Sep 17, 2021

At the height of the COVID pandemic, retail profitability has taken a back seat to meet customer demand by any means necessary. Retailers have had to rapidly expand their omnichannel operations, often without concern for efficiency, to achieve the simple goal of getting goods to customers. While some have been able to meet demand and increase revenue across all channels, even successful retailers have struggled to simultaneously increase profitability, finding that their net is squeezed despite higher gross.

Due to changes in consumer behavior that appear to be permanent, omnichannel demand is expected to continue to exceed pre-pandemic levels. To remain competitive, retailers must make all channels not only viable but profitable while continuing to deliver high quality services and features that have become a critical part of customer behavior.

It is true that online orders for door-to-door delivery are less profitable than in-store sales, and BOPIS and click and collect orders are only slightly better for margins than door-to-door delivery. These options, however, have become an integral part of shopping. Retailers who downplay them to protect their margins will disappoint their customers, lose business, and possibly meet the fate they tried to escape in 2020.

Retailers need to look at all delivery channels – online and offline – and make adjustments using modern technology to improve operational efficiency and inventory productivity instead of putting margins first. A unified supply chain strategy, which brings together traditionally siled processes and data into a single system, enables retailers to efficiently manage in-store and supply chain operations while streamlining online operations.

The pandemic has not made forecasts unnecessary, it has simply made their accuracy more complex. Margins and customer service will improve with access to highly granular and accurate forecasts from a single data source. The same goes for improving inventory levels for all channels while managing staff and planograms in physical stores. Retailers can improve profitability and margins across the enterprise, rather than in specific and separate divisions or locations, while still continuing to meet customer demand with this approach.

Retailers shouldn’t have to choose between profitability and customer satisfaction. While they need to adjust their operations and processes wherever possible to improve their margins, they also need to review the best performing distribution channels and prioritize a high level of service, regardless of any underlying changes.

DISCUSSION QUESTIONS: What will it take for retailers to regain their pre-pandemic profit margins? What are the best retailers doing to increase their bottom line that other retailers lack?

Braintrust

“Using data to make product selection decisions and increase private label investments is how retailers will survive in the future. “

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