Creating a Culture of Cost Efficiency in Retail

In order to remain relevant in an ever-changing marketplace, traditional retailers are seeking out cost reduction measures to build leaner operations, allowing them to maintain a competitive edge over their digital counterparts like Amazon. As such, eighty-two percent of retailers are focused on reducing operating costs and investing savings into growth initiatives, according to Accenture’s Increasing Agility to Fuel Growth and Competitiveness study.

However, the study indicates that implementing and evaluating effective cost reduction measures still remain a challenge. Twenty-three percent of study respondents say they have improved their methods of evaluating business activities and removing those that do not add value. Only 36 percent strongly agree their business retains the benefit of cost reduction programs.

Obstacles Associated with Implementation

While retailers agree that it’s necessary to develop cost reduction strategies, a plan’s actual execution can fall apart. A finance department’s cost reduction efforts aren’t always aligned with a retailer’s overall business strategies. A major challenge for retailers is developing a sustainable balance of maintaining both brick-and-mortar locations while developing a strong e-commerce presence to create an Omni-channel customer experience—a recent example of which can be seen in Wal-Mart’s acquisition of Jet.com.  Additionally, efforts can be stymied by the competing priorities of executives across different company departments, such as merchandizing, sales and marketing.

As a result, retailers can often pinpoint areas where cost reductions are needed and even negotiate better pricing with some of their vendors, however changing a retail team’s actual purchasing behavior can be arduous, as there could be 500 stakeholders in one product that is acquired.

Look Beyond Changing Processes

Seeking out advice from third parties as to where to find cost saving measures within the supply chain is a good start as it can be an impetus to change buying habits and monitor results strategically.

Retailers also should look beyond processes and work towards building a mindset throughout their company that promotes efficiencies that lead to savings that can be reinvested into company growth initiatives. Creating a narrative that explains the importance of streamlining costs, the savings that can be seen across the board and what projects/initiatives such savings can be allocated into can help other departments realize the return on investment. Within each level of the organization, employees should be empowered to seek continuous improvement by asking if the current methods are efficient/relevant or if they can be made better.

The CFOs or CEOs who are doing that are winning. Processes will get dated; that’s why culture beats process every time. 

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