Staying cost competitive in retail despite pressure on pricing
Posted by Taj Onigbanjo
The retail sector is evolving. Modern retailers are faced with a challenge of needing to maximise efficiency and reduce resources in a complex market landscape where costs are on the up, and consumer spending is being squeezed. At the same time, retailers need to invest in smarter core systems to reflect the ways that modern consumers want to shop, and develop new strategies for the use of these platforms.
As rising business rates and inflation are on the up in concurrence with the hike in National Living Wage, Apprenticeship Levies, and pension contributions, the average retailer's profit margins continue to feel the pinch. The likely outcome of such scenarios, for businesses that fail to adapt, is that the rising fees will be passed onto the consumer, one way or another. As a result, retailers should consider reviewing their operational efficiency, to meet consumer needs, or risk losing them to competitors.
April 2018 brought the annual increase in the National Living Wage. The Treasury estimates that the average full time worker aged 25 and over will receive an annual pay rise of circa £600 as a result. In the last five years alone, the minimum hourly wage for those aged 25 and over has increased 25%, from £6.31 to £7.83.
Additionally, April 2018 has seen workplace pension employer contributions rising from 1% to 2%, along with rising apprenticeship levy fees, and increasing business rates - all hammering the bottom line for retailers. GDPR will likely present yet another costly hurdle for the industry to overcome, and so managing all of these fees, in a volatile economic landscape, makes for quite the set of challenges to grapple with.
One prevailing challenge for retailers will be working out how to keep the costs of their products and services competitive for consumers through working hard behind the scenes to reinvent the wheels that are driving their business forward. Mike Watkins, Head of Retailer and Business and Insight for Nielsen UK claims “Retail business models are under threat and it's now the case of investing for the longer term in order to remain relevant”.
This means retail organisations need to spend less time simply gathering user data and more time responding to it. Retailers should consider ways in which they can take analytics out of the sales and marketing funnels, in order to apply them to the supply chain, the employee, the customer, and so on, to ensure all processes run smoothly for all parties.
With the right software as a service in place, retailers are able to remain agile and adaptable to ever-changing business and consumer demands. A unified cloud platform will enable departments from all sectors of a retail business to collaboratively access, share, and report the data needed, quickly and efficiently. This will integrate otherwise siloed communication between different channels, departments, and locations, helping to influence strategies and improve customer experiences, without hiking up prices.
Maintaining multiple legacy systems may seem like the most straightforward and cost effective option, but this can actually be a further drain on resources. After the initial investment, then adoption, and roll out, cloud software as a service typically runs on a subscription pricing model, enabling retailers to pay only for what they need, when it is needed. As such, new services and innovations can quickly and easily be tested pre-launch at a lower cost than setting up on physical infrastructure. For example, a retailer may want to launch a new landing page or app alongside a seasonal campaign - cloud technology can facilitate and streamline the process through scaling up IT and data capacity, with minimal effort and outlay compared to traditional systems. A modernised system is therefore able to deliver long term efficiencies to a business’ bottom line, enhance consumer experiences, and aid company-wide growth.
Through implementing an integrated cloud reporting system that can adapt to changes as they happen, businesses are able to save time and money, and be in a better position to use accurate business intelligence to make better predictions about the future - without leaving their consumers to foot the bill.