Finders, keepers: Unlocking hidden margin by making small adjustments
The retail industry has never been more data driven. Companies can now holistically view operations and results in granular detail, optimising elements of the retail value chain from an informed position to drive improvements.
On paper, this approach makes sense and enables retailers to fine tune aspects of the customer journey continually to ensure that profit margins are optimised. But realistically, this way of working can potentially lead to more challenges than it solves as retailers’ value chains are integrated, complex end-to-end processes.
This is complicated further by consumers shopping behaviours, as they move fluidly between channels and may interact differently on each shopping occasion – no two shopping journeys are the same, and this is where retailers can become ‘unstuck’, resulting in lost conversions.
To address this, retail businesses need to take a more granular approach, focusing on how to innovate one area, or any part of the customer experience that causes friction.
A practical example of an area of the retail value chain which often gets disrupted due to changes made early on in customer journeys, is delivery. Responding to consumer demand for greater convenience, many retailers have implemented click-and-collect services. However, not all of them have fully analysed how click-and-collect impacts stock availability if they choose to leverage store inventory; or how it changes the in-store customer experience, if store associates have yet another responsibility to add to their already busy workload.
This isn’t, however, a case against innovation and change. Rather it is demonstrating the need for strong foundations before decisions are made that will impact the business at various points.
Retailers need to review their operation holistically, so that when they do make adjustments, they initiate a positive reaction through the value chain, improving the customer experience as a result.
The challenge many retailers face in making these informed changes is that it requires a complete view of business activity – in real-time – which some retailers either do not have access to, or they question its accuracy. Indeed, recent research from PWC revealed that over a third of retailers still struggle to achieve a single view of the customer – a vital stepping stone to realising a holistic view of the business.
This is where the journey for innovation must begin. With a 360-degree view of customers, orders and stock, across all channels is the absolute cornerstone of retail innovation. For retailers to understand what needs tweaking or renovating, first they need to map current operations and results.
Only then can retailers look at data-led insights and use these as the basis for strategic decision making. These decisions can be anything from operational changes, or sales messaging edits, to determining how best sales teams serve a customer.
Having an informed structure in place, supported by strategic reasoning as to why the business operates in this way, will allow for improved sales conversion rates and each purchase being fulfilled in a more effective manner, to maximise profit margin. And as retailers benefit from increased margins on every sale, overall profits will be boosted significantly, proving return on investment for the business.
By John McGuire, Managing director, Elucid-Sanderson
This article appears in the September/October 2017 issue of Direct Commerce Magazine.