Purpose – Retailers, irrespective of their scale of operation, face the tough challenge of standing out from their competition; a major driver to ensure success and progress in the retail industry is differentiation. This paper is a case study based description of how a retail house in Dubai, United Arab Emirates, used retail physicality and identity change as sources of innovation and differentiation and revived its retail operation. Design/methodology/approach – A literature review on retailing, retail physicality and identity change is presented to illustrate the challenges faced by retailers and the current trends in retailing. Primary research was conducted by way of in-depth interviews with Better Life, a retail house of the Al-Gurg group of companies, Dubai, United Arab Emirates, to understand the retail strategies employed by Better Life. Findings – Retailers are constantly looking for sources of innovation and differentiation to differentiate themselves from others. This paper shows the role played by retail physicality and identity change as sources of innovation and differentiation and how a retailer has applied them to repositioning its retail identity in the market and revived its operations. Practical implications – Traditional retail strategies may not provide the necessary competitive advantage needed for survival and progress in competitive markets. Understanding customers, calculated targeting, and focussed positioning using various dimensions are important aspects to be planned by retailers. Among the relevant positioning strategies available, retail physicality and identity change are two prime strategies and drivers, and are hence a source of retail innovation in competitive markets. Originality/value – The paper provides retailers with a unique perspective to analyse sources of retail innovation taking retail physicality and identity change as innovation strategies. If the strategies are implemented properly they can serve as competitive advantages for retail sustenance and success.