It you are a retailer, you are already well aware of the myriad challenges your company faces today. The retail industry is highly competitive, and most retailers operate on narrow margins. Significant changes in the business climate – in the economy, in supplier or energy prices, in the weather, or in consumer demand – can adversely affect these margins, turning profit into loss.
The past several years have seen tremendous market consolidation in the retail industry worldwide, as retailers have sought to improve their profits through economies of scale. The shift indeed to big-box and mega chain business models has created new operational challenges for smaller retail chains. Many retailers have invested in new point-of-sale and inventory management systems to improve control over pricing, promotions and streamline execution chain-wide. By now, most large retailers have also extended their supply chains to encompass cheaper labour areas such as Asia – although lower manufacturing costs do not always translate into improved landed costs at the retailer’s distribution centers.
But improvements in operational efficiency only go so far towards enhancing the top and bottom lines. To grow revenues and profits, retailers must increase inventory turns and boost same-store sales. Optimizing the marketing mix to achieve this goal is no easy task.