among their top three most important channels, this represents an 11% drop compared to last year’s survey.

Why is the commercial importance of physical retail outlets declining? The main risks stem from several factors:

1. Declining footfall: Changing consumer behaviour means that lower footfall in retail areas is the biggest challenge (cited by 51% of respondents).

2. Online competition: Strong competition from purely online retailers is constantly putting pressure on traditional retailers.

3. Operating costs: Rising operating costs, including rent (33% consider this a major challenge) and staff shortages in shops (32%), make it even more difficult to remain profitable in a sector characterised by low margins.

Strategic response: Optimisation and experience

Faced with these challenges, retailers have had to set new priorities. Optimising their store networks is now a key strategic objective. Retailers are also seeking to strengthen their omnichannel capabilities (80% of respondents operate under this model) and streamline their operations.

Managers emphasise that growth can only come from innovation at the shop level and from providing customers with exceptional experiences. Rather than simply creating ‘shops’, retailers are encouraged to create engaging shopping experiences. It is also crucial to invest in people as well as technology, and to build a strong corporate culture in order to attract and retain talent.

Although expectations regarding the sector’s overall development are mixed, retailers are confident (69%) that, through adaptation, innovation and countering cost pressures, they will achieve profit growth by 2025. However, this requires maintaining a clear strategic positioning and avoiding chasing every trend.

Research methodology

• Survey type: CAWI.

• Duration: Data collection took place between 31 January and 7 March 2025.

• Sample size: 105 complete responses were recorded.

• Respondents: The survey participants were mainly senior executives from the retail sector, including 41% CEOs and 30% other C-suite executives.

• Company profile: 80% of respondents are directors of companies operating on an omnichannel model, running both physical and online shops.

• Sectors: The most common categories are Food and Grocery Stores (28%), Fashion (21%) and Health and Beauty (15%).