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Welcome to the Business Insights Newsletter

Retail Success Factors, Part 1: Lower costs in a tight retail environment

March 13th, 2013

Category: ERP Enterprise Resource Planning, Managing Retail Costs, Point Of Sale Systems, Retail Business News, Retail Business Tips

How do you overcome skyrocketing retails costs like increased rent, higher staff wages and increased marketing costs as mentioned in a recent article, retail struggling due to rising costs?

The news isn’t all dire. There is definitely a way to get around rising costs and even be profitable today. The key is you need to do two things well and do them well on a consistent basis. The first one is to keep a tight lid on costs, and the second one is to find innovative ways to increase sales.

Today we explore the first success factor to retailing: keeping your costs down (while next months’ article will focus on how to increase sales, while of course, protecting your budget).

Advanced retail systems can help you overcome costs

While there’s a few things you can do to keep costs low, from our perspective as providers of advanced retail software, we see technology as an enabler of cost-efficiencies. If utilised to its full potential, retail management systems (hint, CONTROL) should stop you bleeding money (i.e. ordering too much stock), or losing ‘valuable’ time through inefficient processes, and as you know time = money.

We look at 3 vital areas of your business (inventory, replenishment and staff) that have the potential to deliver major cost-savings to your business.

Replenishment (restock, replace, refill…just in time)

Replenishment is probably where the biggest cost savings can be made (especially if you’re a multi-store operator) and these savings come from the following:

  • Producing, “at the touch of a button”, a list of items requiring replenishment, or better still, have the system automatically determine the replenishment requirements automatically. Compared to the way you currently determine replenishment requirements, this could be a big cost saving.
  • Assuming we have a list of items requiring replenishment, we now have to place orders on the warehouse or directly on suppliers. If the system automatically created these orders for the right quantities and automatically emailed or faxed the generated orders, this would be another large cost saving.
  • If we can automatically generate orders for items requiring replenishment, and have these orders automatically sent to the warehouse or external supplier then we can schedule this process to run as often as we like, e.g. nightly.
  • The more frequent we run this replenishment process, the lower the reorder quantities can be, and the lower the overall stock holding. For example, if we replenish stores monthly, then we need to have stock in the stores to cover at least a month’s worth of sales. If we replenish weekly we need to have stock in the stores to cover at least a week’s worth of sales, but if we run the store replenish ordering process daily then we only need to have stock in the stores to cover one day’s worth of sales.
  • The cost saving by automating the replenishment process and replenishing more frequently can be enormous. But how do we determine the reorder quantities? The answer is simple: the system can calculate these based on current stock holdings and recent sales figures. Even if the supplier imposes minimum order quantities, there are huge cost savings to be made by:

    • only ordering items at the last possible moment while ensuring you do not run out.
    • making frequent orders for the minimum replenishment quantities.
  • Inventory costs can be reduced for non-re-orderable items such as fashion clothing by implementing a fully integrated Open-to-Buy system, which is embedded in CONTROL.

Inventory Management (knowing what stock you have, where it goes and how it performs)

Aside from ‘automated’ replenishment, comprehensive retail Management systems keep costs in check by:

Squeezing extra mileage from poor performing stock: locating stock that is not moving sufficiently well compared to pre-determined benchmarks and then taking appropriate action; for example, moving stock to another store that needs it, moving it to a markdown location, marking it down instore, or selling it through another channel like eBay, etc.

A good inventory management system like you find in CONTROL achieves this efficiently and cost-effectively. For example, CONTROL allows for deep analysis of current stock holding, including stock turn rate, aged stock analysis, number of months cover, etc.

Staff Management (The right staff at the right time, in the right place)

While a retail management system like CONTROL can’t inspire your staff to be better salespeople or provide them with training to improve service and sales skills, it does come with features that can help you save money for what is a major high fixed cost to your business. CONTROL provides reports with instant view on the following:

  • sales per trading hour
  • Sales per salesperson, per hour worked.

The above reports can determine the most cost-effective staffing levels, and the most cost-effective staff.

Other benefits retail software provides that help you keep costs low

  • Minimises or eliminates a lot of manual tasks that take time, or speeds up transactional tasks. These add up to improved efficiencies which equal savings.
  • If you invest in an integrated system like CONTROL, you have a unified view of just about every part of your operation. This provides clear insight into where you’re doing well and where money is being wasted. It helps you refine cost-efficiencies even more.

Today, most multi-store operators can’t conduct business without the help of retail technology. However, is your current retail system tough enough to handle modern retailing? The answer might lie in its ability to assist you to drive down costs…while selling more!

This reminds me, keep an eye out for next months’ article where we look at how you can increase sales in a tight retail environment.

Or, if you want more information today on how CONTROL Retail Management system facilitates cost savings, contact us, or phone Bernie Hogan on 1300 646 536.