According to research published recently bySteria and Verdict Consulting, the barometer of success or failure for almostevery retail business can be evidenced by five critical measures: footfall,spend per customer, market share, margin; and operations.Now more than ever, retailers need to ensure that their activities andstrategies link directly to one or more of these measures. Failure to link tothem and to monitor them on an on-going basis can lead to declining sales, weakprofits and eroded market share.
But why are these five measures so important?More significantly, what can retailers do to improve them, and do softwaresolutions such as supply chain ERP have a role to play?
Footfall: The retailer's lifeblood
Without customers, there is no business. Butwith more shopping destinations than ever before, winning footfall is gettingharder. In 1999, 24% of clothing consumers visited just one store; today thatfigure is down to 15%. Fewer shoppers are hitting the high street and they areshunning the stores they once visited in favour of those that better meet theirpresent needs. But, on the flip side, this promiscuity offers retailers theopportunity to attract new customers.
Given the different routes to market: the highstreet, internet, catalogue and concessions, the battle to win customers meansthat retailers now need complete visibility to spend and activity, presented asconsolidated intelligence, across each and every channel that customers use,regardless of location, retail format and time of day.
As recently reported in The Times, UK fashion sales are currently worth 45 billion annually. Of this massive figure, 5%- 6%is currently derived from online sales, a share which is expected to grow to10%-15% within the next three years.
There can be no doubt that e-commerce has comeof age. The unquestioned multi-channel dimension of retail has created a newimperative for supply chain solutions. They can no longer position themselvesas primarily supporting high street trading, with additional channels as add-ons.
In terms of optimising footfall, supply chainsolutions contribute significantly by streamlining warehouse and stockmanagement. They automate numerous manual processes, resulting in improvedstock availability in store. In particular, customer-facing processes such aseffective ordering and communication that includes SMS messaging increasesatisfaction and loyalty.
Spend: Where browsers become buyers
Fundamental to success is the ability to convert browsersinto buyers and to encourage them to spend as much as possible in onetransaction, thereby maximising the average transaction value. The key toimprovement is to understand what customers want and to put compelling offersin front of them. Minor tweaks to the retail proposition can have a majorimpact.
Companies that have automated their supply chain enjoyaccess to tools including business intelligence and performance management thatgenerate accurate and consistent information across the business. Real-timestock views and integrated WSSI give insights that can support precise, timelyand profitable decision-making. Where system-led stock management is in place,buyers and merchandisers can focus on the new seasons buy and productexception management rather than waste their time behaving as glorified stockcontrollers.
Market share:
In a contracting sector, retailers can growshare by stealing it from competitors, or by picking up sales from retailersthat have gone out of business. In 2008, Verdict Consulting estimates thatretail space accounting for 1.6bn of home furnishings sales was closed. Aroundhalf of this sales value will be picked up by other retailers. And, at the sametime as winning share, retailers need to defend it. The trick is to stay awareof what competitors are doing to avoid missing out on any opportunities.
Acritical element of competitiveness is being able to predict customer tastesand requirements, and then fulfilling them by having suitable product availableat a compelling cost-point. Supply chain solutions equip retailers to improvesupplier management and visibility, by facilitating harder negotiation thatleads to better deals. Then, when it comes to supplier replenishment, functionssuch as the system-led creation of Purchase Orders can give greater stockaccuracy, improved cash flow and better productivity.
Margin: It's time to get creative
Current trading conditions have resulted in increased discounting activity. This practice, whilst aimed at increasing transactions, can reduce overall turnover and, when combined with the weak pound, is putting immense pressure on retailer margins.
With reported sales figures down; retailers need to question how discounting is affecting the transaction volumes. If they are comparable or, worse still, down year-on-year, then launching promotions geared at increasing basket size becomes more relevant than discounting. In general, retailers need to be creative about supporting margins, whether by adding value to a product or being selective about when to discount prices.
Margin management is certainly made easier by the availability of accurate business intelligence, and by the consequent introduction of greater efficiencies throughout the supply chain. That depends upon the ability to automate wherever possible and use system functions to eliminate unnecessary manual interventions and time-wasting administration. Efficient processes and integration of as many functions across the supply chain as possible into a cohesive mechanism can significantly improve productivity and margins.
Operations: Flexibility is the key
Many retailers have achieved cost savings by increasing operational efficiencies. Flexibility is the key. In these uncertain times, being able to quickly respond to new developments is critical. Savings can be made across the operation-from the supply chain and staffing, to back-office processes such as Finance and Accounting. And cost savings are not the only by-product. For example, a more efficient supply chain can mean better in-store product availability, which can improve sales.
A single integrated database for accurate stock management, managed by the supply chain solution, can deliver cost savings. Accuracy of information and stock inventory that seamlessly covers all routes to market means reduced inventory costs and improved ROI on stock. An automated solution enables retailers see where inbound stock is in the supply chain at any time, giving visibility of stock position. Plus a multi-channel single stock pool managed by the supply chain solution means improved stock availability and can lead to increased sales without the need to move stock around.
In summary, these five critical measures are a good barometer of retail trading health, and software solutions such as supply chain ERP are the ideal tools to monitor and manage them.
Alan Morris is Co-founder and Managing Director of Retail-only IT services and solutions provider, Retail Assist.
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