Against the current macroeconomic landscape and cost of living pressures, consumers are spending less, with competition among retailers to win wallet share heating up as purse strings are tightened. But retailers can find innovative ways to compete without slashing prices.
Household spending fell 0.1%, month-on-month, on a current price, seasonally adjusted basis, in September this year, according to figures from the Australian Bureau of Statistics (ABS). Also in the month of September, wages and salaries paid by employers in the retail trade rose by 6.1%, compared to the year prior.
Little surprise, then, that retailers are feeling the squeezed between high costs and soft spend, a scenario that makes it particularly challenging to hold onto profit margin. Indeed, the gross operating profits of businesses in the retail sector have been under pressure, falling by 1.3% on a seasonally adjusted basis in June this year, according to the ABS.
But in the absence of dramatic increases in customer numbers or sales volume, and despite higher business expenses, there are still plenty of ways for retailers to prop up their profit margins by becoming more efficient, doing more with less and saving on unnecessary expenses.
Here’s how retailers can tackle internal inefficiencies to protect profit and boost growth, even in a tight market:
Streamline business processes
One of the most immediate and effective ways for retailers to protect their profit margins is by controlling their costs with efficiency, often achieved by streamlining business processes. Implementing cloud-based business applications, including enterprise resource planning (ERP) systems and supply chain management (SCM) platforms, can help retailers reduce manual work and enhance efficiency by automating tasks such as financial reconciliation, procurement and inventory management.
Sophisticated solutions increasingly come with artificial intelligence (AI) technology embedded, enabling retailers to easily adopt advanced capabilities for automation and optimisation, without the need for complex integrations. For example, a major Australian retailer has used Oracle Fusion Cloud ERP and SCM tools to automate inventory management, improve demand forecasting, and optimise supplier collaboration, reducing stockouts and overstocking, and improving product availability.
Automation and AI offer enormous opportunities for retailers, according to Oracle group vice president for applications in ANZ & ASEAN, Meredith Rowan.
“Leveraging AI-powered features in modern, cloud-based applications like our Fusion Applications, retailers can automate complex tasks like balancing the ledger, optimising inventory levels, and streamlining supply chain operations, allowing them to cut down on manual work, improve efficiency and drive profitability.”
Consolidate digital infrastructure
For labour-saving technology like automation to work effectively, it needs good data. But retail businesses often have a technology environment made up of disparate systems that don’t always talk to each other or share information very effectively. The best way to get business data together in one place is usually to consolidate digital systems.
This is important, especially when consumers expect unified retail experiences across all sales and engagement channels. But creating a seamless unified customer experience first requires a unified IT environment. One useful approach here is the creation of a centralised cloud operating model, which can act as an architectural onramp to data unification.
“A centralised operating model is a strategic enabler for pulling data into a single source of truth for analysis, as it enables the consolidation of the applications that create and use such data,” Kyndryl practice leader for cloud, core enterprise and zCloud for ANZ, Michael Vincetic says.
“One of the best ways to achieve this is to migrate from single-purpose solutions to an end-to-end, cloud-based business system.”
Dig into real-time data
The value of data in driving efficiencies to protect profit is clear. But it’s also a key driver of additional value from every customer interaction. How? Through personalisation. As consumers are becoming more cautious with their spending habits, retailers are finding new ways to provide a personal touch, elevating engagement and conversion rates to bolster profit margins.
Due to the highly omnichannel nature of shopping today, knowing exactly when, where and how to engage consumers is vital, according to Databricks vice president and country manager for ANZ, Adam Beavis.
“But processing customer data in batches, as many legacy business systems do, can lead to analysis delays and ineffective timing. However, modern data intelligence platforms can analyse streaming data in real-time for instant insight and perfectly-timed engagement.”
For instance, luxury fashion retailer Burberry was able to overcome extensive data processing delays and deliver a truly superior customer experience by using the Databricks Data Intelligence Platform. The platforms enabled real-time data analysis for more relevant recommendations and better service.
Make marketing more efficient
With marketing efforts frequently the main way for retailers to engage more deeply with existing customers to boost conversion and acquire new ones for a bigger customer base, the efficacy of marketing efforts is key — not to mention their efficiency as well, given the investment dollars that go into them. But keeping multichannel marketing campaigns in check can be complex.
“Most effective marketing campaigns use many messages over an extended period of time to tell a story. When these are multiplied by the number of channels via which they need to reach customers, it can become a resource-heavy, costly exercise,” Asana head of APAC, Jo Gaines says.
“But a strategic approach to workplace collaboration, backed up by the right digital tools to plan, scale and simplify otherwise complex campaign workflows, can help retailers manage marketing teams and their resources more efficiently for a more seamless process.”
Marketing teams frequently use a complicated network of spreadsheets, calendars and documents to track campaigns, but this can be highly inefficient. Fortunately, retailers today have access to digital collaboration tools that can help teams mobilise around clear goals, get more from their resources and create streamlined campaign workflows for more cost-effective marketing.
By reviewing the business to work out where key inefficiencies may be costing the business more than they should, retailers can transform their business processes and digital tools to maintain more profit margin, even amid an economic crunch.