5 Must have ways to reduce costs and grow sales
Retail is transforming. Retailers need to reduce costs and increase efficiency. They need to do so in a challenging market where consumer spending is being squeezed and costs are rising. At the same time they need to invest in online, refresh core systems, and develop smarter, personalised offers in addition to rethinking the role of their stores.
Quite a challenge!
If you just take the phrases: “Reduce costs”, “Invest in online”, Refresh core systems” and “Develop…” the equation sounds impossible. And this is compounded by the fact that retailers and brands are being asked to produce more and more with ever less. Ok, I’ll be the one to say it: Something just has to give.
How much longer can UK retail focus on saving costs, at the expense of developing sales? How long can head offices try to sit on their hands with their heads in the sand (physiologically impossible anyway)?
So here is a refreshingly new approach to both saving costs and developing retail sales (that you can do without being either double jointed or in a zero gravity atmosphere).
Stop spending money on research and data that doesn’t tell you anything new, useful or that you didn’t already know. Just because you have a contract with a big data house or agency, doesn’t meant that their output is any more valuable, preferable or worthwhile.
You have research questions no doubt. But think about how to get meaningful answers that genuinely add value to your business, before lazily trotting off to the same old, same old suppliers of the same old, same old data.
Real world example: Many corprate decisions are made in silos: Without considering cause and effect from a shopper perspective. Simply adding the wrong sort of doors to chillers without thinking of the shopper can save running costs, but also did reduce sales by almost 50%.
I love this one! “We have to invest online”. We need systems and processes, etc. etc. But take a step back. Before you potentially increase costs by not investing online correctly, clearly define where the greatest ROI lies in this wonderful new medium. I for one have clear irrefutable evidence that online commerce is woefully out of step with how we as a species have evolved to hunt, gather, shop and acquire new things.
Before throwing more money at the consultants, only to have them ask you for the answers to those big, tricky questions. Ask yourself this. “What do shoppers really want from online?” And by really want I mean implicitly and from an evolutionary perspective. We have evolved to hunt and gather, not scroll and click. No wonder so many shoppers still prefer NOT to shop online for everything.
Real world example: Offering people browsing online a massive spreadsheet to scroll down (complete with thumbnail images) can make the site easier to create and manage. Bit doing this did reduce impulse purchasing from 26% to less than 3%.
Refresh core systems
This puzzles me. Brands and retailers say they want to refresh core systems. But as a shopper expert for more than 20 years now, I don’t recall any shopper ever telling me that they wanted a retailer or brand for that matter to improve their core systems.
What I’m suggesting here is that instead of wasting potentially much more money refreshing systems, why not spend a little bit of money discovering what shoppers really want. And before you do, please remind yourself of the ‘reduce costs’ point I made earlier. You may well be surprised with just how close to shopper-oriented some existing core systems already are.
Real world example: Strategically relocating shopping baskets within a well-known High Street chain was and is an operational nightmare. But doing so did increase average transaction value by more than 40%
Develop smarter offers
So retailers and brands need to develop smarter offers? Does this mean to say that the current offers aren’t smart enough? Or is having a different promotion every ½ second in the supermarket just plain overkill?
Get ready for an alarming fact – In fmcg, as many as 80% of shoppers who buy an item that is on special offer… …would have bought it anyway.
So back to the challenge of developing smarter offers. I suggest that the easiest way to achieve this would be to simply align offers with the minds of those buying (or rejecting) the products. As a result, you’d end up with far fewer offers, but those that were in-store and online would be truly effective, both tactically and strategically.
Have you ever stopped to consider which of the following pairs of options is most effective?
Because one thing is for certain, one will always be better than the other. ‘Save 50p’ or ’Save 10% – ‘Half Price’ or ‘1/2 Price’ – ‘3 for the price of 2’ or ‘Now 1/3 off’.
The fact is that promotions are in one way too smart and in another, very, very dumb (from an evolutionary perspective). So instead of decreeing that you need smarter offers, why not understand how offers impact shopping behaviour and shopper psychology and then, only then, decide what is smart and what is perhaps a bit dumb (trust me, the answers will quickly become obvious).
Real world example: Changing the colours of promotional tickets in-store can shave money from the in-store SEL printing process. Bit will it really recoup the £113,000,000 it did cost in lost sales from a single category in a single aisle? Simply multiplying the number of aisles and categories up to your typical supermarket range results is a very large amount indeed.
Rethink the role of stores
For more than a century retailers have been redesigning their stores, to meet different roles. From having perfume departments at the front of store (to mask the smell of the street) in Victorian times, to the small checkouts of Piggly Wiggly stores in USA in 1930s (to reduce theft in newly self-serve environments).
Only in recent times have retailers begun to knee-jerk react to their perception that stores are too big, in the wrong places, with too much or too little range, etc. But again, start from a shopper perspective and guess what… you soon discover that people (yes that’s what we all are’) are predictably irrational. With that in mind it is relatively easy to identify what shoppers want and how to give it to them, ‘without throwing the baby out with the bathwater’.
Once again it comes down to understanding shopper needs (explicit and implicit) and only then start to work on solutions. Do not create solutions and then foist them onto shoppers (most QR codes for example).
Real world example: Changing the store location, size, design and configuration can stem falls in footfall, but simply changing the layout of products in the snacking aisle resulted in a 48% increase in traffic to that aisle: Same store, shelves, décor and even POS.
There you have it, 5 major issues facing retail today. And a single core theme that addresses each of them. Understand shoppers then adapt, as opposed to adapt and then see if shoppers understand.
Hmm, something to think about.
Drop me a note if you’d like to talk about this more.