21 Sep Brexit: As UK retail market shrinks, retailers need to focus on efficiency
Keen to gain more insight into the effect that leaving the EU will have on UK private brand retailers, I tuned in to Planet Retail’s webinar, Brexit and your future in retail. Their forecast is that the Brexit impact will result in a decline in UK retail of -3.0% in 2017 and that it will take until 2020 to recover to current trading volumes.
As a result of the pound devaluation and some consequential shrinkage of the UK economy, Planet Retail predict that UK retailers will consolidate their offering and cut down on imported goods to control inflation.
This cutting down on imports will mean fewer luxury offerings, with consumers being offered less choice. In-store product ranges will become more of a discounter fashion, helping the retailer to reduce costs and supply chain complexity. A different perspective to the recent increases seen specifically in the trend toward more premium private brand products?
Retailers looking to reduce costs
With retailers needing to focus more closely on cost reduction to ride out the Brexit wave, as well as cutting down on their product offering there are clearly cost savings to be had in the efficiencies of their everyday operations.
One of the areas with potential for increasing efficiencies and reducing costs is in the retailer’s interactions with their suppliers. For a private brand retailer, they may have thousands of own label products covering all food and non-food grocery categories which involve many hundreds of suppliers to produce. Working with suppliers on such a large scale offers a multitude of interactions and processes which can be improved upon to make cost savings.
Collaborating with suppliers to streamline
At S4RB, we champion Supplier Engagement as a way of working that builds effective communication between the supplier and the retailer, enabling them to work together as ‘One Team’.
This is a process which involves the retailer building a solid foundation of respect, collaboration and mutual benefit with their suppliers. We’ve seen that investing in supplier relationships results in a wide range of soft (perceived) and hard (measurable and quantifiable) benefits, including increased operating efficiency, better profit margins and boosted brand perception.
We’ve heard much in the news about retailers improving the way they treat suppliers with regards to payment terms etc. but we hear less about working together with suppliers to innovate and streamline processes and this is an area rich for efficiency improvements, especially for private brand products.
It’s about increased understanding
To enable suppliers to work efficiently and accurately, it comes down to increasing their understanding of the task in hand. Here at S4RB, we say that there are three key engagement areas in which to achieve this: communication, support and transparency.
Communication: By communicating valuable information, expressing gratitude for good work, and following up supplier queries promptly, the retailer helps build up familiarity and trust with suppliers. This gives suppliers that extra motivation to do their best work and complete requests.
Support: Many suppliers are used to being beaten down on price, penalised heavily for slip-ups, and to generally being taken for granted. It’s much less often that retailers take the time to provide them with support to do a better job. There are some very practical tools that can help here, such as supplier self-help.
Transparency: The more suppliers know, the more effective they can be. The more they know about their performance, the sooner they can take action to improve. In addition, making suppliers aware of the challenges facing the retailer gives them the opportunity to volunteer a valuable contribution.
Implementing these tactics to increase collaboration will make positive changes that ultimately benefit both parties. Employing Supplier Engagement techniques increases the efficiency and accuracy in suppliers completing day-to-day tasks such as providing information about the products they supply or working on compliance issues. This results in less resource being taken up on the retailer side.
It’s also about improving quality
If retailers are going to be cutting down on product lines, Supplier Engagement can also work to improve the quality and consistency of products to ensure they are competitive – a vital process if retailers are going to work at retaining consumers and winning new ones without the lure of luxury offerings.
In short, we advise that retailers don’t just look at the usual avenues for cost-savings. Brexit is not a usual situation and if retailers are smart and put the effort into employing new ways of working now to change the way that they work with their supply base, the effects will generate ongoing, long-term rewards that extend beyond any initial cost-saving objective.