According to research published recently by
Steria and Verdict Consulting, the barometer of success or failure for almost
every retail business can be evidenced by five critical measures: footfall,
spend per customer, market share, margin; and operations.
Now more than ever, retailers need to ensure that their activities and
strategies link directly to one or more of these measures. Failure to link to
them and to monitor them on an on-going basis can lead to declining sales, weak
profits and eroded market share.
But why are these five measures so important?
More significantly, what can retailers do to improve them, and do software
solutions such as supply chain ERP have a role to play?
Footfall: The retailer's lifeblood
Without customers, there is no business. But
with more shopping destinations than ever before, winning footfall is getting
harder. In 1999, 24% of clothing consumers visited just one store; today that
figure is down to 15%. Fewer shoppers are hitting the high street and they are
shunning the stores they once visited in favour of those that better meet their
present needs. But, on the flip side, this promiscuity offers retailers the
opportunity to attract new customers.
Given the different routes to market: the high
street, internet, catalogue and concessions, the battle to win customers means
that retailers now need complete visibility to spend and activity, presented as
consolidated intelligence, across each and every channel that customers use,
regardless of location, retail format and time of day.
As recently reported in The Times, UK fashion sales are currently worth 45 billion annually. Of this massive figure, 5%- 6%
is currently derived from online sales, a share which is expected to grow to
10%-15% within the next three years.
There can be no doubt that e-commerce has come
of age. The unquestioned multi-channel dimension of retail has created a new
imperative for supply chain solutions. They can no longer position themselves
as primarily supporting high street trading, with additional channels as add-ons.
In terms of optimising footfall, supply chain
solutions contribute significantly by streamlining warehouse and stock
management. They automate numerous manual processes, resulting in improved
stock availability in store. In particular, customer-facing processes such as
effective ordering and communication that includes SMS messaging increase
satisfaction and loyalty.
Spend: Where browsers become buyers
Fundamental to success is the ability to convert browsers
into buyers and to encourage them to spend as much as possible in one
transaction, thereby maximising the average transaction value. The key to
improvement is to understand what customers want and to put compelling offers
in front of them. Minor tweaks to the retail proposition can have a major
impact.
Companies that have automated their supply chain enjoy
access to tools including business intelligence and performance management that
generate accurate and consistent information across the business. Real-time
stock views and integrated WSSI give insights that can support precise, timely
and profitable decision-making. Where system-led stock management is in place,
buyers and merchandisers can focus on the new seasons buy and product
exception management rather than waste their time behaving as glorified stock
controllers.
Market share: Steal, gain and defend
In a contracting sector, retailers can grow
share by stealing it from competitors, or by picking up sales from retailers
that have gone out of business. In 2008, Verdict Consulting estimates that
retail space accounting for 1.6bn of home furnishings sales was closed. Around
half of this sales value will be picked up by other retailers. And, at the same
time as winning share, retailers need to defend it. The trick is to stay aware
of what competitors are doing to avoid missing out on any opportunities.
A
critical element of competitiveness is being able to predict customer tastes
and requirements, and then fulfilling them by having suitable product available
at a compelling cost-point. Supply chain solutions equip retailers to improve
supplier management and visibility, by facilitating harder negotiation that
leads to better deals. Then, when it comes to supplier replenishment, functions
such as the system-led creation of Purchase Orders can give greater stock
accuracy, improved cash flow and better productivity.